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PayPal CEO Dan Schulman Tells Web Summit the ‘Time Is Now’ for Crypto

5 years 10 months ago

PayPal (PYPL) CEO and President Dan Schulman took to the stage on the first day of the major Web Summit event on Wednesday, telling the estimated 100,000 attendees that for cryptocurrency “the time is now.”

Interviewed by New York Times columnist Andrew Ross-Sorkin for the online 2020 tech conference, Schulman anticipated digital currencies soon entering the mainstream and becoming an everyday payments tool. The global coronavirus pandemic has accelerated various trends, such as consumers “abandoning cash,” he said.

The coronavirus pandemic “has pulled these trends forward anywhere between three to five years [and] five to six months,” according to Schulman.

Related: Crypto Buying App Ziglu Bags Largest Raise of 2020 on UK Crowdfunding Site Seedrs

He continued:

“I think that if you can create a financial system, a new and modern technology that is faster, that is less expensive, more efficient, that’s good for bringing more people into the system, for inclusion, to help drive down costs, to help drive financial health for so many people… So, over the long run, I’m very bullish on digital currencies of all kinds.”

PayPal announced in October it will begin allowing users to transact with cryptocurrency as a funding instrument across 28 million merchants early next year. The company is already allowing customers to buy, sell and hold cryptocurrencies inside the PayPal wallet, starting in the U.S. Schulman said the company conducted market research in advance that showed 54% of PayPal’s base wanted the crypto offerings. 

“As we thought about it, digital wallets are a natural complement to digital currencies. We’ve got over 360 million digital wallets and we need to embrace cryptocurrencies,” said the PayPal CEO.

Related: Almost 20% of PayPal Users Have Used App to Trade Bitcoin, Mizuho Says

Bitcoin‘s volatility had previously been Schulman’s primary concern, prompting him to consider it a “poor form of currency” with the potential to wipe out small merchants’ profits. In order to tackle this issue, PayPal will allow consumers to know the exact exchange rate of crypto at the moment of a purchase, removing the volatility risk.

Also read: PayPal Removes Waitlist for New Crypto Service, Boosts Weekly Purchase Limit to $20K

“It bolsters the utility of that underlying cryptocurrency, and you can do more with it than just ride the ups and downs of it,” he said. “In effect, you’re taking that as an instrument that can conduct commerce at our 28 million merchants.” 

Schulman was joined in the session by European Commission President Ursula von der Leyen, Facebook CTO Mike Schroepfer and Dallas Mavericks owner Mark Cuban.

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Ukraine’s Draft Crypto Bill Passes First Parliamentary Hearing

5 years 10 months ago

Ukraine’s legislative effort involving cryptocurrency regulation has had a successful first hearing in the nation’s parliament, the Verkhovna Rada.

After being discussed and given the initial thumbs-up by lawmakers Wednesday, the Draft Bill on Virtual Assets now has two more hearings before it can become law. 

If that happens, Ukraine will join the still-short list of nations that have put in place dedicated laws regulating cryptocurrencies. The country was named a global leader in crypto adoption by blockchain analytics firm Chainalysis in September when citizens were actively using crypto for savings, investment and cross-border trade. 

Related: Crypto.com Secures Australian Financial Service License

Things were not completely smooth for the bill during the parliamentary hearing: Some lawmakers decried spending time on virtual assets when there are more important issues besetting the Ukrainian economy. However, in the end, the bill received 229 “yes” votes out of 340 and passed this first stage of the legislative process. 

The bill defines virtual assets as “a set of data in electronic form,” which “can be an independent object of civil transactions, as well as certify property or non-property rights.” The law suggests not considering virtual assets as legal tender in Ukraine.

The document singles out virtual assets backed by goods or services, suggesting they must be taken out of the market in cases where the backing ceases to exist. 

The ownership of virtual assets is considered as being the entity holding the private keys, unless they are held with a custodian, forfeited by the court decision or acquired illegally. 

Related: Crypto Long & Short: How Bitcoin Development Is Evolving – And What’s Behind It

Virtual assets would be regulated by Ukraine’s Ministry of the Digital Transformation, and crypto service providers must register to be able to operate in the nation. Firms must provide information on ownership structure and beneficiaries, as well as ensure they don’t facilitate money laundering and are diligently protecting users’ personal data. 

Also read: Why Ukraine Is Ripe for Cryptocurrency Adoption

The Ukrainian crypto community sometimes finds itself at a disadvantage on global trading platforms. For example, in September, Bittrex temporarily stopped serving users from Ukraine, along with Belarus, Burundi, Mali, Myanmar, Nicaragua and Panama. The exchange did not give specific reasons, citing only “the current regulatory environment” in the affected jurisdictions.

The Ministry of the Digital Transformation believes introducing a clear regulatory regime would encourage crypto businesses to work with Ukrainians and open shop in the country. The ministry drafted the bill in collaboration with Ukraine’s crypto community, although some members are vocally opposed to the very idea of crypto regulation. 

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Introducing Valid Points: The Risks and Rewards of Staking on Eth 2.0

5 years 10 months ago

It’s alive! Welcome, everyone, to the first issue of Valid Points. 

Today, we’re commemorating the historic launch of Ethereum 2.0, which marks the beginning of Ethereum’s live transformation into a proof-of-stake blockchain. The new blockchain is said to be several times more efficient, scalable and secure than the current decentralized application network. 

While Ethereum 2.0 will take years to build out fully, its first phase of development, Phase 0, is now officially underway. With the activation of Phase 0, there’s a new use case for Ethereum’s native cryptocurrency, ether (ETH). It’s called staking. 

