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Belarus Bank to Offer Bitcoin Purchases, With Litecoin and Ether Coming Soon

5 years 10 months ago

Belarusbank, one of the largest credit institutions in Belarus, has partnered with OTC broker White Bird to offer a bitcoin buying service, according to an announcement Monday.

For now, purchases will be available via bank cards issued in Belarus and Russia (the two countries’ financial systems are well connected). But going forward, the bank is planning to sell cryptocurrency in other neighboring countries, such as Ukraine, Georgia and Commonwealth of Independent States (CIS) nations.

According to Belarusbank spokesperson Alexei Kulik, users will be able to withdraw bitcoin to their wallets “with no intermediaries whatsoever.” The service will function using White Bird’s online infrastructure.

Related: Bank of England Official Balks at Shielding Banks Against Digital Currencies: Report

Litecoin and ether are expected to be added to the service soon, Kulik told CoinDesk via email.

Belarus officially legalized crypto transactions in 2018. Bitcoin has become a key tool for distributing help to Belarusians that lost their jobs during protests against President Alexander Lukashenko, which have been rocking the country since mid-August.

Also read: Belarus Nonprofit Helps Protestors With Bitcoin Grants

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Microsoft Marketing Exec Joins Blockchain Gaming Platform Enjin to Lead Enterprise Push

5 years 10 months ago

Blockchain gaming platform Enjin is launching a bid to attract more enterprise business, and it has hired an executive with two decades of experience at Microsoft to lead the effort.

Announced Monday, Alex Solomon, whose last role at Microsoft was Azure product marketing director, Western Europe, has joined Enjin as its executive director of enterprise platforms.

As Enjin’s enterprise chief, Solomon will work with corporate clients looking to create digital experiences using blockchain tech to improve customer retention, acquisition and engagement, the firm said.

Related: Bitstamp Names Gemini Alum Julian Sawyer as CEO

The aim is to offer a full-service stack enabling businesses to create token projects through a template-driven experience.

At Microsoft, Solomon led the development and launch of Azure Heroes, a blockchain-based digital collectibles recognition program created to incentivize developers to build on Azure. The 2019 project, based on Ethereum blockchain-based non-fungible tokens, or NFTs, was a collaboration with Enjin.

See also: Enjin’s New Minecraft Plug-in Lets Players Spawn Blockchain Assets

His other roles at the tech giant included chief marketing officer in Malaysia and marketing operations lead in Western Europe.

Related: Ex-Coinbase, BitFlyer Lawyer Joins Anderson Kill

“The opportunity to join Enjin’s leadership team to help develop and build the company’s vision for enterprise was a compelling and natural jump offering me a new set of challenges to take on,” said Solomon.

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Microsoft Exec Joins Blockchain Gaming Platform Enjin to Lead Enterprise Push

5 years 10 months ago

Blockchain gaming platform Enjin is launching a bid to attract more enterprise business and it’s hired an executive with two decades of experience at Microsoft to lead the effort.

Announced Monday, Alex Solomon, whose last role at Microsoft was Azure product marketing director, Western Europe, has joined Enjin as its executive director of enterprise platforms.

As Enjin’s enterprise chief, Solomon will work with corporate clients looking to create digital experiences using blockchain tech to improve customer retention, acquisition and engagement, the firm said.

Related: Bitstamp Names Gemini Alum Julian Sawyer as CEO

The aim is to offer a full-service stack enabling businesses to create token projects through a template-driven experience.

At Microsoft, Solomon led the development and launch of Azure Heroes, a blockchain-based digital collectibles recognition program created to incentivize developers to build on Azure. The 2019 project, based on Ethereum blockchain-based non-fungible tokens, or NFTs, was a collaboration with Enjin.

His other roles at the tech giant included chief marketing officer in Malaysia and marketing operations lead in Western Europe.

“The opportunity to join Enjin’s leadership team to help develop and build the company’s vision for enterprise was a compelling and natural jump offering me a new set of challenges to take on,” said Solomon.

Related: Ex-Coinbase, BitFlyer Lawyer Joins Anderson Kill

See also: Enjin’s New Minecraft Plug-in Lets Players Spawn Blockchain Assets

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Record Levels of Negative-Yielding Debt Strengthen Case for Bitcoin: Analysts

5 years 10 months ago

Bitcoin’s long-term bullish case may have got another boost as the global stockpile of negative-yielding bonds hits a new high.

The value of the Global Negative-Yielding Debt Index from Bloomberg and Barclays is now at a record level of $17.05 trillion, surpassing the previous lifetime high of $17.04 trillion reached in 2019. The figure has more than doubled in the past eight months.

A negative-yielding bond offers less money at maturity than the original buying price. The sharp rise in volume is the result of the massive liquidity-boosting bond purchases by the U.S. Federal Reserve and other major central banks to contain the economic fallout from the coronavirus pandemic.

