Top Crypto News – 19/01/2018

Overwhelmed Cryptocurrency Exchanges Are Hiring Staff by the Hundreds


Bitstamp Buttresses its Exchange

Cryptocurrency Exchanges Are Hiring Staff by the HundredsWhen crypto mania and bitcoin prices peaked in December, exchanges were onboarding over a million users a day. Prices have since dropped, but demand for admission to the crypto party has not. Users are still flocking to exchanges, and exchanges are doing their best to accommodate them whilst tending to their existing customer base. In a frank and detailed blogposton Thursday, Bitstamp CEO Nejc Kodrič tried to sum up the extent of the problem. He began:

Our data confirms what was beyond even our most optimistic forecasts for customer growth in the past year. Under normal circumstances this would be cause for celebration, but we are certainly far from feeling in celebratory mood.

He also hinted frustration at having to field so many queries from newbs who lack the slightest understanding of the sector they’re so hastily piling into, noting: “The arrival of so many people who are completely new to the industry means we are also now fielding very different questions about what crypto is”.

Madness and Mania

Cryptocurrency Exchanges Are Hiring Staff by the HundredsOther exchange CEOs can relate to Kodrič’s situation. Last week Michael Gokturk, co-founder of Canada’s Einstein Exchange described the avalanche of customers trying to sign up as “madness”. CBC News reports how the exchange was forced to significantly increase its staffing, and now has over 50 employees working out of its Vancouver and Montreal offices. Goturk claimed to have “lost his voice” apologizing to clients who’d had funds held in limbo while the exchange played catch-up.

Bitstamp is also heavily investing in human resources. Nejc Kodrič writes:

Aware that you need real-time contact with us, and much better response times, we will be setting up a call centre with over 100 staff, which will be up and running in the coming weeks. We will also have a new ticketing system in place in 2 weeks from now to expedite the resolution of open tickets.

He finishes: “Don’t give up on us. I promise you that the efforts we are making will soon show results.”

Denial of Service

Other exchanges have also been hit with growing pains, with Bittrex, Cryptopia, Bitfinex, and Binance all temporarily shutting up shop at some stage during the past month. Normal service has since been resumed, and exchanges are reporting record trading volume. On Thursday, Binance published a snapshot of its six-month performance, revealing that it now serves three million active users a day.

Cryptocurrency Exchanges Are Hiring Staff by the Hundreds

From Bittrex’ curious coin delisting policy to Kraken’s record downtime, every major cryptocurrency exchange has been in the news this week. Even Poloniex hasn’t been exempt; gremlins in its trading platform caused users to report a spate of oddities, including massive sell walls and orders disappearing from the books. The problems now seem to have been addressed, but not before Zcash was forced to publish a statement pointing out that the ZEC sell wall on Poloniex was impossible, as at 3.9 million coins it was greater than the total number of Zcash in existence.

Cryptocurrency Exchanges Are Hiring Staff by the Hundreds

From onboarding to uptime, cryptocurrency exchanges are being vigorously stress tested. With only 1% of the world invested in crypto, the avalanche of new users may still have a long way to run.

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Autopsy of the Bitconnect Implosion: Ponzi, Centralization, Governance


Changes Coming for the Bitconnect System

“Ubitex, MyBitcoin, Bitcoin7, Bitscalper, Bitcoin Savings & Trust, Bitcoin Rain, Gbl Basic-Mining, Butterfly Labs, MintPal, Gemcoin, GAW Miners / Paycoin,” well known developer Jameson Lopp listed, including the latest, “Bitconnect. Scammers have wanted your BTC ever since it had an exchange rate. Learn from history. Don’t be greedy. Don’t be a victim,” he tweeted.

The third week of 2018 brought an announcement, Changes coming for the Bitconnect system – Halt of lending and exchange platform, posted by the anonymous outfit 15 January. “We are closing the lending operation immediately with the release of all outstanding loans,” they claimed.

Autopsy of Bitconnect: Ponzi, Centralization, Governance

“In short, we are closing lending service and exchange service while website will operate for wallet service, news and educational purposes.” Among the reasons for an abrupt change included “continuous bad press,”  “two Cease and Desist letters,” and “DDoS attacks,” according to the scheme’s unnamed authors.

Former believers posting on the subreddit, /r/bitconnect, went apoplectic, as one might imagine (see insets). Their concern now is not with mechanics or figuring what might’ve gone wrong, but is instead purely practical: how to get out. Sober analysis is still important, and maybe it’s a perfect opportunity to pass along an ugly lesson to crytpo’s newcomers in hopes of helping them avoid future tragedy.

Autopsy of Bitconnect: Ponzi, Centralization, Governance

Centralization and Governance are Antithetical to Crypto

Putting aside outright scam (which Bitconnect is), a test going forward filtering all coins is their acceptance of centralization and, always with it, governance. To put the formula in basic terms: if there is a “someone” or a “headquarters” to sue, to shakedown, to roust and cajole, then that coin or team isn’t decentralized.