Related: Market Wrap: Bitcoin Falls to $18.1K as Correlation to Ether Picks Up

What is staking? How does it work? What is the risk/reward profile of using ether to stake on Ethereum 2.0? These are a few of the pressing questions that we’ll start to unpack over the next several months. We’ll also discuss the ramifications of Ethereum 2.0 development on the growing decentralized finance ecosystem, as well as on the competitive landscape of smart contract blockchain platforms. 

Our newsletter, chronicling the progress of Ethereum 2.0, beginning with its launch, will go out every Wednesday. To support our coverage of the network, CoinDesk will be staking its own funds – 32 ETH to be exact. The goal: deepen CoinDesk’s editorial coverage of Ethereum 2.0 and gain an unvarnished perspective on the next major iteration of the Ethereum blockchain. To that end, we’ll also be donating all proceeds from our staked ETH to charity. Read more about CoinDesk’s fact-finding mission on Ethereum 2.0 here. 

Now, let’s get started!

Pulse check

There is a total of 900,129 ETH (roughly $532 million at time of writing) staked on Ethereum 2.0. That is 66% above the initial target for network launch. 

Related: Blockchain Bites: Ethereum 2.0 Beacon Chain Ships, Libra Rebrands, ‘Bitcoin’ Google Searches Up

With more than enough funds and user participation to secure network operations, Ethereum 2.0 has successfully worked through its first epoch, meaning it has worked through its first cycle for creating and processing new blocks. 

As of 22:58 UTC on Dec. 1, a total of 100 epochs have been finalized through the participation of 21,291 validators. Validators can be thought of as the equivalent to miners on Ethereum who are responsible for securing the network and its data. 

Active validators on Ethereum 2.0 are on average earning 0.00403 ETH/day, or $2.36/day at time of writing, for their participation on the network. This amount will likely decrease as the number of validators on the network rises. 

Each day, a maximum of 900 new validators can be onboarded to Ethereum 2.0. There are approximately 6,200 validators in the activation queue as of Tuesday waiting for entry into the network… and the CoinDesk Eth 2.0 validator is one of them. 

Read more on the status of our Eth 2.0 validator below. 

Charting New Frontiers

If you had invested in ether on Jan. 1, you’d be up 364% to date, according to the CoinDesk 20. 

And while that’s impressive, assets built on top of the Ethereum blockchain have seen even greater gains this year. Take, for example, this decentralized finance (DeFi) “blue chip” token: YFI – robo-hedge fund Yearn Finance’s governance token that didn’t exist a year ago – is up 2,300%, per Messari. Overall, the DeFi asset class is up 456% year-to-date against the dollar.

But not all were lucky: Lending protocol Compound’s token COMP dropped off a cliff after a very productive summer, down 55% year-to-date. 

Hits and misses with Ethereum tokens, and DeFi in general, may have some investors looking for more stable returns, particularly ones with less software risk. Which takes us to Ethereum 2.0 also known as Serenity, a proof-of-stake (PoS) blockchain promising stable returns on ETH deposits.

Stake it, baby

The proximity of “DeFi Summer” and Eth 2.0’s launch makes the pair a relatively straightforward comparison: If you have a DeFi coin sitting around, you’re more than likely to have some ether. Luckily for DeFi traders, the niche industry’s first bear market coincided with Ethereum’s relaunch and subsequent reward distribution. 

A PoS network, Eth 2.0’s rewards are denominated in ether and adhere to a distribution curve dependent on participation and average percent of stakers. A lot of Ethereum developers like to compare it to a bond, although this bond’s expiry relies more on GitHub pull requests merging on time than a corporate clerk mailing out checks.

When annualized, rewards per epoch (a period of time during which transactions are proposed and validated by token deposits) are competitive against some DeFi project rewards. 

Indeed, Eth 2.0 staking rewards start at some 20% for early stakers. They will continue to drop as more validators join the network to between 7% and 4.5% annually. 

For comparison, a snapshot of DeFi yields from more trusted projects shows yields sitting around 5%–7%, according to DeFi Rate. That’s not to say you can’t still find higher yield, but you do take on software risk which has determined the fate of many a DeFi project this year.

Eth 2.0: Risk and reward

Staking is risky as well, complete with different tradeoffs from DeFi. Not only can your initial deposit be slashed for failing to keep up with the network, but hidden software risks still exist.

Each Eth 2.0 validator has to choose its own specification to work with from five different teams that programmed Eth 2.0 in various languages. Those specifications could have exploitable flaws, regardless of how smoothly testing went throughout the second half of 2020. That’s one reason staking rewards are set so high by developers.

Some clients, moreover, were late to join the deposit contract party, leading to investors missing out on early high-yield opportunities. For example, Prysmatic Labs had breaking changes in its final implementation of the Eth 2.0 spec. Unfortunately, the client was not ready until after the deposit contract was filled up. Eager validators, including CoinDesk, are in queue for validation but will miss out on at least the first week’s juicy rewards.

Staking in Eth 2.0 also means your ether is locked up for months to years. You can look at it, but you can’t touch it. 

Secondary markets might be able to address concerns around the lock-up period, however. For example, Coinbase chief product officer Surojit Chatterjee announced yesterday the intention to create a market for staked ether, also known as Beacon Chain ETH (BETH) in a blog post. It’ll be interesting to see how liquid a BETH market becomes compared to other tokens, given the inherent counterparty risk associated with staking.

Thanks for reading. If you haven’t already, you can sign-up for our Valid Points newsletter here.

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XRP Led November’s Crypto Bull Run With 169% Gain

5 years 10 months ago

As bitcoin dominated headlines in November with its rally toward an all-time high, one of the most prominent alternative cryptocurrencies, XRP, quietly jumped 169% during the month to top the performance rankings among digital assets in the CoinDesk 20.

The move left XRP, the payments token used in Ripple’s global payments network, up 225% in 2020, versus the older and larger bitcoin’s 165% gain. XRP has a market capitalization of $21.4 billion, a fraction of bitcoin’s roughly $350 billion.

