UBS: Bitcoin Is Too ‘Unstable and Limited’ to Function as Money
Investment bank UBS thinks bitcoin is neither money nor a viable asset class – not yet at least.
The Switzerland-based company’s assessment was featured in a research report on the world’s largest crypto by market capitalization, which was circulated to clients and released on Thursday.
Published by UBS strategists, the report concludes that bitcoin “falls short of criteria that need to be satisfied to be considered money.” It explains,
“Fixed supply and unusual demand dynamics make the system susceptible to high price volatility, in turn making it difficult for bitcoin to step into the role of money or to be a viable new asset class.”
However, the authors don’t rule out the possibility that bitcoin could one day become these things.
They argue that if bitcoin can achieve scalability and regulatory support, it could one day become “a viable payment mechanism and/or a legitimate asset class in which even the most conservative and traditional investors can participate.”
Likewise, they note their plans to “keep on top of these developments,” as “many” see promise in cryptocurrency’s underlying blockchain technology.
According to the report, the research was the banking giant’s answer to its investors, who are becoming increasingly interested in the cryptocurrency space.
“We have received many questions on the subject, which we hope to address in this educational piece,” the authors wrote in the publication.
The authors’ findings were based on comparisons of bitcoin with “macro variables and its performance against various asset classes.” They frequently draw parallels between bitcoin and online payments provider PayPal, and conclude that bitcoin “diffusion” could follow trends in online payments.
This is not the first time UBS has expressed a cautious view on cryptocurrency. In 2017, it declared cryptocurrencies a “speculative bubble” in a report due to sharp rises in price at the time. Nonetheless, the bank has consistently been bullish on blockchain, and advised investors in the same report that “blockchain is likely to have a significant impact” on a variety of industries.
SBI Crypto Investment, a subsidiary of Japanese financial services group SBI Holdings, has acquired a 12% stake in North Carolina-based Clear Markets, Nikkei reported Tuesday.
While the acquisition price was not disclosed, the news outlet estimates that the stake “is likely worth about 1 billion yen ($9 million),” elaborating:
Although digital currencies are more volatile than other asset classes, a derivatives market for them that can hedge against risk remains undeveloped. SBI Crypto therefore wants to build a platform that will allow institutional investors to smoothly trade these instruments.
Last month, SBI Virtual Currencies, the crypto exchange unit of SBI Holdings, opened its Vtrade service to the public following a limited launch in June. The exchange currently supports XRP, BCH, and BTC, but plans to add ETH in the near future.
Thai Multi-Crypto ATM
Thai cryptocurrency exchange Coin Asset unveiled its crypto ATM at the Hybrid Summit on July 28 and 29, according to Prachachat Turakij newspaper.
CEO Sivanus Yamdee explained that the ATM allows customers to purchase and sell BTC, ETH, LTC, and BCH in amounts as low as 100 baht (~US$3). The company plans to add more coins in the future based on demand from customers. The ATM also allows withdrawals in Thai baht.
The machine has a large touch screen and prints out a receipt after each transaction.
Coin Asset has reportedly applied for a license with Thai Securities and Exchange Commission; the agency began accepting applications last week.
Huobi Plans to Achieve 30% Korean Market Share
Chinese exchange Huobi is planning to aggressively pursue the Korean market, according to Asia Economic news outlet. The exchange launched its trading platform in Korea in March.
At the Huobi Carnival 2018 event on August 2 in Seoul, Kim Young-chul, head of the Strategic Planning Division of Huobi Korea, announced the company’s long-term strategy. He said:
The number of members has grown rapidly to 200,000 members within two months after the opening of the virtual currency exchange…We aim to achieve 30% market share in the next year.
In addition, Kim revealed that Huobi Korea will conduct various blockchain-based businesses alongside its exchange business. It will also actively recruit talented people. In February, Huobi Korea announced that it was looking for an “Innovation Business Team Leader,” a position with a minimum annual salary of 100 million won (~$88,596). “This policy will continue…We will hire more talented people in the industry,” Kim detailed.
Written by Bitcoin.com
Philippine SEC Approves Draft Rules for ICOs and Crypto
All Entities Embarking on ICOs to Register With the SEC First
In February, news.Bitcoin.com reported that the Philippine SEC was developing a regulatory framework to govern cryptocurrency transactions. At the time, the financial regulator emphasized the need for legislation focused on ICOs in particular. SEC Chairman Emilio Aquino told reporters on August 2, in Manila, regulations will be set for the sale of tokens or cryptocurrencies issued by companies for the purpose of raising funds, the news wire reported.
The SEC stated 12 points in the proposed rules released on August 2. “Under the draft rules, the tokens issued by the startups or companies conducting the ICO may follow the nature of a security under Section 3.1 of the Securities Regulation Code, and therefore, these should be registered with the Commission and necessary disclosures need to be made for the protection of the investing public.” The SEC press release mentioned.
Study of the white papers of various ICOs that have been conducted within the Philippines shows that the proponents of such ICOs claim that the tokens being issued are not securities and are therefore not under the jurisdiction of the SEC, the regulator said. “Allowing this practice is proven dangerous to the investing public who are left with no clear recourse once the said ICOs are proven to be scams. Therefore, the SEC will put the burden of proving that the tokens issued through an ICO in the hands of the proponents by presuming that the tokens are securities unless proven otherwise,” the SEC stated in a press release. “The proposed rules are benchmarked from the rules in various jurisdictions and markets,” it concluded.
“The bottom line is we are looking at whether we would allow retail investors to participate,” Emilio Aquino told reporters on July 30. He also said the SEC requires all entities embarking on ICOs to register with the SEC first, the Philippine Star reported.
Aquino, who was appointed in June, is facing a new regulatory environment with the proliferation of cryptocurrencies, the newspaper outlined. But as former commissioner, he has been at the forefront of the SEC’s crackdown on investment scams. Aquino said the principle of scamming always involves the promise of investment returns that are too good to be true. In tightening the rules on ICOs, the SEC determined that cryptocurrencies are securities because they include an investment contract whereby a person invests his money and is led to expect profits.
Markets Update: Cryptocurrency Price Trends Turn from Bullish to Bearish
Digital Asset Prices Turn Bearish as the Entire Cryptocurrency Economy Loses $25 Billion USD
Bearish sentiment is starting to haunt cryptocurrency markets once again as many digital assets saw prices tumble today. Bitcoin Core (BTC)prices dropped to a low of $7,503 on July 31 as the currency’s trade volume had started to drift a bit lower after the price hovered around $8,125 the day prior. A large portion of other cryptocurrency markets followed suit with BTC as the top ten virtual currencies are seeing losses across the board of course except for tether (USDT).
Ethereum (ETH) continues to hold the second highest market valuation with a market capitalization that’s around $42.28Bn. One ETH is being traded for $418 and the market is down 7.6 percent today. ETH markets are followed by ripple (XRP) which is down 2.8 percent over the last 24-hours as one XRP is trading for $0.42 cents. Lastly, the fifth highest market capitalization held by EOS is also down 6.6 percent and the currency is trading at $7.13 per coin.
Bitcoin Cash Market Action
This Tuesday bitcoin cash (BCH) markets are seeing losses as well as BCH is down 8 percent over the last 24-hours. Bitcoin cash markets are also down 13.2 percent for the last seven days. One BCH is trading for $741, and the decentralized cryptocurrency has a market valuation of around $12.8Bn. The last 24 hours show BCH trade volumes are around $432Mn at the time of publication. The top exchanges swapping the most BCH today include Coinex ($106.53Mn), Huobi Pro ($69.38Mn), Okex ($64.81Mn), Binance ($46.80Mn) and Hitbtc ($34.79Mn).
The top currency traded with BCH on July 31 is tether (USDT) with 55.2 percent of swaps. This is followed by BTC (28.5%), USD (7.6%), QC (2.8), ETH (2.4%) and the KRW (1.2%). Bitcoin cash holds the fifth highest volume over the past 24-hours among all 1,600+ other cryptocurrencies.