Related: Fidelity’s Crypto Arm Responds to 6 Common Bitcoin Criticisms

The towering stockpile of bonds yielding negative returns is said to be an incentive for investors and corporations to pour money into inflation-resistant assets such as bitcoin. That’s not only because these bonds yield losses on maturity, but also because the money received at maturity may be worth less in real terms than than when purchased, with the central banks’ massive liquidity injections expected to boost inflation.

“The more central banks print money and push bond yields lower to contend with ongoing stress in the global economy, the more compelling the economics around bitcoin become,” Joel Kruger, strategist at LMAX Digital, told CoinDesk over Telegram.

Ever since its inception, bitcoin has been dubbed “digital gold,” because it is considered durable, fungible, divisible, recognizable and scarce, just like the precious metal. Several public listed companies and top investors have diversified their investments into bitcoin this year, validating its appeal as a reserve asset/inflation hedge.

The trend may continue. John Ng Pangilinan, a managing partner at Singapore-based Signum Capital, expects yield-hungry investors to pour money into bitcoin. “On our end, we are seeing an uptick in the number of investors looking at earning yield from lending out bitcoin.”

Related: Citibank Executive Says Bitcoin Could Pass $300K by December 2021

Bitcoin holders can lend the top cryptocurrency on various exchanges and earn significantly higher interest rates than the yields offered by government bonds – up to 6%, according to data aggregator DeFi Rate.

Looking ahead, the volume of bonds offering a loss at maturity looks set to increase, as the central banks have little scope to scale back or halt bond purchases amid the resurgence of the coronavirus crisis across major portions of the globe.

“Expect more liquidity injections from central banks. Markets will be well supported with gold and bitcoin continuing to benefit,” macro investor Dan Tapiero tweeted early on Monday.

Bitcoin is currently trading at $16,335, representing a 2.3% gain on the day.

The cryptocurrency has gained 51% so far this quarter and is up over 120% on a year-to-date basis. Some analysts expect bitcoin to consolidate before challenging record highs by the end of December.

Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Bitcoin’s Options Market Shows Strongest Bullish Mood on Record

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The SEC Is Still Working Out What ‘Qualified Custodian’ Means for Crypto

5 years 10 months ago

The U.S. Securities and Exchange Commission (SEC) is once again asking about qualified custodians and how crypto custody fits into this regulatory framework.

Last month, the Wyoming Division of Banking granted a no-action letter to Two Ocean, a wealth management firm hoping to offer custodial services for digital assets (which include virtual currencies) and call itself a qualified custodian. 

In the letter, the division said it “would not pursue enforcement action against Two Ocean for holding itself out to the public as a ‘qualified custodian’ if Two Ocean operates in conformity with applicable laws and rules surrounding the safekeeping of customer assets, including both Wyoming and federal law.”

Related: This Crypto Custody Breakthrough Will Bring Banks Closer to Digital Assets

In response, the SEC published a statement asking for public input on “qualified custodians,” noting that Wyoming’s letter touched on both state and federal law, and hinting the responses it gets may inform amendments to existing guidance to provide future clarity.

The statement’s very existence is a sign the SEC is still looking at cryptocurrency issues like custody, but confirms there is much work to be done in clarifying how digital assets fit into existing regulatory frameworks, industry experts said. 

“I think essentially the SEC is coming out here and saying, ‘Yes, it’s great that the Wyoming Division of Banking has issued this interpretation to you but we may have a different view and we are in the process of considering these issues,’” said Philip Angeloff, an attorney with Clifford Chance, a multinational law firm. 

The regulator isn’t directly saying its view differs from the Wyoming Division of Banking. Rather, it sounds more like the agency has yet to finalize its position, Angeloff told CoinDesk. Ensuring that it’s clear which companies fall into the definition of a “qualified custodian” remains under the SEC’s purview.

Related: Hong Kong’s Amber Group Picks BitGo Trust in Quest for Institutional Investors

Still, the very fact the SEC is bothering to respond is a promising sign for the crypto industry, said Andrea Tinianow, an attorney who runs her own consulting firm. 

“This public statement reinforces the notion that digital assets are not going away, they are gaining in popularity,” she said. “Serious investors are paying attention to this asset class and they need to be protected, and that’s why the SEC is taking this up.”

The SEC move may benefit institutional investors and other parts of the investment community, she said.

Qualified custodians

The term “qualified custodians” is a legal one, defined by the SEC as a bank, broker-dealer, futures commission merchant or other entity that maintains client funds and securities in specific ways. The federal regulator can designate an entity as a qualified custodian, while state-level regulators typically cannot. 

That hasn’t stopped a number of crypto companies from trying to become qualified custodians, but by and large most have given up their bids and instead focus on becoming state-chartered trust companies, which still lets them offer custody services under regulatory oversight. 

While the Wyoming Division of Banking determined that Two Ocean could call itself a qualified custodian, other trust companies or entities cannot do so without receiving similar letters of their own, the letter warned.

“This is a fact-intensive analysis based on the assertions made in your letter of [July 27, 2020]. The guidance provided in this letter may no longer apply if these facts were to materially change,” the letter said.