The frenzy in XRP may be driven by a looming airdrop of free “spark” tokens to anyone who holds XRP, some digital-markets analysts told CoinDesk last month. 

Related: Bitcoin Sees Record Number of Active Users as Price Almost Hits $20K

There’s also the possibility that some first-time cryptocurrency buyers are unaware that it’s possible to buy a fraction of a bitcoin – divisible up to the eighth decimal, instead of a whole token. For the novice investor, XRP, currently changing hands at 62.3 cents, looks a lot cheaper on a price table than bitcoin’s $19,087. 

“As the digital asset space has seen renewed interest in the second half of 2020, a new wave of investors are looking for ways to get exposure,” said Brian Mosoff, CEO of the publicly traded Canadian investment fund Ether Capital. “Ripple appears to offer exposure in their portfolio, and a quick Google search may result in some users believing XRP is cheap and likely to become a product banks utilize for cross-border settlement.”  

Stellar, another payments token founded by Ripple co-founder Jed McCaleb, was the second-best performer in November among the CoinDesk 20, gaining 153%. It’s up 313% on the year.  

For comparison, bitcoin rallied 40% in November while ether, the native cryptocurrency of the Ethereum blockchain, rose 56%.

Related: Privacy Concerns Over Bitcoin Upgrade Taproot Are a ‘Non-Issue,’ Experts Say

Ether Capital’s Mosoff, for what it’s worth, says he’s skeptical of XRP’s gains. 

“Ripple has struggled to gain wide-spread institutional adoption despite years of effort,” Mosoff said.

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Bitcoin Sees Record Number of Active Users as Price Almost Hits $20K

5 years 10 months ago

As bitcoin continues to set new price highs, its network is also seeing record-breaking user activity.

As of Tuesday, there were 432,451 “active entities” – wallet clusters controlled by a single participant that sent or received funds in a 24-hour period. That’s an all-time high, according to data provided by blockchain analytics firm Glassnode. The previous peak of 410,972 was registered on Dec. 9, 2017.

“The number of active entities has been increasing steadily since the halving and signifies a large increase in network adoption by participants,” said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds.

Related: XRP Led November’s Crypto Bull Run With 169% Gain

Bitcoin underwent its third mining reward halving on May 11 this year. Since then, the number of active entities has increased by 70% and bitcoin’s price has more than doubled to nearly $20,000.

The cryptocurrency printed a record high of $19,920,53 on Tuesday before falling back. It was trading around $19,130 at time of writing, representing a 1.7% gain on the day.

While bitcoin’s price gains have been relatively sharp over the past eight weeks, the number of active entities has charted relatively steady growth. “While the metric has breached highs not seen since 2017, it has done so gradually without ‘bubble-like’ growth,” Dibb told CoinDesk. “We take comfort in this when correlating address clusters with forward-looking price action.”

Analysts consider increased activity as a bullish sign. “When there’s greater usage, there’s more demand for the cryptocurrency, and that drives the price up,” Philip Gradwell, chief economist at blockchain intelligence firm Chainalysis, previously told CoinDesk.

Related: Privacy Concerns Over Bitcoin Upgrade Taproot Are a ‘Non-Issue,’ Experts Say

The number of active entities rose to multi-month highs in early September, despite the multi-week sideways price action in the range of $10,000 to $12,500, signaling a continued increase in adoption and warning of a price breakout. The rise in activity to record highs suggests bitcoin’s rally is sustainable.

“Our expectation is that this metric will continue to rapidly outpace previous highs as bitcoin breaches through $20,000,” Dibb said.

Also read: Missed the Bitcoin Rally? Here’s a Low-Risk Strategy to Ride the Bull Market 

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Dusk Network Takes ‘Around 10%’ Stake in Dutch Stock Exchange

5 years 10 months ago

Security token platform Dusk Network has become a shareholder of a Dutch stock exchange for small- and medium-size enterprises (SMEs).

Announced Tuesday, Dusk Network’s share acquisition in Nederlandsche Participatie Exchange (NPEX) follows a partnership period where both companies developed pilot projects to further financial product innovation. A representative of Dusk told CoinDesk the stake was “around 10%.”

As reported previously, Dusk has plans to tokenize shares for thousands of SMEs in the Netherlands and the Benelux region.

Related: Swiss Digital Asset Bank Sygnum Launches Blockchain Alternative to Stock Exchanges

NPEX said in the announcement that it brought Dusk into the fold to help digitize and grow its platform. “We want to accelerate our growth and contribute more to the sector,” said NPEX CEO Mark van der Plas. “Especially during the pandemic, we see a lot of demand for better access to finance and investing … technology plays a vital role in this.”

Dusk also sees the share acquisition as a “strategic move,” one where joining forces with NPEX will help “innovate the financial sector.”

“As partner and shareholder, we have developed pilot projects to digitize NPEX’s services and infrastructure,” said Jelle Pol, managing director at Dusk. “Our prior experience enables us to quickly add value to the platform in the EU, using our technology.”

According to the companies, the tokenization of digital shares will allow for transactions and trades to be conducted on the exchange in smaller quantities. Dividend payments and expensive processes resulting from shareholder meetings can also be automated.

Related: Dutch Crypto Exchange Adds Extra Verification Measures Citing ‘Disproportionate’ Central Bank Requirements

The initiative also aims to reduce the cost of alternative methods of financing, which in turn could attract larger investments.

The Dutch exchange operates a multilateral trading facility license as a self-regulated financial trading venue under the stringent European legislative framework known as MiFID II.

See also: Malaysia’s Stock Exchange Eyes Blockchain for Bond Market Digitization

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Crypto.com Secures Australian Financial Service License

5 years 10 months ago

Hong Kong-based Crypto.com has secured an Australian Financial Service License through its acquisition of a firm called The Card Group Pty Ltd.

