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30 Japan Firms to Collaborate on Private Digital Yen: Reuters

5 years 10 months ago

A group of Japanese companies has said it will develop and test a private digital currency that would work alongside cash.

  • Reuters reported Thursday that about 30 firms from sectors such as telecoms, utilities and retail will carry out the trials in 2021.
  • The digital yen would be built on a common settlement platform and issued by banks during the trials, later possibly being issued by other entities.
  • “We don’t want to create another silo-type platform. What we want to do is to create a framework that can make various platforms mutually compatible,” Hiromi Yamaoka, chair of the group and formerly an executive at the Bank of Japan, told Reuters.
  • The overarching aim would be to encourage people in the cash-loving country to use a digital form of money, the group said.
  • The Bank of Japan, which is the nation’s central bank, has also said it would work on a national digital currency and hold tests next year.

See also: Bank of Japan Forms New Team to Explore Central Bank Digital Currency

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Solidus Labs Believes Its Crypto Surveillance Tool Can Help Launch a Bitcoin ETF

5 years 10 months ago

Market manipulation is one of the main concerns the U.S. Securities and Exchange Commission (SEC) has cited in rejecting a number of bitcoin exchange-traded fund (ETF) applications. Solidus Labs, a technology firm, believes it has developed a technical surveillance solution to address this issue.

Solidus announced Wednesday it was rolling out a market surveillance tool to monitor crypto exchange transaction data and flag potential manipulation across different platforms, as part of an effort to address ongoing regulatory concerns about crypto markets. 

“These are issues that have been largely resolved in traditional markets through market surveillance systems [that] were designed for traditional markets,” said Solidus Labs Chief Operating Officer Chen Arad. 

Related: ‘Digital Mercenaries’: Why Blockchain Analytics Firms Have Privacy Advocates Worried

Proponents say an ETF would make bitcoin accessible to a wider swath of retail investors by offering a regulated product that would be available on major investment platforms, such as Charles Schwab or TD Ameritrade. 

However, a number of ETF applications have been rejected by the SEC, which has said the bitcoin market isn’t large enough to properly surveil. Chairman Jay Clayton, who will leave the role at the end of the year, has said in the past that a bitcoin ETF couldn’t be approved until the agency is confident the market was free from manipulation. One example of manipulation is wash trading, when a few accounts trade back and forth to make volume appear higher than it is using bots. 

In 2019, the agency rejected Bitwise’s effort, saying there needed to be a surveillance-sharing agreement between an exchange and a market of “significant” size as one potential example of how to address this concern. 

How it works

Solidus’ tool has four parts: data collection, data storage, data processing and reporting, Arad said. 

Related: SEC Is Willing to ‘Try’ a Tokenized ETF, Chairman Says: Report

The program collects data from a number of parties conducting transactions, mainly exchanges, acting as a sort of intermediary for the information. This ensures that exchanges aren’t required to share potentially proprietary trading data with each other, Arad said. 

“The first part is being able to collect the data in a fully anonymized, obfuscated and encrypted way, and assembling it … in a multi-tenant database,” he said. 

Solidus’ system then processes the information, comparing buy and sell data to look for potential wash trading or other forms of market manipulation. 

Read more: Prime Broker Bequant Adds Risk-Monitoring Service in Push for Added Compliance

Part of this processing includes comparing market information from accounts on one exchange to its “neighbors,” meaning accounts with similar attributes, said Solidus CEO Asaf Meir.

Neighbors are effectively a way of creating different types of broad profiles, which in turn act as a sort of average baseline for comparing account activity, if a user’s behavior diverges from the norm.

Solidus looks at an exchange’s reporting requirements, what alerts should be reported and which parties might be involved before sending these alerts to its clients. 

“This type of data is extremely sensitive and confidential, and by the way that’s also how generally our product works right. Our product works off of private data that exchanges, broker dealers, regulators provide us with,” Meir said.

More broadly, this same technology can be used in different jurisdictions, potentially acting as a sort of global standard to help exchanges worldwide comply with the Financial Action Task Force travel rule, Arad noted. 

In use

Solidus is in discussions with a number of crypto exchanges and regulatory agencies to begin operating its surveillance tool in the U.S., though Arad and Meir declined to identify potential clients on the record, citing ongoing discussions. 

Chris Land, general counsel at the Wyoming Division of Banking, said his agency is one of the regulators working with Solidus and evaluating its solution.

The company has already helped contribute to a section on market manipulation in an upcoming manual the division plans to publish, he said.

Read more: Goldman Sachs Veterans Raise $3 Million to Fight Crypto Manipulation

The tool is already in use with some other, non-U.S. clients, Arad said, adding that it had been developed specifically to address regulatory concerns. 

“We were working with specific exchanges in a particular jurisdiction where they were required to apply for licensing. In that process we also started working with the regulator, and we generally developed the product with regulators,” he said.

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Electrum Developers Apply Fix After Apple Update Bricks Bitcoin Wallets

5 years 10 months ago

After the most recent Mac update caused major problems for one of Bitcoin’s oldest wallets, its development team has rolled out a fix.

Originally raised as an issue on Github, the Big Sur update is bricking MacOS Electrum clients, a Bitcoin software wallet which is a favorite of power users because of its complex tooling and user controls. The Electrum team announced today that a new release fixes the issue.

“Currently, the latest release of Big Sur has completely broken Electrum [for Mac devices]. You can’t open the app or load any of your wallets,” one Electrum user, Nico, told CoinDesk.

Related: New Mac Update Leaves Users No Room to Escape Data Collection

The issue was opened on Electrum’s Github on Aug. 1, around the time Apple released Big Sur’s beta.

While the “root cause is still unknown,” Electrum developer SomberNight said in the Github issue page, it’s related to Big Sur’s treatment of Python, the coding language that Electrum is written in. 

To work around the problem, Electrum users can run the software from source (that is, by manually compiling the source code) or they can bundle an older version of Python into their software. The Electrum team’s fix incorporates the latter solution.

For Bitcoin, Apple’s problems hit home

The snafu is the first case of Apple’s latest release disrupting the Bitcoin realm, but it’s not the first time the update has caused issues.

Related: Brainwallets: The Bitcoin Wallet You Probably Shouldn’t Use (Unless You Have To)

Upon the version 11.0 release last week, an error in Apple’s servers caused worldwide shutdowns of Mac hardware running the update. These servers process OCSP requests, or the data packets that verify user credentials for applications.

Mac users soon discovered that the Big Sur update and the error were related. Big Sur sends OCSP requests for every online and offline application that a user opens, and if these requests fail, then the computer fails too.

This activity logging feature has been present since Apple’s Catilina update, but Big Sur makes it so Mac users can’t trick the feature with firewalls and VPNs like they once could.

These requests are transmitted unencrypted, raising privacy concerns over how this data may be intercepted and used by third parties.  From the perspective of a Bitcoin user, this feature would broadcast every time a wallet, coin mixer or other Bitcoin-related service is used on their device.

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Duality Technologies Launches Platform for Analyzing Big Data While Keeping It Private

5 years 10 months ago

Encryption may not seem sexy, but it’s never been more important. 

Duality Technologies, a  provider of privacy-enhancing tech, (PETs), is launching SecurePlus Statistics, a privacy-enhanced “statistical analysis solution” that uses Homomorphic Encryption (HE).

While it may sound dry, it marks a step forward in practical uses of HE, which lets multiple actors conduct data analysis on a variety of datasets while keeping that information encrypted and protecting things like personally identifiable information. 

Related: Balaji Srinivasan, HashKey Back $2M Round in Twitter Privacy Tool Mask Network

“HE is relevant for any industry dealing with highly sensitive data, such as health care and the financial services industry, but other regulated industries such as telecom, insurance and academic research that involves personal data, can also benefit from HE applications,” said Dr. Alon Kaufman, CEO and co-founder of Duality, in an email. 

“In financial services industries, HE can facilitate privacy-enhanced, collaborative financial crime investigations across firms and legislations, by enabling institutions to share information and insights while complying with privacy regulation.”

What is homomorphic encryption?

