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Top Crypto News – 22/02/2018

Ripple Paper Pledges New Support for $40 Billion XRP


The startup that oversees development of the world’s third most-valuable cryptocurrency, XRP, is moving to upgrade the underlying technology on which it operates.

Announced Wednesday, San Francisco-based startup Ripple is releasing two new white papers for peer review – one describing XRP’s consensus algorithm in a more formal way and the other outlining a way to improve the diversity of connections of each node, the software users run to relay and verify transactions on the network.

Taken together, the moves show that Ripple, whose investors include banks like Santander and SBI, is ready and willing to invest in the core infrastructure supporting its cryptocurrency, which despite falling out of favor with the company at times, now secures more than $40 billion in value.

Yet, while XRP has become one of the most in-demand crypto assets, in some ways its development has lagged behind other more established offerings like bitcoin and ether.

Indeed, Ripple CTO Stefan Thomas sought to portray the papers as a step towards developing a tighter relationship between the company’s research arm and academia. In short, the startup wants it to be easier for researchers to follow Ripple’s technology, so its easier for them to contribute.

In interview, Thomas sought to stress how the papers open up the possibility of further building a network effect around the tech – one that might be key now that traders are buying in.

Thomas told CoinDesk:

“This is the first time we’re releasing peer-reviewed academic papers. Obviously, it opens the door for future research. After this, I expect you’ll hear much more about us interacting with academia.”

More broadly, the papers can be seen as perhaps the first attempt in some time for the company to refresh and improve documentation around the open-source platform. (The work is the first since 2014 to detail the XRP Ledger, then called the Ripple Consensus Ledger.)

As such, the papers are also a statement on the continuing evolution of Ripple, which after launching with the goal of repurposing cryptocurrency into a secure payments network is seeking to replace centralized bank messaging and liquidity services with decentralized alternatives.

Playing defense

For Thomas, however, the two releases have one central theme: security.

“What we’re trying to do here is add some defenses against some unlikely attack scenarios. Basically, it says you can’t completely manipulate the entire network,” he explained.

The key word here is “unlikely.” Thomas argues these attack vectors aren’t viable unless the attacker was a state actor, say the U.S. government, with enough money and technological resources to disrupt the network. And though he isn’t particularly worried about this happening, Thomas said the startup is trying to protect against those use cases anyway.

“We’re extremely cautious. We want the best security,” he added.

The first paper, called “Analysis of the XRP Ledger Consensus Protocol” builds on the company’s 2014 paper, providing a formal, mathematical proof that what’s supposed to happen on the network will really happen. It boils down to two things: “safety,” that the network won’t fork into two competing networks, and “liveness,” that the network won’t get stuck and will keep processing transactions.

The second paper, “Cobalt: BFT Governance in Open Networks” seeks to improve on previous XRP plans with an algorithm that supports a richer array of validators.

You can think of XRP as kind of like a voting system, where each node storing Ripple’s transaction history gets a vote on what happens next. To help it accomplish this, each node in Ripple carries something called a Unique Node List (UNL), a list of nodes on the Ripple network that the node considers legitimate.

So, if each node is connecting to a better variety of nodes, the argument goes, that’s good for the long-term resiliency and decentralization of the network.

Both papers draw heavily on distributed systems, a body of computer science research describing how large connected networks function. And because they’re more theoretical, Thomas stressed these papers will likely have a longer-term impact.

“It’s not going to affect how users use XRP right now. They won’t experience any downtime or anything,” he said.

One step behind

Still, it will remain to be seen if Ripple’s developments, including these papers, are enough to allay criticisms of Ripple and its arguably hot-and-cold relationship with XRP. It’s worth noting there are some who have been skeptical of its tech from the beginning, and that these criticisms have only grown as XRP has seen more attention.

Critics are often supporters of other blockchains, like bitcoin or ethereum, which seek to use decentralization in a different way. (Some even going as far as to argue the technology “serves no purpose” as an alternative to today’s global, financial technology.)

Thomas, though, is unfazed by these negative assessments.

In statements, he sought to position critics as out of touch, while remarking that the nature of the technology is that it can improve and respond to market needs.

“Critics are always one step behind,” Thomas told CoinDesk. “When I started at Ripple, all sorts of things didn’t happen. It wasn’t open-source, we didn’t have validators, but over time it’s grown and we’ve been able to accomplish all of these things.”

In this way, Thomas sees the papers as just another way Ripple is responding to market needs, whether that’s ensuring it’s providing an alternative to SWIFT or that its cryptocurrency is secure.