Read more: SEC, FINRA Issue Explanation of Crypto Custodian Approval Delay

This distinction is important. As the Wyoming letter notes, the law surrounding custody, especially for digital assets, “is not fully developed.” This means it may be difficult to ascertain which companies can provide custody for assets like virtual ones, or how these assets are treated under law. 

In response, the SEC published a statement telling the general public to send it comments on how the “Custody Rule,” a part of the Investment Advisers Act of 1940, should apply to issues like digital assets. 

Chris Land, general counsel at the Wyoming Division of Banking, told CoinDesk this question has hovered over the industry for a few years, noting that most crypto custodians in the U.S. currently operate as trust companies.

One of the main issues for a trust company is whether custody qualifies as a fiduciary activity, another important regulated activity that falls under the Advisers Act. 

Good sign

The SEC’s letter is encouraging, Land said. The SEC is highlighting that investment advisers must consider their fiduciary duties when acting as a qualified custodian, and in his view the federal agency is just laying out questions around this issue. 

“The SEC letter and our letter both agree we have shared power over this area, the custody area, but I don’t think that line has been drawn with the precision that the banking industry and the securities industry might like, and I think that’s one thing we’re both going to have to work together [on],” he said.

Tinianow agreed, saying trust companies and other entities are likely to provide “thoughtful input” in response. 

The move fits into a broader trend of recognizing that digital assets have value, something many states have already done by crafting laws around the space, she said. 

“The SEC staff would not invest its time, resources or expertise if this was going away,” she said.

Read more: Texture Capital Awarded FINRA License to Trade Security Tokens

What the letter does show is the SEC is maintaining its ground in terms of being able to declare whether or not an entity is a qualified custodian, Angeloff said. 

“In some cases, law firms and, as in this case, state regulatory agencies, could provide their interpretation of state and federal law, but the SEC has the final word on interpreting the Advisers Act,” he said. 

In other words, while the Wyoming Division of Banking can tell entities they look like qualified custodians, those entities should still be talking to the SEC, he said.

“From my perspective, this is a sign that the SEC staff is still grappling with the notion that digital securities can be held on a distributed ledger and is still in the process of forming a definitive view as to how intermediaries that provide digital securities custody services can provide such services in compliance with the securities law and SEC rules,” he said.

Not bitcoin

The question of how digital assets are relevant to qualified custodians only applies to securities, meaning assets like bitcoin are not affected, Land said. 

“I think providing further clarity around which virtual assets are securities is another issue,” he said. 

Land noted the question does not apply to Wyoming’s Special Purpose Depository Institution license. So far only two entities have received this license – Kraken and Avanti – and both are operating as banks under the state law. 

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

“I think it’s reflective of the SEC’s willingness to continue to look hard at digital assets and I’m fairly encouraged by the SEC putting that statement out. It was quite good, in my opinion. It was thoughtful and highlighted the issues well, in my opinion,” Land said.

The SEC’s statement asks whether state-chartered companies resemble qualified custodians, how their services compare, what advisers might look at when assessing custodians and if there are any qualified custodians that do not match the policy goals. Members of the public interested in commenting to the SEC can email the agency, and the SEC will make all responses publicly available, it said.

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Fidelity’s Crypto Arm Responds to 6 Common Bitcoin Criticisms

5 years 10 months ago

Fidelity Digital Assets, a subsidiary of Fidelity Investments, has responded to some of bitcoin’s most frequent criticisms, suggesting clarity is needed amid heightened interest in the cryptocurrency.

In a blog post on Thursday, Director of Research Ria Bhutoria said she was addressing persistent “criticisms and misconceptions” about the cryptocurrency. These include whether bitcoin is too volatile to be a store of value, has failed as a means of payment and is environmentally wasteful.

“Bitcoin’s volatility is a trade-off [that] makes for perfect supply inelasticity and an intervention-free market,” she said, but with greater adoption and introduction of derivatives and investment products, volatility may continue to drop.

Related: Record Levels of Negative-Yielding Debt Strengthen Case for Bitcoin: Analysts

According to the Bhutoria, the world’s first cryptocurrency’s “core” use case isn’t in payments. However, it uses its limited capacity for settling transactions that aren’t well-served by traditional rails, and offers “high settlement assurances.”

“Limited throughput is the trade-off bitcoin makes for decentralization, which is a direct result of cheap and easy validation,” she wrote.

The post responds to bitcoin’s reputation for sucking up vast amounts of energy in the mining process, arguing a “substantial portion” of its power consumption comes from renewable sources. Further, the energy it does expend is a “valid and important” use.

“Bitcoin transactions connected to illicit activity are very low,” Bhutoria went on, addressing a common criticism of cryptocurrencies in general. Like cash, bitcoin is “neutral and has properties that may be valuable to good actors and bad actors,” she said.

