CoinDesk Crypto

A 52-year-old Singapore man has been found guilty of promoting OneCoin, the multi-level marketing, or Ponzi, scheme based around its own cryptocurrency.

• On Wednesday, Fok Fook Seng was convicted and fined S$100,000 (almost US$72,000) for marketing OneCoin between January 2016 and June 2017, as reported by The Straits Times on Friday.
• The Singapore Police Force said the man is the first to be charged under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act, 2000.
• Fok used the Facebook page “OneLife One World Team Singapore” to advertise OneCoin and promote it at major events.
• Victims – around 1,180 people from Singapore and elsewhere – would be sold educational packages that came with tokens said to be usable for “mining” the OneCoin cryptocurrency, per the report.
• OneCoin has been deemed fraudulent in the U.S. with “top leaders” Ruja Ignatova and Konstantin Ignatov indicted on charges of wire fraud, securities fraud and money laundering in May last year.
• New Zealand has also issued warnings against fraudulent crypto scams involving OneCoin.
• A jury convicted OneCoin's Lawyer Mark Scott on fraud charges in November 2019 after it was revealed he laundered $400 million for the scheme beginning in 2016.
• Those convicted under Singapore’s law face fines of up to $200,000 Singapore dollars ($143,340) and/or five years in prison.

See also: Scams, Schemes and Crypto Privacy, Feat. Preston Byrne

• Singapore Begins Crackdown on Unlicensed Bitcoin Sellers
• How to Spot a Crypto Scam
• New Zealand Police Seize $90M Linked to Alleged BTC-e Exchange Operator
• Singapore Ride-Sharing App Lets Customers Pay With Bitcoin

Switzerland’s InCore Bank AG has become the first financial institution in the country to offer banking services to Kraken clients.

• Announced Thursday, the move means clients located in the EU will be able to fund their accounts using Single Euro Payments Area (SEPA) deposits – the payment integration project the EU designed to simplify euro bank transfers.
• The companies said the move comes at a time when institutions and traders are seeking alternative sources of capital value during an “uncertain macroeconomic climate.”
• Rudy Suter, a strategy consultant for digital assets at InCore Bank, said the bank's new strategy is based on three pillars: cryptocurrencies, tokenization and blockchain applications.
• “As digital assets, cryptocurrencies are a valuable addition to modern asset management and will be indispensable as a payment and investment value in the future,” said Mark Dambacher, InCore’s CEO in a statement.
• The companies plan to enable deposits in British Pounds (GBP), Swiss Francs (CHF) and Canadian dollars (CAD) in Q3 2020.
• According to a recent study by research firm Finery Tech, Kraken possesses the deepest bitcoin to euro liquidity in Europe as of June 2020.
• InCore Bank AG is the 209th-largest bank in Switzerland in terms of total assets under management.
• Kraken is rated the 10th-largest crypto exchange in the world by trade volume, according to data analytics website Nomics.
• Last month Kraken extended its services to Australia, enabling local clients to fund their accounts in Australian dollars (AUD).

See also: $103M Bailout Denied for Coronavirus-Hit Firms in Switzerland’s ‘Crypto Valley’

• Sri Lanka’s Blockchain Bank KYC Platform to Enter Development ‘Shortly’: Central Bank
• Swiss Government Makes Moves to Encourage Crypto Businesses
• Kraken Pledges $150K for Development of Open-Source BTCPay Server
• Germany’s Neufund Shuts Down Security Token Platform, Saying BaFin Failed to Act

We might be entering into the era of genetically modified yield farming. Or maybe decentralized finance (DeFi) just doesn’t make sense anymore.

There are currently far more DAI in supply on Compound than there are DAI in the world, at least according to the numbers reported by Compound’s website. Assuming that nothing has gone awry there, the numbers seem impossible. But they might not be.

Liquidity on Compound is shifting dramatically between assets as new rules for distribution of its governance token, COMP, take effect.

Related: DeFi Insurer Nexus Mutual Maxed Out by Yield-Farming Boom

Compound’s website reports a gross supply of 401 million DAI right now even though there are only 148 million DAI in existence, according to DAI Stats.

The supply of DAI on Compound has skyrocketed from $42 million Wednesday.

The most reasonable explanation for this is that Compound counts each deposit of DAI as additional gross supply, even if that DAI was just borrowed and re-deposited. So imagine there were 100 DAI and a user deposited 200 USDC. They could then borrow all that DAI and deposit again. Many users are probably running a few wallets to make this work more easily. 

As Electric Capital’s Ken Deeter put it in an email to CoinDesk, “Note that this is actually what banks do with USD as well. If I deposit $100, and $90 gets lent out, someone gets paid with that $90 and they deposit it in the bank. Now there’s $190 in the bank even though there was only $100 to start with.”

Related: Investment Firm Plans ETF-Like Product for Compound Yield Farmers

At about 21:00 UTC on Thursday, Instadapp put out the message that it was time to move deposits from USDT to DAI in order to maximize yields and it seems like users took note. 

As we previously reported, the addition of COMP yields makes these machinations very lucrative.

The price of COMP is $178.80, as of this writing.

A rules change went into effect Thursday that tweaked the incentives for those looking to mine new COMP.

Previously, the rules had favored the basic attention token (BAT) market because it had the highest interest rates after massive deposits into its liquidity pools. The rules now only count total borrowed and total deposit, ignoring interest rates. So there’s no longer incentive to game a high rate with a risky cryptocurrency.

The total supply to Compound has gone from $320 to roughly $80, though yields on BAT remain strong, at 5.4%.

Read more: Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy

At 7%, DAI has by far the strongest yield of any token on Compound right now, making it attractive to buy on the market and supply. With Tuesday’s change to the protocol – which went into effect today – all that counts for COMP earnings going forward are the total amount borrowed and lent. 

Yield farmers will look for the best risk-adjusted return and since DAI has the highest yield with low volatility, it’s a very clear bet. 

This was exactly what the MakerDAO community was worried about earlier this week. Cyrus Younessi, from MakerDAO’s risk team, wrote: 

“There is a chance (likelihood, even) that we see an unprecedented demand for Dai. Much of the natural supply for Dai could also be locked up in COMP farming, thinning out sell-side order books.”

As forum user “Maker Man” put it today in the MakerDAO chat, “Remember this whole COMP thing is a recycling issue – this is not necessarily draining DAI liquidity though it will tend to drive a siphon of it if it continues.”

UPDATE (July 3, 01:37 UTC): This story has been updated to reflect that fact that Compound reports more up to date figures on its main markets page than on individual token pages. CoinDesk reported in part from the latter, but has updated to the correct amounts.

• Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy
• DeFi’s ‘Agricultural Revolution’ Has Ethereum Users Turning to Decentralized Exchanges

Bitcoin broke below $9,000 Thursday afternoon as the leading cryptocurrency has continued to trade in a tight range just above $9,000 for several weeks.

• Bitcoin at $9,060 as of 20:00 UTC (4 p.m. ET), down 2% over 24 hours
• BTC trading range (past 24 hours): $9,300 – $8,900
• Ether down 3% trading, at around $225
• Institutional investment continues despite sleepy market
• Nearly all cryptocurrencies down over 24-hour period

Despite the brief 3% afternoon drop, however, the cryptocurrency markets continue to stay eerily calm as volatility drops and traders continue to expect a big move. Bitcoin was changing hands at around $9,060 as of 20:00 UTC (4 p.m. ET). 