  • The license has been approved by Australia’s Foreign Investment Review Board which examines proposals by foreign entities to invest in Australia and will allow Crypto.com to work within the local regulatory frameworks, the firm said Tuesday. 
  • No details on the acquisition were provided after a CoinDesk request for information.
  • Crypto.com – which offers cryptocurrency exchange, payments and debits cards – recently announced support for Australian dollar transfers by allowing its users to directly deposit the currency to their Fiat Wallet via the app.
  • With the license in place, Crypto.com said it plans to launch its debit card in Australia going forward.
  • “We are committed to accelerating the world’s transition to cryptocurrency; working within the regulatory frameworks of the markets we operate in is a key pillar of achieving our mission,” said Kris Marszalek, Crypto.com CEO.
  • In late November, Crypto.com received preliminary approval from the Malta Financial Services Authority for two financial licenses that govern how payment companies operate and what services they can provide. 

Also read: Australia and Singapore to Trial ‘Paperless’ Trade Using Blockchain Technology

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Australian Crypto Exchange Exposes Personal Data of 270K Users

5 years 10 months ago

BTC Markets, one of Australia’s biggest cryptocurrency exchanges, has accidentally exposed users’ personal data, raising the risk of phishing attacks.

As reported by Business Insider Australia on Wednesday, the exchange revealed the names and email addresses of over 270,000 users when it sent out mass emails. The error saw names and addresses placed in the “to” section rather than individually addressing each recipient or using blind carbon copy.

The emails were sent out in batches of 1,000 recipients and meaning the exposure to a bad actor was limited to the data of 999 individuals per email.

Related: Crypto.com Secures Australian Financial Service License

However, “all account holders were affected.” BTC Market’s CEO Caroline Bowler said in a tweet “The email was sent in batches, rather than in bulk.”

Once initiated, the emails could not be stopped even after the error was noticed, according to the report.

While no passwords or financial data were included in the breach, email addresses can be used for targeted phishing campaigns, since the attackers know the individuals affected have cryptocurrency accounts.

The error highlights the risks that centralized exchanges can pose when it comes to user’s data and privacy.

Related: Huobi-Branded Crypto Exchange Launches for Malaysian Market

According to Business Insider, BTC Markets will report the breach to the Office of the Australian Information Commissioner, undertake an internal review and work to increase its security.

CoinDesk reached out to BTC Markets for comment, but did not receive a reply by press time.

See also: Crypto Exchange Liquid Says User Data Possibly Exposed in Security Breach

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Crypto Buying App Ziglu Bags Largest Raise of 2020 on UK Crowdfunding Site Seedrs

5 years 10 months ago

U.K.-based cryptocurrency app Ziglu has raised over $8 million in a crowdfunding campaign, the largest equity raise on the Seedrs platform this year.

The support from some 1,250 investors brings Ziglu’s total fundraising to $14.8 million. 

As for why the offering seemed to command attention on Seedrs: It’s good timing for the crypto app, which former Starling Bank co-founder Mark Hipperson launched in June of this year. Apps like PayPal, Square and Revolut are embracing bitcoin and its price is near all-time highs.

Related: Almost 20% of PayPal Users Have Used App to Trade Bitcoin, Mizuho Says

“I am blown away by just the reception and the support we’ve gotten from the community about our crowdfunding campaign,” said Ziglu Chief Growth Officer Yang Li. 

Read more: Just-Launched Ziglu Wants to Make It Stupid Easy to Buy Crypto

Ziglu had aimed to raise a modest £1 million ($1.34 million) but hit this target within three hours of the campaign opening.

“We weren’t being purposefully coy to set our target at £1 million,” Li said. “I was thinking it would be nice if we could get halfway there by the end of the week. And then we blew the gates apart.” 

Related: PayPal-Backed Identity Platform Acquired by Nevada’s Blockchains LLC

The crowdfund turned out to be five times oversubscribed. The average investment amount was $6,445, Li said.

Ziglu allows users to buy, hold and sell bitcoin, bitcoin cash, ether, litecoin and XRP. Earlier this year, the U.K.’s Financial Conduct Authority (FCA) approved the payments platform as an Electronic Money Institution.

Read more: Starling Bank Co-Founder’s New UK-Licensed App Adds P2P Crypto Payments

The momentum created by the crowdfunding, plus the febrile atmosphere around a gathering crypto bull run, has also seen Ziglu’s user numbers spike.

“We were ranked as high as number five on the App Store and we are seeing a huge upsurge in user numbers,” said Li. “We’ve doubled the number of users in the past couple of weeks.”

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Institutional Bitcoin Shop NYDIG Raises $150M for Twin Crypto Funds

5 years 10 months ago

New York Digital Investments Group (NYDIG) raised $150 million for two new funds to invest in cryptocurrencies, a move that underscores the one-stop crypto shop’s skyrocketing clout on the institutional bitcoin scene.

As revealed in two U.S. Securities and Exchange Commission filings, NYDIG Digital Assets Fund I raised $50 million from institutional investors while NYDIG Digital Assets Fund II raised $100 million.

A source familiar with the matter confirmed to CoinDesk that Fund I invests entirely in bitcoin. The source said it is NYDIG’s latest offering for a growing lineup of institutional clients going long on BTC.

Related: Why a $631B Asset Manager Just Changed Its Mind on Bitcoin

It was not immediately clear whether Fund II also invests solely in the market-leading cryptocurrency.

But more intriguing than the size of the two new NYDIG offerings are the identity of the whales who bought in. Just two unnamed investors appear to have participated in NYDIG’s $50 million bitcoin fund, while it seems its larger brother got all its cash from just one.

The funds capture the extent to which deep-pocketed players are powering the 2020 bull run. Corporations making the crypto their treasury reserve, storied investors pumping their bags on CNBC and institutions piling in have combined to push BTC to new all-time highs.

