Top Crypto News – 19/07/2018

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume


Bitforex, Coinmarketcap and the Case of the Fake Volume

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume
Everything about Bitforex looks off – including its logo

Fake trading volume, defined as buy and sell orders designed to artificially create the impression of demand, are a running motif in the cryptocurrency world. For as long as anyone can remember, various exchanges have been accused of wash trading and inflating their volume. It’s the equivalent of a half-empty airliner placing its passengers in window seats to give the impression that the plane is full. Creating fake volume may sound like a relatively minor transgression, but it can have major ramifications for traders.

“Cooking the books” by falsifying activity lures traders into signing up for an exchange that may be untrustworthy, insecure, and far less liquid than it looks. Any exchange that is willing to create false volume may have few qualms about committing more egregious crimes against its users. Until recently, Bitforex was a little-known exchange, languishing around 70th in the world by trade volume. It now stands at 12th according to data provided by Coinmarketcap, with 24-hour volume of $227 million.

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume

Crypto Exchange Ranks calls out Bitforex

In a detailed and compelling blog post, Crypto Exchange Ranks outlines its case for Bitforex having generated fake volume. Aside from the fact that Bitforex’ trade volume has multiplied by almost 100x in recent weeks, and now stands at more than 10x that of established exchanges like Kraken and Kucoin, there’s its modest social media presence that includes less than 2,000 Twitter followers. The Singapore-based exchange does have 65,000 Telegram followers, but much of this can be attributed to the usual spate of bots coupled with airdrop token chasers.

How Coinmarketcap Incentivizes Exchanges to Report Fake Volume
Bitforex’ claimed trade volume according to its website

Bitforex claims in its Twitter bio to be licensed in the EU, but there is no evidence to support this; in fact its website states that the platform is licensed in the Seychelles and Philippines. The site also includes such bold claims as having 1.8 million users, to be attracting 15,000 new users a day, and to have amassed $1.5 billion of trade volume, taking it as high as number five on Coinmarketcap’s exchange rankings.

Bit Who?

Crypto Exchange Ranks isn’t buying Bitforex’ claims, writing “We see that the number of UU [unique users] of BitForex is 29K. In turn, Kucoin has 889K unique users. Kraken has 666K unique users. KuCoin’s number of UU is 30 times higher than that of BitForex, Kraken’s number of UU is higher by 23 times.” It concludes:

As we have already discovered through SimilarWeb, the exchange receives the bulk of the new traffic through the referral source — CoinMarketCap; thus, the platform immediately attracts attention. Here’s the explanation: creating and implementing marketing and communication strategies and building a community in an organic way is more expensive than forging trade volumes.

While CMC is unlikely to be abetting Bitforex, in publishing the exchange’s figures without question, it is unwittingly complicit in the deception. Other crypto comparison sites have been less eager to report the sort of inflated figures produced by the likes of Bitforex, regardless of what the data pulled by API might say. With its shoddy web design, poor English, and almost certain fake volume, Bitforex does not inspire confidence. But until Coinmarketcap makes a stand against blatantly falsified volume, exchanges will be incentivized to cheat the system and lure in gullible traders eager to try out the next big platform.

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These Digital Monsters Live on Ethereum, But They’ll Fight on Zilliqa


Before my one and only “mon” reached level 4, I was out of ether.

Such was the end result of my first experience with Etheremon, a game inspired by Pokemon and built on the world’s second-largest blockchain, ethereum. I had around $15 worth of ether to spare, so I decided to try it out, eventually arming myself with a cute, fire-themed creature called Kyari.

But I quickly ran into an issue with the blockchain game. Namely, with $15, I never got a chance to move on to more interesting gameplay: battling other users’ mons, “evolving” my mon into more powerful forms, laying eggs or making trades.

Every action, from “catching” the mon (in reality a non-fungible ERC-721 token) to “training” it in gym sessions with other mons (i.e., altering the data associated with that token), had cost the equivalent of a dollar or two.

The reason is that every update to Etheremon’s smart contracts calls for “gas,” part of a complex fee mechanism that incentivizes the miners who maintain the ethereum blockchain. Making matters worse, these transactions often took several minutes to complete.

Such problems – transactions that cost too much and take too long – are known by the shorthand “scalability” in the blockchain world, and they’ve caused severe headaches for game designers who want to use a decentralized platform like ethereum.

Poor user experience – which also involves having to buy ether and install a browser extension that can connect to the blockchain – has stunted adoption. Etheremon is the second-most popular ethereum-based game, but that’s not saying much. At the time of writing, it’s had just 209 users over the previous 24 hours, according to DappRadar.

At one point, gas costs rose so much that Etheremon’s developers had to take drastic action.