While projects such as IOTA, Ripple, Decred etc. are not scams in the Bitconnect sense, they’re currently embracing centralization and the cocaine of the industry at present, governance. Boards. These are all trappings leading to the rise of the bitcoin ethos in the first place. Crypto was created to fight them. A careful look at once-lauded concepts such as Tezos, and its foundation embroiled in lawsuit after lawsuit, should give pause to anyone long on cryptocurrency. Understanding just why cryptocurrencies matter and how they’re different can better inform new investors.

Autopsy of Bitconnect: Ponzi, Centralization, Governance

Bitconnect lost from the start in terms of its basic concept, built on the sturdy credulity of countries not yet familiar with Ponzi. In the west, as Andreas Antonopoulos explains, we’ve had at least a century to be fooled, to have felt the sting of our stupidity. The great thing about bitcoin and crypto is that it’s bringing-in emerging markets, people who’ve in many ways been left out of traditional capital arrangements – and it has done this precisely because it is decentralized and lacking formal governance. In countries with a history of command economics, the age-old lesson of Ponzi appears to be something they’re going to have to learn anew.

Bitconnect failed the Ponzi filter, but it also, and more importantly, failed the decentralization test: it could be given letters of cease and desist. It could be hectored. And because it was centralized, it lacked a robust segment of its team to shake it out of its scam properties. A perfect storm. This isn’t to exactly absolve Bitconnect’s religious believers. They’re guilty too, and as of this writing they’re busy trying to resurrect the dead, pumping their coin (which they insist doesn’t exist) back up even if ever so slightly. If only they knew about feathercoin, and a string of other failed altcoins that are dead, dying, or on life support. The patient cannot be saved.

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US Sheriffs Welcome $1.7 Million Windfall After Students Plead Guilty to Stealing 5,400 BTC



LEA Celebrates Another Bitcoin Bonanza

Bitcoin thefts end badly for hackers who don’t cover their tracks, but spell great news for law enforcement. Across the US, federal and state agencies have been treating themselves to new computers and other equipment, all paid for with confiscated digital assets. It’s common practice for law enforcement to keep a portion of the proceeds from major crimes, but bitcoin’s rising value, coupled with the glacial pace at which criminal trials move, has caused payouts to balloon.

US Sheriffs Welcome $1.7 Million Windfall After Students Plead Guilty to Stealing 5,400 BTC

This week, Sean Harrison Mackert and Nathan Gibson pled guilty to wire fraud for hacking drug marketplace Sheep in late 2013. The pair, who are in their mid twenties, face a maximum sentence of 20 years in jail, in a case that first reported on last year. But one legal official believes they deserve to walk free.

“These young men, yes, they stole this money but there aren’t victims in the traditional sense,” said Jacksonville defense attorney Richard Landes. “If there were victims, the federal government would be returning this money to the victims; instead, the federal government is not returning this money. The federal government is keeping this money.”

US Sheriffs Welcome $1.7 Million Windfall After Students Plead Guilty to Stealing 5,400 BTC
Officials toast their latest proceeds of crime award, for $1.7 million.

Officials Divvy Up the Spoils

At a press conference, officials smugly congratulated one another on their stellar work and the multi-million dollar windfall it had brought about. The first major cash boost US agencies received from bitcoin was after auctioning off the 144,000 BTC seized from Silk Road admin Ross Ulbricht. Since then there have been scores of similar cases, including a pending auction of $52 million worth of BTC by US Marshals. The proceeds from this week’s Jacksonville case will be divvied up between the Nassau County Sheriff’s Office, JSO, and the Florida National Guard, who will put the money towards “equipment upgrades”.

US Sheriffs Welcome $1.7 Million Windfall After Students Plead Guilty to Stealing 5,400 BTCWhile law enforcement are duty bound to go after crime wherever it occurs, be it on the dark web or in the hood, they seem to reserve particular fondness for bitcoin seizures. It helps to portray agencies as being on the cutting-edge of technology and attuned to emerging cyber threats. The reality is often more prosaic: Mackert and Gibson got caught after cashing out their bitcoins into five banks including Jacksonville Federal Credit Union, Bancorp Bank, and Bank of America. They then blew the profits on luxury goods including jewelry. They may have been capable hackers, but master criminals they were not.

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Neo Approaches Record High But Centralization Concerns Persist


The Neo Kid on the Blockchain

Neo Approaches Record Highs But Centralization Concerns PersistIf 2017’s crowdsales were all about Ethereum, 2018 is shaping up to be the year of Neo. The Asian smart contract platform has some way to go before it can match the transaction volume, market cap, or number of ICOs as Ethereum. But if hype is any arbiter of things to come, Neo is on course to own 2018. The biggest token generation events this month have all been on the Neo blockchain, with tokens selling out in record time.