BCH/USD Technical Indicators
Looking at the daily and 4-hour charts on Bitfinex and Bitstamp shows bears have grabbed the reins and still have a good portion of control. RSI levels are screaming oversold conditions (33), while the MACd has swooped down to -85. The SMA 100 is far higher now above the longer-term 200 SMA trendline which means BCH bulls may lose a bit more grip over the short term. Many traders can see looking at charts that the price was rolling sideways for close to three days and many were convinced of a bull flag after the inverse head & shoulders. But just before the dip sell orders on popular exchanges worldwide began stacking up. Looking at order books from the current vantage point BCH bulls have some high walls up until $775 but if they can manage to break that resistance we could return to previous levels. On the back side there’s solid support between now and $710 but unfortunately, books are thinner until $650.
The Verdict: Flat Volumes and Bearish Sentiment Brings Market Skepticism
Overall skeptics and bearish cheerleaders are hoping for some stronger dips and they just may get them. Volumes across the board for many cryptocurrencies has been getting flatter as each day passes. Traders and enthusiasts are now unsure the upcoming ETF decision will pull prices up until then for two reasons: One the Winklevoss Twins fund was denied again, putting a black cloud over positive vibes toward the Cboe ETF, and secondly everyone is unsure exactly when the Securities and Exchange Commission (SEC) will make their ultimate decision. This week the current market sentiment, and our price verdict, point to far more skepticism and shade towards bullish prices returning soon.
Written by Bitcoin.com
One Year Later, A Wave of Apps Is Emerging on Bitcoin Cash
Happy birthday, bitcoin cash.
Tuesday marks the one year anniversary of the first block on the crypto protocol that split from the bitcoin network, now the fourth largest by total value, after a years-long disagreement about the course the cryptocurrency should take.
For supporters, the main goal for the competing protocol was increasing the block size to allow more transactions, and in turn more users, all in an effort to make cryptocurrency competitive with more traditional payment rails. But whether or not that plan would work was very unclear, if not highly criticized.
Yet, over the course of the last few months, around the same time developers raised its block size parameter from 8 MB to 32 MB (bitcoin’s limit is ~1 MB), bitcoin cash has seen an influx of new projects, including social media and tipping methods, taking advantage of its blockchain.
And since many of bitcoin’s most active developers were adamantly against the tweaks bitcoin cash stood for, the developers behind the alternative protocol see these apps as proof their offering is competitive.
Looking through the applications that have sprung up, it’s clear that those drawn to bitcoin cash are trying to carve out a unique role for the cryptocurrency – one that aligns with the initial value proposition touted.
Many of the applications target users with cheaper, faster payments, like Blockpress, a social media platform, and Centbee, a wallet that uniquely integrates a user’s phone list.
But there’s also some work being done to make bitcoin cash a more complex blockchain, able to handle smart contracts and token launches.
“The tremendous accomplishments that the bitcoin cash community has managed to garner in a year of existence with a new ticker, wallets and an all-around ecosystem has been phenomenal, and we hope to continue and increase on this trajectory,” Eli Afram, founder of Bitcoin Cash Australia, an advocacy group for the software, told CoinDesk.
“There’s a lot happening. We truly have an app explosion in full effect.”
Space and fees
For many app developers, the lure to bitcoin cash is all about the protocol’s unique selling proposition – basically, more space.
Take for instance Memo.cash, a social media platform resembling Twitter, where users can post short messages that get stored on the bitcoin cash blockchain never to be erased. Since bitcoin cash allows for more data to be stored in each transaction, supporters argue bitcoin isn’t capable of supporting an app like Memo.cash.
“Many of these apps cannot work on the bitcoin network, simply because of certain limiting changes that have been made to the codebase. For example, the OP_RETURN function on bitcoin cannot take the same size payload as bitcoin cash, meaning an app like Memo would have a restrictive message size limit,” Afram explained.
On top of that, more space within blocks also means reduced fees for users sending transactions.
For GitCash, which launched just last month, this is integral since it allows users to tip – no matter how small the amount – developers for their work on Github. The project emphasizes that bitcoin cash’s model allows fees to stay low even if usage increase dramatically.
And for developers that work on open-source projects generally on a volunteer basis, this app will likely be a welcome development.
Yet, the timing for these apps that focus on fees could be off.
Many of these developers compare the fees on bitcoin cash to those of bitcoin during the latter’s most popular time period, whereby fees eclipsed $20 per transaction. But right now, bitcoin fees are rather low – sometimes even lower than those on bitcoin cash today.
Still, supporters say it’s still worth it to build on bitcoin cash since it’s future-proofed, meaning ready for a day when usage of the protocols picks up again.
Alejandro de la Torre, vice president of business operations at BTC.com, a mining and wallet provider focusing on the cryptocurrency, told CoinDesk:
“We think these community-driven networks can be very effective at moving the needle in the adoption of bitcoin cash as a medium-of-exchange, which is the primary reason it was forked and developed.”
But even while all this innovation happens, there’s a big downside to increasing the amount of data kept on a blockchain – namely, it could make it much harder for users to run the underlying infrastructure that makes bitcoin cash tick.
That’s why in bitcoin, many developers are heads down working on the lightning network, an in-progress layer for pushing transactions off-chain.
Despite these alternatives, bitcoin cash supporters think raising the block size is a better and easier solution.
“[Bitcoin cash’s] last hard fork increased the block-size to 32 MB, virtually eliminating the risk for any network congestion due to scaling and paved the way for a low-cost transaction super-highway,” de la Torre said.
He believes that by making that one small change, bitcoin cash will avoid scaling problems other blockchains have faced.
Referring to the crypto cat app that went viral and caused high fees and transaction backlogs late last year, de la Torre said: “I don’t think we’ll see the bitcoin cash network get clogged by CryptoKitties anytime soon.”
And for de la Torre, the fact that there’s so much space within bitcoin cash means that plenty of other long-heralded use cases for cryptocurrency might finally see some pickup.
“In countries such as Venezuela where monetary inflation is estimated above 40,000 percent, the utility of this new block space to open up fast, low-cost transactions as an alternative payment system to local fiat has been more than salient,” de la Torre added.
Yet, that hasn’t necessarily happened in practice so far – not for bitcoin cash, which only sees a fraction of the transactions the main bitcoin network sees and is worth about a tenth of bitcoin by market cap, but also not for bitcoin either.
And not only are developers thinking about high-value payments use cases, but the use case that garnered incredible attention last year – the initial coin offering (ICO) – is also being considered for bitcoin cash as well.
Pointing to a long-standing upgrade proposed by Bitcoin Unlimited developer Andrew Stone, Afram told CoinDesk: “There are teams racing to produce a token protocol that will enable countless new use cases, which I’m very much looking forward to.”
And a couple weeks ago, cryptocurrency mining giant Bitmain released a proposal for adding a token mechanism to bitcoin cash, perhaps eerily dubbed “Wormhole.”
The idea with behind these proposals is to make it possible to spin up new tokens on bitcoin cash.
But just as ICOs broadly have taken vast amounts of criticism, the idea is sparking controversyamong bitcoin cash users and developers too. Some have argued that the birth of tokens on the network will poorly impact the protocol and even worse, could introduce vulnerabilities that could put users at risk.
Still, that isn’t stopping several developers from trying to implement the upgrade into bitcoin cash’s next hard fork, coming in the fall.
As such, crypto tokens could be the next step towards differentiating bitcoin cash from its rival, bitcoin, and adding features that allow it to compete with even more protocols.
Birthday candle image via Shutterstock
South Korea Plans to End Major Tax Benefits for Bitcoin Exchanges
Stripping Away Tax Benefits
The South Korean government has announced its proposed Revised Tax Law 2018. In the official statement published Monday, the government wrote, “from next year, virtual currency handling businesses will be excluded from the industries eligible for the tax reduction for SMEs [small and medium-sized enterprises].”
