Top Crypto News – 13/02/2018

Better Late Than Never: Why It’s Time Regulators Put Crypto on Notice

Capture.

I’m late, I’m late!

For a very important date!

No time to say “Hello.”

Goodbye!

I’m late! I’m late! I’m late!

When the White Rabbit was late in “Alice in Wonderland,” he rapidly scampered off to meet his appointed duties. In the wild and rapidly-evolving Wonderland of cryptocurrency, government regulators are quickly ramping up their efforts in fulfillment of their appointed duties, though the current regulatory framework still limits them in that regard.

That’s the clear takeaway from last week’s Senate Banking Committee hearing on cryptocurrency, where the heads of the two main financial market regulators testified.

If they weren’t already, cryptocurrency exchanges and promoters of initial coin offerings (ICOs) are now on notice: people who invest with them are entitled to be treated like all other investors in the U.S.

Exchanges that want to proclaim they are legitimate and that they follow all U.S. laws need to act like it when something goes wrong. ICO promoters who want to sell a product and raise funds by crowdsourcing crypto need to disclose all information accurately, transparently, and deliver on the product they sold.

If they don’t, they need to face the consequences of their actions.

I agree wholeheartedly with Securities and Exchange Commission Chairman Jay Clayton’s public statements over the past few months criticizing ICOs and the people behind those fundraisers.

“I believe every ICO I’ve seen is a security,” he told the Senate committee. It is almost as if he read my CoinDesk 2017 Year In Review article “I Love Bitcoin. That’s Why I Sue Exchanges,” wherein I said there has yet to be an ICO that did not perform that was not a security.

Clayton went on to condemn the promoters, attorneys and other related professionals who flout federal securities laws by putting the form of their offerings over the substance of what they really are: investments, stating, “We should regulate [ICOs] like we regulate securities offerings. End of story.”

ICO companies and their legal counsel should be scrambling over their past tone-deaf responses to investors. These entities need to take responsibility and not blame the people who sent them money. Legal loopholes are not designed to punish innocent people who were deceived.

Listening to the hearing testimony, it is also clear that squarely within the regulators’ crosshairs – and an area in which enforcement actions are on the near horizon – are cryptocurrency exchanges.

“When you have an unregulated exchange, the ability to manipulate the prices goes up significantly,” Clayton told the lawmakers.

Those comments were echoed by his counterpart at the Commodity Futures Trading Commission Christopher Giancarlo, who told the committee:

“Any proposed federal regulation of virtual currency platforms should be carefully tailored to the risks posed by relevant trading activity and enhancing efforts to prosecute fraud and manipulation.”

Market manipulation

Because each exchange makes its own independent and unregulated market for the cryptocurrency traded on its platform, the threat of market manipulation constantly hovers over its activities. Account holders at the exchange have no protections against the exchange suddenly slashing a cryptocurrency’s value without notice.

Even today certain exchanges admit their systems don’t work, but claim that doesn’t matter. While lawyers for these exchanges claim it’s within the legal rights of these exchanges to do so, those lawyers should know that legally and ethically they’re wrong.

Just as certain law firms believed in 2015 and 2016 that there was such a thing as a pre-functional utility token, almost all lawyers and regulators believe that not to be true today. What’s changed? My firm and others started filing lawsuits.

Similarly, most crypto investors are familiar with “flash crashes” and oversized liquidations that have caused crypto values to plummet on individual exchanges while those same cryptocurrency values remained unaffected on other exchanges at the same time.

In instances such as those, exchanges have disavowed responsibility for any possible market manipulation and simply shrugged off the incidents as “part of the game” while account-holders suffered devastating losses with little to no recourse.

The exchanges would like that to be the end of the story. However, an exchange that permits trading – especially leveraged transactions – has real responsibilities to its account holders and should be held accountable when it allows or causes massive amounts of value disappear in an instant on the exchange while no such impact is felt elsewhere.

The SEC and CFTC are clearly moving in that direction, though it is entirely unclear when they might reach their destination.

The overseers are rapidly making their way to fulfill their appointed duties in the cryptocurrency Wonderland, even if – like the White Rabbit – they arrive a little bit late. Better late than never, I say.

Clocks via Shutterstock

 

KYC Requirements Are Making ICOs Riskier, Not Safer

Capture.

KYC Requirements Are an Accident Waiting to Happen

It’s Easier to Open a Bank Account Than It Is to Participate in an ICOLast year, the U.S. Securities and Exchange Commission went after a number of ICOs for failing to perform due diligence to ensure their investors didn’t hail from the U.S. Spurred partially by a desire to avoid censure or shutdown from the SEC, ICOs have taken things to the opposite extreme, using Know Your Customer procedures to weed out investors from the U.S., China, and a handful of other countries. To date, all of 2018’s major crowdsales have required some sort of KYC in order to gain admittance to their whitelist, with many outsourcing the task to third parties that specialize in such matters.