Related: Citibank Executive Says Bitcoin Could Pass $300K by December 2021

As for the argument that bitcoin isn’t backed by anything, such as real-world assets, it is in fact “backed by code and the consensus that exists among its key stakeholders” was Bhutoria’s response.

Bitcoin is growing because people recognize it offers “perfect scarcity … transaction irreversibility, and seizure and censorship resistance,” she said.

Finally, on the threat that a competitor might some day replace bitcoin, she argued that while alternatives have tried to improve upon bitcoin’s “limitations” (such as limited transaction throughput and volatility), “it has been at the cost of the core properties that make bitcoin valuable.”

See also: Fidelity Report Says Bitcoin’s Market Cap Is ‘Drop in the Bucket’ of Potential

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Citibank Analyst Says Bitcoin Could Pass $300K by December 2021

5 years 10 months ago

A senior analyst at U.S.-based financial giant Citibank has penned a report drawing on similarities between the 1970s gold market and bitcoin.

The whole of bitcoin’s existence has been characterized by major price swings, “exactly the kind of thing that sustains a long-term trend,” said Thomas Fitzpatrick, global head of the company’s CitiFXTechnicals market insight product, in his report solely intended for the bank’s institutional clients.

The report was first leaked to the cryptocurrency community by Twitter user “ClassicMacro” in a tweet on Saturday, noting Fitzpatrick is “a big fan of moon targets.”

Related: First Mover: Vaccine Won’t Come Fast Enough to Avoid More Stimulus

Fitzpatrick pointed to bitcoin’s weekly chart and used technical analysis (TA) of prior highs and lows to determine a target of $318,000 by December 2021.

“This kind of technical analysis is of little value,” ClassicMacro commented in his tweet. “There is no edge in guessing targets so far in time with TA. All we know is that price is likely to continue going up.”

The Citibank executive drew on bitcoin’s 2010-2011 “exponential move” as being “very reminiscent” of the 1970 gold market. Gold had experienced 50 years of a constricted $20–$35 price range before a breakout occurred after a change in fiscal policy by the Nixon administration in 1971.

See also: Bank of England Official Balks at Shielding Banks Against Digital Currencies: Report

Related: Record Levels of Negative-Yielding Debt Strengthen Case for Bitcoin: Analysts

A decoupling of gold from fiat currencies, the COVID-19 pandemic and the desire for central banks to pursue aggressive quantitative easing policies could lead to future explosive price growth in bitcoin, according to Fitzpatrick.

“Readers loves this,” commented ClassicMacro. “What matters here is Citi’s clients being exposed to the bitcoin moon.”

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Citibank Executive Says Bitcoin Could Pass $300K by December 2021

5 years 10 months ago

A senior executive at U.S.-based financial giant Citibank has penned a report drawing on similarities between the 1970s gold market and bitcoin.

The whole of bitcoin‘s existence has been characterized by major price swings, “exactly the kind of thing that sustains a long-term trend,” said Thomas Fitzpatrick, a managing director at Citibank, in his report solely intended for the bank’s institutional clients.

The report was first leaked to the cryptocurrency community by Twitter user “ClassicMacro” in a tweet on Saturday, noting Fitzpatrick is “a big fan of moon targets.”

Related: Fidelity’s Crypto Arm Responds to 6 Common Bitcoin Criticisms

Fitzpatrick pointed to bitcoin’s weekly chart and used technical analysis (TA) of prior highs and lows to determine a target of $318,000 by December 2021.

“This kind of technical analysis is of little value,” ClassicMacro commented in his tweet. “There is no edge in guessing targets so far in time with TA. All we know is that price is likely to continue going up.”

The Citibank executive drew on bitcoin’s 2010-2011 “exponential move” as being “very reminiscent” of the 1970 gold market. Gold had experienced 50 years of a constricted $20–$35 price range before a breakout occurred after a change in fiscal policy by the Nixon administration in 1971.

A decoupling of gold from fiat currencies, the COVID-19 pandemic and the desire for central banks to pursue aggressive quantitative easing policies could lead to future explosive price growth in bitcoin, according to Fitzpatrick.

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

“Readers loves this,” commented ClassicMacro. “What matters here is Citi’s clients being exposed to the bitcoin moon.”

See also: Bank of England Official Balks at Shielding Banks Against Digital Currencies: Report

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New MIT Paper Roundly Rejects Blockchain Voting as Solution to Election Woes

5 years 10 months ago

As media outlets waited to announce a winner until the Saturday following the election day, calls for how blockchains would have made this process easier emerged, most prominently perhaps by  Changpeng Zhao, CEO of Binance, as well as Vitalik Buterin, who added that, though there are technical challenges, the call for a blockchain-based, mobile voting app “is directionally 100% correct.”

A new report from MIT, however, strongly argues against the idea of blockchain-based e-voting, largely on the basis that it will increase cybersecurity vulnerabilities that already exist, it fails meet the unique needs of voting in political elections and it adds more issues than it fixes. 