As Thomas views it, curbing centralization of validation is what they’re working on next, even going as far as to argue that Ripple will be “far more decentralized” than bitcoin in the future.

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Bafin Clarifies Stance on ICOs as More Germans Ask About Tokens


Revelation: Tokens Are Securities, Shares and Units of Account

In an advisory letter, the Bundesanstalt für Finanzdienstleistungsaufsicht (Bafin) provides some basic definitions of ICOs and related terms. A company or an individual issues tokens and sells them in exchange for traditional currencies, such as the Euro, or more commonly virtual currencies like bitcoin or ether, the agency explains. Bafin educates the public that tokens are typically generated using distributed ledger or blockchain technology, and ICOs are used to raise funds for startup projects.

Bafin Clarifies Stance on ICOs As More Germans Ask About Tokens

The federal financial supervisory authority advises participants in ICOs to check and follow rules applicable to regulated financial instruments, such as securities. Individuals and businesses should approach Bafin in case they have any doubts about regulations. The note clearly states that for regulatory purposes, ICOs, tokens, coins and cryptocurrencies are subject to the existing provisions in the field of securities supervision and other relevant national and EU laws.

Companies should also fulfil any obligations under the Banking Act and the Capital Investment Code, the Insurance Supervision Act and the Payment Services Supervision Act. Bafin’s Department of Licensing will investigate cases in which special permissions may be required. If relevant regulatory requirements are not met, respective projects or transactions may be prohibited. In addition, such violations may constitute administrative offenses and result in fines.

The legal classification of tokens requires precise examination, Bafin says. Depending on their design, tokens can be defined as securities, shares or used to issue derivatives. The supervisory body will determine their status on a case-by-case basis after studying their features. German regulators also note that a token can be both viewed as a financial instrument and a unit of account. In order to be classified as a security, it should be transferable and tradable on cryptocurrency trading platforms referred to as financial markets. Bafin recognizes that token transfers are documented on a distributed ledger or using blockchain technology.

Majority of Germans Know About Bitcoin

Over two thirds of Germans know about bitcoin, with one in five admitting interest in using the cryptocurrency, a recently published study revealed. The survey was conducted by Germany’s digital association Bitkom, which said curiosity and dissatisfaction with official monetary policies were the main reasons for the findings.

Bafin Clarifies Stance on ICOs As More Germans Ask About Tokens

Rapid gains in bitcoin, but also reports of spectacular thefts, frauds and market fluctuations, have caught the attention of German citizens. Now, 64% of them admit they have heard of the most popular cryptocurrency, twice as many as in 2016. Despite that, only 4% have used it so far, almost a fifth of the respondents, 19%, say they can imagine acquiring bitcoin. According to Bitkom’s Chief Executive Bernhard Rohleder:

Bitcoin and other cryptocurrencies are good examples how digitization can change the financial industry.

Discontent with policies of central banks and the search for alternative currencies are major drivers of interest in bitcoin (37%). Desire to use cryptocurrency in online payments is another important factor (31%). Only 6% say they have been motivated by expectations to increase their wealth through rising bitcoin prices.

“Cryptocurrencies will enable micro transactions in the Internet of Things in the future. The service of charging an electric car, for example, can be automatically agreed and paid for without the driver having to deal with it”, Dr. Rohleder says.

A quarter of those interviewed (26%) complain that acquiring bitcoin is too complicated because one needs access to a cryptocurrency exchange. 19% of Germans admit they don’t know how and where they can buy bitcoin. One in five is afraid that crypto holdings can be stolen.

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What Venezuelans Are Saying About the Petro


Social media has been abuzz since Tuesday’s initial sale of the forthcoming Venezuelan government-backed cryptocurrency, the petro, though reviews are so far mixed.

So far, Venezuelan president Nicolas Maduro has claimed that the country had collected a whopping $735 million during the first day of its presale for the new cryptocurrency. In spite of a lack of proof, the claim came amid a splashy, nationally-televised broadcast where Maduro himself declared that the country has “taken a giant step into the 21st century.”

Venezuela’s government first unveiled the petro back in December, setting up a dedicated government agency to oversee the development of the project and build up an ecosystem for it within the South American nation. In anticipation of the sale, the government published a white paper, a buyer’s guide and, most recently, newly crafted rules for creating cryptocurrency exchanges within Venezuela.

The initiative has sparked a range of tweets in support – and in opposition – to the idea, buoyed by a dedicated hashtag, #AlFuturoConElPetro (which translates to “to the future with the petro”).

For instance, one advocate tweeted, “The new economic era for Venezuela begins. The newborn criptomoneda called el petro has many challenges ahead, but its armoring will be the potential for the progressive regularization of the economy.”