News1 explained that crypto exchanges “have been considered as venture companies or small and medium-sized businesses for tax purposes until now,” allowing them to benefit from considerable income tax deduction. Citing other favorable tax treatments such as depreciation of assets acquired during the first four years, the publication elaborated:
Under the current tax exemption rules, income tax and corporation tax are reduced by 50% to 100% for five years for business startups, SMEs and venture companies.
Crypto Exchanges to Pay Higher Taxes
According to the news outlet, the government has decided to exclude crypto exchanges from the list of entities eligible for SME tax deduction “because the cryptocurrency trading business lacks the effect of creating added value.” The revised tax law will be submitted to the National Assembly and, if passed, will go into effect next year.
Crypto exchanges are currently liable to pay corporation tax of up to 22%, Seoul Finance described, adding that “considering that virtual currency exchanges earned huge amounts of money in the last year and earlier this year, it is estimated that the amount of exemption would be considerably large.” The publication conveyed that under the current setup:
Bitsum exchange, which is estimated to have net profit of over 250 billion won [~US$223 million] last year, should pay 54.4 billion won [~$48.6 million] in corporate tax but it is expected to save 27.2 billion won [~$24.3 million] since it receives 50% reduction.
However, “taxation on the sale of cryptocurrency was not included in the amendment bill…based on the judgment that more research is needed,” the publication emphasized. “The government has been considering imposing capital gains tax virtual currency trading profits since early this year, but no specific taxation bill has come out.”
Bitcoin ETF Rejection Sparks Firm’s Public Protest
Bitcoin EFT Rejected Firm Van Eck Protests Publically to SEC
In a letter to Dalia Blass, the SEC’s go-to on investment management and someone well familiar with the Bitcoin ETF quest prior to her tenure at the agency, Van Eck, one of the firms impacted by rejection, issued a public protest. It was written just prior to the latest SEC denial of the Winklevoss Bitcoin Trust.
Van Eck’s detailed response was recently published on the SEC’s website, and it pains in detail over issues often cited by agency leaders such as Ms. Blass, five in particular. “For the reasons stated above,” Van Eck concluded in the 13-page missive complete with graphs and charts, “we believe that our proposed ETF will operate consistent with the rules and requirements of the 1940 Act. Further, by offering investors exposure to bitcoin through a regulated investment product, we believe the proposed ETF will be consistent with the Commission’s mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”
Ms. Blass was appointed by Chair Jay Clayton, himself new to the job earlier that same year (2017), having been tapped by President Trump. Though with the agency during a previous stint, Ms. Blass re-emerged from the private sector.
In fact, she was counsel to the Winklevoss’ first failed ETF attempt at the hands of the SEC. Notice of her appointment in December caused at least one media outlet to dub her an “ETF specialist.” She would go on to have quite an impact on the current discussion, especially her Staff Letter: Engaging on Fund Innovation and Cryptocurrency-related Holdings of 18 January 2018, as it is the document Van Eck is addressing.
Van Eck takes on essentially five main issues in its response to the SEC. Regarding valuation, regulators really fear Bitcoin ETF prices will be screwy if, say, more forks of the digital asset continue. To that end, Van Eck explains, “Some rules that should be employed are using meaningful liquidity and infrastructure tests to assess forks and pricing issues. If prices are just displayed on a website but do not reflect sufficient volume, then those prices can be de-emphasized for valuation purposes. Forks that do not trade with sufficient volume or have adequate infrastructure (wallet or exchange support) can be excluded from indices that are meant to be investable.”
Liquidity is yet another worry for the SEC. Here, Van Eck relies on a steady increase in futures markets. The firm details, “We expect that the futures market will grow proportionally to our proposed ETF and that such growth will fuel additional interest by other investors, thereby adding additional liquidity. Additionally, since the launch of the U.S. bitcoin futures contracts, unregistered futures contracts have traded on Bitmex, a non-U.S. exchange, with a consistent volume of greater than $2 billion per day. Moreover, to the extent other futures-based bitcoin ETFs follow our proposed ETF into the market, we anticipate that such other ETFs would have a similar impact on the futures market, thus increasing liquidity in the market and benefiting fellow market participants.”
The issue of custody is a serious one both for regulators and institutional investors, and it seems to be already addressed by the current market. Coinbase is just the latest example, and so Van Eck doesn’t really dwell on the issue too much. Arbitrage, however, is a serious concern as well for regulators. Using stoppages in recent contract history, Van Eck notes, “To date, there have been 7% and 13% halts for the CME contracts and 10% halts for the CBOE contracts. Each halt lasted for 2 minutes; markets then re-opened trading in an orderly fashion. During a halt, ETF market makers will continue to have access to underlying real-time futures reference prices as well as prices in the underlying physical markets. These prices are publicly available. Furthermore, because bitcoin trades globally, the closure of a single bitcoin exchange should not affect the arbitrage process, although the market price may be affected for a number of reasons based on the nature of the closure,” the firm readily concedes.
For Van Eck, price manipulation is almost nulled by the definition of an ETF. “While one cannot rule out manipulation in the underlying spot market,” they soberly remind regulators, “we believe that, due to the diversified ownership and volume of trading, the market does not have major, structural vulnerabilities. Therefore, the Commission’s increased enforcement and regulatory actions can reduce the number of bad actors in a basically sound market.” As of this writing the SEC has not responded.
Written by Bitcoin.com
TRON (TRX) Chrome Extension Beta Arrives, Project Marks First Anniversary
Compiling a Lightning Network Node
The Lightning Network is a second layer payment protocol that many people believe can solve Bitcoin Core’s (BTC) scalability problem. The reason for this is because the LN system works on top of the BTC chain and because of this factor there would be fewer on-chain transactions. Essentially the system comprises a great number of participating nodes that can send transactions through bidirectional payment channels. Alongside this, there’s been a ferocious debate over the years because people have touted LN as the solution for BTC’s congested mempool, even though the network is very much in its infancy.
Just recently we reported on the owner of Shitcoin.com, Andreas Brekken, when he initially freaked everyone out with a couple hundred grand worth of BTC sitting within his LN node. Both the BTC and Bitcoin Cash (BCH) communities had discussed the subject heavily during the first few days, and Brekken’s story made headlines in multiple news publications and podcasts. Since then Brekken wrote four reviews about his experience being the largest node on the Lightning Network. In Brekken’s first review “Lightning Network #1 Can I Compile and Run a Node,” the review gives some comprehensive insight to successfully installing and configuring the ‘lnd’ protocol. The author notes that the ‘autopilot’ feature helps establish a connection and provides funding to the payment channels.
Brekken explains there are a few reviews online that detail the Lightning Network’s probability of finding routes, but people who experience issues may be making a simple error. Furthermore, even though the installation process took a lot of time because it requires compiling a BTC full node installation, Brekken details the process was fairly simple to configure.
“Writers critical of Lightning Network claim the probability of finding routes between two random nodes is very low for amounts over $10. I suspect this is because they are choosing random nodes and not peering properly,” Brekken explains.
Compiling, installing, and running Lightning Network Daemon, lnd, was straight forward. I look forward to using payment channels for sending and receiving bitcoin.
Shitcoin.com Becomes the Lightning Network
In part two of Brekken’s review, he says maintaining a payment hub is becoming stressful and routing doesn’t make that much money. “When I started writing the review the total capacity of the Lightning Network was slightly over 20 BTC (around $130,000) — I decide to shake things up,” Brekken notes. “Reactions to my experiment on social media are mixed. The increase in capacity of the Lightning Network is celebrated by some.”
“My Lightning Network node has established over 200 payment channels with 250 peers. The node capacity is exceeding 40 bitcoin. The month_fee_sum comes to 4289 satoshis, or 0.00004289 bitcoin ($0.31). I also wonder how any payments have been routed,” he adds.
