Top Crypto News – 21/03/2018

How Much Should A Blockchain Cost? The Compelling Case for Higher Fees

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According to a group of researchers, cryptocurrency users are a bunch of free-loaders.

Well, maybe they wouldn’t go that far, but they argue users aren’t paying for certain data they should be paying for, and in turn, are putting the growth of blockchain networks at risk.

At least that’s the finding put forth by a new paper that outlines a system for how higher fees could be charged based on the amount of data users need to store on a blockchain and the amount of time their data needs to be stored.

It’s a controversial finding since rising transaction fees have set many cryptocurrency communities into infighting as various stakeholders debate the solutions for scaling blockchains and pushing fees down.

For instance, bitcoin’s notorious scaling debate many times circled around growing transaction fees, which hit an average of $52 at their highest but have since fallen significantly to $1.30, according to BitInfoCharts.

Still, IOHK research fellow Alexander Chepurnoy believes part of the problem is that miners just don’t have good ways of pricing their services accordingly.

Chepurnoy told CoinDesk:

“Miners are judging fees on bitcoin for bandwidth consumption, so for transaction size, and that’s it. The idea of our research is we have few a different things we need to charge for.”

Indeed, because of the way transaction fees are decided in most cryptocurrencies today, Chepurnoy said, users are incentivized to overuse some data, making blockchain full node software grow and become more cumbersome to spin up and run – which he argues is a bad thing, since full nodes are the most secure way to interact with the bitcoin network.

The pool of data tracking who owns which cryptocurrency is called “state,” and this is the data the researchers propose users pay for. (State is typically stored in a special corner of computers called RAM, a type of storage that allows for the easy retrieval of the data, but it also makes that data more expensive to store.)

Blockchain states tend to grow larger and larger over the years as more people adopt these systems and use them more for transacting. Bitcoin’s state, for example, has increased by about five times since 2014, while ethereum’s is growing even faster.

But by slapping a fee on this data storage, Chepurnoy’s hope is that users will be more cognizant of only storing what data is a must, in turn, shrinking the rate at which the state grows.

Why pay more?

For some, paying extra fees would seem to make cryptocurrencies less attractive (as they’ve generally been touted as less costly ways of transacting), but actually, Chepurnoy’s goal is the exact opposite: to make cryptocurrencies easier to use.

At least, easier to use in their most secure form – by running a full node.

As mentioned previously, this becomes an issue as adoption and the number of transactions increases. Already, it can take anywhere from a few days to weeks to get a bitcoin full node up and running, and the size of the state takes up roughly the amount of data a normal laptop holds.

And this isn’t just a problem for bitcoin, ethereum’s state is about three times as big.

Chepurnoy sees these fees as an “economic solution” to “unreasonable” data growth, slashing transaction data would make it easier to run a full node.

He continued, telling CoinDesk:

“If cryptocurrencies are for people, not just for banks, then it should be possible to run full nodes on normal laptops today.”

While many blockchain developers are working on solutions to this problem, Chepurnoy believes increasing fees could be a secondary measure for limiting the amount of data stored on the blockchain.

Keeping crypto alive

But coming up with a sensible fee scheme is easier said than done. Chepurnoy admits it’s “trickier” to put into practice.

Because one way of solving this issue is to make users pay for how long they’d like their state to survive on the blockchain. But this would require users be able to predict exactly how long their state will exist in advance – which they many times can’t do.

“Usually you don’t want to think about how long your money will be alive,” Chepurnoy admitted.

As such, the researchers propose an algorithm, what they call “scheduled payments,” which allows users to add more fees to a transaction over time, in this way, extending the life of the transaction’s state.

Yet, another hurdle that the scheme might face is the grueling process of adding new mechanisms to cryptocurrency systems. For instance, Bitcoin Core developers are more choosy when it comes to updating bitcoin with new features in an effort to protect the integrity and security of the cryptocurrency.

There was a little pushback at the Financial Crypto 2018 conference, where one member argued that adding fees on RAM would introduce “perverse incentives,” prompting miners – who are rewarded these fees – to censor the state for their own financial gain.

Still, Chepurnoy believes the proposal might get more attention from ethereum developers, who have considered a similar mechanism called “state storage rent,” and are dealing with a node state that’s growing at an exponential rate.

He stated:

“We need to avoid this infinite growth.”

Coins stacked disorderly image via Shutterstock
Written by CoinDesk.com

 

The NSA Has Been Tracking Bitcoin Users, Snowden Papers Reveals

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Not to be mistaken for another Jason Bourne thriller, the Edward Snowden papers show a US government/bitcoin connection. The Intercept is reporting classified documents leaked by Snowden prove that the US National Security Agency (NSA) in fact was keeping tabs on bitcoin users globally, as evidenced by a report that’s surfaced from March 2013. The timing is curious, with the ink barely dry on an executive order signed by President Trump to ban Americans from transacting with Venezuela’s Petro coin.

In true spy agency style, the report is filled with code names and numbers as well as the cataloging and cross-referencing of data that ultimately helped them to “track down the senders and receivers of bitcoins,” top secret excerpts reveal. The NSA called its bitcoin spying project Oakstar, and the initial focus of the mission was counterterrorism-focused.

It doesn’t appear that the NSA was randomly targeting people. They at least appear to have been monitoring groups that were using the level of anonymity allowed by bitcoin transactions for clandestine purposes, such as money laundering activities. If you’ve ever wondered what a top-secret NSA entry looks like, here’s a glimpse:

“[NSA agent] is hoping to use the access for their mission of looking at organized crime and cyber targets that utilize online e-currency services to move and launder money. These illicit finance networks provide user access to international monetary systems while providing a high degree of anoymity.”