Ether, the second-largest cryptocurrency by market capitalization, dropped 3%, trading around $225 as of 20:00 UTC (4 p.m. ET), according to Coinbase.

Related: Bitcoin Miners Saw 23% Revenue Drop in June

Bitcoin teased bearish traders Thursday with a 3% dip from $9,250 to $8,930 in afternoon hours. The move sparked a series of liquidations on BitMEX, spiking to $30 million after the afternoon price move, according to Skew. Liquidations had been fairly flat for several days on the largest bitcoin derivatives platform.

Despite the afternoon drop, spot trading volumes were relatively stable relative to the preceding few days. Coinbase volume, for example, just barely edged out its Wednesday’s volume, reporting a total of $78 million traded. 

Despite the quiet price action, institutional investors continue to make moves in crypto markets. 

Norwegian crypto investment firm Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange, CoinDesk reported Thursday. Arcane plans to issue 6.6 billion new shares – each at half a U.S. cent – to fund a $32 million take over by Swedish firm Vertical Ventures, which is facilitating the listing.

• S&P 500 flat, gaining less than 0.2%
• FTSE 100 up 1.3%
• Nikkei 225 down less than 0.2%
• Gold up 0.5% trading at $1,777

Related: Bitcoin Startup Zap Is Working With Visa

As bitcoin dipped, some of the darlings of the equities markets continued to soar. Tesla made a new all-time high for the second consecutive day Thursday, climbing to $1,228 in early trading hours. The technology stock opened 5% higher than its Wednesday close as its bullish momentum continues with ferocity. Zoom also made a new all-time high, trading at just below $264 during afternoon hours. 

See also: DeFi Insurer Nexus Mutual Maxed Out by Yield-Farming Boom

Social media stocks weren’t quite as lucky, dipping a bit on Thursday. Twitter dropped more than 1% Thursday. Facebook dropped 2.2%.

Cryptocurrencies in general were almost all in the red Thursday, according to Messari. The only digital asset categorized as a currency with a positive 24-hour return, according to its methodology, was monero (XMR) up 2.5%. 

In commodities, gold gained 0.5% on the day after recovering from 1% drop during afternoon trading hours. Crude oil gained more than 2%.

• After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions
• Why Bitcoin Bulls Are Betting on Explosive Growth in India

Nexus Mutual is maxed out covering the risks associated with decentralized finance (DeFi) platforms.

“Our product has honestly seen massive interest since yield farming kicked off,” Nexus Mutual founder Hugh Karp told CoinDesk in an email. “With potential yields being so lucrative many users are looking to protect themselves against the risk of smart contract failure.”

Nexus Mutual provides a way to hedge against the risk posed by smart contracts, with policies that pay out against a failure in the underlying software of a DeFi product within a given time frame. 

Related: Why Bitcoin Bulls Are Betting on Explosive Growth in India

It made its first payments earlier this year following the attacks involving flash-loan provider bZx. The Nexus Mutual risk pool already doubled over the last quarter, but the craze following the release of Compound Finance’s governance token on June 15 has notched it up even further. 

Read more: Business Is Booming for DeFi Insurer Nexus Mutual Ahead of Ethereum 2.0

“In particular, there is big demand coming from hedge funds and more professional investors for our product, they want multi-millions of cover. As a result, we’ve hit our current capacity limits on the key yield-farming protocols such as Compound, Balancer and Curve,” Karp told CoinDesk.

On Nexus Mutual Tracker, a data site made by 1confirmation partner Richard Chen, Curve is at the top, with active per contract sitting at $695,000. Compound and Balancer are a close second and third, respectively, with $651,000 and $619,000 of cover.

Related: Market Wrap: As Traditional Markets Rally, Bitcoin Gets Boring

Those are the most well-covered contracts on Nexus now, but Balancer is only slightly ahead of payments system Flexa.

Nexus is run as a mutual company by holders of the NXM token. They have set limits of $630,000 in coverage on each protocol. That amount is based on how much is on hand to pay out claims. The token is designed to recruit more capital when it’s needed, however, so they may be able to take on more policies soon. 

Nexus currently has $5 million on hand to cover claims, up $1 million since earlier this month. It’s worth noting that there’s no need for users of Nexus to show a loss to use Nexus. They only need to take out a policy that the smart contract might break or be exploited to get paid out. 

Read more: DeFi Platform Opyn Launches Put Options on Compound Token

This is similar to Opyn, which allows users to take out short positions against various tokens dramatically losing value, whether they hold the token or not.  

Karp wrote, “Yield farming is certainly attractive due to the outsized returns, but it does come with increased risk; leverage and smart contract risk can be dangerous, so be careful out there.”

• IOTA Foundation Enters Base Layer Race With ‘2.0’ Testnet
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Bitcoin miners suffered a 23% drop in revenue during June, resulting from lower network fees and a reduced block subsidy after the halving in May. 

Down from $366 million in May, bitcoin miners generated an estimated $281 million in revenue in June, a three-month low according to Coin Metrics data analyzed by CoinDesk. Estimates assume miners sell bitcoins immediately.

Mining is the process of adding confirmed transactions to the Bitcoin blockchain. For the resources required to mine, the network compensates miners via subsidies and transaction fees. Subsidies are paid per block at a current rate of 6.25 BTC. Fees are paid per transaction.

Related: Market Wrap: Bitcoin Briefly Breaks Below $9K, but Markets Remain Comatose

Compared to May, June subsidies and fees offer a better representation of mining revenue after the halving, said Austin Storms, founder of mining mobile infrastructure company BearBox. Even with an 11% decline in May, the month’s first 11 days of the month are weighted heavily from the 12.5 BTC per-block subsidy that later dropped to 6.25 BTC, Storms told CoinDesk. 

See also: Bitcoin’s Mining Difficulty Has Rarely Been This Static in a Decade

During the halving, the size of Bitcoin’s mempool grew substantially, which caused transaction fees to also increase. The mempool serves as a sort of holding depot for verified transactions that need to be included in new blocks by miners. As the mempool emptied through the end of May and into June, monthly miner revenue estimates reflect the subsequent decline in transaction fees. 

Fees only generated $12 million in June, which accounts for 4.3% of monthly revenue, down from a 12-month high of 8.3% in May. Since the per-block subsidy remains constant until 2024, growth in mining revenue can only come from two sources: an increase in network fees or bitcoin’s price.

• Bitcoin Startup Zap Is Working With Visa
• After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions
• Why Bitcoin Bulls Are Betting on Explosive Growth in India

New research shows certain wallets are vulnerable to a quasi double-spending attack, a federal appeals court effectively said blockchain data is not protected under the Fourth Amendment and more. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Law of the Land
The Senate Banking Committee plans to introduce legislation this week to study virtual currency’s role in illicit online activity. “Although the use and trading of virtual currencies are legal practices, some terrorists and criminals, including international criminal organizations, seek to exploit vulnerabilities” through them, the amendment read. Meanwhile, a federal appeals court on Tuesday effectively said searches of a suspect criminal’s blockchain activity does not violate the Constitutional Fourth Amendment’s protection against warrantless search and seizure in denying defendant Richard Gratkowski’s claims his blockchain and Coinbase-held bitcoin transaction records could not be used as evidence against him.