The report’s authors are Ron Rivest, MIT Computer Science and Artificial Intelligence Laboratory (CSAIL) professor and one of the creators of RSA encryption; Michael Specter; Sunoo Park; and Director of MIT’s Digital Currency Initiative (DCI) Neha Narula. The paper will be published in the Journal of Cybersecurity later this month. 

Related: Digital Voting Is Coming. Let’s Do It Right.

“I haven’t yet seen a blockchain system that I would trust with a county-fair jellybean count, much less a presidential election,” said Rivest in a blog post accompanying the report. 

Why online voting isn’t like digital banking

The report recognizes the desire for people to want the voting process to be faster and more efficient, but pushes back on the idea that just because we do things like shop or bank online, that means elections should be done in the same way. 

One reason is that those systems have “higher tolerances for failure.” For example, if an issue were to occur, such as credit card fraud, you could block your card and a bank might even reimburse you. But when it comes to election, there is little remedy if a vote is altered or not delivered, particularly given that online voting systems might not always recognize when one of these actions occurred. 

Read more: Overstock Touts Voatz ReBlockchain Voting App as Solution to US Election Fracas

Related: The 2020 Elections Are Boosting Crypto Prediction Markets

Another is that anonymity, or at least detaching the way you voted from your identity, is an important part of any electoral process. While a bank or shop can offer you a receipt, proving you did something to detect or prevent fraud, with voting, it’s important no such receipt exists so votes can’t be coerced or sold. 

“For elections there is no insurance or recourse against a failure of democracy,” Rivest says. “There is no means to ‘make voters whole again’ after a compromised election.”

And the cybersecurity issues are numerous. 

Issues with cybersecurity in online voting

One issue with online voting is that it opens itself up to attacks that are both scalable and undetectable. 

In terms of scale, according to the report, a zero-day Android vulnerability only cost $60,000 to acquire in 2012. A zero-day vulnerability is a security flaw that is known about but for which a patch isn’t yet available. 

The authors estimate that testing and weaponizing such a vulnerability would increase the associated costs by two orders of magnitude, meaning an election exploit could cost $6 million. While that may seem like a large sum, it’s little for a nation-state adversary, especially in comparison with the roughly $768 million that was spent on the 2016 U.S. Presidential election. This makes a scalable attack on an election system attractive, in terms of getting a bang for your buck. 

Such an attack could also be undetectable, resulting in large numbers of votes being exploited. This is, in part, due to the number of vendors and devices that would have to be involved. 

“Voting system flaws might be introduced by the voting software vendor, the hardware vendor, the manufacturer, or any third party that maintains or supplies code for these organizations,” reads the report. 

“A voter using a phone to vote depends not only on the phone vendor, but on the hardware companies providing drivers for the device, the baseband processor, the authors of third-party code in the voting software, the manufacturer of the physical device, and the network or any other systems that the device relies upon to cast the vote.”

No concrete solutions to non-hypothetical problems

Even important tools like encryption don’t offer a concrete solution. While encryption does offer some protections, it doesn’t prevent system bugs. Plus, implementing it is difficult, not to mention there are numerous examples of flaws in a system allowing cryptographic protocols to become compromised. 

These concerns aren’t just hypotheticals. The report notes that  electronic-only voting devices at polling stations used in Georgia and Maryland, for example, have previously been shown to be vulnerable, and internet voting systems in cities like Washington, DC, and countries like Estonia and Switzerland were found to be vulnerable to serious failures. 

Read more: Downvoted: Security Researchers Slam Voatz Over Stance on White-Hat Hackers

For comparison, tried-and-true methods like mail-in ballots make a large-scale attack on them incredibly difficult to conduct with any ease because of substantial friction points, like needing physical access to the ballots.. 

When asked whether there were lessons that the U.S. could take from other countries when it comes to voting online, a MIT CSAIL spokesperson said, “None that are positive. Online voting systems will suffer from major vulnerabilities for the foreseeable future, given the state of computer security and the high stakes in political elections.”

The arguments for blockchain-based voting – and why they don’t hold up

The report lays out a number of arguments that have been held up by blockchain proponents. These include using coins as votes, using a permissioned blockchain, and employing zero-knowledge proofs for secret ballots. 

Voting with coins

Coins as votes is one model the report identifies as problematic. In it, a registered voter has a public/private key pair created by the voting authority, with each voter sending their public key to the voting registry. 

“Then, the voter registry spends one coin to each public key. To vote, each user spends their coin to the candidate of their choice. After a period, everyone can look at the blockchain, total up each candidate’s coins, and select the one with the most coins as the winner,” reads the report. 

Read more: Trump’s Post-Election Purge Reaches US Cybersecurity Agency

The issue here is that it doesn’t provide a secret ballot – all the votes are on a public blockchain. It also relies on users being able to get their votes on the blockchain in a certain amount of time, something that could be compromised through distributed denial-of-service attack, making the network unavailable to users. 

An adversary could drive up transaction fees on a public blockchain, further hampering the “vote.” Or the blockchain could be compromised if a majority of the miners or validators collude, creating multiple versions of the blockchain. 