“It became super, super expensive, and we saw our daily active user drop a lot,” co-founder and business development director Nedrick Ngo told CoinDesk.

As a result, the team moved “battles” – in which users pit their mons against others’ for experience points and bragging rights – off the ethereum chain and onto centralized servers.

Partially re-centralizing a decentralized game seems like it’s missing the point, however, so Etheremon announced earlier this month that it is planning to move much of the gameplay to a new, soon-to-be-launched blockchain protocol called Zilliqa (both Zilliqa’s and Etheremon’s teams are based in Singapore).

But in a decision that may reflect an emerging trend in the development of decentralized applications (dapps) such as Etheremon, the designers don’t plan to move the game’s assets. The tokenized “mons” that encode data such as level, experience points and evolutionary form – data that gamers have earned through many slow and costly actions – will stay on ethereum for the time being.

In other words, Etheremon will be one game on two blockchains: a zippier, more scalable chain on top, allowing users to play the game quickly and cheaply; and an (arguably) more secure chain below, providing users with the reassurance that their hard-won assets are safe from attack.

As Ngo put it:

“Zilliqa would work as a side-chain for us.”

Zilliqa: sharding from launch

Ethereum’s developers have a number of scalability projects in the works. But according to Ngo, Etheremon’s team and its users can’t wait around for those to be implemented.

“They have to commit Casper and then proof-of-stake and then sharding, so it will take a long time,” he told CoinDesk.

Zilliqa, by contrast, is rare if not unique in the world of blockchain protocols, in that it is integrating sharding, a technique that’s been used to manage more traditional databases for decades, from the get-go.

Amrit Kumar, Zilliqa’s  co-founder and head of research, said the technique has allowed the network to process 2,488 transactions per second in tests, whereas ethereum, right now, can manage perhaps a couple dozen.

Kumar explained how sharding works in a blockchain network using an example.

Given a network of 10,000 computers (known as “nodes”), he said, a sharding protocol would split those up into 10 smaller networks (or “shards”) of 1,000 nodes each. Each shard would then process a subset of the total transactions. Every time Alice sent some cryptocurrency tokens, for example, shard A would process the transaction. Every time Bob sent some, the transaction would go to shard B.

This technique is relatively new territory for blockchains, but Zilliqa’s team brings serious academic credentials to bear on the problem.

Two authors of an early paper laying out a blockchain sharding protocol are involved: Zilliqa chief scientific advisor Prateek Saxena, and Kyber Network CEO Loi Luu, who advises the project.

Kumar said Zilliqa, which is expected to launch before the end of the third quarter, aims to be “the go-to platform for applications which require high throughput and high scalability.”

Bedrock ethereum

Scalability and throughput are not the only considerations for Etheremon’s developers, however.

Users want gameplay to be fast, but they want to be sure there’s no risk of losing their lovingly bred, trained and evolved monsters. The mons represent a good deal of accumulated time and expense for some users, and therefore there are currently no plans to migrate these tokens over to a new chain.

Instead, the data from gameplay on Zilliqa will periodically be synced over to these tokens.

“We actually feel that keeping all the in-game assets on the ethereum network is very secure,” said Ngo.

Kumar said he understood why Etheremon would keep in-game assets where they were:

“Ethereum is certainly an established network and we do understand that there’s still some benefit of using ethereum.”

He argued, however, that in certain ways Zilliqa offers more security than ethereum, because Zilliqa’s non-Turing complete language, Scilla, means “you won’t be able to write a buggy contract like [the] DAO,” the ethereum-based victim of an infamous 2016 hack. According to Kumar, because Scilla is not as complex as ethereum’s language, Solidity, it is easier to test for vulnerabilities.

On the other hand, Zilliqa’s method of reaching network consensus, practical Byzantine fault tolerance (PBFT), is potentially more vulnerable to certain kinds of attacks than ethereum’s proof-of-work method. Unlike bitcoin or ethereum, which are theoretically secure so long as the majority of the nodes follows the rules, PBFT presents a potential limitation, in that it requires two-thirds of nodes to be “honest.”

In other words, PBFT runs the risk not just of 51 percent attacks, but 34 percent attacks. Although, Kumar argued that the situation is actually more complicated, since it’s possible to attack a proof-of-work blockchain without controlling a majority of nodes.

Whatever the actual security advantages of keeping Etheremon assets on ethereum versus moving them to Zilliqa, this sort of architecture – in which a slower, battle-tested chain is used to store assets while a top layer processes transactions – may be catching on.

Loom Network offers tools to build dedicated sidechains for decentralized games that are anchored to ethereum, and has begun exploring shared sidechains that host multiple games.