Related: Blockchain Bites: DeFi and DEXs Surge, Bitcoin’s Negligible Adjustment and an ICO Class Action

Shut Down?
The U.K. High Court of Justice has ordered crypto exchange GPay to be “wound up in the public interest.” In a statement Tuesday, the U.K. government said 108 clients had lost a total of just under £1.5 million ($1.9 million) using GPay, which also sold clients insurance to protect them against trading losses, but the exchange did not always pay out.

Bugs
Researchers at ZenGo have discovered a vulnerability in how certain wallets display Bitcoin’s replace-by-fee transactions, possibly enabling malicious actors to swindle funds from unsuspecting victims. The affected wallets ZenGo studied, Ledger Live, Breadwallet and Edge have fixed or are fixing the issue, though other wallets may be vulnerable. Meanwhile, cybersecurity firm Group-IB has identified a scam that uses victim’s personal information and celebrity deep-fakes to lure people to a website that details an investment scheme, which requires a 0.03 bitcoin ($276) fee to enter. (Decrypt)

Incumbents  
BlockFi says its monthly revenue has doubled as it sees a surge in new users for its crypto lending service and interest accounts. The revenue increase has been driven by bitcoin’s recent halving event in May, the company said, as well as the launch of a mobile app. Elsewhere, CNET founder Halsey Minor launched Public Mint, a “fiat native” blockchain that makes transactions efficient and accessible. Funds are held in insured banks, enabling users to create their own “digital money systems,” enabling companies using the platform to accept dollars via credit card, wire transfers and more whether or not they have a bank account. Finally, Coinbase Custody will secure assets used in 21Shares’ Bitcoin ETP in an offline storage solution, taking over from South Dakota-regulated Kingdom Trust.

Double Digits
June trading volume on decentralized exchanges set a record high of $1.52 billion, up 70% from May, according to data from Dune Analytics. This double-digit percentage growth is simply “the continuation of a trend dating back to the end of [2019],” Messari’s Jack Purdy said. Curve and Uniswap control the largest amount of traded volume, recording $350 million and $446 million, respectively, in June.

Related: First Mover: Crypto.com’s Chain Token Dominated Markets in June With 33% Gain

Tight Range
Wednesday evening, bitcoin broke above $9,250 for the first time since Friday as the leading cryptocurrency continues to trade in a tight range just above $9,000 for several weeks. Despite trading above $9,250, bitcoin is still stuck within a tight range of a few hundred dollars above $9,000. As a result, 30-day volatility continues to decline reaching its lowest mark since Feb. 23, according to Coin Metrics.

Retail Buyers
New research suggests that as the Bitcoin network continues to halve every four years, the daily supply of mined bitcoin will not be able to meet retail demand. The researchers propose that in 2024 when the daily supply will drop to 450 BTC, retail buyers could account for 50% of the need, and extrapolate out from there. (Decrypt) 

Valuing Bitcoin
Nearly half of investors in a recent survey said a lack of fundamentals keeps them from participating. In a 30-minute webinar July 7, CoinDesk Research will explore one of the first and oldest unique data points to be developed by crypto asset analysts: Bitcoin Days Destroyed. 

We’ll be joined by Lucas Nuzzi, a veteran analyst and a network data expert at Coin Metrics. Lucas and CoinDesk Research will walk you through the structure of this unique financial metric and demonstrate some of its many applications. Sign up for the July 7 webinar “How to Value Bitcoin: Bitcoin Days Destroyed.” 

Scott Alexander on the Value of Pseudonymity
Last week, Scott Alexander, the author of the influential rationalist blog Slate Star Codex (SSC), abruptly shut down (perhaps temporarily) his blog in advance of a New York Times (NYT) story on him and SSC that would include his real name. He tells of his decision in an interview with CoinDesk’s Ben Powers, abbreviated here.  

Are there circumstances under which you believe it would be appropriate to unmask an online persona?

This is a tough question, but I place it in the same realm as other tough questions like, “Are there times when violence is appropriate?” or “Are there times when the government should suppress speech?” There might be, but it needs a higher burden of proof than just “I don’t like this person.”

How do you respond to the people who say, “Your real name is already out there”? I know the blog post addresses it but it’d be helpful for you to lay out for our audience.

There are a lot of people who have had naked pictures of them leaked online who would still be entirely justified not wanting those pictures in the New York Times. I admit my security has been bad. But so far most people who google my real name don’t find my blog. People who do the opposite can find my real name with a little Internet savviness and a minute or two, and maybe the extra difficulty just makes me feel more secure without really keeping me any safer. But that extra feeling of security is still important to me.

Did you see an opportunity here to “Streisand Effect” your blog? I believe you have said in the past that traffic is down but that you’d also like to pivot out from your day job and do SSC-style work full time. So is there any fairness to a cynical view of your blog takedown as a way to relight the spark in the SSC community?

No, I didn’t do this, and would lose respect for anyone who did. I’m not sure what kind of evidence you want me to give. But if you want, you can confirm with Cade [Metz, the Times reporter] that I begged him, at great length, many times, over the course of days, not to use my real name in the article. I gave him a warning that I would delete the blog if he used my real name, in order to pressure him to reconsider, and I only deleted the blog after he refused.

“We do not comment on what we may or may not publish in the future,” responded Danielle Rhoades Ha, vice president of Communications at the New York Times, in a statement sent to CoinDesk. “But when we report on newsworthy or influential figures, our goal is always to give readers all the accurate and relevant information we can.”

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The Internal Revenue Service (IRS) is laying the groundwork for a possible assault on privacy-enhancing cryptocurrency technologies.

• IRS-CI Cyber Crimes Unit challenged its “industry partners” to explain where the crypto tracing community stands on privacy coins, Layer 2 protocols, sidechains and the Schnorr signature algorithm in a June 30 Request for Information (RFI), as first reported by The Block.
• “There are few investigative resources for tracing transactions” that move across these privacy-enhancing vectors, the IRS said, noting a recent spike in illicit privacy coin use. “The CI Cyber Crimes program is working to get in front of this trend.”
• The IRS singled out the monero, zcash, dash, grin, komodo, verge and horizen privacy coins, sidechains Plasma and OmiseGo, and Layer 2 protocol networks Lightning, Raiden and Celer.
• What’s good for user privacy is bad for investigative efficacy: The IRS bemoaned the Bitcoin blockchain’s apparent plans to integrate Schnorr signatures, writing that such a move will undercut IRS agents’ current tracing techniques. 
• The tax agency seeks estimates of how much it would cost to “support this initiative” as well as return on investment estimates.

• Bug in Moscow’s Blockchain Polling System Can Reveal How Users Voted: Report
• ‘I Failed Terribly at Keeping My Identity Secret’: Scott Alexander on the Value of Pseudonymity
• Cryptography Startup Brings Private Payment Channels to Tezos Blockchain
• Facebook, IoTeX, R3 Among New Members of Confidential Computing Consortium

As Chinese police step up efforts to crack down on illegal economic activities, crypto over-the-counter (OTC) traders are being detained to assist investigations. 

In another sign Chinese law enforcement are targeting cryptocurrency trading, Zhao Dong – a prominent Chinese crypto OTC trader and the co-founder of crypto lending platform RenrenBit – has been held up by police in the city of Hangzhou. A rumor that Zhao had been taken away first emerged on WeChat on Thursday, after a screen capture describing his detention began circulating within the local community and was later reported by local news outlets.