The node has routed 260 payments for other users, averaging a profit of $0.0012 USD per transaction. I doubt that this will cover the costs of running the node, but leave the node running for now.
LN Impractical Even for Highly Technical Users
Brekken’s third review, called “Lightning Network #3 Paying for Goods and Services,” shows his experiences sending payments through the network. First Brekken heads over to a website called Satoshitweet to pay a small microtransaction for a posted tweet on the platform. However, after clicking the ‘Pay 2020 satoshis’ to tweet button he gets an error. “I click the button a few more times — The error remains the same — I look in the Google Chrome network inspector and SatoshiTweet is returning a generic 500 Internal Server Error response.”
The review then discusses trying to use an LN-based dice game called ‘Lightning Spin’ but Brekken has issues with the site glitching and invoices changing rapidly. After resetting his browser and getting a stable invoice Brekken sends some funds. “The payment will be sent through two hops and pay 1800 msats (0.00000002 BTC or 0.000135 USD). Back in the web browser the spin has been detected and I have won 400,000 sats (0.004 BTC or $30 USD).”
After playing around with Lightning Spin, Brekken tests out various other LN web portals like the Blockstream store, Bitrefill and Satoshi’s Place while experimenting with both the Eclair and Zap wallets. Minus an order for Reddit Gold on the website Bitrefill and Brekken’s win on Lightning Spin, most of the attempts had errors. Brekken concludes in his third review:
Sending payments using the Lightning Network is cheaper than the regular Bitcoin network, but suffers from routing errors and wallet bugs that make it impractical even for highly technical users.
Stressing Out About a Possible Lightning Network Exploit
Brekken wraps up his final review in his Medium article called, “Lightning Network #4 What Happens When You Close Down Half of the Lightning Network Capacity?” Brekken says operating the largest nodes within LN was fun, but also “terrifying” at times. Brekken’s node has routed 389 payments in total which added up to a profit of USD$0.34 cents. But a portion of the funds didn’t come from routing as Brekken notes, “I suspect the increase is mostly from the recent increase in bitcoin’s price.” Brekken also tries to close the connected channels manually but ran into some more errors making some channels unable to close.
So Brekken ‘force closed’ all his channels unilaterally which locks up his funds until a predetermined amount of time ends. “The amount of time the funds are locked up depends on the channel policy — This policy is negotiated when the channel opens. Most channels will release the funds to me in between 1440 and 20180 minutes,” Brekken emphasizes.
The Shitcoin.com owner concludes his fourth review by saying he looks forward to trying LN when it matures more and says that leaving funds on the network can be trying.
“Running a large Lightning Network node has been quite stressful — An exploit such as we saw with heartbleed could allow an attacker to drain all funds from the node while I’m sleeping. It’s time to end the experiment,” Brekken concludes.
Operating the largest node on the Bitcoin Lightning Network has been educational, frustrating, fun, and at times terrifying. I look forward to trying it again once the technology matures.
Written by Cryptovest.com
Bitcoin’s Second-Ever Developer Is Back (With a Big Vision for Crypto)
There are early adopters, then there are early early adopters.
Revealed exclusively to CoinDesk, the first coder to work alongside bitcoin’s pseudonymous creator Satoshi Nakamoto, Martti ‘Sirius’ Malmi, is joining a team of developers launching a new cryptocurrency called AXE. The project, which is combining Malmi’s Identifi online reputation system with decentralized database system GUN, is taking on the long-desired mission of decentralizing the Web.
And Malmi’s history in the cryptocurrency space should pique the interest of plenty of enthusiasts.
An amateur college developer in 2009, Malmi played a crucial role in bitcoin’s early days as the only active developer working alongside Satoshi – and even striking up a bit of a friendship. He earned Satoshi’s trust enough to be given admin access to the website Bitcoin.org, and most of the changes in bitcoin’s second code release are attributed to him.
But a couple years in, Malmi followed Satoshi’s lead and left the project, thinking bitcoin didn’t really need him anymore.
“I felt like bitcoin had already gone from zero to one, so to say. It was already up and running with a growing community and had lots of great developers working on it,” he told CoinDesk.
In 2014, then, he started Identifi, with a decentralized architecture that didn’t include a cryptocurrency at first.
But as he built – with his eyes on reducing the control web companies like Google and Facebook have – he decided something else was needed that hadn’t been tried before and that a crypto token could incentivize its use.
Malmi told CoinDesk:
“Most of the giant online businesses, such as Google, Facebook, eBay or Airbnb are basically centralized indexes – searchable lists of stuff. If we want to disrupt them, we need decentralized indexing.”
And that’s where GUN, which has been in the works since 2014 as well, comes in.
Two projects as one
To tie it all together, the decision was made to launch a new company called ERA.
“Martti and I were discussing how governments can still blacklist bitcoin miners’ IP addresses. Telecom companies, Google, Amazon or others can throttle or reroute our traffic without net neutrality,” ERA CEO Mark Nadal (also the CEO of GUN) told CoinDesk.
“This is a huge vulnerability that could affect everyone, thus why we’re building AXE,” he continued.
GUN, which is known for using simple stick-figure comics to explain how its tech works, scored a $1.5 million round led by Draper Associates earlier this year, and has already built a decentralized Reddit and YouTube.
While those services are a bit slower than their centralized counterparts, Nadal argues both have been taking off “like crazy.” And according to Malmi, Identifi can help decentralize the system further by offering a censorship-resistant identity layer.
While digital reputation systems can conjure up images from the “Black Mirror” episode “Nosedive,” whereby a mobile reputation system goes awry, Malmi says he’s been careful to improve on older attempts and keep these unintended consequences in mind.
In the context of ERA, Identifi provides a crucial role.
“You could have users digitally sign all their posts and use Identifi to fetch the identity profile (name, avatar, feedback etc.) that corresponds to the public key,” Malmi said. “You could use your Identifi web of trust to filter out spam, trolls and other kinds of unwanted content without resorting to centralized censorship. That is useful for decentralized social media.”
But to be truly decentralized, ERA needs people from around the world running the database systems – which is where the new crypto token comes in.
Reminiscent of older blockchain storage projects like Filecoin and Storj, ERA with AXE is supposed to incentivize users on the network to store data. But it takes a slightly different approach by paying servers to move encrypted data around (instead of paying them to store data).
Since the data is encrypted, the data won’t be readable by the servers moving it around.
Although Malmi is about to head a new cryptocurrency project, he’s still skeptical of the promise of blockchain tech as it’s been advertised recently.
“Blockchain technology is overhyped and pushed for applications where it is not useful,” he said. “If you don’t need a distributed ledger with no trusted parties, you don’t need a blockchain.”
Yet, he thinks ERA is going about incorporating cryptocurrency into a decentralized web in the “right” way. “Crypto should be given credit for incentivizing the decentralization of infrastructure,” Malmi continued.
Indeed, he and Nadal make a big deal about this tech being more “scalable” than other tech.
“The missing piece [to a decentralized web] was a decentralized database that could handle CryptoKitties scale traffic,” Nadal said, pointing to the blockchain-based cat app that earlier this year clogged the ethereum network to the point users were having trouble using other decentralized apps on the network.
To create that scalable system, ERA is only using its cryptocurrency as a decentralized money, and will not be using a blockchain to store people’s data.
In this way, they argue they’re on a better track to building something that people might actually want to use.
Though, admittedly, the apps built using GUN today are not nearly as large as the companies they hope to replace. Yet, they have big hopes the project will go beyond that, since like so many others in the industry they believe decentralization is the way of the future.
“One of the things I learned is that it is better to do what is meaningful, not what is expedient,” Malmi said, adding:
“I believe that decentralization of digital identity and other basic infrastructure of our society are the some of the most meaningful things a developer can work on these days.”