Finally, it relies on private key management, something that is user-dependent and, as cryptocurrencies have shown, something people are often bad at implementing. 

Permissioned blockchains

Another proposal the report challenges is using a permissioned blockchain. A permissioned blockchain is one in which a central actor approves who can be a part of it. There is also usually a control layer that governs what actions participants have permission to perform.

Like voting with coins, use of this strategy would still suffer from key management vulnerabilities. Furthermore, permission parameters would also keep users from reading the blockchain to verify their votes were counted in order to preserve the secrecy of people’s votes. 

A permissioned blockchain would also likely run on a smaller number of servers, with most of them running the same operating system, meaning it would be easier to compromise. 

Zero-knowledge proofs

A final proposal that MIT examines is the use of zero-knowledge proofs (ZKPs). ZKPs are a cryptographic technique that allows two parties on the internet, such as an app and a user, to verify information with each other without sharing the underlying data related to this information. This would seemingly help ease the tension between secrecy and making a vote publicly verifiable. 

But the report notes that, aside from the potential bugs in ZKPs and challenging cryptographic processes, it also doesn’t prevent physical monitoring by “coercers or vote buyers.” 

Additionally, the report argues that “zero-knowledge proofs are designed for a setting where the party with secret information wants to keep it secret (that’s why they’re using zero-knowledge proofs) – they generally do not prevent that party from revealing information voluntarily.”

Read more: ‘Snake Oil and Overpriced Junk’: Why Blockchain Doesn’t Fix Online Voting

A final and fundamental concern about any digital processes such as these, however, is that they rely on various vendors, hardware and software, all of which add additional complexities and likely vulnerabilities to the voting process. 

“The biggest issue is that blockchain-based approaches require that voters use software in which a single bug could undetectably change what they see – for example, showing them that their vote was cast for a certain candidate when it actually wasn’t,” said a MIT CSAIL spokesperson.  “Blockchain is ripe for situations where election results could be changed in ways that are undetectable, or, even if detected, would be irreparable without running an entire new election.”

The report also plays up that elections have stakes beyond just losing money, as would be the case if these online voting tools were compromised in regards to cryptocurrencies. 

Blockchain has lots of potential, just not for actual voting

The report notes that they aren’t addressing voting within a blockchain, such as EOS holders voting for validators in consensus networks, or Augur users using REP to vote on contract outcomes. These may fulfill some aspects of voting, but don’t map onto the system of political elections well, and leave many vulnerabilities that can’t be accounted for. 

The report also recognizes it’s focusing on voting, not areas such as voter registration management or auditing. 

In conclusion, the report notes that blockchain and online voting don’t address fundamental security concerns; instead, they introduce more vulnerabilities than are present in current in-person and mail-in ballot systems. 

“If vote-casting is entirely software-based, a malicious system could fool the voter about how the vote was actually recorded,” said Rivest in an accompanying blog. “Democracy – and the consent of the governed – cannot be made contingent on whether some software correctly recorded voters’ choices.”

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Bitcoin Cash Has Split Into Two New Blockchains, Again

5 years 10 months ago

The Bitcoin Cash network, a result of a hard fork from Bitcoin, has split into two new blockchains, again. At press time, Bitcoin Cash ABC (BCH ABC) has received no hashpower, meaning that it is possible Bitcoin Cash Node (BCHN) will become the dominant software of the Bitcoin Cash network, according to data from Coin.Dance.

The last “common block” among bitcoin cash miners was #661647, mined by Binance. The first block that split the Bitcoin Cash blockchain was mined by AntPool. Since then, hashpower has been in BCHN’s favor, as miners have mined multiple consecutive blocks on the network.

Before the fork, 80% of miners were signaling support for BCHN.

Related: Roger Ver: Bitcoin Cash Hard Forks Could Have Thwarted PayPal Support

To recap, a group of Bitcoin Cash developers led by Amaury Sechet, known as BCH ABC, proposed an update on the Bitcoin Cash network, which has included a controversial new “Coinbase Rule,” which requires 8% of mined bitcoin cash to be redistributed to BCH ABC as a means of financing protocol development.

The upgrade is opposed by another group from the Bitcoin Cash community, known as Bitcoin Cash Node, who removed this so-called “miner tax” from their source code. When some nodes on a network adopt a hard fork and others don’t, then the blockchain will split into two different versions: one with the old software and one with the new software.

Prior to the hard fork, prices of bitcoin cash plummeted to as low as $237.54, down by 7.5% from an earlier high at $256.82, according to data from CoinDesk 20.

If BCH ABC does not attract enough hashpower to produce a viable blockchain, the ABC blockchain would in theory “disappear.”

Related: Market Wrap: Bitcoin Fails to Reach $16.5K; Wrapped BTC Hits $2 Billion

Most major crypto exchanges have announced that they are likely to support BCHN and it will inherit the “BCH” ticker.