Here’s how it went down. The NSA was seemingly able to use the sophisticated tools available to the US spy agency to collect and analyze internet data, capabilities that were bolstered by let’s call it a super software program that protected the identity of users.

Bitcoin was one of three areas of activity that were being watched, in addition to Liberty Reserve, which has since been shuttered amid money laundering with cryptocurrencies, and one other. Even though bitcoin isn’t the most anonymous cryptocurrency out there, it was the “No. 1 priority” of the NSA.

Network Access

While the blockchain is a public ledger, the NSA didn’t stop there. They apparently gained access to user computer systems, collecting information such as passwords, user sessions and a media access control address. They also seem to have captured personal info such as billing details and IP addresses. The agency was set on uncovering the connection between what they called “bitcoin targets” and the data they had.

As for the timing of the reveal, it could just be a coincidence. But regardless, the more that the government tries to get its grips on the blockchain movement, the more it seems to only embolden the cryptocurrency community to distance themselves further from the centralized financial system.

Featured image from Shutterstock.

A16z, USV Lead $12 Million Funding for CryptoKitties

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The team behind the viral ethereum app CryptoKitties is breaking away from its parent company, Canada-based Axiom Zen, and raising $12 million in venture funding to go it alone.

Announced Tuesday, the app’s Series A round was led by venture capital firm Andreessen Horowitz, whose portfolio includes a variety of tech companies such as Coinbase and Airbnb, and Union Square Ventures, a New York-based firm that has stakes in Coinbase, OB1 and other industry startups.

Still, the news is a milestone for the ethereum-based app, which has enjoyed tremendous popularity since its launch in December 2017. CryptoKitties allows users to buy, collect, breed and exchange unique digital cats built on ERC-721 tokens, and users have done so, even congesting the ethereum network and delaying token sales due to demand.

A spokesperson for Axiom Zen said CryptoKitties, which will retain at least 20 employees, aims to “make blockchain technology accessible and relevant to everyday consumers,” and believes “digital collectibles can act as a constellation for identity and self-expression.”

“They can be wonderfully representative of who we are and what’s important to us,” the representative told CoinDesk in an email, adding that the people behind CryptoKitties believe “the world in the future will involve reputation-based identity powered by the blockchain.”

Axiom Zen’s spokesperson said the proceeds will primarily be used to “dramatically expand” the CryptoKitties team “as we figure out how to scale the blockchain to a billion consumers.”

Token Summit founder and advisor to Coin Center William Mougayar, who is an angel investor in company, told CoinDesk he thought the app could be a leader in what will turn out to be “the year of native digital assets on the blockchain.”

“The team and the company behind CryptoKitties are in a leading mindshare position and capable of increasing their market share in the consumer gaming sector,” he said.

Axiom Zen said in its announcement that its other angel investors include Coinbase co-founder Fred Ehrsam, AngelList founder Naval Ravikant and Zynga founder Mark Pincus, in addition to senior figures at BitFury, Y Combinator, Tinder, Earn.com, Lending Home, Compound VC and Entrepid.

Likewise, the company noted that it had obtained seed funding from the Digital Currency Group, YesVC, Version One and CAA Ventures.

Going forward the firm has high hopes that it can turn its brand of unique digital items into something that can appeal to larger enterprise partners and new business.

A representative told CoinDesk:

“We think crypto-gaming and crypto collectibles can be bigger than cryptocurrency,”

Kittens image via CryptoKitties
Written by CoinDesk.com

 

Hardware Wallet Demand in South Korea Grows Exponentially

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Regional Reports Detail South Korean Hardware Wallet Demand is Rising

South Korean cryptocurrency traders want to keep their digital assets safer after a few scares from local exchanges in 2017. The cryptocurrency trading platform Upbit, and Bithumb were both targeted last year with attempts at breaching the firm’s hot wallets. Further, the recent Coincheck exchange hack in Japan has frightened South Koreans as well, which has bolstered more individuals to get their hands on some form of cold storage.

Many cryptocurrency enthusiasts worldwide use cold storage devices like Trezor, Ledger, Bitbox, and Keepkey. However, South Koreans also have a few local choices to choose from when it comes to hardware wallets and more in the near future. The cold storage hardware producers selling products in South Korea or plan to launch this year include Key Fair, Penta Security, Coldwelt, and K-Sine.

Two Local Choices

Key Fair’s CEO Lee Chang-keun has created the ‘Key Wallet Series’ that utilizes its own developed algorithm tethered to a dedicated security chip. There are also features called “Pro and Touch” which uses fingerprint recognition and NFC communications with smartphones. The Key Wallet can hold multiple cryptocurrencies including bitcoin core, ethereum, bitcoin cash, dash, ethereum classic, ripple, and litecoin.

Hardware Wallet Demand in South Korea Grows Exponentially

Another company offering cold storage devices in South Korea is Penta Security although the products beta testing is due to finish in June of this year. Penta’s offering is a hardware wallet that resembles a credit card which uses advanced key storage and offers multiple authentication features. This includes a one-time-password, two-factor authentication and being tied to the user’s mobile device.

Hardware Wallet Demand in South Korea Grows Exponentially

Two More Hardware Wallet Manufacturers Plan to Offer South Korean’s Cold Storage Products

Two other companies planning to launch cryptocurrency hardware wallets to the Korean market includes Kay Sine, and Coldwelt. Kay Sine’s subsidiary S-Tech Co., Ltd will launch the ‘Touch X-Wallet’ later this year which uses biometric fingerprint authentication. It also provides an electronic signature function through BLE communication with a smartphone application.

Hardware Wallet Demand in South Korea Grows Exponentially

The French company, Coldwelt, will also be selling its hardware wallet to Koreans later this year with a device that is similar to Ledger’s Nano S. According to Coldwelt, the product will hold up to 20 different cryptocurrencies.

Written by Bitcoin.com

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