Decentralized Exchange Waves Scored a $6 Million Debut. Then It Got Hacked
When a decentralized cryptocurrency exchange supports fiat tokens and courts banks, yet makes customer identification optional, all bets are off.
According to data provided to CoinDesk by the blockchain project Waves, the company’s new decentralized exchange (DEX) was facilitating $6 million of crypto transactions a day in beta testing last month. That’s six times the daily volume that a rival DEX, AirSwap, boasted at its debut in April.
Waves, which is incorporated in Switzerland but headquartered in Russia, also told CoinDesk its DEX had 90,000 traders using 330,000 wallets ahead of its full launch this week – dwarfing the comparable figures for other DEXs.
There are a few reasons for this impressive performance coming out of the gate. One is speed, courtesy of the platform’s centralized matchmaking service – highlighting the contradictions inherent in so-called DEXs, which have a way to go before they live up to their name.
Another factor is that almost any trader can issue a token on Waves’ unique blockchain, even one that represents an IOU in fiat currency, and instantly trade it for bitcoin on the exchange.
Not least of all among its attractions for traders, standard know-your-customer ID checks are optional in this marketplace except in certain circumstances.
But the rollout hasn’t been all rainbows.
On Tuesday, when Waves officially ended the beta period and launched the full DEX, hackers hijacked both the exchange website and the company’s main site to phish for users’ personal wallet information. It took hours for Waves to regain control of the domains.
“Someone just faked my passport and gave it to support [staff] at the domain company and they changed the password at his request. Then the attacker was able to change the main website,” Waves CEO Sasha Ivanov told CoinDesk.
Undaunted by the incident, or by criticisms of Waves’ security practices, Ivanov told CoinDesk he hopes that even banks will also start launching currencies on his DEX.
“We are looking for partnerships with major banks because we hope major banks will want to issue their own fiat tokens.”
How it works
In order to transact on the DEX, users need Waves tokens. The broader project raised $22 million by selling these native tokens in 2016. The tokens are also used to run smart contracts and incentivize node operators on the Waves blockchain, a model similar to ethereum.
The network has garnered more than 200 unique nodes, including two run by the Canadian mobile gaming company RewardMob, which sees the DEX as a key attraction.
“Now we don’t have to worry about currency control from different countries and players wanting to cash out in different currencies. It allows players to trade their tokens between other players…The decentralized exchange was a huge, key component in our decision to go with Waves,” RewardMob CEO Todd Koch told CoinDesk.
His company launched its own Waves-based token and is preparing for an ICO. It operates tokenized rewards for multiple video games, such as a beer pong app, and maintains back-end wallets for more than 100,000 users.
“We want to integrate the DEX right into our app so that [when] a player earns our currency, they could easily exchange it for Waves or bitcoin or any other cryptocurrency,” Koch said.
Since the Waves DEX matchmaking software is open source, numerous nodes could run their own matchmakers and almost act like cryptocurrency miners earning fees (in Waves tokens) for processing trades.
But most of the trades are going through Waves’ own central matchmaker.
Dean Eigenmann, co-founder of blockchain governance startup Harbour and of the DEX project Dexy, found this approach dubious, saying it defeats the purpose of a DEX if service can be denied by a central authority.
Ivanov acknowledged that the current state of affairs is out of step with the decentralized ethos and will have to change. He said:
“A centralized matcher can just say ‘I don’t accept the trade,’ for now, so it’s important for us to make it more trustless.”
The Waves DEX generally requires identity checks in two instances: when users opt for fiat cash out, through the Czech Republic-based payment processor Coinomat, a separate company Ivanov launched in 2013; or when they issue a token on the Waves platform and then list it publically on the DEX.
Private token issuance traded through private listing options, according to Ivanov, does not require identity checks for compliance. And neither does trading of bitcoin for other tokens.
“For now, you can do crypto-to-crypto trading without any type of KYC,” Ivanov told CoinDesk.
But Drew Hinkes, chief legal counsel and co-founder of the crypto advisory firm Athena Blockchain, told CoinDesk that exception probably doesn’t apply to users in the U.S.
“We know from the 2013 guidance issued by FinCEN [Financial Crimes Enforcement Network] that a lot of people in the crypto ecosystem need to have a BSA, the Bank Secrecy Act, and AML, which is anti-money laundering, compliance programs,” Hinkes said. “Those programs are required to include customer identification programs.”
According to this guidance, if an exchanger accepts or transmits a virtual currency, or if the exchanger buys or sells virtual currency for any reason, they are a money transmitter under FinCEN’s jurisdiction, and thus required to check ID.
“The guidance says that, when defining a money transmitter, they don’t care whether you use real currencies or convertible virtual currencies,” said Hinkes, who is also an adjunct professor at New York University’s School of Law and Stern School of Business.
Meanwhile, Waves node operator RewardMob requires users to hand over personal information such as their full names and addresses, according to Koch, who cited requirements of Canadian sweepstakes law.
This week’s phishing attack not only put a damper on the DEX launch, it also prompted criticism of Waves’ practice of having users enter their recovery seeds – strings of words that act like passwords for crypto wallets – into a website to use its software wallet.
Drawing a different lesson from the hack, Ivanov said, “We and the whole industry need to work on decentralized domain name systems.”
The incident was not the company’s first brush with security flaws, though.
In 2017, an audit by the cybersecurity firm Kudelski Security pointed out Waves’ unique blockchain was susceptible to several types of attack and that users’ wallet passwords were stored in a cleartext database that was “readable to anyone accessing the file system.”
When asked about this, Ivanov said:
“Most of the recommendations were carried out. As for the passwords, all the critical moments have been fixed. They are still stored in a clear config file.”
Eigenmann said he was unimpressed with Waves’ infrastructure or ICO.
“It’s just embarrassing the level of software development skills which goes into some of these projects,” he told CoinDesk. “I don’t see any real value in tokens for exchanges.”
Regardless of the controversy, Waves’ volume is staggering for a new exchange with self-custody options.
According to Waves’ internal data, on June 23rd alone DEX traders swapped Waves tokens for $1.59 million worth of bitcoin and $251,697 worth of monero, just to name a few.
Ivanov said he was grateful to the community for supporting their ICO and is eager to deliver real value to global businesses.
“Our blockchain is quite fast,” he said, claiming Waves can process 500 transactions per second. “We have a very active Brazilian and Turkish community, you can even trade a token Lira on our exchange.”
Bank vault via Shutterstock
Written by CoinDesk.com
Binance Prepares to Enter the South Korean Market
Binance Eyes South Korean Market
Binance, the world’s largest cryptocurrency exchange by trading volume, is eying the South Korean market for expansion, Business Korea reported Tuesday.
Quoting CEO Changpeng Zhao during his keynote speech at the Blockchain Partners Summit in Seoul on July 21 and 22, the publication elaborated:
He stressed the importance of the South Korean market, saying that his company would enrich its community in the market.
The company has “hired Koreans as a local marketing director and a Binance Lab director, which is a social impact fund,” the publication added.
Binance added the Korean language to its website in August last year. “Now, our customers from Korea can use our website in their native language,” the company wrote at the time.
The timing proved fortuitous as the following month the Chinese government shut down exchanges in China, forcing local traders to move to exchanges elsewhere including South Korea. Binance also moved its operations out of China at that time.
Competing with Korean Crypto Exchanges
According to reports, South Korea has about 100 crypto exchanges, 31 of which are members of the Korean Blockchain Industry Association. However, only four exchanges hold the majority of the market share of crypto trading in the country.
Bithumb and the Kakao-backed Upbit are the largest crypto exchanges in the country, although Upbit is an affiliate of the U.S. exchange Bittrex.
At the time of this writing, Coinmarketcap shows Upbit has a 24-hour trading volume of $780,019,012 while Bithumb has $601,046,530.
The other two large Korean exchanges are Coinone and Korbit. A few other Chinese crypto exchanges have tried to open in South Korea such as Huobi and Okcoin.