HE lets math calculations be done on data in its encrypted form. The result of the calculations is also encrypted, but when the result is decrypted it is identical to the result had the data not been encrypted in the first place. 

So if data is sent to a commercial cloud, large-scale analysis can be done on it without putting sensitive information such as people’s medical or financial information at risk. 

Related: New Mac Update Leaves Users No Room to Escape Data Collection

In encryption, plaintext is converted to ciphertext, or its encrypted form. Ciphertext can be converted back to plaintext, but only by certain parties possessing a secret key that decrypts the information using that secret key. 

Read more: Community Behind Privacy-Focused Smart Contract Forges Ahead After Settlement

In traditional forms of encryption, data is only protected in storage and during communications. In the case of HE, which is named for homomorphisms in algebra (or the ability to mirror the operations on one algebraic structure with operations on another), analysis can be done without access to that secret key which would decrypt the information. 

When thinking of HE, said Kaufman, imagine placing the pieces of a jigsaw puzzle, representing your data, in a box. Then you lock that box using encryption and hand it to somebody else. This person is actually able to assemble the puzzle (run analytics on your data) without unlocking the box and seeing the pieces, because the box is still  encrypted. You then receive the box back and unlock it to see the assembled puzzle, or the encrypted results that you then decrypt. 

“In this way, Homomorphic Encryption enables computations, including advanced analytics and Machine Learning, on encrypted data, assuring data privacy throughout the analytics cycle,” said Kaufman in an email to CoinDesk. “Homomorphic Encryption allows multiple parties to collaborate on data without seeing each other’s data assets, thus generating valuable insights from them.”

Why homomorphic encryption matters now

In a world where privacy concerns are advancing, particularly amid the pandemic, and disparate privacy laws are resulting in countries revoking some form of data access to others, tools like HE could give companies a way to get data insights without creating the potential not just for non-compliance, but also for big data abuse that has driven concerns about Big Tech. 

Earlier this year researchers showed how HE can enable analysis on genomic data in such a way that it preserves data privacy. Such analysis can help us understand complex or novel diseases, such as COVID-19. 

Duality piloted SecurePlus Statistics at the Tel Aviv Sourasky Medical Center in Israel where it was used to analyze data regarding the prevention, diagnosis and treatment of cancer studies while protecting personal health information. 

Read more: EU Privacy Shield Ruling Is an Opportunity and Conundrum for Decentralized Tech

Numerous proposals have also been written for how HE could benefit blockchain-based projects. One paper, published in 2019, proposed using HE to protect sensitive data generated from the ever-expanding internet of things (IoT). 

“Previous blockchain-based IoT systems have issues related to privacy leakage of sensitive information to the servers as the servers can access the plaintext data from the IoT devices,” reads the abstract. “So, we present the potential of integration of blockchain based-IoT with homomorphic encryption that can secure the IoT data with high privacy in a decentralized mode.”

Another proposal, published earlier this year, experimented with applying blockchain technology in edge computing to improve edge computing’s performance of secure storage and computation. The researchers introduced HE  as a way to ensure the “noncorrelation, anonymity and supervision of identity privacy in blockchain systems,” and found promising results they said would lay the groundwork for future research. 

“Privacy-preserving data collaboration – even among competitors – is also important in solving other global challenges, such as fighting different types of cyber and financial crimes that are committed by increasingly sophisticated global networks,” said Kaufman. 

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Mintbase Raises $1M Seed Round to Bring NFTs to NEAR Protocol

5 years 10 months ago

Lisbon-based non-fungible token (NFT) platform Mintbase has closed a $1 million seed funding round.

The round, led by Chinese venture capital firm Sino Global and with participation from D1 Ventures, Block Oracle Capital, Arweave and angel investors, is meant to help Mintbase stand out from a growing pack of NFT platforms.

“Being a marketplace is really an afterthought,” Mintbase CEO Nate Geier said in an interview. “The goal was to build the best minter out there, and we did that.” 

Related: First Mover: As Bitcoin Shoots Past $18K, There’s Comfort in the Crowded Trade

The new funding allows the team to actively hire developers and designers to prepare for a testnet launch on NEAR before the end of this year. Building on NEAR will be in addition to its continued work on Ethereum. Geier also hinted that a governance token may be in the works. 

What differentiates Mintbase from similar NFT marketplaces such as SuperRare, Rarible or OpenSea, Geier says, is the lack of focus on one specific category of NFT. 

“They get more publicity and we get more usage,” he added, pointing out that many people log onto Mintbase to mint their NFTs only to trade them on OpenSea.

Read more: The Inevitable Marriage of Yield Farming and NFTs, Explained

Related: CryptoGenies? Digital Avatars Are Coming to Dapper’s Flow Blockchain

The NFT ticketing platform that launched Ethereum in 2019 decided to expand to other networks in July due to high gas costs, adding competing smart-contract blockchain NEAR Protocol to the mix. When travel and events came to a halt during the COVID-19 pandemic, the team behind Mintbase looked to other use cases for NFTs, like partnering with permanent storage network Arweave. 

“We’re just scratching the surface of what we can do with NFTs,” said Mintbase co-founder Carolin Wend. “Now that we’re getting to the point of lower transaction fees, that will be huge for mass adoption.” 

Investor Sino Global Capital said in a tweet thread, “We weren’t interested in just acquiring a few NFTs for a few trades. We are investing to support their vision with our China-centric network.”

Update (Nov. 19, 0:02 UTC): Mintbase is not leaving Ethereum, it is building on NEAR as well. The story has been updated for clarity.

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Tor Developers Pursuing ‘Anonymous Tokens’ to Stop Hacks and DoS Attacks

5 years 10 months ago

The privacy-oriented browser Tor (The Onion Router) is researching ways “anonymous tokens” could counter Denial of Service (DoS) attacks – a pressing issue for the network. 

Tor has been subject to DoS attacks, degrading its performance. While there are technical fixes Tor has worked to implement, the nature of the network and the anonymity of the traffic on it make it particularly susceptible to DoS attacks. 

In August, Tor introduced the idea of using anonymous tokens to counter such attacks, allowing them to differentiate between “good” and “bad” traffic, and to avoid implementing user accounts, which most sites and networks use to identify traffic and bad actors. 

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

During last week’s “State of the Onion” address, when the Tor team gave updates on projects and forecasted new developments for 2021, the team reinforced their interest in developing these anonymous tokens. 

“Memory is an amazing thing,” said George Kadianakis, a Tor Network team developer. “It allows us to experience the world, remember the things we’ve been to and remember the nice food we ate.

“It’s also particularly important in our digital life. At Tor, we don’t have the concept of memory. The Tor network does not keep track of its clients, does not use cookies or anything, and every claim that comes in and comes out we forget about it. So Tor is memoryless. It’s stateless. And this fact causes some issues.”

A DoS attack is one such issue. 

What is a DoS attack?

Related: Token Projects Are Not Happy With KuCoin’s Handling of $280M Hack

A DoS attack disrupts a website by initiating thousands of connections to it, overwhelming it and causing it to crash. 

Tor is particularly vulnerable to such attacks because of its emphasis on anonymity. While a normal network would have your identity tied to an account or the like, Tor does not; therefore, it doesn’t have a great way of differentiating malicious traffic from non-malicious traffic. 

The process of navigating the Tor network to secure a connection between a server and remote user also requires intensive work by a central processing unit (CPU), which can get to a state where it’s maxed out and unable to accept new traffic, a feature DoS attacks exploit. 

Read more: Tor Project Launches Membership Program to Boost Agility, Funds

“The attacks exploit the inherent asymmetric nature of the onion service rendezvous protocol, and that makes it a hard problem to defend against,” reads a post that examines solutions to DoS attacks.. 

“During the rendezvous protocol, an evil client can send a small message to the service while the service has to do lots of expensive work to react to it,” the post reads. “This asymmetry opens the protocol to DoS attacks, and the anonymous nature of our network makes it extremely challenging to filter the good clients from the bad.”

How anonymous tokens could help

Rather than implementing accounts or cookies, both of which would undermine Tor’s mission, Kadianakis proposed tokens that could be included in a user’s traffic request. These tokens would allow websites accessible through the Tor network to “intelligently prioritize which requests it answers.”