That crypto-forward institutional investors would flock to NYDIG should be no surprise to those familiar with the space. NYDIG was spun out of $10 billion Stone Ridge Asset Management in 2017 with a mission to court institutional cryptocurrency newcomers. It quickly hired BitLicense architect Benjamin Lawsky and secured $50 million in funding to build out the team.

Related: Galaxy Digital Bitcoin Funds Raise $104M as Institutional Cash Flows In

See also: Fund Manager Got NY BitLicense 11 Months After Hiring Its Architect

NYDIG raised an additional $50 million in growth equity in October. It now offers custody, execution, investment and prime brokerage services to hedge funds, pensions, banks and other high-dollar clients.

The two funds continue NYDIG’s recent trend of registering its crypto offerings as Rule 506(c) investment vehicles. Essentially, that means NYDIG can advertise the funds to a wider audience.

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CEO of World’s Largest Asset Manager Says Bitcoin Can Possibly ‘Evolve’ Into Global Asset

5 years 10 months ago

The head of the world’s largest asset manager has provided a somewhat bullish take on the world’s first cryptocurrency.

According to a report by CNBC on Tuesday, CEO of BlackRock Larry Fink said bitcoin has “caught the attention” of many people and that the cryptocurrency market was still relatively small compared to others.

Speaking to the former Bank of England Governor Mark Carney at the Council on Foreign Relations on Tuesday, Fink said the nascent cryptocurrency asset class can possibly “evolve” into a global market asset, CNBC said.

Related: BlackRock’s Chief Investment Officer Says Bitcoin Could Replace Gold to a Large Extent

According to the report, Fink also said having a digital currency has a real impact on the U.S. dollar, making it less relevant on a global scale for international holders of dollar-based assets. He also raised the question: “Does it change the need for the dollar as a reserve currency?”

The comments are a still relatively rare endorsement from a major traditional financial players but follow on the heels of even more bullish views from billionaire hedge fund managers Stanley Druckenmiller and Paul Tudor Jones II who are allocating a portion of their assets to bitcoin.

BlackRock is the world’s largest asset manager with over $7.4 trillion dollars in assets under management, according to the managers website.

See also: Crypto Long & Short: What We’re Getting Wrong About Druckenmiller and Bitcoin

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Privacy Concerns Over Bitcoin Upgrade Taproot Are a ‘Non-Issue,’ Experts Say

5 years 10 months ago

Bitcoin privacy experts are far from impressed with a recently circling slideshow-style privacy report that puts Taproot, a likely upcoming upgrade to Bitcoin, in the crosshairs. 

The Taproot upgrade will boost Bitcoin’s privacy and scalability. The years-in-the-making upgrade has been applauded by Bitcoin’s most active developers, with the community being invited numerous times to test and scrutinize it. Plus, in an unprecedented move for large Bitcoin upgrades, the majority of bitcoin miners are now signaling support for the upgrade.

Against this backdrop comes a new report from blockchain explorer Blockchair’s lead developer Nikita Zhavoronkov, who has released several privacy-oriented tools. He argues that because Taproot introduces a new “script” to Bitcoin – which dictates under which conditions coins can be spent – the Taproot coins will become distinguishable from other bitcoins. 

Related: Market Wrap: Bitcoin Falls to $18.1K as Correlation to Ether Picks Up

Read more: Bitcoin’s Future: Exactly How a Coming Upgrade Could Improve Privacy and Scaling

Zhavoronkov, who has developed a reputation for his frequent criticism of Bitcoin, now appears to have one goal: to stop the upgrade. 

But Bitcoin privacy experts pointedly disagree with Zhakoronkov’s claim that Taproot isn’t up to snuff. 

“I think the ‘research’ sucks, to put it bluntly,” said Bitcoin privacy expert Chris Belcher, who works on Bitcoin privacy projects CoinSwap and JoinMarket). In an email to CoinDesk, he argued that, ironically, what Zhavoronkov proposes – to stop Taproot – would harm Bitcoin privacy in the long term.

Related: Missed the Bitcoin Rally? Here’s a Low-Risk Strategy to Ride the Bull Market

“What Nikita describes is a non-issue,” pseudonymous bitcoin educator and privacy guru 6102 told CoinDesk.

Veteran bitcoin developer Greg Maxwell, who invented Taproot, went so far as to go on Reddit and call Zhavoronkov’s research an “attack,” warning, “Be informed and don’t let malicious actors sow FUD in an effort to hurt Bitcoin users.”

The criticisms

Let’s dive into the details a bit. Taproot will enable new rules, known as scripts, for locking up coins. Bitcoin has many types of scripts. The most common is just the rule that Bitcoin cannot be sent to someone else unless the user uses a private key to sign it and send it along. But there are others, such as the rule that two-of-three specific users need to sign the transaction to move the coins elsewhere.

Bitcoins locked up in these different scripts each look a little different. Remember, Bitcoin’s ledger is open for anyone to see. It’s possible for busybodies, namely blockchain analysis companies, to peruse Bitcoin’s transaction history and pass on what they find to paying customers, such as government agencies, who may then use this information for a variety of reasonsto crack down on criminals. 

In short, Zhavoronkov points out that once the new Taproot script is added, Taproot coins will stand out from other bitcoins. 

More specifically, he looks at where bitcoin transactions are sent. Bitcoins are stored in chunks called Unspent Transaction Outputs (UTXOs). Say Alice has 3 BTC locked in one UTXO, but only wants to send 1 BTC to Bob. Once she sends the bitcoin to Bob, her 3 BTC UTXO will be split into two pieces: 1 BTC will be sent to Bob, and 2 BTC will be sent back to Alice in what’s called a “change address.”