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Value DeFi Suffers $6M Flash Loan Attack

5 years 10 months ago

Decentralized Finance (DeFi) protocol Value DeFi was exploited for approximately $6 million earlier Saturday, possibly due to a flash loan attack, a scheme often seen in the fast-growing DeFi sector.

  • “A complex attack” on Value DeFi’s MultiStables vault has caused a net loss of $6 million, according to a tweet by Value DeFi on Saturday.
  • The exploit appears to be a flash loan attack, according to data from Etherscan, after an attacker or attackers borrowed 80,000 ether from the DeFi lending platform Aave.
  • Flash loans allow users to borrow funds without collateralization because the lender expects the funds would be returned instantly.
  • By taking advantage of the uncollateralized loans, the attackers arbitraged the funds between stablecoins dai and USDC after depositing funds in the Value DeFi’s MultiStables vault.
  • At press time, the price of the protocol’s native token value liquidity plummeted to $1.99, down 27.9% from around $2.76 before the attack, according to data from CoinGecko.
  • Flash loan attacks are common in the DeFi sector: Value DeFi’s loss came just two days after another DeFi platform Akropolis suffered a similar hack and lost about $2 million in total.
  • The team behind Value DeFi did not return CoinDesk’s questions by press time.

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Roger Ver: Bitcoin Cash Hard Forks Could Have Thwarted PayPal Support

5 years 10 months ago

There are still a lot of uncertainties around the scheduled Bitcoin Cash fork event on Nov. 15, but one thing is for sure: The cryptocurrency’s biggest advocate, Roger Ver, executive chairman of Bitcoin.com, is not a fan of the scheduled upgrades on the network, which take place every six months.

“If PayPal knew that this sort of contentious hard fork was likely to happen, maybe they wouldn’t have added bitcoin cash at all to their roadmap,” Ver told CoinDesk in an interview, referring to PayPal’s recent announcement to add cryptocurrencies – bitcoin cash included – to its system. “So it is really a big problem to have these contentious hard forks. I’d like to see that come to an end.”

As of press time, PayPal hasn’t responded to CoinDesk’s request for comment on the upcoming fork event. Paxos, the company that provides crypto service for PayPal, rejected CoinDesk’s request to comment on the topic.

Related: Market Wrap: Bitcoin Fails to Reach $16.5K; Wrapped BTC Hits $2 Billion

A Bitcoin fork known for forks

Unlike a “soft fork” that allows non-upgraded and upgraded nodes to still transact with each other, a hard fork is a software upgrade that implements a new rule to the blockchain that is not compatible with the older software. Thus, developers tend to be extremely conservative about introducing hard forks and usually try to ensure there will be community consensus around these sorts of changes to the code. However, some hard forks have been contentious. In these instances, if some nodes on a network adopt a hard fork and others don’t, then the blockchain will split into two different versions: one with the old software and one with the new software.

Bitcoin Cash itself is a result of a hard fork from Bitcoin, after a group from the Bitcoin community, advocating the literal interpretation of Satoshi Nakamoto’s Bitcoin white paper, insisted on increasing block sizes. They pushed for a hard fork of the original Bitcoin blockchain, as they view low-cost, peer-to-peer transactions as the blockchain’s core value.

Read more: OKEx, Still Paralyzed by Founder’s Arrest, Details Plans for Bitcoin Cash Hard Fork

Related: Developers Debate Disclosure Protocols After ‘Accidental’ Ethereum Hard Fork

Today, as the most well-known fork of Bitcoin, the Bitcoin Cash network undergoes an upgrade every six months, and a chain split can occur when the community is unable to meet consensus requirements. An example is when Bitcoin Satoshi Vision (BSV) forked away from Bitcoin Cash on Nov. 15, 2018.

The Bitcoin Cash hard fork expected this coming Nov. 15 is the result of a blockchain update proposal from a group known as Bitcoin Cash ABC (BCH ABC), led by developer Amaury Sechet. The update has included a controversial new “Coinbase Rule,” which requires 8% of mined bitcoin cash to be redistributed to Bitcoin ABC as a means of financing protocol development. 

Developers with ‘too much money’

This funding approach has triggered a debate within the BCH community regarding the governance and the development of the software that runs the Bitcoin Cash blockchain. 

The group led by developers from BCH ABC holds there should be an organized and consistent effort in order for bitcoin cash to become a universal digital payment. Therefore, developers should be funded by the Bitcoin Cash network, according to Chris Troutner, a developer who formerly worked at Ver’s bitcoin.com and is close to Sechet’s BCH ABC group. 

However, an opposing group against this funding mechanism, Ver included, said that because the software is an open-source protocol, developers should help improve the protocol on a voluntary basis and look for financial resources elsewhere.

Ver went a step further by saying the Bitcoin Cash network’s problem is developers have “too much money.”

“I think the way [Bitcoin] went off the rails from Bitcoin Cash is developers had too much money and then they started developing and tinkering with too many different things, which caused a problem in the network.”