As the rumor drew wider attention given Zhao’s prominent status, a representative of RenrenBit said in a statement on the social media platform Weibo that one unnamed OTC trading desk in Beijing had its whole team taken away by police late last month. It does not appear that any of the OTC traders were outright arrested.

Related: How Chainlink and Cosmos Fit Into China’s Grand Blockchain Initiative

RenrenBit said Zhao, who has invested in the OTC team but was not involved in day-to-day trades, returned to China from Japan in early June and is now “actively” assisting local police in anti-fraud and anti-money laundering investigations.

In 2017, the Chinese government prohibited local crypto exchanges from allowing trades between cryptocurrency and Chinese yuan. Many traders turned to OTC platforms as a result, which essentially enable peer-to-peer trading by connecting buyers and sellers. Individual users in China have been relying on OTC desks to buy or sell USDT or bitcoin with Chinese yuan to participate in crypto-to-crypto trading. 

A person with direct knowledge of the issue, requesting anonymity due to the sensitivity of the case, told CoinDesk that Zhao is currently being held by police but added this is systematic effort, not an isolated incident. The issue has also sparked some fear among other OTC desks in China, the person said.

The person said law enforcement agencies across Chinese provinces have increased their scrutiny over crypto OTC desks since mid-June, and have taken away more than one trading desk to assist on investigations related to money-laundering activities. But the news about Zhao has drawn wider attention since he is well-known as one of the largest OTC traders in China, and has been a member of China’s crypto community since 2013.

Related: Bitcoin Miner Maker Ebang Estimates $2.5M Loss for Q1 in IPO Prospectus Update

Read more: Chinese Police Freezing OTC Traders’ Bank Accounts Over ‘Tainted’ Crypto Transactions

Although the recent investigations do not necessarily suggest buying or selling cryptocurrency through OTC is illegal, a more systematic target could have a larger ripple effect on OTC desk operations in China, which remain a significant part of local crypto trade.

The latest action by Chinese police follows a wide bank account freeze reported in early June, where more than 1,000 people were estimated to have been affected. At the time, a wide range of OTC desks and users in China had their bank accounts frozen by law enforcement after being suspected of either knowingly or unknowingly facilitating illegal activity, such as telecom frauds or ponzi schemes, to launder proceeds via crypto OTC trading. 

Cryptocurrencies, especially the dollar-pegged USDT, have been a popular method for Ponzi schemes or fraud organizers to launder money in China, which would then contaminate the fiat money and cryptocurrencies that are circulating in the Chinese OTC market. 

Law enforcement’s investigations of these illegal schemes are a way to track the flow of contaminated fiat money and crypto assets. Users or OTC desks who even unknowingly touch these questionable assets might have their bank accounts frozen. 

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Lightning developer and Zap, Inc. founder Jack Mallers announced Thursday his startup’s Strike product, which allows people to receive bitcoin as dollars via direct bank deposits, is finally entering public beta.

A Visa card is also in the works.

“Zap, Inc. has joined Visa’s Fast Track program,” Mallers said in an email about the startup’s plan for 2020. “Visa works with members of the Fast Track program to help them go to market in the most efficient way possible, providing them support and resources every step of the way.” 

Related: After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions

He said his primary focus this year is launching a Strike card for consumer app users and integrating Visa Direct into the consumer app, which is the program that makes Venmo payments so fast. There’s no date yet for the upcoming Strike card. 

“They [Visa] are a partner for our consumer issuance offering and are not involved in our merchant offering at all,” Mallers added.

This year Visa appears to be doubling down on partnerships with crypto companies. For example, the shopping rewards app Fold (also a Fast Track member) and the exchange Coinbase both also offer corresponding Visa cards. These are generally used by crypto advocates who prefer to earn crypto rewards rather than other types of points. There are also crypto debit cards, which allow people to spend dollars. It remains to be seen what specific options will be available to Zap cardholders in 2020. 

Visa confirmed the deal but did not offer any additional comment by press time. 

Related: Why Bitcoin Bulls Are Betting on Explosive Growth in India

Although Jack Dorsey’s Cash App and the exchange unicorn Coinbase are widely considered the most mainstream apps for buying and selling bitcoin, Mallers is looking to offer an app of the same caliber, at a fraction of the cost.

Mallers said his two-year-old startup, with several people on staff, will take a three-pronged approach to the recession. To start, Strike gives each user a unique, public website where people can send bitcoin just by scanning a QR code. This is comparable to what the Ethereum Name Service offers with .ETH public wallet addresses. 

Read more: Zap’s New Product Lets Merchants Take Dollars Over Lightning Network

However, Zap’s Strike is not a crypto wallet. Instead, the startup does an exchange on the backend and sends dollars to the user’s account. 

“Traditional tax rules would apply to the financial transaction, and the exchange would bear the taxable cost of the bitcoin sale, not the individual,” attorney Sasha Hodder of DLT Law Group said in an interview, describing one potential benefit of Strike’s setup. 

Anyone around the world can now anonymously send bitcoin to people with American bank accounts or credit cards. 

Strike offers a public identifier that is not associated with one’s personal bitcoin address. Instead, the startup manages these wallet addresses. This means someone can pay content creators, for example, without revealing personal information to each other. 

So far, the Strike setup is mostly used by small businesses and their customers. One such user, a coder and U.S. Army veteran named Rick in Colorado, uses Strike to purchase medicine to help with his seizures. Another user, who goes by Tyler, buys gift cards with Strike.

“It’s very responsive, there’s never lag time or anything like that. It’s like Twitter or something,” Rick said in a phone interview, describing how intuitive Strike was.

The startup offers two different services, the merchant offering for businesses, and the free mobile app for consumers. For users who prefer to receive bitcoin, they can use Zap’s namesake product, a Lightning-friendly bitcoin wallet. The Zap wallet offers self-custody for bitcoin while the custodial Strike wallet can only receive value in fiat.

Zap now offers two complementary wallet apps, plus it has a third trick up its sleeve. 

Attorney Lisa Zarlenga of Steptoe & Johnson LLP said custodial services like Strike may reduce the hurdles for both shoppers and merchants during the economic lull by taking on “the burden” of channel management and reporting because “the person transferring the bitcoin has to keep track of the value.”

Bitcoin advocates often claim they would like to use bitcoin, especially with Lightning transactions, to anonymously pay for products and services like media content. There are e-commerce vendors that accept bitcoin, although few shoppers use these options. Now it’s possible for creators and merchants with almost any technical skill level. Beyond computer literacy, the tax requirements are another major hurdle that bitcoin users might face. 

Read more: The COVID-19 E-Commerce Boom Hasn’t Trickled Down to Bitcoin, Despite Advantages

Over the past three years, the nonprofit Coin Center repeatedly proposed changing the tax regulations to reduce paperwork requirements for small purchases made directly with crypto, but Hodder said lawmakers aren’t prioritizing such tax issues during the COVID-19 crisis. 

Omri Marian, a professor of law at the University of California, Irvine, pointed out that most exchange services like Coinbase “would calculate your taxable income” anyway, so Strike may not solve any “administrative issue” for some users. 

“Why not just pay in dollars?” Marian asked. 

Someone can easily pay rent or buy groceries with value derived from bitcoin, using these free apps and a Visa card. The question remains whether bitcoiners will use the system enough to fuel the startup’s behind-the-scenes exchange earnings. If so, Zap doesn’t need to become a unicorn in order to make a healthy profit. 