“We could use anonymous tokens. Tokens are a part of the internet that use blockchains and other protocols like Cloudflare’s Privacy Pass,” saids Kadianakis during the presentation. “It’s basically like a train ticket. By having a train ticket you can show that you’ve done some effort to acquire it, but it doesn’t tie to your identity. So if you drop it on the floor and someone else picks it up they cannot impersonate you and they don’t know who you are.”

The scenario he envisioned is one where the onion service could issue these tokens and give them to clients who have already demonstrated their trustworthiness (in ways yet to be determined). These trusted clients would then give their tokens to the onion service when they connect and, in doing so, get service before an untrusted user (eg., a potential attacker). 

Read more: ‘Digital Mercenaries’: Why Blockchain Analytics Firms Have Privacy Advocates Worried

Kadianakis said tokens could also be used to design a secure name system so people can register names for their own use with tickets, which could help encourage audience activities. 

“The anonymous nature of our network makes it challenging to filter the good clients from the bad. There is no one established attacker, but rather an ongoing challenge,” according to Isabela Bagueros, executive director of the Tor Project.

“That is why we are focused on investigating methods to rate limit or otherwise reduce the ability of clients to make large numbers of connections to an onion service without violating a client or service’s privacy,” she said. 

Users could also apply their tokens toward acquiring private bridges and exit nodes, which would potentially provide additional security. Private bridges are how users access the Tor network in places where censors have blocked access to public Tor relays by blocking their IP addresses. They have a collection of private bridges that are not publicly available; these can be handed out a few at a time to clients in order to impede enumeration and IP address-blocking by censors.

Tokens may help with one crypto hack

Another attack vector for hackers are “relays.” Relays route traffic and obscure traceable and identifiable IP addresses, with an exit relay being the final one that connects users to a site. 

As CoinDesk reported in August, a hacker was using his or her position as a “major exit relay host to stage sophisticated person-in-the-middle attacks, stripping websites of encryption and giving her/him full unrestricted access to traffic passing through her/his servers.” The hacker was using this access to steal cryptocurrencies. 

When asked what impact tokens might have on mitigating such an attack, Kadianakis said a token-based approach could improve usability in a way that makes phishing attacks like this infeasible, but it all depends on the integration. 

Read More: Start9 Labs Pitches a Private At-Home Server. And It Works

“Another approach to this issue, one that we’re already taking, is to strengthen the onion services ecosystem and encourage more service and sites to use onions, as onion services do not use exit nodes and therefore bypass this kind of attack completely,” he said in an email to CoinDesk. 

For exits and exit safety, the Tor Project is investigating ways of creating a trusted set of exit relays with known and verified operators, to reduce the incidence of attack from exit usage, said Bagueros.  

“We are also looking into requiring captcha-issued tokens in order to use these exits. In this way, these exits should be used less for automated scraping and spam, which should reduce the rate at which their IP addresses are banned from sites, and generally improve their IP address reputation,” she said. 

The team is still researching tokens and does not have a timeline for development. 

Proof-of-Work

Another approach the original blog post lays out is a proof-of-work system to acquire tokens. 

Onion services can ask the client to solve a proof-of-work puzzle before they’re allowed to connect. 

“With the right proof-of-work algorithm and puzzle difficulty, this can make it impossible for an attacker to overwhelm the service, while still making it reachable by normal clients with only a small delay,” read the post. 

In the case of DDoS attacks, Kadianakis said Tor could employ proof-of-work tokens created by the clients themselves and sent directly to the service.

Read more: How a Hacker Launched a Decentralized Network to Track Internet Censorship

“Proof-of-work is one way to make it more expensive for clients to consume service resources in bulk that we’re investigating,” said Bagueros. “We’re also looking into … a token that signifies the quantity of work spent compactly without impacting privacy.”

Tor has not yet found a privacy-oriented blockchain it sees as sufficient for this, but remains hopeful one will be found. 

In terms of other ways of earning these tokens, Tor lays out a number of options, such as allowing connected sites to award tokens to trusted users or giving users tokens with every donation they make to the project. It is also in the midst of brainstorming what additional benefits tokens could offer, how they could interact with each other and what wallets for them might look like, including a Tor Browser wallet integration.   

There is currently no discussion about monetizing tokens. 

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Market Wrap: Bitcoin Hits $18.4K; $260M in Ether Options Expire in December

5 years 10 months ago

Higher spot volumes Wednesday – and record volumes for the past month – are helping push bitcoin higher. Meanwhile, ether options for December pass 550,000 ETH.

  • Bitcoin (BTC) trading around $17,688 as of 21:00 UTC (4 p.m. ET). Gaining 0.17% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $17,571-$18,474 (CoinDesk 20)
  • BTC below its 10-day moving average but above the 50-day, a sideways signal for market technicians.

Bitcoin made gains for the third straight day this week, going as high as $18,474 according to CoinDesk 20 data. The price slipped, however, to $17,688 as of press time. 

Read More: Bitcoin Indicator Suggests Bull Market Is Still in Early Phase

Related: Vijay Boyapati’s Four Mental Models for Valuing Bitcoin

The last time bitcoin was in this range occurred way back in December 2017. “In general, the market sentiment is still very bullish,” said Andrew Tu, an executive at quant firm Efficient Frontier. “It is possible that we range between $17,500 and $18,300 for a bit. However, it seems likely in the coming days that we break the $18,300 resistance.” 

Constantin Kogan, a partner at Wave Financial, points to a $18,690-$18,950 “resistance” area where exchange books have a number of sell orders piled up, though he expects bitcoin to push above that soon. “I’m bullish, personally,” he told CoinDesk. 

Volumes were much higher than normal Wednesday, with major spot USD/BTC over $1.6 billion as of press time, surpassing this past month’s Nov. 5 high. 

“We’ve had a strong run up from $13,200, which was only a couple of weeks ago, and I think it’s now gunning for the all time high,” noted Rupert Douglas, head of institutional sales for crypto brokerage Koine. However, Douglas’ outlook mirrors Sir Isaac Newton’s famous dictum that what goes up must come back down. “At some stage we’re going to see a flush down to $13,000. The trend is up but it won’t be without volatility,” said Douglas.

Related: Bitcoin’s Rally Could Be Caused by a Supply Crunch in China

The bitcoin derivatives market, which was nascent in the last major bull run, continues to see open interest rise. Bitcoin options on major venues, for example, are at over $4 billion as of press time, the highest they have ever been and a sign some smart money is looking to hedge away any risks volatility may – or may not – bring. 

“Today’s active options market – which was nonexistent back in 2017 – is keeping any meteoric rises in check,” said Micah Erstling, a trader at firm GSR. 

Nevertheless, Erstling sees more money piling in because of crypto’s eye-popping performance so far in 2020. “Seasoned investors are finding it increasingly hard to argue with bitcoin’s performance – over 133% year-to-date, and up 100% over the last year.”

Ether options traders bet on 2.0

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Wednesday, trading around $472 and slipping 2% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Ethereum Classic Gets DeFi Treatment With Wrapped ETC

The amount of open ether options for December expiration has surpassed 550,000 ETH, worth more than $260 million as of press time.

Traders are likely taking bets about the future of Ethereum’s technical roadmap to “2.0”, an ambitious effort to insert staking and higher efficiency while porting over its native asset, ether.  

“Our theory is that this open interest pattern in ETH was strictly due to traders positioning themselves for an ETH 2.0 phase 0 launch, or yet another delay,” said Greg Magadini, chief executive officer of options data aggregator Genesis Volatility. “Even while BTC options had open concentrated in different expiration months, ETH consistently had open interest concentrated in December.”