The Key raised $22 million in minutes, and projects such as Aphelion – a Neo P2P DEX – and Deepbrain – an AI platform – have also reported record uptake. Others still to come include Zeepin, Narrative, and Apex, the latter boasting one of the largest crypto Telegram groups and guaranteed to hit its $25m cap. On the surface, everything is going smoothly, but beneath the waters the good ship Neo is sailing on, trouble may be brewing.

Who Controls Neo?

Neo Approaches Record Highs But Centralization Concerns Persist
Da Hongfei

Da Hongfei, Neo’s CEO, is a man of few words and even fewer tweets. Binance CEO Changpeng Zhao is loquacious, personable, and approachable; Hongfei, on the other hand, is an enigma. The entire Neo team aren’t known for their communicative skills, preferring to let their community do the talking. One reason for this may be the uncertain regulatory environment in China. Like other crypto companies that originated in the country, Neo is obliged to keep government officials onside, as it walks a delicate tightrope, balancing its goals with its legal obligations. The core team has since relocated, but Neo retains close ties with its country of origin.

One of the biggest concerns regarding Neo, and indeed many other cryptocurrency projects, is the level of centralization. Ethereum, despite its “strong leader” handicap, is at least decentralized in terms of the nodes that secure the network, as a recent study has shown. With the majority of Neo nodes controlled by the project’s inner circle, the blockchain is susceptible to interference, either directly or at the say-so of government officials. Its Github also only has one branch.

Loads of Nodes (Just Not for Neo)

Neo Approaches Record Highs But Centralization Concerns PersistIn its December monthly report, the Neo council spoke of plans to decentralize the network, explaining: “We want to have at least 3 nodes run by external parties…The initial phase of decentralization is planned as follows: 2 nodes will be run by City of Zion. 1 node will be run by the community and will be community funded (independent of CoZ). 2 nodes will be run by institutional for-profit companies with blockchain interest. 2 nodes will be run by the NEO Council.”

Like many blockchains, Neo seems to be working to a “future decentralization” model: get things up and running first and then, once the teething problems have been ironed out, decentralize. Great if it works, though as history shows, power, once gained, is hard to relinquish. Bitcoin and Ethereum have over 30,000 globally distributed nodes between them; the number of official Neo nodes is less than 10. The Neo blockchain is fast and has high throughput, but speed is of little benefit if it comes at the expense of security. Speaking of security…

Security or Utility?

One of the greatest challenges Neo may face in 2018 stems from a land beyond its reach: the USA. The Chinese blockchain doesn’t need America’s blessing to function, but with the US dominating the crypto market, Neo’s absence would be a major blow to Da Hongfei’s plans for global domination. With Bitfinex having closed its doors to US residents, the number of licensed exchanges where US traders can buy Neo is already limited. The token is currently available on Bittrex, but rumors suggest the US exchange may be poised to delist Neo.

Neo Approaches Record Highs But Centralization Concerns Persist

Deposits and withdrawals of Neo have been unavailable at Bittrex for a month, and the exchange recently delisted another token, Mysterium, for no apparent reason. With the Securities and Exchange commission looking closely at tokens that may constitute securities, it is thought that Bittrex may be removing security-like tokens to head off an SEC clampdown.

Neo token holders are paid Gas as a dividend, and while most people wouldn’t view this as a profit share, the SEC may see things differently. As it stands, Bittrex doesn’t pay out Gas to token holders for that reason, whereas Binance does. Even if Neo can shrug off issues on foreign soil, it is a prime target for regulation should China or South Korea come wielding the axe. Delisting from Upbit or Okex would be a major blow.

Neo Approaches Record Highs But Centralization Concerns Persist
Officially, Neo wallets on Bittrex are awaiting a developer update

Plagiarism and Fake Goods

The global counterfeiting economy is valued at half a trillion dollars a year, with the bulk of those fake goods coming from China. The blockchain space isn’t immune from accusations of counterfeiting either, with China accounting for its fair share of imitators. There’s Tron for example, led by Justin Sun, which was shown to have copied entire chunks of its white paper. Then there’s Trinity, a project operating on the Neo blockchain, which has copied its state channel diagrams directly from Raiden. This plagiary is not the doing of Neo – nor is it limited to Asia – but it does indicate that the crypto projects to emerge from this part of the world deserve close scrutiny.

Neo Approaches Record Highs But Centralization Concerns Persist

If Neo can overcome its centralization issues, and the ICOs it launches can add value and not vaporware, there is every likelihood that the project will flourish. Many investors though see potential hurdles, from the US to China, at every twist and turn. As the coin continues to rise in value, one of the biggest obstacles it may face is a logistical one.

Unlike other cryptocurrencies, neo is indivisible. You can buy a fraction of a neo on an exchange but you can only send whole units between wallets. Should the token ever attain the same sort of valuation as ethereum, this could present a major problem. Hodlers with half a neo on an exchange would then be faced with a quandary: sell it or shell out another $500 just to be able to withdraw.


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