Read more: Lightning Wallet Zap Launches in-App OTC Desk for Bitcoin Buyers

Strike user Tyler said he hopes the service will “allow merchants to accept and use bitcoin with Lightning without their customers knowing or spending bitcoin.”

“This app allows me to interface with Lightning so easily,” Tyler said, noting how the scaling solution operates quietly in the background.  

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A vulnerability in a blockchain-based system used in Russia’s recent poll meant users’ votes could be decrypted, journalists found.

On Wednesday, the final day of a vote on constitutional amendments, Russian media outlet Meduza published research showing the keys for decrypting votes could be retrieved using the HTML code of the electronic ballot. 

Over the past week, the country has voted to approve or reject changes to Russia’s constitution, the most striking of which eliminated the two-term restriction for presidents in office, effectively allowing Vladimir Putin to run for reelection until 2036.

Related: ‘I Failed Terribly at Keeping My Identity Secret’: Scott Alexander on the Value of Pseudonymity

In two parts of the country, Moscow and the region of Nizhny Novgorod, people had an option to vote electronically. Their votes were recorded on Exonum-based blockchain system created by Moscow’s Department of Information Technologies with the help of Kaspersky Lab. 

According to Meduza’s findings, votes had been encrypted using the TweetNaCl.js cryptographic library. This provides a deterministic algorithm, meaning that with similar input data, the system generates the same cryptographic key, which is used for both encoding and decoding the vote. 

As such, Meduza said it was able to find the two keys that were universally used to encode the “yes” and “no” votes. This allowed its team to decode the voting data, which was being published in CSV files by the Department of Information Technologies as the voting proceeded. 

See also: Hacker Attempts to Disrupt Russia’s Blockchain Voting System

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Such transparency was intended to help independent observers to check the correctness of the vote count, but can also be used to check how particular people voted – bringing the threat that they may be pressured to vote a certain way in future polls, Meduza wrote.

The BBC has previously reported that city-owned companies in Moscow had been forcing their employees to register for electronic voting and even share credentials for their accounts with supervisors. 

The Department of Information Technologies’ representative Artyom Kostyrko commented on Meduza’s report Wednesday, saying people can only decode their own votes on their own devices. That contradicted Meduza’s report, which said it’s possible to decode any vote using the same cryptographic keys. 

The department’s press office did not respond to CoinDesk’s request for comment by press time.

Kaspersky Lab’s press representative, Olga Bogolyubskay, told CoinDesk the company has nothing to add to the official comment by the department, but did say it has been providing “expert support to the Moscow Department of Information Technology,” along with other companies. 

See also: Russia’s Ministry of Justice Latest to Criticize Proposed Crypto Ban

“We have expertise and significant experience in ensuring the security and transparency of mass online voting using blockchain technologies through our Polys platform,” Bogolyubskay added.

Meduza’s report is just the latest security concern with the voting system. The Department of Information Technologies reported Friday an “observation node” had been attacked while the constitutional vote was underway. However, according to independent elections observers in Russia, there is no technical way to connect to the blockchain from the outside, as it ran entirely on the department’s servers.

• Hacker Attempts to Disrupt Russia’s Blockchain Voting System
• Facebook, IoTeX, R3 Among New Members of Confidential Computing Consortium

Norwegian cryptocurrency investment firm Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange through a reverse takeover.

• On paper, Arcane will be fully acquired by Swedish firm Vertical Ventures – which is listed on Nasdaq First North – for just under SEK 300 million (~$32 million).
• However, Arcane will be the majority owners of Vertical Ventures, which will trade under the Arcane name.
• To fund the $32 million takeover, Vertical Ventures will issue more than 6.6 billion new shares – each at half a U.S. cent.
• In November, Arcane tapped Eric Wall, blockchain lead at Cinnober, which was acquired by Nasdaq in 2018, as its new CIO.
• Arcane CEO Torbjorn Bull Jenssen said that if the listing is successful, the firm would appeal to a wider investor base.
• The latest deal will have to be approved by shareholders; Nasdaq North will also have to sign off on the new company structure before it can be re-listed.
• Vertical Ventures’ shares have jumped on the news, and are up 53% since the market open.
• Both sides are now performing due diligence, with the takeover expected to be completed in the second half of this year 2020.

EDIT (July 2, 13:40 UTC): A previous version of this article stated Arcane was a fund and that it had signed an LOI with Tongdow E-Commerce, this has now been corrected.

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Norwegian cryptocurrency investment fund Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange through a reverse takeover.

• On paper, Arcane will be fully acquired by Swedish firm Vertical Ventures – which is listed on Nasdaq First North – for just under SEK 300 million (~$32 million).
• However, Arcane will be the majority owners of Vertical Ventures, which will trade under the Arcane name.
• To fund the $32 million takeover, Vertical Ventures will issue more than 6.6 billion new shares – each at half a U.S. cent.
• In November, Arcane tapped Eric Wall, blockchain lead at Cinnober, which was acquired by Nasdaq in 2018, as its new CIO.
• Arcane CEO Torbjorn Bull Jenssen said that if the listing is successful, the firm would appeal to a wider investor base.
• The latest deal will have to be approved by shareholders; Nasdaq North will also have to sign off on the new company structure before it can be re-listed.
• Vertical Ventures’ shares have jumped on the news, and are up 53% since the market open.
• Both sides are now performing due diligence, with the takeover expected to be completed in the second half of this year 2020.

EDIT (July 2, 13:40 UTC): A previous version of this article stated Arcane had signed an LOI with Tongdow E-Commerce, this has now been corrected.

• Nasdaq Is Using R3’s Corda for Managing Digital Assets
• SEC Seeks More Feedback on tZERO’s Proposed Security Token Exchange
• Diginex Steps Closer to Backdoor Nasdaq Listing as SEC Approves Merger
• Nasdaq, Morgan Stanley Trading Vets Build Startup to Unite Crypto Market Price Ranges

Crypto payments processor BitPay now supports segregated witness (SegWit), according to a company blog post shared in advance with CoinDesk.

“Support for SegWit is currently an optional feature for Bitcoin wallets in the BitPay App. Later this year, as part of a phased rollout plan, support for SegWit will be a default for all Bitcoin wallets. In addition later this year, SegWit will be implemented for invoice payments,” the blog states.

The move comes three years after the firm opposed the update in favor of an alternate solution, SegWit2x. The fight over SegWit vs. SegWit2x fractured the Bitcoin community. The dispute spilled over into a civil war of sorts between Bitcoin proponents that saw closed-door industry agreements, the launch of rival project Bitcoin Cash and the swatting of Bitcoin developer Jameson Lopp. 

Related: Why Bitcoin Bulls Are Betting on Explosive Growth in India

BitPay regularly processes some $1 billion in yearly payments. The firm processed 100,718 payments in April 2020, with 91.93% being bitcoin (BTC) transactions, according to self-reported figures.

SegWit was first proposed in 2015 by Bitcoin Core contributor Pieter Wuille and quickly became a flashpoint for the developer community. In essence, SegWit freed up block space without increasing the block size in order to keep the Bitcoin blockchain small. 

Read more: One Year Later, What’s Holding Back SegWit Adoption on Bitcoin?

It also took out a vulnerability called “transaction malleability” that allowed for transaction signatures to be manipulated. Removing this vulnerability was a necessary condition to develop an experimental payment platform on top of Bitcoin, the Lightning Network.