Other markets

Digital assets on the CoinDesk 20 are mixed Wednesday, mostly red. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Notable losers:

Read More: Zcash Undergoes First Halving as Major Upgrade Drops ‘Founders Reward’

Equities:

Commodities:

  • Oil was up 0.69%. Price per barrel of West Texas Intermediate crude: $41.64.
  • Gold was in the red 0.51% and at $1,869 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Wednesday jumping to 0.870 and in the green 1.5%.
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Promoters of Rapper TI’s 2017 ICO Ordered to Pay $103K Penalty

5 years 10 months ago

The U.S. Securities and Exchange Commission (SEC) prosecution of rapper T.I.’s 2017 initial coin offering (ICO) has netted $103,000 in court-ordered fines and penalties for the agency, this time from associates of the Atlanta-based act.

Defendants Chance White, Owen Smith and William Sparks were all named in the original September FLiK ICO suit for alleged securities law violations and for boosting the coin without disclosing their ties. Eight individuals were charged in September and seven quickly agreed to settle, including White, Smith and Sparks.

The trio on Tuesday consented to the final terms of their penalty without admitting or denying wrongdoing, according to Law360, which first reported the consent order. All three are now barred from future securities violations, and prohibited from dealing with digital securities for the next five years.

Related: Grayscale’s Ethereum Trust Granted SEC Reporting Company Status

It was not immediately clear on Wednesday if fellow FLiK defendant Ryan Felton had settled the charges against him. The film producer faces allegations of fraud and manipulation from the SEC.

Read more: SEC Charges Rapper TI With Securities Violations for Promoting 2017 ICO

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Binance Sues Forbes for Defamation Over ‘Tai Chi’ Document Leak

5 years 10 months ago

Binance Holdings Limited sued Forbes Media LLC for defamation Wednesday over a story last month that purported to reveal regulatory evasion tactics employed by the global cryptocurrency exchange.

The suit, filed in the U.S. District Court in New Jersey, claims Forbes and two writers, Michael del Castillo and Jason Brett, harmed Binance by publishing a story that “contains numerous false, misleading and defamatory statements.” 

In the suit, Binance denies a laundry list of allegations in the Forbes story and even refuted the veracity of the “Tai Chi” documents at its core. In the document, Binance demands that Forbes take down the article and pay punitive damages to be determined at trial.

Related: Binance Discontinues UK Pound Stablecoin Calling It Just an ‘Experiment’

The suit is the latest escalation of long-simmering tensions between Binance and the news media. Binance is one of the largest cryptocurrency exchanges in the world and also one of the most closely scrutinized. Central questions swirl around it and its founder Changpeng Zhao, better known to the industry as CZ.

But while Binance has sued other firms for defamation in the past, it has shied away from doing the same to the media. Instead, Binance tends to fight stories in the court of public opinion, namely on social media.

“We exercise and support freedom, including freedom of information and freedom of the press, as well as accountability,” a Binance spokesperson told CoinDesk, adding: 

“We want to assure the media that this suit doesn’t represent any threats to the reporting of Binance. We and any leading industry players need media to keep us accountable and reporting information to the public.”

Related: $300M in Bitcoin Flow to Binance From Huobi as China Gets Tougher on Exchanges

Forbes and Michael del Castillo did not immediately respond to separate requests for comment.

Read the complaint:

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DeFi Exploits Can’t Be Pinned on Flash Loans, Industry Leaders Say

5 years 10 months ago

Nine months ago, in a Denver convention center, a booth sat empty.

Littered with token stickers, the table was supposed to hold the physical representatives of decentralized finance (DeFi) protocol bZx. It remained empty, however, as the team struggled to make sense of the digital forces twisting their young project. 

bZx, as they would come to find out, was 2020’s flash loan “patient zero”.

Related: Ethereum Classic Gets DeFi Treatment With Wrapped ETC

New cases haven’t stopped in the months since then. Take November: $2 million from Akropolis, then $3.3 million from Cheese Bank, followed by $6 million from Value Finance and finally $7 million from Origin Protocol.

Flash loans remain the common thread through all those recent attacks. These DeFi-native tools enable a savvy investor to take out unbacked loans and amass leverage behind a position. For example, Monday’s Origin Protocol attacker pulled a 70,000 ETH loan from decentralized derivatives platform dYdX. It enabled the attacker to up the amount of loot sucked out of the project.  

Yet, while they may be the string connecting these exploits, flash loans are not the cause in and of themselves, industry leaders told CoinDesk.

Oracle manipulation and flash loans

It may not even be fair to characterize the recent DeFi exploits as “flash loan attacks,” Chainlink co-founder Sergery Nazarov told CoinDesk in an email.

Related: Origin Protocol Loses $7M in Latest DeFi Attack

Nazarov said flash loans at their core are just lump sums of capital thrown at success trade positions. The real issue lies with poorly constructed DeFi projects.

“While many are trying to frame this trend as the result of flash loans, most of these exploits could have been committed by any well-capitalized actor. All a flash loan does is temporarily make anyone a well-capitalized actor,” Nazarov said. 

Read more: Everything You Ever Wanted to Know About the DeFi ‘Flash Loan’ Attack

DeFi’s projects are smart contracts deployed to the Ethereum blockchain. They require outside information, namely pricing data, to execute actions baked into each contract. 

That pricing information is liable to distortions simply because of how the Ethereum blockchain packages transactions – that is, every 15 seconds. Prices can move every which way in 15 seconds, which forces smart contracts to act on stale data. 

Moreover, many DeFi applications rely on in-house pricing oracles created by token reserves, non-decentralized pricing feeds or other ad hoc solutions. For example, Harvest Finance leaned on another DeFi project, Curve Finance, to price its token pools.

In cases like Harvest Finance, interoperability became a negative dependency. A flash loan worth $50 million deviated asset prices temporarily away from the market value, creating an arbitrage opportunity. A project that had a more robust pricing system wouldn’t have fallen prey to the exploit, the theory goes.

Are audits enough?

Another point developers are coming to grips with is that code audits alone don’t make a DeFi project safe.

Speaking with CoinDesk via Whatsapp, Quantstamp CEO Richard Ma said developers need to understand markets themselves, perhaps more so than the code they deploy to the Ethereum blockchain. Quantstamp has audited or consulted on multiple top DeFi projects such as Curve Finance, MakerDAO and SushiSwap, among others. 

“Understanding the products and the business logic is much more time-consuming and important than a straight-up code review,” Ma said. 

Indeed, Akropolis was audited twice by two separate firms, but still suffered a re-entrancy attack.

This sort of attack occurs when a smart contract’s backdoor is left ajar. The contract’s state – which records how many tokens the contract has, among other things – fails to update quickly enough when tokens are removed, allowing the attacker to move more coins out than okay. It’s not dissimilar to a lazy bank teller continuing to fork over funds from an overdrawn account.

Read more: Harvest Finance: $24M Attack Triggers $570M ‘Bank Run’ in Latest DeFi Exploit 

Combining audit redundancies with insurance is a step at least one major cryptocurrency investment firm is now urging.

“We are recommending our portfolio companies to get multiple audits from more than one provider,” Paul Veradittakit, partner at venture capital firm Pantera, said in an email. “We also think that projects and investors may want to buy insurance to protect themselves.”

It’s also notable that none of the top DeFi projects have suffered oracle attacks spurred by flash loans, dYdX founder Antonio Juliano told CoinDesk in a message. Many flash loans used in attacks have originated on his platform, which offers the product without a fee.

He said that “there’s a big divide between the well-engineered projects and others;” a divide being fleshed out in real time by flash loans.

“In the same way you wouldn’t blame Ethereum for an implementation detail of the chain being used for an attack, the way flash loans are being used in exploits is the fault of developers building insecure applications, not the flash loans themselves,” Juliano said.

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Bitcoin’s Rally Could Be Caused by a Supply Crunch in China

5 years 10 months ago

Bitcoin’s price surge may be driven as much by a drying up in supply as by an increase in demand. 

That’s because Chinese miners are struggling to sell their crypto in ways that would quickly get them much-needed cash in the face of a government crackdown on local exchanges. 

“The lack of supply has fed extremely well to the trendiness of this rally, without any of the large sell-downs typical of miner activity in the past,” Singapore-based trading firm QCP Capital noted in its Telegram channel. 