To merely be considered for a token sale, it is now commonplace for an individual to have to submit a passport scan, bank statement, and various other documents and to answer a string of questions about their background and the origin of their cryptocurrency. Legolas, for example, requested that investors “Provide as much detail as possible about the origin of the BTC”. Being whitelisted for a token sale is no guarantee of participation either. Oversubscribed ICOs such as Arcblock returned ether to hundreds of participants who had failed to contribute in time or who were deemed to have “cheated” by using over the prescribed gas limit. Twitter traders now encourage investors to submit KYC to as many promising ICOs as possible, just in case they later decide to participate.

A Data Leak In the Making

It’s Easier to Open a Bank Account Than It Is to Participate in an ICO
In Sentinel’s Telegram chat, investors were deeply critical.

With ICOs now holding the passports and other identification documents of thousands of crypto investors together with their emails and wallet addresses, hackers have an added incentive to target crowdsales. Even if they’re unsuccessful in altering the contribution address, the raw data of tens of thousands of crypto holders is a honeypot of significant value in its own right. Some of that honey was stolen from The Bee Token, whose email database was accessed and used to send out phishing emails which raised over $1 million.

This week, Sentinel ICO had an even bigger fail after the passport data of its users was leaked. In a Medium post, the startup confessed that a website vulnerability had allowed uploaded files to be accessed by another user. To compound the problem, the user who discovered the flaw then claimed to have been reported to the police by Sentinel for their actions, despite having done nothing wrong.

KYC: Good for ICOs, Bad for Investors

It is hard to put a figure on the success rate for ICO whitelist applicants, though it’s likely to stand at less than 50%. At least half of the time, in other words, participants are submitting personally identifiable documents in exchange for nothing, be it due to whitelist oversubscription or network congestion that prevents them from contributing ether in time. The likelihood of that data being leaked is low, but cumulatively, over the course of dozens of KYC applications, those odds start to mount up. It only takes one failure to expose an individual’s data once and for all time. Email and wallet addresses can be changed; passports and driving licenses are permanent.

Gaining approval to participate in pre and public sales is now viewed by many ardent ICO participants as a game. The price for admission is the time it takes to complete the KYC registration process and the chance that none of the countless ICOs they apply to will suffer a catastrophic data breach. As if investing in ICOS wasn’t risky enough, KYC requirements have ironically made crowdsales even more hazardous.

 

This 16-Year Old Crypto-App Developer Fights Back Against Reddit Hate

Capture.

This week news.Bitcoin.com spoke with, Harshita Arora, a 16-year old girl who developed the Crypto Price Tracker application for iPhones. Arora explains she lives in a small town just outside of New Delhi in India and she’s a big fan of technology. Arora has been studying computer science, and was accepted to the Massachusetts Institute of Technology (MIT) for a summer internship. Arora decided to make a cryptocurrency price tracking app for iOS and announced the launch of the project on January 28.

This 16-Year Old Crypto-App Developer Fights Back Against Reddit Hate

However, when she announced the app herself on the forum /r/bitcoin, she was greeted by a mob of people who didn’t believe she created the app. One critic wrote a blog post detailing that the app was plagiarized although the story was later revealed as false. Most of the criticism came from the fact Arora hired help to do some of the backend coding on the Crypto Price Tracker. But following the accusations /r/bitcoin patrons started harassing Arora for being young and a wrote hateful and sexist comments to her. News.Bitcoin.com chatted with Arora to hear how she got into coding and cryptocurrencies but more importantly how she dealt with the issues she faced launching the platform.

Harshita Apps: How This Young Woman Overcame False Accusations and Attacks from Redditors

News.Bitcoin.com (BC): Can you tell our readers how you got into coding applications?

This 16-Year Old Crypto-App Developer Fights Back Against Reddit Hate Harshita Arora (HA): I got into technology at first because of my CS teacher at school. He’d assign really interesting projects to play with design software, Google Scratch, and the MIT App Inventor so we could learn programming concepts and start building fun programs and software. He planted the seed that eventually made me more interested. I then invested my time in programming and building things. I learned iOS app development in Swift around 2017 after I came back from MIT summer program. After working on an iOS app, at the university with a team, and learning from my friends.

BC: What got you into bitcoin and cryptocurrencies?

HA: The first time I heard about cryptocurrencies was in 2016, in a tech magazine I used to read every month (Digit). I learned about Bitcoin mining and understood some basic underlying technology and cryptography.

And then in 2017, cryptos and bitcoin was all over my Facebook feed and Quora. So I started getting more curious and read up more online.

BC: What made you decide to develop the Crypto Price Tracker?