“The number of South Korean Binance users is not that large yet. Still, it is one of the most favorite foreign cryptocurrency exchanges for South Korean traders,” Business Korea detailed. The Investor earlier this year wrote, “contrary to widespread speculation that Korean users account for a significant part of the Binance user-base, Zhao told reporters that they make up only about 1 percent and are the 10th largest group in terms of nationality.”
In an interview with Soso Lab this month, Zhao said the main reason Binance had gained popularity in South Korea was due to Korean exchanges listing only a limited number of coins. “If you want to trade newer coins then Binance is a good choice. We got lucky in that sense,” Zhao revealed. According to Coinmarketcap, Binance currently lists 376 coins while Upbit has 268 and Bithumb has 37. Zhao told the media outlet:
We do have a lot of users, what we call Binancians, in Korea…I think Korea is a hot market.
Korean Regulation Undergoing Changes
South Korea introduced crypto regulation at the end of last year. In January, the government implemented the real-name system for cryptocurrency trading.
Bithumb, Upbit, Coinone, and Korbit have access to real-name accounts but the rest of the exchanges currently do not. This creates problems for the regulators who believe that without the real-name accounts, exchanges have to continue using corporate accounts to trade cryptocurrencies and these accounts are prone to money laundering.
Recently, the country’s top financial regulator, the Financial Services Commission (FSC), announced its plan to undergo a major restructuring including setting up a dedicated bureau for crypto policies. The government has also indicated that it will ease crypto regulation.
With the changing crypto regulatory environment in South Korea, the Investor reported Zhao saying earlier this year that Binance had postponed its plan to launch in Korea “until Seoul fine-tunes the regulatory framework.”
Reflections on a Swatting: Inside One Bitcoin Engineer’s Security Battle
Jul 26, 2018 at 08:00 UTC | Updated Jul 26, 2018 at 08:03 UTC
October 16th, 2017 started off like any other Monday. I awoke at 6 a.m. and drove to the YMCA to play racquetball, ready to start the week with a win.
When I finished playing, I tweeted out a cute quip:
I then hit the steam room and the shower to relax and freshen up. Upon returning to my neighborhood, I encountered an unusual problem: a police cruiser with its lights flashing was blocking the entrance. I came to a stop and rolled down my window:
“Hi Officer, is there a problem? I’m just trying to get to my house.”
“Sorry, we have to secure the area due to an ongoing incident.”
“Is it an active shooter?”
“Unclear, but we have information that he has long guns on the premises.”
“Well shit, what should I tell my family to do? They’re at the house.”
“Call them and tell them to get in the car and exit the community.”
I pulled off the main road and found a place to park so that I could call the house.
“Hey, don’t panic but the police are locking down the neighborhood due to an incident. You should get in the car and leave.”
“OK, I’ll be right out.”
I waited a few minutes and then received a call back.
“The police stopped me as I was leaving and asked me if I was OK. Apparently they were called to our house! They want you to come speak with them at the mobile command unit around the corner.”
I drove back to the entrance and told the patrol officer that his captain wanted to speak with me, so he waved me through. Upon entering the mobile command unit, the first thing I was asked was:
“Sir, do you have any enemies?”
To which I replied:
Then came the media
It wasn’t long before the news stations showed up; apparently, they didn’t even know what “swatting” meant.
The news stations managed to get a copy of the phone call that was made by the attacker; you can listen to it here. The attacker claimed that they shot and killed someone and were holding others hostage after rigging the front door with explosives.
Once the news crews left and everything calmed down, I figured I should let the attacker know that they failed to achieve their goal.
Within a few hours of making my tweet, I received a threatening voicemail from a number with a New York area code; you can listen to the voicemail here. Note a common theme between the 911 call and the voicemail — both times he demands $50,000 (or the equivalent in BTC.)
“Next time I do anything to you, it won’t involve the police.”
Within 48 hours the Durham Police Department told me that they had traced the call to a throwaway server in Texas but hit a dead end and were turning the case over to the FBI. I never heard from the FBI. I lost any confidence in the ability of law enforcement to protect me a long time ago, so this was disappointing but not surprising.
What did I do in response? I installed 360-degree 4K resolution surveillance around my property, double-checked the rest of my physical security setup, took a few firearms out of the safe, and I waited.
Fortunately in my intuition, the attacker didn’t have the guts to put his own life in danger by physically attacking me proved to be right. There were no further (physical) incidents.
Shit just got real
Swatting is not a game; it can be fatal. Case in point:
I have little hope that the perpetrator will be found, but I feel compelled to offer an additional incentive.
I want to make it extremely clear that I will not tolerate threats against myself or anyone I care about. I will defend myself and my loved ones until my dying breath with every resource at my disposal.
The following message is signed with this PGP key.
There was a lot of speculation that this was related to the bitcoin scaling debate, but the attacker never said what his motivations were. After the fact, he left me this voicemail demanding a ransom payment… but didn’t even give me an address to which I should send the BTC!
After speaking with other folks who have been harassed, I fully expected other annoyances such as:
Using stolen credit cards to purchase things and ship them to my house.
Purchasing drugs / illegal things on darknet sites and shipping them to my house.
Tampering with the accounts for my utilities to get them turned off.
Forging a deed in an attempt to claim ownership of my home.
On November 9, I got email bombed by a bot that was signing me up for a ton of email marketing lists.
Since the emails were “legitimate” marketing rather than mass emails from a few sources, I decided pretty quickly that the best option was to just I turn off my email for the day and made most of the signups bounce, preventing my email address from getting added to the lists of the marketers. Having 8 years of experience writing email marketing software has its perks.
Twelve hours later statoshi.info was DoS attacked and my host blackholed the IP address to save their own infrastructure. No big deal.
A few thoughts on OPSEC
I’ve kept this detail a secret for the past year, but I wasn’t home when the attacker sent the SWAT team to my house. I truly hope that the perpetrator reads this article and gets to realize how miserably they failed.
I highly suspect that the reason the attacker chose to strike when he did was from the tweet you see at the beginning of this article. I generally vary my social media posts and delay tweeting anything that may tie me to a specific location.
So, when the attacker saw that I “just woke up” he incorrectly assumed that I must be at home – he was clearly not sophisticated enough to know my routine. I can only imagine how this story may have played out differently if not for this one tiny point.
Had I been home, we may not have made contact with the SWAT team until they were breaking down the door, which would have likely ended badly.
The real problem with swatting
I’ve waited so long to reveal the details of this day because I wanted to take additional steps to improve my operational security. I’ve written down all of the precautions I’ve taken over the past year and intend to publish them soon.
The thing is, I was lucky that the Durham Police Department is more competent and cautious than other departments in the U.S. Had a few variables been different that day, I could easily be dead.
While I certainly blame the attacker for the actions they took, my root cause analysis places the blame squarely upon law enforcement for creating an exploitable vulnerability. The militarization of police combined with non-existent authentication creates a great environment for swatting.
When you think about it, the asymmetry is disturbing – a single anonymous phone call can result in lethal force being deployed in a matter of minutes against an arbitrary target. A single anonymous phone call costs only a few dollars to make and yet can consume tens if not hundreds of thousands of dollars in public resources just to determine whether or not a threat is real.
What’s the solution? While I’m a huge privacy advocate, I don’t think it should be possible for someone to deploy lethal force with no risk to themselves. At the very least, you should have to put your reputation on the line so that you can be held accountable.
My recommendation to law enforcement agencies: Realize that swatters are almost always going to place a call from outside of their target’s locale. As such, they can’t actually call 911 – they have to find a non-emergency number they can call that will escalate them to 911. These escalations should be red flagged as suspicious.
Trace the source of the phone call; if it traces back to a completely different state than the caller’s claimed location, red flag!
If the source phone number of the caller isn’t registered in their name (or anyone’s name) then ask for proof of identification. If the caller refuses to identify themselves (my attacker hung up when asked) then it’s a red flag!