If the change address script type is the same as the sending address but different from the recipient address then it’s easy to guess where the sender sent their coins. Zhavoronkov argues this is an assumption (known as a “heuristic” in privacyland lingo), that blockchain analysis companies can use to figure out (or at least guess) where funds are going.

Zhavoronkov argues that adding another script for Taproot will increase the likelihood of this privacy hurdle. And he doesn’t think this will be a short-term problem. 

Zhavoronkov argues that if Taproot gets 100% adoption, then he agrees with other Bitcoin developers that the upgrade will be a “net good.” But he doesn’t think it will get to that point.

“Taproot shouldn’t be considered as a ‘privacy feature’ because it’s not like the shielded pool in Zcash or ring signatures in Monero. The advantages are minuscule and applicable to edge cases only,” he added.

Devs: Concerns don’t hold water

Bitcoin developers argue this is a concern that many have already considered. It’s not new information.

“The reality is that this is already a ‘problem’ and adding a new type will likely have negligible impact, while bringing other significant benefits,” 6102 told CoinDesk. He added that the heuristic Zhavoronkov points to can be easily gamed.

Maxwell argued (again, on Reddit) that Taproot was actually designed specifically with the problem Zhavoronkov pointed out. 

“This is a fact that was always discussed along with the development of taproot, and it drove a number of design decisions: e.g., not deploying it as multiple features and making sure new extensions can be deployed in leafs where they may not get exposed,” he said.

Belcher added there are already many, many script types, each of which can be differentiated from others, and adding one more won’t be much of a issue, let alone a catastrophic one as Zhavoronkov describes it. 

“Bitcoin today already suffers from the situation described by that PDF, and Taproot improves the situation on balance,” Belcher said. 

Taproot: A privacy improvement

Further disagreeing with Zhavoronkov, the developers CoinDesk contacted argued the long-term benefits of Taproot far outweigh Zhavoronkov’s concerns. 

The privacy benefit Taproot brings is actually supposed to be the opposite of what Zhavoronkov describes. With Taproot, Bitcoin users will be able to use different ways of locking up their coins “without being able to be distinguished from each other,” as Belcher put it. For example, a transaction used to set up a Lightning channel can be made to look just like a regular bitcoin transaction.

Belcher recently posted a thread on Twitter exploring in more granular detail the ways Taproot will benefit Bitcoin privacy in the long term. 

“Taproot is a huge positive for privacy and it should be added to Bitcoin as soon as is safely possible,” Belcher said, later adding that “this glossy and charismatic, but dishonest, PDF is an attempt to reduce the privacy of Bitcoin.”

Bitcoin developer Lloyd Fournier, who earned a grant from Square Crypto earlier this year, also noted that Taproot transactions are cheaper (contrary to what Zhavoronov said) so users will have an extra incentive to adopt them.

“The immense individual and community effort that went into the specification and engineering around Taproot aims to improve Bitcoin over the coming years and decades. The author’s emphasis on very narrow short-term concerns seems to be misaligned with the long-term flourishing of Bitcoin,” he said.

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CoinDesk

Market Wrap: Bitcoin Falls to $18.1K as Correlation to Ether Picks Up

5 years 10 months ago

The price of bitcoin took a bit of a dip, though overall market sentiment remains bullish. Ether’s correlation to bitcoin is going up despite differences in value propositions.

  • Bitcoin (BTC) trading around $19,077 as of 21:15 UTC (4:15 p.m. ET). Slipping 2.1% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $18,171-$19,920
  • BTC above its 10-day and 50-day moving average, a bullish trending signal for market technicians.

The price of bitcoin was able to hit as high as $19,920, according to CoinDesk 20 data, before momentum stalled. Traders began hitting the sell button, taking the price to as low as $18,171 before it recovered. It was at $19,123.70 as of press time. 

Katie Stockton, a technical analyst for Fairlead Strategies, sees $19,511 as a “resistance” level, a price point the world’s oldest cryptocurrency can break through in this time of highly bullish sentiment. “An eventual breakout appears likely from a momentum perspective,” she said, noting that $19,511 “is not a strong resistance level – $20,000 is a psychological hurdle, much like Dow 30,000.”

Related: Privacy Concerns Over Bitcoin Upgrade Taproot Are a ‘Non-Issue,’ Experts Say

As for equities, Tuesday was green across major market indexes.

A positive performance out of stocks often means bitcoin’s price will trend upward, but Tuesday’s sideways activity again reiterates how volatile the crypto markets can be. In turn, that raises questions about a major narrative regarding bitcoin’s role. 

Read More: Coinbase Brokered MicroStrategy’s $425M Bitcoin Purchase, Exchange Says

“Expect additional short-term volatility, although intermediate- and long-term momentum are strongly positive,” Fairlead’s Stockton said. Thus, when looking at bitcoin’s volatility versus popular traditional assets, the store of value thesis may not be as strong as many believe as volatility is trending up versus other investments.

Related: Missed the Bitcoin Rally? Here’s a Low-Risk Strategy to Ride the Bull Market

However, the narrative that bitcoin serves an important purpose in uncertain times still holds for a large swath of the market. 

“It is being used as a hedge against inflation that will come from global monetary easing as a result of COVID-19,” said Midori Kanemitsu, a market analyst at cryptocurrency exchange bitFlyer.

Some of this increased volatility may simply be because investors are participating in profit-taking at these lofty levels, said Andrew Tu, an executive for quant trading firm Efficient Frontier. “Currently, there is less stablecoin inflow into exchanges and more bitcoin inflow into exchanges, which suggests less buying pressure for bitcoin for the very near future,” Tu told CoinDesk. 

Analysts are also keeping an eye on ether. The all-time high for the native currency of the Ethereum network is over $1,400 and many think the cryptocurrency is a good buy in this bull market. 