Related: Market Wrap: Bitcoin Hits $18.4K; $260M in Ether Options Expire in December

QCP’s interpretation of the rally is simpler and less exciting than some of the other popular explanations, which cite macro factors such as demand for a hedge against monetary and fiscal indiscipline, an impending rise in inflation across the developed world, and search for yield as primary reasons for the price surge.

Miners mostly operate using cash and offload their bitcoin holdings onto the market almost daily to fund their expenses, mainly electricity costs, which are to be paid in the local currency (yuan, in the case of those operating in China). That makes miners constant sellers, and their actions influence the market price. 

However, Chinese miners, who control over 70% of bitcoin’s hashrate or mining power, have been facing challenges liquidating their crypto holdings for cash because many are finding their bank accounts and cards frozen as a part of the Chinese government’s nationwide crackdown on telecommunications fraud and money laundering via cryptocurrency deals. 

Currently, 74% of the miners are facing difficulty liquidating their holdings to meet electricity expenses, a Chinese crypto watcher going by the name Wu Blockchain mentioned on his Weixin blog, according to QCP Capital. Thomas Heller, formerly global business director at the mining pool F2Pool and now chief operation officer of mining and media firm HASHR8, confirmed the Chinese miners’ predicament earlier this week, saying it’s currently a “challenge” for Chinese miners to convert bitcoin and tether into cash. 

Related: Vijay Boyapati’s Four Mental Models for Valuing Bitcoin

Read more: China’s Crypto Miners Struggle to Pay Power Bills as Regulators Clamp Down on OTC Desks

The industry has been suffering ever since the Chinese authorities began freezing bank accounts in June and the situation has worsened in the past couple of months.

“Mining pools were selling large chunks of bitcoin in early September through exchanges, but this was hastily halted as their last remaining fiat off-ramp avenues were impacted with the arrest of large exchange heads like Star Xu and other [over-the-counter] brokers,” QCP Capital said.

Miner selling pushed bitcoin lower, roughly from $12,000 to $10,000, according to QCP Capital. The supply, however, dried up after the cryptocurrency exchange OKEx’s accounts were frozen in October. 

That, coupled with increased institutional participation or large buying in the spot market, created a supply crunch, allowing an exaggerated bullish move. 

Bitcoin is currently trading at $17,700, representing an over 140% year-to-date gain. Prices are short $2,500 of the record high of nearly $20,000 reached in December 2017.

Rally overstretched?

Sharp price gains are often accompanied by a big jump in the funding rate, the mechanism used by exchanges offering perpetuals (futures with no expiry) to balance the market and guide the perpetuals price toward the spot price.  

The funding rate is positive, or longs pay shorts, when the perpetuals trade at a premium to the spot price, indicating stronger buying pressure. Alternatively, when perpetuals trade at a discount to the spot market, the funding rate is negative and shorts pay funding to longs. 

A very high funding rate is widely considered a sign of an overextended bull run and often paves the way for a price pullback. For instance, the funding rate surged from 0.008% to 0.078% in the first half of August as bitcoin rallied to multi-month highs above $12,450. The cryptocurrency deflated to $9,800 by the second week of September. 

This time, the funding rate has remained steady below 0.010%, meaning the cost of holding long positions is still considerably lower than in mid-August. Hence, a meaningful correction could continue to remain elusive, allowing further upside in the near term, possibly above record highs.

As per QCP Capital, the spot market imbalance driving the price has allowed the leverage funding market to remain stable throughout the recent bullish move. 

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OKEx Token Rallies on Rumors Founder Xu Released From Custody

5 years 10 months ago

OKB, the in-house token for leading crypto derivatives exchange OKEx, rallied more than 13% Wednesday on rumors that the firm’s founder, Mingxing “Star” Xu, had been released from police custody.

  • The exchange reported losing contact with Xu on Oct. 16 and was forced to suspend all trading account withdrawals, as CoinDesk reported at the time. Chinese media outlets reported Xu was in police custody but, speaking to CoinDesk, OKEx denied the investigation of Xu was related to money laundering.
  • Rumors started circulating on Twitter Wednesday (here, here and elsewhere) that Xu has been or will soon be released from police custody.
  • Reacting to these rumors, OKB surged more than 13% from its open of $4.80 at 0:00 UTC, changing hands around $5.48 at last check. The token has gained more than 17% this week.
  • The gains retrace part of the steep losses suffered after the token tumbled 30% following the mid-October suspension of withdrawals.
  • After more than a month of zero completed withdrawals, Xu’s rumored release could mean a return to normal for the exchange. OKB’s primary uses are for discounts on trading fees and collateral for margin trading at OKEx, so its utility (and to a large degree its value) depends on the exchange’s viability.
  • Repeated calls to OKEx attempting to confirm the rumor were not immediately returned.
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Thai SEC Revises Net Capital Rules in Bid to Open Liquidity, Support Digital Asset Businesses: Report

5 years 10 months ago

Thailand’s Securities and Exchange Commission (SEC) has announced changes to its net capital requirement rules for brokerages and securities firms, including those in the digital assets sector. 

According to a report by the Bangkok Post, the revised requirements are aimed at raising liquidity in the market and supporting the growth of new businesses, including cryptocurrency exchanges. 

The report said that under the revised rules, digital assets would also be counted as capital funds but the maximum amount calculable in digital assets for a firm’s total required capital would be 50% of the asset value. 

Related: Grayscale’s Crypto Assets Under Management Break $10B

The revised rules will also allow the increased use of junior or subordinated debt to replace the maintenance of net capital funds for when securities or futures transactions jump sharply over a short period of time. 

Read more: Thai Central Bank’s New Blockchain-Enabled Bond Infrastructure Passes Test With $1.6B Bond Sale

The report said the announcement comes on the heels of rising market activity on the local stock exchange, which recently touched levels three times higher than usual for this time of the year. 

Thailand has already made major strides towards furthering digital asset and blockchain adoption, as evidenced in its blockchain-enabled issuance of government bonds and its plans to move judicial system records onto a blockchain. 

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Blockchain Bites: Bitcoin’s Latest Billionaire Bull, Zcash’s Upgrade, Grayscale’s $10B Breakthrough

5 years 10 months ago

Bitcoin continues to rally, with one indicator suggesting the bulls have room to roam. Zcash, the privacy-minded blockchain network, had its first halving. And acting Comptroller of the Currency Brian Brooks may stay on for a five-year term.

Top shelf

Top or not?
At least one obscure indicator suggests bitcoin’s bulls have room to roam. Already notching 80% gains in the past six weeks and fast approaching an all-time high of $20,000 set in 2017, the cryptocurrency’s Mayer Multiple – the ratio of price to the 200-day moving average – is showing the current rally may be in early stages. Standing at a 16-month high of 1.67, this indicator is still well short of the 2.4 threshold that has historically signaled the final leg of the bull markets. It was this key metric that preceded the end of the 2019, 2017 and 2013 bull runs. Things are different this time around, compared to three years ago there is less retail interest in bitcoin and significantly more institutional involvement.

New money
Mariner Wealth Advisors, a registered investment advisory (RIA) with a network of financial planners managing some $29 billion, is the first to join a new bitcoin-focused separately managed account (SMA). This SMA will allow Mariner’s 346 wealth managers to offer bitcoin trading, custody and tax services for their 23,000 clients. Set up by crypto firm Eaglebrook Advisors, the SMA is targeting high-net-worth clients in the $5 million to $10 million range, offering many who did not participate in the 2017 bull run a chance to jump in. Eaglebrook is offering bitcoin custody services through Gemini Trust Company at launch. As of Tuesday, Mariner is Eaglebrook SMA’s only customer, though the company states it can easily scale to other RIAs.

Related: First Mover: As Bitcoin Shoots Past $18K, There’s Comfort in the Crowded Trade

$10 billion
Grayscale Investments has broken above $10 billion in digital assets under management for the first time. The New York-based firm, wholly owned by CoinDesk’s parent company DCG, now oversees $10.4 billion in assets including bitcoin, ether and other altcoins held across nine single-asset investment trusts and a diversified fund. At last count on Oct. 30, Grayscale held $7.6 billion worth of crypto, meaning the latest milestone is largely due to price appreciation across the digital asset sector.