I leave you with an excerpt from “The Crypto Anarchist Manifesto” (emphasis mine):
“Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner. Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other. Interactions over networks will be untraceable, via extensive re- routing of encrypted packets and tamper-proof boxes which implement cryptographic protocols with nearly perfect assurance against any tampering. Reputations will be of central importance, far more important in dealings than even the credit ratings of today. These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.”
UK Central Bank Says New Payments System Will Be Blockchain Friendly
The Bank of England’s updated payments system will be compatible with blockchain-based financial technology forms, Reuters reported Monday.
The announcement is the latest in the BoE’s ongoing efforts to modernize its Real-Time Gross Settlement system (RTGS), which is essential for banking and trading in Britain and handles transactions worth around £500 billion annually, or almost a third of the country’s economic output. The upgraded system is expected to be launched in 2020, and will be designed to be resistant to cyber-attacks while also being available to a wider number of smaller businesses.
This would enable these businesses to use the system directly, rather than through a proxy of a large bank.
In March, the BoE presented a “proof of concept,” asking several firms, including payments technology providers Baton Systems and Token, R3 and Clearmatics, for feedback. They were asked to examine whether the “renewed” cloud-based RTGS service would be able to interact with systems based on distributed ledger technology (DLT) and how its functionality could be expanded through the use of new technologies.
“All participants confirmed that the functionality offered by the renewed RTGS service would enable their systems to connect and to achieve settlement in central bank money,” the BoE explained Monday. “A number of recommendations were received to ensure optimal access to central bank money.”
One of those recommendations was to explore the possible use of “cryptographic proofs” to protect data from being stolen or altered.
Costa Rican Workers Can Be Legally Paid in Cryptocurrency
Cryptos in Costa Rica Can Be Goods, Assets, Quasi-Money
Workers in Costa Rica may soon start receiving a portion of their salary in cryptocurrency, local media reported. As far as Costa Rican law is concerned, there is no reason this cannot happen. The country’s legislation allows employers to partly remunerate their staff with goods that are not currency, as long as the legal minimum wage is paid in money. It also develops the concept of “quasi-money”, or any asset that can be used as a means of payment and has been widely accepted as such in the society.
“This is a trend that could take hold in the country,” said Rolando Perlaza who is working at Nassar Abogados, a prominent law firm in Central America. “This type of payment would in no way replace traditional or liquid cash. It would rather become an incentive for the workers, who could decide if they accept these currencies as payment for their services,” the expert elaborated, quoted by the Costa Rican News. He also emphasized that in any case employees are protected by article 166 of the country’s Labor Code.
The publication notes that in October last year, the Central Bank of Costa Rica (CBCR) issued a directive which established that cryptocurrencies are outside the national banking system. The document also indicated that carrying out any type of commercial transactions with digital coins is a “limited option” in the country. Along with that, the central bank warned that those who use cryptocurrencies assume the associated financial risks.
Costa Rica’s Growing Crypto Sector
Despite CBCR’s assessment, the local crypto sector has been developing steadily in recent years with a growing number of merchants and other businesses, including many hotels and companies from the tourism industry, accepting cryptocurrencies as a legitimate payment method. Costa Rica, which has remained relatively open towards business ventures in the crypto space, has also seen a number of bitcoin ATMs popping up in the capital San Jose and elsewhere.
According to the report, the Latin American country also offers favorable conditions for crypto mining thanks to its renewable sources. “Our Costa Rica-based crypto mining facility utilizes renewable energy options such as solar and wind. We think renewable energy has to be an essential part of any crypto related project. This green approach is good both for us and for the planet and makes the new business opportunities even better,” said Daniel Yépez, a local crypto entrepreneur. “Cryptocurrencies are here to stay and we are embracing the changes,” added Yépez whose company, SH Mining Technologies, specializes in providing cloud mining services.
Written by Bitcoin.com
Coinbase Gets $20 Billion Prime Client, Ads Back on Facebook
$20 Billion Hedge Fund
Coinbase has been focusing on big institutional money recently, launching a custodial service this month and, earlier this year, establishing Coinbase Prime, a suite of tools specifically designed for institutions, along with an institutional coverage group headquartered in New York City to provide a higher level of service to these type of clients. And the strategy has apparently now started to bear fruit.
A $20 billion hedge fund has already signed up for the prime business according to “people familiar with the matter” cited by Business Insider. And additional massive hedge funds are being worked on by the Coinbase Prime team to possibly join the trading venue too. The lack of a prime brokerage to use is seen as the main hurdle for getting big money trading crypto as institutional players don’t like to risk it with a direct exposure to an exchange. Coinbase may have solved the issue by launching its own prime service, something that on Wall Street is usually reserved for mega-banks. The company is also reportedly planning to offer margin finance as early as the end of the year, allowing institutional investors to trade on borrowed capital for increased leverage.
Coinbase Ads Back on Facebook
The company also got good news on its retail side of the business, with its promotional posts allowed back on Facebook. CEO Brian Armstrong announced on social media that: “Facebook banned ads for crypto earlier this year. Proud to say we’ve now been whitelisted and are back introducing more people to an open financial system.”
After banning all crypto ads in January, Facebook has updated its policy in June to allow promotional content from “pre-approved advertisers.” With its position in the US market, and the money it can afford to spend on lawyers, it’s little surprise that Coinbase made it on the list.
Images courtesy of Shutterstock.
An $8 Million ICO Ran Out of Tokens. What’s Next Is Anyone’s Guess
“Scarcity” may be a crypto buzzword, but “shortage” has hardly made the footnotes – until now.
In early July, the developers behind U Network, a blockchain publishing protocol valued at around $8 million, abruptly announced that it had run out of its reserve of UUU crypto tokens, and that it planned to buy back some of the supply it distributed to early investors through its airdrop in February.
At the start of the project, U Network established a 10 billion UUU cap on its token supply (worth approximately $15.6 million), setting aside 40 percent of its total tokens (about $6.2 million) for the founding team and future development.
Yet, due to a rising number of strategic partners and interest in its token, the project announced on Medium, “The demand for UUU tokens has exceeded our current designated holdings.”
The post continued:
“The team now faces a problem: leaving our ecosystem tokens intact, how do we pursue these new opportunities to grow the U Network ecosystem?”
The result is a problem that seems to have little precedent.
The structure of ICOs and airdrops varies widely across projects, particularly with regard to the number of tokens minted, distributed and maintained by a given company or non-profit. While some projects do not limit the number of tokens that can be created within their blockchain ecosystem, others, like U Network, choose to implement a cap on the total supply.
For U Network, the 10 billion limit was implemented because the content-centered project, which aims to “help online content platforms better align with the interests of their users,” wanted to “provide sufficient incentives to community members.”
While U Network’s dilemma is currently an outlier in the industry, other blockchains that have implemented hard caps on their ICOs and airdrops may soon find themselves in a similar quandary as they begin building their ecosystems.
Likewise, U Network’s situation may force similar projects to confront an even more difficult question: what happens when your startup runs out of its own tokens?
Method to the madness
Incentives are especially important in blockchain systems, and so far, there is no established methodology by which projects can determine how many tokens to issue and keep.
That’s according to Joshua Gans, a professor of strategic management at the University of Toronto, who told CoinDesk: “There is no metric.”
“If you want to use tokens for incentives, the amount of the incentive is dependent on the price of the token,” he explained. “At the start, it is hard to predict that.”
Gans added that establishing the amount of tokens projects should keep is equally as unsystematic.
According to Catherine Tucker, a professor of management and marketing at MIT, projects face a doubly difficult situation in the highly scrutinized industry. Not only do they lack methodologies for determining token supplies and holdings, they must also consider the perception of their actions.
“I think this case illustrates the huge trade-offs founders face,” she told CoinDesk. “If they keep too many tokens in reserve, they are often accused of being greedy. But if they give away too many tokens then they lose a crucial lever they need to incentivize people to use their platform or service in the future.”