Related: Market Wrap: As Traditional Markets Rally, Bitcoin Gets Boring

At the time, BitPay was joined by the majority of bitcoin firms and mining pools such as Bitmain, Digital Currency Group (DCG) and Coinbase in supporting the rival SegWit2x update. SegWit2x would have implemented SegWit while also doubling the bitcoin block size from 1 mb to 2 mb. (Note: DCG is the parent company of CoinDesk.)

Read more: Explainer: What Is SegWit2x and What Does It Mean for Bitcoin?

Competing visions over the Bitcoin block size led to the creation of Bitcoin Cash. Fans of smaller block sizes say they make the network more robust against attacks; advocates of larger blocks say they are needed if bitcoin is ever to take off as a currency.

However, SegWit2x largely failed following a User Activated Soft Fork (USAF) of SegWit deployed to the network in August 2017. As of June 29, 2020, 63% of daily bitcoin payments used SegWit.

Sean Rolland, BitPay director of product, told CoinDesk that right now was “a good time” to make the move based on merchant feedback. 

SegWit decreases the cost of sending transactions by up to 30%, the BitPay blog states. The firm has also implemented a fee estimation with the new update that can “reduce fees by as much as 5%-10% over previous versions.”

Not adding SegWit or other transaction “batching techniques,” as they are commonly known, makes everyone pay more to process transactions. A report published by an independent blockchain analyst in May detailed how crypto derivatives platform BitMEX increased the entire network’s average fee by broadcasting transactions without SegWit.

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Credit-card lender Crypto.com has boosted the number of total users by at least 50% in the past two months to 3 million, according to CEO Kris Marszalek.

The company’s chief disclosed the increase in response to questions from First Mover about this year’s market-dominating gains in Crypto.com’s CRO tokens. According to the company’s website, the tokens can be used for “cross-asset intermediary currency settlement for the native Crypto.com Chain.”  

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Related: First Mover: Crypto.com’s Chain Token Dominated Markets in June With 33% Gain

The CRO token has nearly quadrupled in price this year, the top performer among digital assets with a market capitalization of at least $1 billion. As reported by First Mover on Wednesday, the token was also the best performer in June.  

Cryptocurrency analysts including TradeBlock’s John Todaro say the Hong Kong-based company has raised its profile through extensive marketing efforts, such as promotions and sponsorships, while pushing into new businesses that have attracted users and interest in the CRO tokens. (Last month, Crypto.com sponsored a portion of CoinDesk’s Consensus: Distributed virtual conference.)

Speculation is a hallmark of cryptocurrency markets and traders appear to be betting big on CRO in 2020, given its 273% gain since the start of the year. That’s well ahead of the second-best performer, Cardano’s ADA token, which is up 177%. Bitcoin, whose $170 billion market capitalization is about 75 times that of the CRO tokens, is up just 29%. 

First Mover reached out to Marszalek to get his comments on the outsize gains. A spokesman sent Marszalek’s responses via email.

Related: First Mover: Bitwise Calls $50K Bitcoin Price When Market Calm Finally Breaks

What would be your comment/explanation on why CRO has done so well this year in digital-asset markets?

As a rule of thumb, we don’t comment on price action. The overall market has done really well this year and there are plenty of digital assets that performed well. Our focus is solely on building great products for our rapidly growing customer base. 

What would Crypto.com consider to be the primary achievements/milestones of June/the second quarter/this year/the past six months?

We’re the only crypto debit card program that is live in the U.S., Europe and Asia. This global rollout of a much-loved product led to rapid growth in our user base from 1 million in September 2019 to 2 million in early May 2020. We’ve just hit the 3 million user milestone only two months after hitting 2 million.  

According to one analyst, a part of Crypto.com’s performance could be attributed to marketing spending. How much has Crypto.com spent on advertising this year? Would you agree with this analyst’s assessment?

Our primary source of new customers is word of mouth. We’ve spent four years building a rock-star product that people love and recommend to their friends. We now have a nearly complete crypto ecosystem, covering payments (Visa cards, Crypto.com Pay), trading (exchange, wallet app) and finance (lending and interest accounts), so there are plenty of reasons for people to use our products. Attributing our growth to marketing alone is not seeing the forest for the trees: You need a great product before you spend a single dollar on marketing. 

Do you think there’s any speculation driving the token related to future developments and/or partnerships/initiatives? If so, what would those be?

Our ecosystem roadmap has been published in November 2019 and we’re simply relentlessly executing against it. Looking at our monthly updates or even the Twitter feed, there is rarely a day without a product improvement being rolled out. Rapid progress is clearly visible to anyone comparing our roadmap with what we deliver every week. 

Crypto.com earlier this week was running a 50% off sale on $2 million worth of BTC. Would it be fair to say that this promotion would cost roughly $1 million worth of bitcoin? 

It’s a special event to celebrate our fourth anniversary and gives us an opportunity to reflect on all the milestones we hit during this time. At the same time, it helps us to onboard more customers to our exchange, which has launched in beta in November 2019. We’re committed to investing in the exchange business until it reaches critical mass.

BTC: Price: $9,215 (BPI) | 24-Hr High: $9,300 | 24-Hr Low: $9,141

Trend: Bitcoin’s on-chain network activity is surging as price volatility stays close to an all-year low. But this isn’t as paradoxical as may appear.

• Bitcoin jumped to $9,300 Wednesday, sparking hopes of that an expected range breakout had started, before returning to just over $9,200 at press time. 
• Crypto markets analyst Mati Greenspan wrote in a daily report: “Bitcoin is pretty much flat at the moment, and it’s still unclear if it’s headed toward support around the 200-day moving average or if it’s gonna look for a fresh breakout above $10,000.”
• Glassnode data shows active wallet addresses and new addresses are at 1-year and 2-year highs, respectively, while hourly spent outputs – bitcoin’s volumes – are at an all-time high. 
• This suggests bitcoin may be unusually liquid – low volatility has tightened spreads, meaning volumes are effectively funneled through a smaller selection of quotes.  
• Then again, it could just be market makers injecting liquidity into exchanges. 

• First Mover: The Return of the Bitcoin Retail Investor (and Why That’s a Good Thing)
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The latest venture from Salesforce co-founder and CNET founder Halsey Minor looks a lot like an attempt to recreate the legacy monetary system on a blockchain.

• Launched commercially last week, Public Mint says its “fiat native” blockchain makes transactions efficient and accessible.
• The platform is described as a programmable blockchain with fiat funds held in insured banks, enabling users to create their own “digital money systems.”
• Users would transact in regular U.S. dollars using their smartphones, while the funds are held centrally by custodians.
• Companies using the platform can accept dollars via credit card, wire transfers and more whether or not they have a bank account.
• Support for other fiat currencies is expected to be added in the future.
• Public Mint is a fiat layer that is claimed to be supported by more than 200 banks – although they aren’t named in a press release.
• The platform could be a solution for cryptocurrency firms that have had trouble accessing the traditional banking system, the firm says.
• Reportedly taking two years to build, it was founded by Halsey Minor, who was also behind CNET, Salesforce and crypto trading platform Uphold (formerly called Bitreserve).
• VideoCoin, another Minor venture, became one of Public Mint’s first corporate users in late May.