Perhaps unsurprisingly, members of the country’s National Assembly – which is controlled by political parties in opposition to Maduro – have blasted the move, including in statements issued just hours after Tuesday’s broadcast event.

Among those taking a public stance against the petro is Marialbert Barrios, a National Assembly deputy who asked: “Who in their right mind buys a [cryptocurrency] from a government that does not pay the foreign debt, with an economy in hyperinflation?”

The pushback from the Assembly comes amid an acute political standoff between opposition forces and the Maduro government. According to Reuters, opposition parties are expected to boycott an upcoming presidential election in April, which they argue is rigged in Maduro’s favor.

Deputy Rafael Guzman called the cryptocurrency “fraudulent,” reiterating past arguments that it will fuel illegal activity.

“[The] petro is a fraudulent, illegal and invalid mechanism for the government to continue its shady business and money laundering, because it is not known where those resources will come from,” he wrote.

Base of support

In contrast with the denunciations from the opposition-controlled Assembly, various offices within the Venezuelan government have used their social media presences to boost agencies that promote the petro.

Among those is SENIAT, Venezuela’s tax and revenue authority, which claimed that residents can use the petro to pay their tax liabilities, among other things.

“The state will accept the payment of national taxes, duties, fees, contributions and public services in petro,” the agency wrote.

Mariana Ribera of Infocentros, which operates a network of IT centres throughout Venezuela, also celebrated the move on Twitter.

“This initiative, this new South, gives us an endless range of options and opportunities in the national and international market, opening new Horizons that have no limits,” she wrote.

Other tweets in support of the move include those from the Venezuelan consulates in Hong Kong and Vancouver.

Maduro’s official Twitter account has seen a number of related posts in the past day, including one from Wednesday afternoon that played back footage from Tuesday’s broadcast.

Local bitcoiners raise concerns

Yet, turning back to the opposition, politicians in Venezuela aren’t the only ones pushing back against the idea.

While the skepticism voiced by Venezuelan opposition lawmakers could be seen through the lens of the ongoing political crisis in the country, the critiques put forward by members of the local bitcoin and cryptocurrency community are more nuanced and focused on the fact that the Maduro government will likely wield significant control over the cryptocurrency it’s creating.

In a post on a local Facebook group, one commentator wrote that it is “really worrying” that the government would exercise such a large degree of control, especially considering the wide-reaching push for people to start using it.

The fear, he said, is that the government will have “the absolute power to manipulate and adulterate the blockchain at will over petro.”

Others aruged the petro isn’t much of a decentralized cryptocurrency at all. “That’s what makes the petro a debt bond and not a crypto in itself, plus the danger of these guys behind that project,” one community member wrote.

Yet another observer offered a broader take, posting in the Facebook thread:

“Tyranny is that: [a] monopoly of power in the hands of a political class that only cares about its space.”

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India Teams with Canadian Blockchain Institute for Digital Economy Push


One of India’s leading tech industry organizations is partnering with the Blockchain Research Institute (BRI) to help spur a digital economy within the world’s second most-populous nation.

India’s information technology trade organization, the National Association of Software and Services Companies (NASSCOM) will work with BRI researchers backed by the Canadian government to help developers learn more about blockchain platforms in preparation for creating and launching tools within the nation.

To that end, the two groups have signed a memorandum of understanding (MoU) establishing a financial and research partnership. According to media platform INC42, each organization will invest in webinars and other types of seminars whereby researchers within the BRI can share their knowledge using case studies with Indian government departments and other entities.

NASSCOM chairman Raman Roy said that, while he is delighted to launch a research initiative, he understands that encouraging blockchain use in the country will be a long-term effort, rather than “a plug and play we can do tomorrow,” according to the International Data Group’s CIO India.

To this end, the MoU splits the research push into two parts, said BRI’s Don Tapscott. He explained:

“We need to create an awakening in India, showcase the power of blockchain and we can do this by looking at incentives/discounts to organizations who do this. That’s phase one.”

Phase two would build a blockchain institute in India, which will be specifically aimed at helping grow the digital ecosystem in the state of Telengana, according to INC42.

CNN reports that this center would “provide high-end technology capabilities” to the state, as part of the BRI’s push to “build blockchain-based economies around the world.”

Stepping back, these moves would appear to bolster India’s goal of putting electronic health records, land records and digital certificates on a blockchain, as stated by Amitabh Kant, the CEO of the National Institution for Transforming India, a government-run think tank.

Indian flag image via Shutterstock
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