Halving an upgrade
Zcash, a privacy-centered fork of Bitcoin, has completed its first halving, which not only cut miner rewards but triggered a network upgrade. At 12:37 UTC, the automatic event reduced the miner subsidy from 6.25 ZEC to 3.125 ZEC. It also triggered the Canopy upgrade, which established a new development fund and eliminated the controversial Founders Reward, in a move to more equitably fund network development. With the upgrade, miners will receive 80% of the block rewards, as before, with 20% divided among a grant fund, the Electric Coin Company (ECC) and the Zcash Foundation. Previously, critics said too much of the block reward was directed to the EEC.

Deep pockets
Mexican billionaire Ricardo Salinas Pliego told the world that 10% of his liquid portfolio is now tied up in bitcoin. Tweeting Wednesday, he said, “Bitcoin protects the citizen from government expropriation.” Engaging with startled and ragingly bullish Bitcoiners, Salinas Pliego said the other 90% of his investments are “in precious metals miners,” recommended reading “El Patron Bitcoin” and dismissed government-issued fiat. The billionaire made his fortune as founder and chairman of Grupo Salinas, a collection of companies with stakes in telecommunications, media, financial services and retail.

Quick bites
  • PLAY GROUND: Vietnam’s Ministry of Education will use TomoChain to archive student records on a blockchain. (CoinDesk)
  • SECURITY BREACH: Crypto exchange Liquid said a domain name hosting provider slip up may have exposed sensitive customer data. (CoinDesk)
  • THE EDUCATOR: Incoming Wyoming senator Cynthia Lummis said a key item on her agenda will be explaining bitcoin to her new colleagues in Washington, D.C. (CoinDesk)
  • TWITTER OBLIGES: Bridgewater’s Dalio tweeted, “I’d love to be corrected” on bitcoin, after denouncing it last week. (CoinDesk)
  • TELCO TRANSFORMER: OXIO wants to use blockchain to make “Telecom-as-a-Service” as common as SaaS for major brands. (CoinDesk)
Market intel

Institutional interest
Open interest for bitcoin futures traded on CME Group’s exchange hit a new high of $976 million Monday. “The number of large open interest holders (LOIH) is once again at a record 102 holders,” a CME spokesperson told CoinDesk. The previous record of $948 million in outstanding CME derivative contracts was set in mid-August, following bitcoin-positive statements from respected financiers Paul Tudor Jones, Stanley Druckenmiller and Bill Miller. While open interest may be “indicative of institutional investors wanting exposure to bitcoin,” according to Chainalysis Chief Economist Phillip Gradwell, it’s important to note that CME’s recent surge comes as incumbent exchanges BitMEX and Huobi face ongoing regulatory challenges and flat or declining open interest through Q3 and Q4.

At stake

Related: Blockchain Bites: Bitcoin’s Run, Uniswap’s Hemorrhaging Value, Anchorage’s Banking Bid

Banking head
Acting Comptroller of the Currency Brian Brooks may take on a full-term position. Yesterday, outgoing President Donald Trump nominated the  former bank executive and chief legal officer for Coinbase to lead the national bank regulator for a five-year term.  

Since taking office temporarily, Brooks has pushed forward a number of policy decisions seeking to clarify and ease national banks’ working relationship with the digital asset sector. Most notably, the OCC has published two letters telling nationally regulated banks they could offer crypto custody services and hold funds for fiat-backed stablecoin issuers.

While taken as a positive signal, the true effect of these statements has yet to fully play out. Kristen Smith, founder of the Blockchain Association, a Washington, D.C., crypto advocacy group, said in September, following the stablecoin guidance, that any practical changes will likely be muted. 

That has not kept some government officials from criticizing Brooks’ focus on cryptocurrency and fintech. Last week, a group of House Democrats published a sharply worded letter saying Brooks’ priorities have been misplaced during a severe economic downturn and public health crisis.

“Arguably, the immediate needs of millions of at-risk individuals who have not yet received an economic stimulus check and/or cannot deposit their funds in a bank, deserve greater attention than an effort to increase access to financial services to the ‘banked community’ via mobile phones,” they wrote.

CoinDesk regulatory reporter Nikhilesh De writes that Brook faces several hurdles to confirmation. The U.S. Senate Banking Committee oversees the OCC, and will likely hold a confirmation hearing before the entire Senate votes to confirm or reject Brooks’ nomination.

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First Mover: As Bitcoin Shoots Past $18K, There’s Comfort in the Crowded Trade

5 years 10 months ago

Bitcoin’s ascent continues, with prices scaling the $18,000 mark during Asian trading hours. In a sign of persistent dip demand, sudden pullback to $17,200 seen following the breakout to fresh 34-month highs was quickly reversed. 

“Bitcoin will now be setting its sights on the all-time high of $20,000,” Simon Peters, crypto asset analyst at multi-asset investment platform eToro, said in an email. “The last time bitcoin hit the $20,000 mark was in 2017 and retail investors piled in as they experienced crypto FOMO.”

In traditional markets, European shares and U.S. stock futures gained ground, and safe havens such as gold and the dollar weakened as investors continued to price in prospects of swift global recovery on potential coronavirus vaccines. 

Market moves

Related: The Dark Future Where Payments Are Politicized and Bitcoin Wins

Has betting on bitcoin become a crowded trade? 

That was the assessment of some 4% of global fund managers in a monthly survey published Tuesday by Bank of America, when asked to name the “most crowded trade.” The response “long bitcoin” ranked behind “long U.S. tech” (65%), “short U.S. banks” (11%), “long corporate bonds” (9%) and “long gold” (5%):

A few things come to mind. 

1) It’s hard to argue that “long bitcoin” is particularly crowded right now, given how many big investors have yet to assert that the trade has any merit at all. On Tuesday, Ray Dalio, CEO of Bridgewater Associates, the world’s largest hedge fund, tweeted several “problems with bitcoin being an effective currency,” including its limited usability as a form of payment. “What am I missing?” Dalio wrote. (#CryptoTwitter had plenty of responses for that.)

Related: Blockchain Bites: Bitcoin’s Latest Billionaire Bull, Zcash’s Upgrade, Grayscale’s $10B Breakthrough

According Mati Greenspan, founder of the foreign exchange and cryptocurrency research firm Quantum Economics, price-chart patterns suggest that bitcoin was “due for a pullback a long time ago.” 

“But the fundamentals are firmly in control right now as increasingly large players are entering this tiny market,” Greenspan wrote Tuesday. 

In other words, people are just starting to arrive. 

2) If the trade is crowded, then a lot of investors must be overjoyed at how well it’s working out this year. Bitcoin shot past $17,000 Tuesday, and then $18,000 early Wednesday, rising to levels not seen in three years and with prices up more than 150% year to date. That compares with 12% for the Standard & Poor’s 500 Index of large U.S. stocks. This might be a sign the rally is overdone. But as discussed previously by First Mover, a lot of investment decisions are made on the basis of backward-looking track records. Few big banks have made a serious push into cryptocurrencies, but Germany’s Deutsche Bank has described bitcoin as the world’s best-performing asset in 2021. 

“If you knew 10,000 people who owned bitcoin, you could phone all of them and congratulate them on their success,” Matt Blom, head of sales and trading for the cryptocurrency firm Diginex, wrote Tuesday. “Thing is, you don’t know 10,000 people who own bitcoin, you probably only know a handful. And they will all say the same thing: ‘I don’t own enough.'”

3) Market signals suggest that interest among big investors is growing, not plateauing – indicating there’s no shortage of traders looking to put more money into the trade. Open interest in bitcoin futures has climbed to above $6 billion from $4 billion as recently as October, according to the data firm Skew. Even those amounts are still tiny fractions of bitcoin’s total market capitalization, currently about $325 billion. 

4) The number of active bitcoin addresses recently climbed to about 1.2 million, but that’s still a touch below levels witnessed during bitcoin’s bull run of 2017, when prices surged to an all-time high near $20,000. According to the Norwegian cryptocurrency analysis firm Arcane Research, “the number of active addresses has grown more organically in 2020, without a surging and dramatic spike as witnessed in late 2017.”