“It’s really important to have that decentralized base layer of ethereum,” Loom Network co-founder James Duffy told CoinDesk in May, “because then you can use it like the high court.”

At the moment, Etheremon and Zilliqa have yet to figure out how exactly to juggle two chains, but Ngo was optimistic, telling CoinDesk this is “just the first stage of the collaboration.”

Etheremon gameplay image courtesy of Etheremon
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No Matter How You Slice It — Token Assets Are Coming to Bitcoin Cash


Bitcoin Cash Community Greeted by Two More Token Creation Systems

No Matter How You Slice It — Token Assets Are Coming to Bitcoin CashThe Bitcoin Cash (BCH) network has seen a lot of development since the last hard fork which debuted the reenabled Satoshi OP_Codes and the upgraded default data-carrier-size. The BCH community and developers have been bolstering the idea of tokenization on the BCH chain. There’s been a bunch of ideas so far with Andrew Stone’s GROUP proposal and Joannes Vermorel’s Tokeda paper. Then this week Bitmain developers revealed the Wormhole project that utilizes a fork of the Omni Layer. Then on Wednesday, two more token ideas have been introduced for the BCH chain — One concept from the developers, and another proposal written by a group of six developers including Jonald Fyookball, James Cramer, Unwriter, Mark B. Lundeberg, Calin Culianu, and Ryan X. Charles.

Colored Coins & Cryptonized Cash

No Matter How You Slice It — Token Assets Are Coming to Bitcoin CashThe creators of the platforms and the Cashpay wallet explained that they are bringing the Colored Coins protocol to the BCH network. The Colored Coins (CC) protocol debuted for the BTC back in 2013 network by adding specific metadata to the blockchain. This in turn created ‘representative tokens’ or ‘colored coins’ that can represent any physical or digital item like stocks, bonds, gold and silver backed coins. The Colored Coin protocol will allow the ability to create a currency called Cryptonized Cash (CC) that can be used with Cashpay for discounts and exclusive products.

“Further utility will be added as grows — There will be a total of 1 billion CC, without the ability to add more in the future,” the developers emphasized on the social media platform “The tokens are always redeemable on — One of the most important questions to answer when proposing adoption of a certain framework is what are the use-cases?

Luckily with colored coins, the answer is endless. Colored coins can represent vouchers, coupons, tokens, altcoins or other assets. You can tokenize whatever you want. The first real-world use-case is Cryptonized Cash (CC), an incentive program on which is live right now.

The Simple Ledger Protocol

Following the Colored Coins concept, another paper was revealed to the public written by Ryan X. Charles, Mark B. Lundeberg, Calin Culianu, Jonald Fyookball, James Cramer, and the developer Unwriter. The paper called, “Simple Ledger Protocol: A token system for Bitcoin Cash,” details a proposal for the BCH network that handles tradeable redeemable tokens without a consensus upgrade. Enhancement proposals such as GROUP have not been able to obtain consensus needed to change the base protocol, explains the group of developers. Simple Ledger Protocol (SLP) utilizes metadata in OP_Return transactions and the SLP creators believe consensus can be achieved by “token users and market participants adhering to a prescribed set of simple rules.”

No Matter How You Slice It — Token Assets Are Coming to Bitcoin Cash
A diagram from the SLP paper.

“Because SLP builds on the transaction chain of the existing Bitcoin framework, users can easily verify transactions with SPV/lite wallets within practical boundaries,” the paper explains.

Full validation of a transaction back to its token genesis is possible by supplementing existing transaction-retrieval infrastructure with the integration of SLP consensus rules.

The developers say that the SLP system will be permissionless, simple, robust, non-invasive, extensible, and an implementation plan for rapid ecosystem support. The 26-page paper is extremely detailed and it observes multiple subjects that need attention such as wallet implementations, token address format, proxies, utilizing the Bitdb network, economic implications, and more. The group of six developers revealed they were motivated to present their own token solution and the key to its success will be simplicity. “But will also depend on our taking action to foster the support of the ecosystem,” the SLP programmers add.

No Matter How You Look at It, Token Assets Are Coming to the Bitcoin Cash Network

Of course, the Bitcoin Cash community was pretty thrilled about two more tokenization projects using the BCH chain. One user on the Reddit forum r/btc who enjoyed the SLP paper notes that there has been quite a lot of these proposals lately, “I believe we’re hitting some ‘tokenization proposal fatigue.” Nevertheless, enthusiasts dig the competition and the amount of development dedicated to bringing tokenized assets to the Bitcoin Cash network. The community may end up using a bunch of different color coin methods down the line or perhaps they may just use the superior tokenized system. Whatever the case may be, the race is on to get a system that creates representative tokens using the security of the BCH protocol.

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