See also: Senate Banking Committee Remains Open to Idea of Digital Dollar in Tuesday’s Hearing

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The Monetary Board of the Central Bank of Sri Lanka is close to starting development of a blockchain platform expected to speed up the processing of bank users’ ID information.

• The Monetary Board has now shortlisted three software development firms to be tasked with designing a proof-of-concept (PoC) know-your-customer (KYC) platform, local news source the Daily Mirror Online said Thursday.
• The final decision and the start of development are expected “shortly,” said Central Bank director of payments and settlements, D. Kumaratunge, at a Tuesday event.
• The KYC platform is planned to allow the banking sector and the government to share and update bank customer data in real-time on a blockchain. 
• Kumaratunge said several banks have given their consent to join the project.
• The open call was on a voluntary basis, with 36 candidates both national and international having applied for the project last November. One of the three finalists is a foreign tech firm.
• The development of the system is expected to take anywhere between six and nine months to complete.
• The project is expected to allow banks to onboard new customers without delays for manual processing, as well as save costs associated with traditional paper-based methods of verifying documents.
• Sri Lanka has been taking steps to improve its financial sector to meet international standards.
• In October 2019, the nation was removed from the Financial Action Task Force’s anti-money laundering/counter the financing of terrorism (AML/CFT) “strategic deficiencies” blacklist, to which it had been added in 2017.

Also read: World’s Oldest Central Bank Reviews Possible Digital Currency With Mixed Results

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BlockFi says its monthly revenue has doubled as it sees a surge in new users for its crypto lending service and interest accounts.

• In a company blog posted on Thursday, the crypto lender said monthly revenue had been climbing since February, when it raised $30 million in Series B funding.
• The revenue increase has been driven by bitcoin's recent halving event in May, the company said, as well as the launch of a mobile app.
• BlockFi saw more users join in the week of the halving than any other week in its history.
• 7,000 new accounts have had funds added, putting the startup at a 25% month-over-month growth rate, per the firm’s figures.
• New-York based BlockFi said it is now “on track to generate $50 million in revenue” over the next 12 months.
• “Monthly revenue has grown four times since December 19 and doubled from the beginning to end of Q2.” said Zac Prince, CEO and co-founder of BlockFi, in an email to CoinDesk.
• The lending platform recently widened its focus on Asian markets. In June, it hired ex-Bank of America Merrill Lynch global equities portfolio sales trader Rishi Ramchandani to head the company’s business developments in the region.
• Singapore-based hedge fund Three Arrows Capital and crypto mining pool Poolin have joined as strategic partners to assist the Asia push.
• Former U.S. Defense Department and Microsoft Alum Adam Healy came aboard as BlockFi's security chief in mid-June, charged protecting client data, digital assets and proprietary information.

See also: Bitcoin Mining Pool Poolin Partners With BlockFi to Expand Crypto Lending Service

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When India’s Supreme Court overturned the banking restrictions for crypto exchanges back in March, everything changed. 

Since then, Binance joined the Internet and Mobile Association of India (IAMAI), which played a key role in overturning the ban, and noted explosive growth via WazirX, the Indian exchange Binance acquired in 2019. A WazirX spokesperson told CoinDesk the exchange saw 150% more signups in many Indian cities from February to May 2020, which boosted local trading volumes by 66%.

“The Supreme Court’s positive verdict has surely helped in creating positivity around crypto in India,” the spokesperson said.

Related: Market Wrap: As Traditional Markets Rally, Bitcoin Gets Boring

Read more: Binance Joins Indian Tech Association That Helped Overturn Crypto Banking Ban

As part of that broader sentiment shift, prominent Indian economist Subhash Chandra Garg argued a “digital rupee will replace physical paper rupee as currency.” As the former executive director of the World Bank and former Indian finance secretary, Garg argued both that bitcoin is a global currency and that India should create a Central Bank Digital Currency (CBDC) that citizens can use with “digital wallets.” 

Even beyond India, entrepreneurs like London-based Pavel Matveev of Wirex Ltd. are eager to expand in India. 

“Last November we launched our product in eight countries across Southeast Asia, and we are hoping to launch in India this summer,” Matveev said in a phone interview. “The United Kingdom for example has a huge remittance flow from the UK to India. … [Indian demand for crypto] may be exhilarated by the COVID-19 situation.”

Related: Satoshi’s Unappreciated Marketing Genius, Feat. Dan Held

Read more: The Big Thing Holding Back India’s Crypto Boom

Beyond boosting exchanges and remittances, Matic Network co-founder Sandeep Nailwal said there’s been an uptick in the usage of decentralized applications (dapps). Within the first month of rolling out an Ethereum scaling solution, Nailwal said his startup garnered roughly 60 dapps and is currently in the process of onboarding another 60. 

“Especially with crypto, people are able to play games and earn money out of it. Real money games are becoming more popular,” he said during a video call. “We’re seeing a lot of applications [rely on us] because Ethereum is completely choked up.”

Nailwal added that there are more tech workers in India, with more than 1 billion people, than the entire populations of some countries. Especially in tech hubs like Bangalore, there are plenty of technically skilled people willing to overcome the UX challenges that hinder “mainstream” users. So far at least 15 of the dapps using Matic also hail from India, Nailwal said.

This may be the summer of Ethereum in India.

“You will start seeing a large number of Indian applications being used, proportionately,” Nailwal said about the rise of “India’s Silicon Valley,” Bangalore. 

While government blockchain projects explore issues like food distribution, Nailwal said he is participating in a monthlong ETHIndia virtual hackathon, along with a few hundred developers. The ETHIndia Community Telegram group has roughly 931 members.  

Plus, the Trump administration’s hostile approach to foreign worker visas may inspire some Indian workers to build their careers in India’s tech industry instead. As the global recession worsens, India is now home to millions of people with diaspora connections and the computer skills to use cryptocurrency. 

Unocoin exchange co-founder Sunny Ray said, now that a few of the Indian industry’s major legal battles were won in court, exchanges are coming “back from the dead.”

Read more: Indian Police Seize ATM Run By Crypto Exchange Unocoin

“Banking is back, the company is profitable again in less than two months, we’re hiring people back,” Ray said about Unocoin reopening and serving “thousands” of active monthly users again. In total, the exchange has roughly 400,000 users that completed the know-your-customer process. Now Indian traders are barely getting started. The local market is slowly ramping up. 

Unocoin co-founder Sathvik Vishwanath said the broader economic crisis has reduced expendable income and made Indians more conservative as unemployment spreads. According to the Centre for Monitoring Indian Economy, the unemployment rate last month was over 22%. Instead of pre-coiners flocking to crypto, Vishwanath expects this crisis could have a delayed impact of inspiring more crypto-novices and day traders that start treating crypto as an investment. 

Tech-savvy users may increase their crypto holdings, Vishwanath said, because any Indian household with expendable wealth is now thinking about diversification. 

Kashif Raza, a co-founder of the Indian news startup Crypto Kanoon, said, “people are finding crypto as an attractive proposition for hedging their risks, but still it is a long way [to go].” In the meantime, gold is often seen as the best way for Indian families to custody their own wealth. Indeed, the Indian gold market is booming and prices reached record highs in June. 

Read more: Geopolitical Crisis May Benefit Oil, Gold and CBDCs, Not Bitcoin

“One thing is clear post-COVID-19, that in both [urban and rural communities] gold is a perfect hedge during the crisis. The gold price has risen exponentially,” Raza said in an email. “There are many exchanges that have observed a spike in new registrations on their platform during the lockdown in India.”