“The increase in active addresses indicate that bitcoin is seeing increased usage and adoption,” Arcane wrote Tuesday in a report. “This is a bullish and healthy sign and underlines the strength of the current bull run.”  

5) The reality is that nobody really knows how to value bitcoin. It’s an 11-year-old cryptocurrency, too short of a timeline to really evaluate what it might be worth in the future, especially when neither Federal Reserve nor private economists can agree on the likelihood of eventual runaway inflation from this year’s trillions of dollars of coronavirus-related stimulus, or on the impact of epochal changes like the shift to remote working. Bitcoin has no earnings, so it can’t be valued like a stock, and it has no yield, so it can’t be valued like a bond. The price is really just a function of how many people want to buy it, versus the amount that’s created every day by cryptocurrency miners. (By the way, that’s about 900 bitcoin per day, worth about $15.3 million at current prices.) Dalio argues that governments will “outlaw it and make it too dangerous to use” if bitcoin becomes too popular. But according to that same Bank of America fund-manager survey, some 3%-4% of global fund managers think bitcoin is the asset class most likely to outperform in 2021. (Emerging markets ranked first, followed by the S&P 500, oil and gold.)  

So roughly the same percentage of respondents see bitcoin prices climbing higher as those who see the trade as overcrowded. These are all just guesses about what the future holds, of course. A Citigroup analyst recently predicted the price could pass $300,000 by the end of next year. 

If that’s the case, there’s little reason for the crowd to disperse. 

Bitcoin watch

Bitcoin’s recent rally from $10,000 to $18,000 looks similar to the steep rise to record highs near $20,000 seen in the final quarter of 2017. However, that does not necessarily mean the market is now nearing a top. 

While the 2017 rally peaked in December, the current rally looks to have legs, according to the Mayer Multiple, which is the ratio of price to the 200-day moving average. At press time, the ratio stands at a 16-month high of 1.67. However, the metric is still well short of the 2.4 threshold that has historically signaled the final leg of the bull markets.

The ratio rose above 2.4 on Dec. 1, 2017, after which bitcoin doubled in value to $20,000 in just two weeks before falling back to $12,000 on Dec. 22. Similar price action was observed in April and November 2013 after the ratio rose above 2.4. 

– Omkar Godbole

Read More: Bitcoin Indicator Suggests Bull Market Is Still in Early Phase

What’s hot

CME sees record high open interest for bitcoin futures on wave of institutional inflows (CoinDesk) 

Grayscale (a unit of CoinDesk parent company Digital Currency Group) says assets under management broke $10B (CoinDesk)

One of Mexico’s billionaires reveals 10% of his liquid assets are in bitcoin (CoinDesk) 

Crypto-friendly U.S. regulator Brooks gets nod from Trump to serve 5-year term leading OCC (CoinDesk)  

Traders brace for major volatility as bitcoin price nears record high (CoinDesk) 

Zcash undergoes first halving as major upgrade drops ‘Founders Fund’ (CoinDesk) 

OKEx mining pool flatlines after 99.5% hash power drop as withdrawal suspensions spook clients (CoinDesk)

Analogs The latest on the economy and traditional finance

U.S. retail sales lose speed as pandemic, lack of fiscal stimulus weigh (Reuters) 

Saudi Arabia’s state oil company, Saudi Aramco, selling $8B of bonds to raise cash as low crude prices dent finances (Reuters)  

Trump Federal Reserve nominee Judy Shelton (who advocated returning to gold standard) fails key Senate procedural vote (CNBC) 

New York tourisim industry, which supported 400,000 jobs and $46B of annual spending in local hospitality industry, won’t recover until 2025 (NYT)  

Roughly 300 companies that received about $500M of emergency loans from the U.S. government have filed for bankruptcy (WSJ)  

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CryptoGenies? Digital Avatars Are Coming to Dapper’s Flow Blockchain

5 years 10 months ago

After finding a fit for digital collectibles outside the blockchain realm, Genies is bringing its customizable 3D avatars to a partnership with Dapper Labs.

The collabo with the team behind CryptoKitties and now NBA Top Shot is seen by Genies as a way to introduce Gen Z-ers to the blockchain.

“Dapper Labs was a brain-dead fit for us to be able to further educate our young users,” Genies founder Akash Nigam told CoinDesk in an interview.

Related: NIFTEX Raises $500K to Build Out NFT Trading Platform

Genies has established itself as an avatar company bringing celebs closer to their fan bases, one digital representation at a time. With the pandemic, Nigam said there are now more incentives for influencers to interact virtually with their fans. Think of it as a way to make up for all those cancelled concerts, sporting events and meetups. 

Last week, for instance, singer Justin Bieber announced his Christmas album on Twitter through his Genie. 

Nigam said once Genies are up and running on Flow – the new blockchain built by Dapper Labs to flee the scaling constraints of Ethereum – Bieber could, for example, issue a certain number of signed Santa hats with his Christmas album announcement. The non-fungible tokens (NFTs) are digitally unique and can be sold and traded among users. 

“Justin Bieber already sells vintage collectibles to his fans,” Nigam said. “We’re just extrapolating what they already do in the physical world and bringing it to the digital world.” 

Related: RAC on the First Truly Free Markets for Music and Culture

Read more: Dapper Labs–USDC Integration Helps NBA Collectibles Game Clear $2M in Revenue Since June

Roham Gharegozlou, CEO of Dapper Labs, added that users do not need to know the specifics of blockchain technology to understand true ownership. 

“If something is on the blockchain, you own it and you can sell it. If not, you don’t f***ing control anything,” Gharegozlou told CoinDesk on a call.  

The mechanisms of how to bring digital goods or existing users onto the blockchain is still in the works. But what will be different is that users, not only celebrities, will be able to create their own avatars and therefore own a piece of their online personas. (It’s a direction Genies also recently took in issuing a software development kit used by the likes of Giphy and Gucci.)

“Today we let you personalize your username. In the future we want to let you personalize your own digital identity,” Gharegozlou said.

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FATF Needs Entirely New Approach to Regulating Crypto, Says V20 Summit

5 years 10 months ago

The Financial Action Task Force (FATF) needs an entirely new approach when it comes to policing crypto, according to Sian Jones, the driving force behind much of the sector’s anti-money laundering (AML) standards work to date.

Speaking at the close of the second annual V20 Virtual Asset Service Providers Summit, Jones said FATF only needs to look at the fast-evolving world of decentralized finance (DeFi) to see how incongruous the traditional system of checking transactions created half a century ago by SWIFT is becoming.

Global AML watchdog FATF has recommended local regulators of the G-20 countries and beyond try to graft the so-called Travel Rule requirements onto digital assets, where intermediaries (virtual asset service providers, or VASPs, in this case) must share personally identifiable information (PII) about crypto transactions. 

Related: Why FinCEN Wants Details on All Cross-Border Transactions Over $250

Read more: Why FinCEN Wants Details on All Cross-Border Transactions Over $250

The core of crypto is about removing intermediaries, however – something DeFi clearly demonstrates, said Jones.  

“FATF must consider developing entirely new approaches to manage money laundering and terrorist financing risks in crypto,” Jones told the V20 delegates Wednesday. “The tried and tested methods work, after a fashion, in the traditional world of money. Arguably, they can be made to sort of fit the intermediated crypto world. They do not necessarily fit a DeFi world where they are not fit for purpose.”

Jones added that FATF seems to have only partially grasped the fact that “crypto was born out of a desire by some, not to circumvent authority, break the law or facilitate money laundering, but rather to remove intermediaries, to disintermediate traditional finance.”

Members only

Related: South Korean Crypto Firms Must Disclose Users’ Identities Under Planned Law Change

Day two of the V20 summit, which was open to members only, heard from several representatives from prominent DeFi platforms who told delegates they had either been refused access to FATF’s private-sector consultative forum meetings or haven’t heard at all from FATF, Jones said.

The FATF did not return requests for comment by publication time.

“FATF needs to double down on its engagement with all actors, including DeFi software developers and users who are not part of the industrialized crypto world,” Jones said. “Equally, the industry needs to work more closely together to present a unified voice and its engagement with the FATF and regulators.”