As such, remedying a shortage of tokens looks to be a precarious task. Solutions such as increasing the token supply of the network could influence the token’s price, angering investors and jeopardizing their trust in the project.
So instead, U Network plans to refurbish its holdings by conducting a token “buy-back.” In practice, this means it will re-purchase 1,000 ETH worth of UUU (about $284 million worth) from current token holders over the course of several stages.
“For the first stage we would be buying back 200 ETH worth of UUU between the price range of 0.004 and 0.005 USD,” U Network told CoinDesk. At press time, one UUU token was valued at $0.001569.
As for how the project determined the number of tokens to re-purchase, it explained, “We believe it’s a reasonable amount. Not too high to affect market price, not too low to affect the expansion needs.”
From Gans’ perspective, the buy-back is “a good way to go.” He went on, “You issue the tokens and retain some other currency to use for buy-backs if you make an error. The other option is to give yourself the ability to issue more tokens for incentive purposes but that is ultimately the same as retaining some tokens at the outset.”
And as for what the rest of the industry could do to avoid U Network’s dilemma, MIT’s Tucker suggested:
“If I had to give advice to founders, it would be to think about the uncertainty involved with the project. In those cases of heightened uncertainty, it might be best to limit the initial distribution of tokens until the business plan has evolved and been tested.”
UK Begins Research on Law Reform for Use of Blockchain Smart Contracts
The U.K. Law Commission has launched a research project investigating reforms that would bring legal clarity to the use of blockchain-based smart contracts.
According to a working paper published on Thursday, the independent agency has already this year carried out initial research on the topic and a more formal project is due to start in the summer. The agency said the work is to “ensure that the law is sufficiently certain and flexible to apply in a global, digital context and to highlight any topics which lack clarity or certainty.”
“There is a serious intention to take forward reform in this area,” it added.
The Law Commission believes that smart contracts have the advantage of increasing “trust and certainty” and boost transaction efficiency among businesses. As such, the current legal system should adapt to the nascent technology to make the U.K. attractive for enterprises, it argued.
The working paper states:
“It is important to ensure that English courts and law remain a competitive choice for business. Therefore, there is a compelling case for a Law Commission scoping study to review the current English legal framework as it applies to smart contracts.”
The effort follows a report published by the commission in December 2017 which outlined 14 areas – including the use of smart contracts – that are set for law reform after a year-long public consultation process.
The commission said at the time that the smart contract research process could take 9–18 months to complete, adding:
“There are questions about how this feature (smart contract) would interact with contract law concepts such as implied terms or contracts which are held to have been void from the outset. There are also questions about data protection law.”
Last year, John Thomas, the top judge for England and Wales also made notable remarks at a lecture hosted by the Law Commission, saying that British law may need to be updated to account for blockchain-based smart contracts.
U.K. flag and court image via Shutterstock
Written by CoinDesk.com
Japanese Minister Denies Ties to Unregistered Crypto Exchange Under Investigation
Given Her Position as a Cabinet Minister, Noda Risked Being Accused of Exerting Pressure on a Government Investigation
“Because there has never been any administrative ties between this company and my office, I believe there is no exerting pressure on the front of this government investigation.” Noda told the press at the Ministry of Internal Affairs, on Thursday.
According to Noda, her secretary and aide solicited an FSA agent for general background briefing regarding crypto exchanges’ legal framework and organized a meeting at her parliamentary office with an acquaintance who represented the company. Noda said she was not present at the meeting. The unnamed company was under government investigation on suspicion of violating the fund settlement law at the time, but Noda’s team claims it was not aware of that fact. An FSA official visited Noda’s office at the Diet members’ building on January 30 to explain Noda’s aide and the representative of the company under investigation the FSA’s positioning on regulations concerning funds raising by issuing cryptocurrency and other matters.
A senior agency official noted that the request from Noda’s office for a briefing could be interpreted as pressure. “A public servant will likely take it as pressure if an aide to a sitting Cabinet member calls for a meeting in which an employee of a company the agency is looking into is also present,” the official was quoted saying to Asahi newspaper.
Noda told reporters that she hasn’t received any political contribution, nor had she made any investment with the company. “I promise I will take more prudent responses in the future.” She added.
The company, which began dealing in its own cryptocurrency in October 2017, received administrative guidance in February 2018 not to continue selling cryptocurrencies.
The Amended Settlement Act
Japanese lawmakers amended the Act on Settlement of Funds in May 2016 to regulate businesses handling virtual currencies. This law was amended after Mt. Gox went bankrupt in Japan in February of 2014 due to the misappropriation of customers’ assets by its operator.
In response to these background events, Japanese lawmakers enacted the Amended Settlement Act with three pillars of regulation as follows:
Registration requirements on virtual currency exchange business in Japan;
Regulation against money laundering and terrorist financing; and
Introduction of rules to ensure customer protection.
Written by Bitcoin.com
It Took Just A Day for Tron’s Founder to Win His Own Blockchain’s Election
An unconventional candidate has triumphed in tron’s ongoing blockchain elections: its own founder Justin Sun.
After announcing his candidacy to become a tron “super representative” (a node on the software elected by token holders to validate transactions, create blocks in the network and compete for its rewards) just one day ago, Sun has successfully garnered enough votes to run one of just 27 nodes that will operate the $2.5 billion tron network.
As of press time, Sun had acquired over 120 million votes according to tron’s Tronscan feature. Candidates must receive over 100 million votes to be elected, with each TRX counting for one vote. (For context, it took other candidates several days to a week to be elected, and only 11 representatives have been elected thus far.)
As reported by CoinDesk, tron kicked off its election in June as part of the launch of its own proprietary blockchain. The project was originally meant to run on the ethereum blockchain, and is currently in the process of migrating its TRX tokens from that network to its new platform.
Sun wrote in his Wednesday announcement on Twitter:
“I hope that my candidacy will make all the TRX holders, supporters and believers see the significance embedded in voting. I hope it will enable all of us to contribute to the establishment of a truly democratic, decentralized tron community.”
Sun’s decision was not wholly unexpected, as it was foreshadowed in an April Medium post in which he wrote, “I myself will participate in the tron super representative election along with all other candidates.”
Later, Sun clarified in his statement that his candidacy was “a completely personal action” and will not represent the Tron Foundation, of which he is the CEO. He previously promised that the foundation would not use its 34 billion tokens to vote in the election, though he did not disclose his personal TRX holdings in the announcement.
At the time, Sun largely sought to downplay the potential impact that his influence in the community could have on the election. “I am determined to go through the selection process like everyone else, which displays tron’s inclusiveness and openness as a decentralized and autonomous community,” he said.
Unlike other super representative candidates, Sun did not publish an election “manifesto,” which typically contains information on the candidates and the hardware they plan to use to run the node.
Still, tron’s ongoing election is part of a broader trend among public blockchains, one that finds notable projects experimenting with novel ways to coordinate stakeholders to update the software.
Most recently, neo, the 12th largest blockchain by total value, saw its founders take on a prominent, almost exclusive, role in its election, despite claims the process was decentralized or democratic.
As such, Sun’s announcement was greeted with some skepticism by tron users. “Hey Justin that’s not good for us, this is unprofessional,” one Twitter user commented on Sun’s post.
A Reddit user questioned Sun’s rhetoric of democracy, commenting: “Create democracy. People love it. Huge media presence and influence. People love you. Run for head office. Everyone follows. Easy win. Now in control of said democracy. Seem strange? No? I give up.”
Others suggested that Sun’s candidacy would bolster criticism of the project, which was previously accused of plagiarizing its white paper and failing to properly attribute code in its Github repository.
However, with the results only recently concluded, it remains to be seen whether the move will have any lasting impact on the project, which after making global headlines by acquiring BitTorrent in June, remains one of the more prominent to have emerged over the last year.