“I think ETH is still undervalued versus BTC,” noted George Clayton, managing partner of investment firm Cryptanalysis Capital. “All this DeFi (decentralized finance) going on is showing the utility of smart contract protocols.”

Is bitcoin leading ether?

Ether (ETH), the second-largest cryptocurrency by market capitalization, was down Tuesday, trading around $596 and slipping 2% in 24 hours as of 21:15 UTC (4:15 p.m. ET).

Over the past several days, ether has mirrored bitcoin’s price rise closely.

The correlation between bitcoin and ether is also trending upward, though is lower than it was after the March market meltdown.

The fact the two cryptocurrencies are increasingly trading in tandem belies the fact that Ethereum’s 2.0 Beacon Chain launch clearly differentiates some of its use case aspects. While bitcoin’s “store of value” narrative continues to be a strong signal coming from industry analysts, the “programmable money” thesis of Ethereum doesn’t seem to be making the market asset perform based on its own fundamentals – yet. 

Read More: Ethereum 2.0 Beacon Chain Goes Live as ‘World Computer’ Begins Overhaul

“Both assets have definitely seen a [U.S. dollar]-priced upswing, and though BTC has been the one to have a lot of recent news around its proximity to all time highs, Ethereum has been the real star of the summer of DeFi and into the fall compared to BTC,” noted John Willock, chief executive officer of crypto custody provider Tritium. “I believe that as confidence in 2.0 with some operating history and broader investor understanding of the economic implications to the valuation of ETH spreads, we will see a bull run in ETH,” he added.

Other markets

Digital assets on the CoinDesk 20 are mostly red Tuesday. One notable winner as of 21:15 UTC (4:15 p.m. ET):

Notable losers:

Read More: Hive Reports $7.4M Q2 Profit as Lower Costs More Than Offset ‘Big Spend’ 

Commodities:

  • Oil was down 1.1%. Price per barrel of West Texas Intermediate crude: $44.54.
  • Gold was in the green 2.1% and at $1,814 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Wednesday jumping to 0.929 and in the green 11.8%.
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CoinDesk

Missed the Bitcoin Rally? Here’s a Low-Risk Strategy to Ride the Bull Market

5 years 10 months ago

Bitcoin has come a long way since bottoming out below $4,000 in March. The cryptocurrency clocked a record high above $19,900 early Tuesday and is up nearly 170% this year.

While institutional participation has increased, a large part of the retail crowd may have stayed away from the market. For that group, the fear of missing out (FOMO) on the opportunity to make triple-digit gains may have set in over the past few weeks.

Yet, investing now while the cryptocurrency is trading near lifetime highs may seem risky because there is always a possibility of significant price pullback. Bitcoin has seen several pullbacks of over 20% during the previous bull markets. 

Related: Privacy Concerns Over Bitcoin Upgrade Taproot Are a ‘Non-Issue,’ Experts Say

As such, investors looking to buy bitcoin now should consider implementing a dollar-cost averaging (DCA) strategy, according to leading traders in the cryptocurrency space. 

“It is a good way to build exposure to both bitcoin as well as other asset classes such as global equity indices, as both look set to perform well against a backdrop of negative real rates for the next few years,” Scott Weatherill, chief dealer at the over-the-counter liquidity provider B2C2 Japan, told CoinDesk.

How dollar-cost averaging saves money

DCA, also known as the constant dollar plan, involves buying smaller amounts of an asset at regular intervals, regardless of price gyrations, instead of investing the entire amount at one time. The strategy helps investors take the emotion out of their trades and can result in a lower average purchase cost because markets seldom move higher without pullbacks. 

Read more: 5 Reasons Why Bitcoin Just Hit an All-Time High Price

Related: Market Wrap: Bitcoin Falls to $18.1K as Correlation to Ether Picks Up

“Dollar-cost averaging in bitcoin has historically been a very profitable strategy that lowers drawdown risk,” Weatherill said. 

To illustrate, let’s say an investor has been accumulating $100 worth of bitcoin at the highest price observed on the 17th of every month, starting from Dec. 17, 2017, when bitcoin peaked at $19,783. As of press time, that investor would own roughly 0.48 BTC at an average cost of around $8,660. It also means the investor would be making a nearly 120% gain at the current market price of $18,850.

However, if the investor made a lump-sum investment at the record price of $19,783 on Dec. 17, 2017, the investment would currently suffer a loss of 4.7%. Over a long period, that loss could be more significant when adjusted for inflation.

In the former case, the investor spread out $3,600 over 36 months, buying fewer bitcoin when prices were high and more when prices were low. That helped pull down the average cost and bring in a substantial gain. The strategy has delivered similar results during the previous bull-bear cycles. 

“Ideally, one must invest with a hope of selling at higher prices in the long run,” Chris Thomas, head of products at Swissquote Bank, said. “The best way, in my opinion, is to buy each month and build up a position over the longer term.”

The risk of certain option strategies for retail traders

Some investors may think of implementing synthetic strategies through the options market, such as buying a put option against a long position in the spot market. The put would gain value in the event of a sell-off, mitigating the loss (on paper) in the long spot market position. 

Yet, such strategies are more suitable for speculators who intend to profit from short-term price volatility and go against the idea of pulling down the average purchase cost via DCA. “I wouldn’t recommend buying puts if you are ‘DCAing,’ as it would crimp returns,” Weatherill said. 

A put option is a derivative contract that gives the purchaser the right but not the obligation to sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy. 

An option buyer needs to pay a premium upfront while taking a long call/put position. A long put position makes money only if the asset settles below the put’s strike price on the day of expiry. Otherwise, the option expires worthless, causing a loss – in this case, the premium paid – for the buyer. 