So far, Raza said, Indians staying indoors are online searching for “new avenues of investment,” then finding crypto after gold. Indeed, Ashish Singhal, the Bangalore-based CEO of both the crypto wallet CRUXPay and the exchange Coinswitch.co, said he’s up to a total of 25,000 users since the coronavirus crisis began. More than half of the Indian users are women, he said. 

“The main cryptocurrencies are bitcoin and ether,” Singhal said during a call. “Exchanges like us need to do a big push to educate users. … A lot of people still believe cryptocurrency is banned in India.”

Women from India, who generally own gold jewelry as part of their wealth, are more likely to work in the tech industry than women from the United Kingdom or the United States. Across genders, Singhal said he’s seen a lot of enthusiasm, participation and “activities” around Ethereum.  

“Ethereum has its limits, but it’s an open platform to experiment,” Singhal said. “India is a very important market. Everyone understands that. We just need regulations to protect users, which will spark innovation.”

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A standard way to transact Bitcoin could be vulnerable to double-spending, new research has found. Blockchain sleuths at ZenGo, a wallet startup, have found a vulnerability that affected at least three major crypto wallets – Ledger Live, Edge and Breadwallet (BRD) – and potentially more. 

The bug, which the Tel Aviv-based firm calls BigSpender, allows a hacker to double spend a user’s funds and possibly prevent them from ever using their wallet again. It works by exploiting a flaw in Bitcoin’s replace-by-fee (RBF) function, a failsafe  that enables users to swap an unconfirmed transaction with one that has a higher fee. 

“[BigSpender] can lead to substantial financial losses and in some cases to make the victim’s wallet totally unusable with no way for the victim to protect themselves,” ZenGo CEO Ouriel Ohayon said in an email. “So this can be seen as a high severity attack.”

Related: Nomura-Backed Crypto Custody Venture Launches After 2 Years in the Works

Like other vulnerabilities found in Bitcoin’s core codebase, such as timelocked transactions, the RBF function has become a standard way for users to send value back and forth. It was pitched and accepted by the developer community as a way for Bitcoiners to circumvent slow confirmation times by paying more in fees. 

See also: Raphael Auer – The Security Trilemma and the Future of Bitcoin

From the outset, there were fears that the RBF function was not well supported by Bitcoin wallets, despite being integrated at Bitcoin’s protocol layer, the pseudonymous Bitcoin researcher 0xB10C said. “ZenGo shows that a user can be tricked into thinking he is receiving bitcoin when he is not. I believe this to be novel. I’ve at least not heard about it before,” he said. 

The firm tested nine different wallets including Ledger Live, Trust wallet, Exodus, Edge, Bread, Coinbase, Blockstream Green, Blockchain and Atomic Wallet. Of those tested, three were found to be vulnerable to the theoretical exploit. 

Related: Thailand to Raise $6.4M With Sale of Blockchain-Based Bonds

“We have not tested all the wallets but it could be that if three of the largest are implicated, more out there are too,” Ohayon said. ZenGo alerted the firms about its findings, and gave them 90 days to repair the vulnerability. 

Ledger and BRD have released code changes to prevent the attack from happening, and paid undisclosed big bounties to ZenGo, while Edge is currently undergoing a “significant refactor” that will address the issue, Edge’s CEO Paul Puey said in an email. 

The hack leverages a known vulnerability in how certain wallets treat Bitcoin’s RBF transactions, Peter Todd, Bitcoin developer and RBF’s architect, said.

How it works: Attackers send funds to their intended victim, and set fees low enough to nearly guarantee the transaction will not receive a confirmation. While the transaction is pending, the attacker cancels it. For vulnerable wallets, this pending transaction will be reflected as an increase in a user’s account balance, and therefore, possibly, lead some victims to erroneously believe the transaction has gone through, despite being cancelled. 

This discrepancy between a victim’s stated and actual balance could be exploited by malicious actors tricking people into providing goods or services without paying for them – except the minimal amount of fees spent. In this sense, the flaw is with a wallet’s UX and UI design.

If a hacker can trick a person into believing they received payment, while simultaneously maintaining control of the bitcoin, this is a double-spend, according to ZenGo’s researchers. 

“You have to decide what is the definition of a double-spend. Most people that aren’t trolls would say that a double-spend is when you have a confirmed transaction that is somehow invalidated and spent with a different confirmed transaction,” Jameson Lopp, CTO of custody startup Casa, said, denying the researchers’ claims. 

This attack, by its nature, takes advantage of the way wallets display unconfirmed transactions. In this sense, the attack – while fraudulent – isn’t breaking the way the Bitcoin code functions.  

“The whole point of the blockchain is to prevent the double-spend problem,” Lopp said. “It goes back to the original Satoshi white paper, which says the solution to double-spending is to have a distributed ledger that many people are checking.” 

The only thing you can rely on is transactions that have been mined

A general rule of thumb when transacting with Bitcoin is to never trust a transaction with less than six confirmations, 0xB10C said. This was a point repeated by a number of developers, including Todd, Lopp and BRD CTO Samuel Sutch. If this exploit goes through, at least some of the responsibility is on the victim. 

“The only thing you can rely on is transactions that have been mined,” Todd said.

In this sense, Sutch called BigSpender a “minor bug,” and “kind of contrived,” but also something worth fixing and paying a bug bounty for. BRD recently passed 5 million users, Sutch said. 

“More wallet developers need to know their users don’t know the distinctions under the hood,” Lopp siad. Many don’t even know the difference between confirmed and unconfirmed from a security standpoint. So the onus is on developers to build a better user experience so they cannot be confused and defrauded by things like this.”

To this end, Ledger updated the way the wallet displays RBF transactions, and added that if users are unsure “to check the status of a transaction” using a block explorer. “Such verification is not possible with your bank today,” Ledger’s CTO Charles Guillemet said over email.

Updating wallets to clearly display what is happening during a RBF transaction is well and good for everyone involved. However, ZenGo researchers found there is a second order attack, which follows the same scheme outlined above, which could permanently disable a wallet with or without the victim’s knowledge of the transaction. 

In this case, the attacker again artificially inflates a victim’s balance by sending repeated transactions to her wallet. This can be done without a victim’s consent. By canceling the transactions before confirmed, the victim’s stated wallet balance and actual funds are again decoupled, making their wallet unusable. Worse, the attack can affect multiple wallets at the same time. 

See also: Long-Festering DeFi Dapp Bug Still Not Fixed by Industry (Updated)

Essentially, it’s a denial of service (DoS) attack, preventing people from using their wallets.

“This also disables other kinds of sending attempts if the wallet’s coin selection algorithm chooses funds from this nonexistent transaction,” Ohayon said. These wallets are “bricked,” to use Sutch’s parlance. “It’s a huge inconvenience.”

Sutch said BRD made the vulnerability a top priority for the firm after it was alerted. Strangely, it managed to fix the bug while working an unrelated problem, he said. 

The issue ZenGo raises with its security research is not sequestered to the wallets the team tested. The vast majority of Bitcoin wallets are capable of receiving RBF transactions, and many of them are “resource constrained,” Sutch said, and are unable to provide a fix immediately.  

When enabling RBF functionality on Casa, Lopp said he configured the system to not display these types of transactions until confirmed, which is non-standard in the industry. “The default parameters would display these transactions,” he said.

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