HA: I’ve written a bit here in this article. In short, it was because of frustration from using horribly-designed apps that made it extremely hard for me to keep up to date with prices. And being a designer and maker at heart, I couldn’t stop myself from designing a new app with a better UI and UX.

This 16-Year Old Crypto-App Developer Fights Back Against Reddit Hate

BC: When you introduced the application to the Reddit (bitcoin) community there were a lot of negative people saying mean things. Why do you think that happened?

HA: Well, when I first introduced the app on the launch day (28th Jan), it got a lot of positive reaction. This was the thread. I got a lot of positive feedback on the app and how I could improve it further. I saw a lot of my traffic (in iTunes Connect App Analytics) came from Reddit. And I read four 5 star reviews mentioning that they came from Reddit. One of them even said, “I came here from Reddit, and I was not disappointed.”

But a woman decrypted my app on a jailbroken iPhone and wrote an angry blog post accusing me of plagiarizing the app based on inconclusive evidence. She posted it on Reddit, and that’s where it went viral and invited a lot of abuse and hatred.

BC: Do you think your age had anything to do with the criticism?

HA: Likely, but I’m not sure. I’ve been thinking about it based on the patterns in the comments. There were quite a lot of sexist, racist, and ageist remarks by some abusers. Not sure if any of that was the sole reason people criticised me and my app. But it could be a strong reason because *some* people have a hard time believing that there are teen entrepreneurs and developers out there.

This 16-Year Old Crypto-App Developer Fights Back Against Reddit Hate

BC: Do you think this type of behavior may be only particular to the Reddit bitcoin crowd? — as in — Do you have confidence the bitcoin community overall is far friendlier?

HA: After the article on The Daily Beast was published, I got an overwhelming amount of positive emails and messages from supporters in the bitcoin and crypto community.

People emphasized to me and understood what I had to go through. It might be just r/bitcoin that was nasty to me – but again, I’m not too sure.

BC: Are you a bitcoin holder or own any other cryptocurrencies?

HA: No, I don’t invest in bitcoin or other cryptos. I’m much more interested in the technology more so than the economics. I think people have been treating cryptos wrongly as an asset to invest in and to make quick money with.

BC: Where you live do any of your peers or classmates know much about bitcoin and cryptocurrencies? Maybe classmates or friends?

HA: I live in a small town in North India. All of my friends use the Internet regularly. My closest friends know about bitcoin and are actually building applications for bitcoin and cryptos. I tend to spend most of my friend time with other nerds. As for classmates, I do not go to school. I left formal schooling in 2016.

Written by CoinDesk.com

 

Iceland Bitcoin Mining to Double Energy Consumption This Year

Capture.

Iceland Mining Expected to Double to 100 Megawatts

“Four months ago, I could not have predicted this trend,” Johann Snorri Sigurbergsson, Hitaveita Sudurnesja’s business development manager, announced incredulously, “but then bitcoin skyrocketed and we got a lot more emails. Just today, I came from a meeting with a mining company seeking to buy 18 megawatts.”

Powering southwestern Iceland, Hitaveita Sudurnesja is a Svartsengi-based geothermal energy plant (about four km north of Grindavík). The area is also home to cryptocurrency mining, which is increasing at a pace to use more wattage than its residents combined, effectively doubling “its energy consumption to around 100 megawatts this year,” according to reports. In fact the National Energy Authority puts its usage at more than 340,000 households on the island.

Arguably, mining is the heart of the entire bitcoin affair – and due to its concept of baked-in digital scarcity, the computational problems associated with mining blocks, confirming transactions, building what is referred to as the blockchain or distributed ledger, mining has become a lucrative business.

Iceland Bitcoin Mining to Double Energy Consumption this Year
Svartsengi

To do so effectively, cooler climes are necessary, as are abundant sources of energy. Iceland is a natural home for the burgeoning industry, but not everyone is pleased. “Under normal circumstances,” Pirate Party legislator Smari McCarthy explained, “companies that are creating value in Iceland pay a certain amount of tax to the government. These companies are not doing that and we might want to ask ourselves whether they should.” Tapping a typical trope, the lawmaker continued, “We are spending tens or maybe hundreds of megawatts on producing something that has no tangible existence and no real use for humans outside the realm of financial speculation. That can’t be good.” The Pirate Party was once known as very pro bitcoin.

Iceland’s more timid hands might be forgiven due to its somewhat recent experience with so-called “speculation.” The 2008 Great Recession impacted it harshly, spreading to its banking system. When all was said and done, the island nation and government debt ballooned. Three of its major banks defaulted, and by some estimates it was considered the worst economic crisis in economic history relative to its size.

And especially in recent months, many people have soured on the digital asset, noting its volatility and lack of good user experience when it comes to basic transactions (fees and processing time). However, though Iceland’s economy has bounced back, it might not be wise to turn away the future of money so quickly.

Written by Bitcoin.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s