Going forward, Jones recommended creating a single unit to speak to FATF representing all the industry and its associations, rather than 20 or so different voices each speaking for a few minutes. She also suggested meetings to talk to FATF occur more frequently – monthly instead of quarterly. 

With many crypto Travel Rule solutions now live, including a widely adopted messaging standard, industry players dived into the nuts and bolts of getting those solutions to seamlessly interoperate.

Read more: Crypto Firms Establish Messaging Standard to Deal With FATF Travel Rule

The plethora of Travel Rule solutions has created an interoperability problem of its own, especially given the variety of proprietary proposals and non-profit protocols; some solutions prefer centralized anchor points like certificate authorities, while others want a more decentralized approach using blockchains and smart contracts.

Thus far, the biggest step in terms of interoperability has been the InterVASP Messaging Standard (IVMS 101), which details exactly the format the message payload of PII data sent between VASPs should take. Following on from this achievement, the V20 summit heard that several more standards have been tabled and are under discussion.

FATF friction

Malcolm Wright, head of AML at Global Digital Finance, highlighted areas where standards could help remove pain points – including directory sharing and customer data storage.

“Some solutions are working on a VASP directory or look-up and so we need to smooth out how a Sygna Bridge will talk to a Notabene,” said Wright. “Another could be a security standard for what happens to data when that is stored, like how that is secured and kept separate. We also mustn’t overlook the need to screen info for sanctions, although that’s probably not going to need a standard.” 

Read more: Where FATF Crypto Compliance Gets Interesting: Africa

Leaving aside the wrinkle smoothing being done across FATF’s VASP universe – which is fairly limited to the so-called “industrialized crypto” space – the elephant in the room remains what happens with private or non-hosted wallets. 

This is often seen by regulators as some kind of proxy for illicit activity but as previously stated it’s a core tenet of crypto, not to mention a necessary way to avoid regularly recurring exchange hacks.

“Over the next few years there are a whole set of issues around non-custodial private wallets which are just massive,” said CipherTrace CEO Dave Jevans. “That would make all the work we’ve done over the past 18 months seem like child’s play.”

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‘Not My Cup of Tea’: Jamie Dimon Is Still Not a Bitcoin Fan

5 years 10 months ago

JPMorgan Chase CEO Jamie Dimon said blockchain will have a pivotal role in the future of finance even if bitcoin, the market-leading cryptocurrency that made blockchain famous, is not his “cup of tea.”

Speaking at the New York Times’ DealBook Conference Wednesday, Dimon reiterated JPMorgan’s support for blockchain technology as a potentially transformative financial mechanism.

“The blockchain itself will be critical to letting people move money around the world cheaper,” he said. (His bank made waves recently with the launch of its “JPM Coin” for wholesale banking payments). “We will always support blockchain technology.”

Related: Family Offices May Now See Bitcoin as Alternative to Gold: JPMorgan Report

But Dimon refused to give ground on his opposition to bitcoin.

He repeated his longstanding belief that governments will ultimately more heavily regulate it (something echoed recently by fellow billionaire Ray Dalio). Oversight is inevitable for something so large, he said.

Even so, Dimon acknowledged that “very smart people” are buying into the cryptocurrency in the belief that it will outperform gold, the U.S. dollar and U.S. Treasury bonds.

“Let them do that,” he said. “It’s just not my cup of tea.”

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

5 years 10 months ago

Netherlands-based cryptocurrency exchange Bitonic says it has been “forced” to bring in extra verification measures due to requirements from the country’s central bank.

  • In a notice published Monday, the exchange said it will now ask users for extra information “such as the purpose with which you intend to purchase bitcoins and what kind of wallet you use.”
  • It said it must obtain proof from customers they are the “legitimate owner” of a bitcoin address by uploading a screenshot of their wallets, or by signing a message with the bitcoin address.
  • Bitonic called the requirements “ineffective and disproportionate,” saying it had asked multiple times that the central bank remove the requirement.
  • The central bank, De Nederlandsche Bank, is said to be applying the Netherland’s Sanctions Act to cryptocurrency exchanges, seeking to ensure their users and transaction beneficiaries are not on a Dutch or European sanctions list.
  • “The Netherlands is currently the only country in the European Union where this far-reaching measure is demanded,” the exchange said.
  • It further called for users to “formally object” to the central bank about extra requirements and the collection of the data.

See also: Dutch Central Bank Gives First Approval to Digital Asset Exchange

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Ethereum Classic Gets DeFi Treatment With Wrapped ETC

5 years 10 months ago

Ethereum Classic wants to play in the decentralized finance (DeFi) space of the blockchain from which it contentiously split in 2016.

Announced Wednesday, Ethereum Classic Labs, the ETC blockchain’s biggest supporter, released Wrapped ETC (WETC) – an ERC-20 token that lets ETC holders participate in Ethereum-based DeFi services like trading, lending and borrowing.

“We wanted to make sure ETC could go to a different ecosystem and use different applications on top of that ecosystem,” said James Wo, founder and chairman of ETC Labs. “I expect at least 10% of ETC holders will want to participate and use WETC.”

Related: Market Wrap: Bitcoin Breaks $17.8K, Outperforming Ether in November So Far

Wrapping is the act of taking a blockchain asset like bitcoin and issuing an equivalent representation on another blockchain such as Ethereum. Wrapped Bitcoin (WBTC), for instance, is an ERC-20 token that’s backed on a 1:1 basis with bitcoin held in reserve by qualified custodian BitGo Trust. More recently, Zcash announced a wrapped, DeFi-ready version of the privacy coin. 

Read more: Privacy Coin Zcash Makes Its Ethereum ‘Wrapped’ Debut With Tokensoft and Anchorage

Wo of ETC Labs pointed out that WBTC tokens are backed and guaranteed by BitGo, a centralized entity. “What we have done here is use a smart contract so people can easily exchange ETC for WETC using a smart contract which is totally decentralized,” he said.

This is similarly the case for tBTC from Thesis and renBTC from Ren.

Related: ConsenSys Acquires Blockchain Developer Toolmaker Truffle Suite

WETC can be transferred or stored in any ERC-20-compatible wallet or storage mechanism, said Wo. Under the hood, ChainBridge, a decentralized application that interfaces with both the Ethereum Classic blockchain and the Ethereum mainnet, allows ETC tokens to be transferred to the Ethereum mainnet via the bridge. Then a specified amount of ETC is locked in a smart contract and a corresponding amount of WETC is minted on Ethereum.

The release of WETC follows the launch of a DAI-ETC bridge, said Wo, which enables ETC users to gain access to MakerDAO’s dai, a popular stablecoin in DeFi.

New beginnings

Ethereum Classic has something of a checkered history, beginning with its emergence in July 2016 from the Ethereum fork that followed the infamous DAO hack. 

ETC, which trades at about $5 today, reached an all time high of $47 back in December 2017, thanks in no small part to the enthusiastic support from crypto investor Barry Silbert, CEO of Digital Currency Group, which is also the owner of CoinDesk. For context, Ethereum’s native asset, ether (ETH), is now trading at nearly $500.

The ETC blockchain was subjected to a series of 51% attacks in August. Wo agreed the emergence of WETC will help rebuild ETC’s reputation. 

“I will say that right now ETC network is very secure, so you can trust it,” he said. “We are also directly building applications on top of the ETC network, as well as using WETC to go through the Ethereum network.”

Read more: Ethereum Classic Labs Airs New Plan to Stop Future 51% Attacks

In any case, Wo sees a bright future as ETC sticks to its proof-of-work (PoW) mining guns while Ethereum embarks on the difficult and extended jump to proof-of-stake (PoS).

“Not everyone trusts PoS. Some projects believe in PoW,” said Wo. “So I think some of the ecosystem will probably stick to ETC or other PoW versions of a blockchain that can do smart contracts.”

Correction (Nov. 18, 15:14 UTC): Technically, Ethereum “forked” from what became Ethereum Classic. The opening paragraph has been modified to make that more clear.

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