Read more: Bitcoin Price Sets New Record High of $19,850

What’s more, those trying to combine DCA with an options hedge may end up hurting their portfolios. For example, if an investor buys puts while DCAing and the market goes up, the options bought to hedge against a potential downturn would bleed money, crimping overall returns from dollar-cost averaging. 

“Retail investors should stay away from options trading,” warned Thomas. He added that one particular strategy, selling out-of-the-money calls, is extremely dangerous. 

Savvy traders often generate additional income by selling call options well above bitcoin’s current spot price and collecting premiums on hopes the market wouldn’t rally above the level at which the bullish bet is sold. However, with short call positions, holders can theoretically suffer unlimited loss because the sky’s the limit for any asset. 

In the case of bitcoin, that’s particularly risky as sentiment remains bullish, with analysts expecting a continued bull run on increased institutional demand. As such, selling call option(s) while DCAing could prove costly. 

“While there may be a temptation to optimize through various trading strategies, the new money should stick to sure strategies: 1) stay long, and 2) buy dips,” said Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic Capital. 

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CoinDesk

Why You Shouldn't be Surprised by Bitcoin's Rally

5 years 10 months ago
For those who have not been watching Bitcoin closely, a bursting bubble in 2017 shook the market and caused most retail BTC investors to retreat. However, now Bitcoin is rising because there are more buyers than sellers coming into the market
Guest Contributors

Yearn Finance Set to Gobble Up SushiSwap for Its Fifth DeFi Merger

5 years 10 months ago

Yearn Finance is eyeing yet another merger with yet another food-themed DeFi project – only this time, the candidate has a larger market size than Yearn itself.

Per a blog post authored by Yearn Finance creator Andre Cronje, the so-called decentralized finance protocol may fuse with SushiSwap, another automated market maker (AMM) that forked from UniSwap. 

In addition to combining technical features for market infrastructure, the merger would, among other things, combine both markets’ total value locked (TLV, a measure of the total assets deposited in these lending markets) into a single lending pool. Both protocols would also share developer resources and hold each other’s tokens in their treasuries, per the agreement. 

Related: ‘Basis Cash’ Launch Brings Defunct Stablecoin Into the DeFi Era

Read more: Yearn Merges With Cover, DeFi Protocol’s 4th Deal in a Week

Yearn has already absorbed four other DeFi protocols: Akropolis, Cover, Cream and Pickle. SushiSwap, however, would be Yearn’s largest merger yet and is the first time Yearn would be joining hands with a lending market larger than its own. (Per DeFi Pulse data at the time of writing, SushiSwap’s TVL is $732 million while Yearn’s is $440 million).

Yearn and SushiSwap: An ‘aggressive synergy’

Cronje has spoken with SushiSwap’s de facto leader, a pseudonymous programmer named 0xMaki, about the merger, but Yearn and Sushi token holders from both communities will have to vote on the proposal to make it official.

In his post, Cronje called the move one of Yearn’s “more aggressive synergies.”

Related: Yearn Merges With Cover, DeFi Protocol’s 4th Deal in a Week

“As Sushi focused on expanding their AMM ecosystem, and as Yearn focused on expanding their strategies, more and more overlap became apparent. Yearn needed custom AMM experiences for their strategies, and Sushi started pushing the boundaries of yield and money markets,” Cronje writes in the post.

“With these overlaps, more and more work started to become mutualistic, and at this point it takes the relationship to the next level.”

Read more: Yearn, YAM and the Rise of Crypto’s ‘Weird DeFi’ Moment

On SushiSwap’s Discord channel, the news was mostly well received by the protocol’s users. In the chatroom, SushiSwap contributor ctrl reassured SushiSwap token users that “SushiSwap will of course keep evolving too, independently,” continuing that the team envisions a “sibling platform aimed more at pro traders.” This sibling platform is built on Deriswap, a DeFi financial product platform conceptualized by Cronje that SushiSwap’s team will help Yearn build.

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Almost 20% of PayPal Users Have Used App to Trade Bitcoin, Mizuho Says

5 years 10 months ago

Nearly one-fifth of PayPal (PYPL) users have already traded bitcoin using the PayPal app, according to a report published Tuesday by Mizuho Securities and obtained by CoinDesk.

  • Per the Mizuho survey, about 65% would use bitcoin as a currency at PayPal’s 28 million merchants; 17% of users have already used the app to buy and sell bitcoin.
  • Bitcoin exuberance boosts user engagement, the survey found, with bitcoin traders reporting more than three times higher usage frequency compared with non-bitcoin traders. They also held larger cash balances, the survey found.
  • “About 50% of PayPal bitcoin traders reported increased usage of the PayPal app after beginning to trade bitcoin,” the survey found. “This compares with just 9% who reported reduced engagement.”
  • The survey comes over a month after PayPal announced its plans to support bitcoin and other cryptocurrencies, as CoinDesk reported at the time, and only a few weeks after the payments firm removed the waitlist to access the service, citing overwhelming demand.
  • But converting non-bitcoin traders into cryptocurrency users is a challenge for PayPal, the survey found. Only 8% of non-bitcoin traders said they would plan to trade the leading cryptocurrency in the future on PayPal’s app while 42% said they “don’t know yet,” according to Mizuho.
  • Citing the results of the survey, the firm raised its stock trading target on PayPal to $290 per share, up from the prior target of $270. In recent trading, shares of PayPal were up about 2.37% to $219.20. Mizuho maintained its “buy” rating on the payments giant.

Read also: PayPayl Removes Waitlist for New Crypto Service, Boosts Weekly Purchase Limit to $20K

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Privacy Concerns are Not an Existential Threat to Bitcoin

5 years 10 months ago
U.S. Treasury might try to force “Know Your Customer” (KYC) type identity disclosure rules on the users of individual crypto wallets. In the United States, KYC rules are largely in place for crypto exchanges, but not for self-hosted wallets or the user who holds their own keys.
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