Troutner, who told CoinDesk that he will support both chains after the fork, said the real issue behind the dispute is a collective hatred toward Sechet. Sechet’s BCH ABC has been leading the scheduled Bitcoin Cash updates for the past few years, Troutner said. And Sechet’s team has always wanted to implement this funding mechanism.

“[BCH ABC’s opponents] want Amaury Sechet to leave the ecosystem,” he said.

Read more: Ethereum’s ‘Unannounced Hard Fork’ Was Trying to Prevent the Very Disruption It Caused

Ver said he didn’t think the fork will take place as planned, saying only about 0.2% of the blocks mined on Bitcoin Cash have signaled support for Bitcoin ABC.

As of press time, of the last 1,000 blocks mined on Bitcoin Cash, about 80% have signaled support for the Bitcoin Cash Node (BCHN) and only 0.3% for Bitcoin ABC, according to data from Coin Dance.

What the data may indicate is that a fork will take place because the software upgrade by BCH ABC is not supported by the majority of the miners, as more blocks are signaling support to BCHN. That will force BCH ABC to fork away from the old chain, said Aidan Mott, analyst at Messari.

On the other hand, Troutner posits that the data may have hindered the actual support of BCH ABC.

“If you think about it in terms of a game theory, some miners are probably legitimately signaling for BCH but other miners who are planning to mine on ABC probably are also signaling for BCHN because they want their competitors to mine on that chain,” Troutner explained. “That makes it easier for them to mine blocks on the ABC chain.”

Exchanges and ‘fork fatigue’

Ver’s early argument is service providers like PayPal can be frustrated by a cryptocurrency blockchain that’s constantly going through forking events. This sort of frustration is already happening at crypto exchanges. Even though it is unclear which chain will become the dominant chain after the fork, a few major crypto exchanges have already announced their support for BCHN, which will inherit the Bitcoin Cash name, assuming the BCH ABC would get the minority of nodes.

In a Nov. 6 post by Kraken, the exchange said it will support BCHN, “regardless of the outcome of the fork.”

“Bitcoin Cash Node tokens will be called ‘Bitcoin Cash’ on our platform and represented by the ticker symbol ‘BCH,’” Kraken said in the post. “We will support Bitcoin Cash ABC ONLY IF the hash power on the ABC network is at least 10% of the hash power on the Bitcoin Cash Node network.”

“Exchanges have to put themselves in a position where they can know what their customers want, which means they understand the kind of the consensus of the miners but also they understand the positions of the development teams,” said Mott. “In this sense, it would be a pretty easy decision to just keep their support and only run Bitcoin Cash Node network software.”

Since prices of the two newly split cryptocurrencies will be decided by market supply and demand, exchanges play a significant role because they are the ones that allocate the new tokens to their customers.

Another important implication from Kraken’s post is that exchanges also get to decide which new chain will take the Bitcoin Cash name.

Read more: Roger Ver’s Mining Pool Pulls Support for Bitcoin Cash Dev Fund Over Chain Split Threat

Ver claimed the reason Bitcoin Cash is less popular than Bitcoin is because the latter took the “Bitcoin” name after the hard fork. Ever since then, marketing has been one of the biggest obstacles for the mass adoption of Bitcoin Cash, according to Ver.

The market capitalization of bitcoin cash is approximately $4.88 billion at the time of writing, yet bitcoin has a market capitalization of $283.28 billion, according to data on CoinDesk 20.

“When the split happened, the Bitcoin Cash version had all the characteristics that made Bitcoin popular to begin with, but the other version that didn’t have those characteristics got the Bitcoin name and the infrastructure to go with it,” Ver said. “Bitcoin Cash has been rebuilding all of that infrastructure and its brand recognition basically from scratch.”

If that’s the case, BCHN will find itself ahead of BCH ABC, as evidenced by exchanges’ support, if it takes the name of Bitcoin Cash.

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Galaxy Digital Makes Twin Acquisitions in Bid to Strengthen Institutional Appeal

5 years 10 months ago

Cryptocurrency merchant bank Galaxy Digital has purchased two firms as it seeks to become the “go to” platform for institutional access to digital assets, the firm said Friday.

  • Announced in a press release, the newly acquired firms are DrawBridge Lending, a “white glove” service for borrowing and investing in digital assets, and Blue Fire Capital, which focuses on providing two-sided liquidity for futures markets and digital assets.
  • The terms of the deals were not disclosed, but Galaxy did say the move would bring DrawBridge’s over $150 million in third-party assets to the firm.
  • “Galaxy Digital’s mission is to bring cryptocurrency to traditional finance and vice versa,” according to said Christopher Ferraro, president of Galaxy Digital.
  • The acquisitions “will enable us to further amplify our strong position as a go-to trading desk in digital assets and more rapidly grow our innovative portfolio of trading products and services,” he said.
  • The news came hours after Galaxy, which was founded by Mike Novogratz, announced net income of $44.3 million for Q3 2020 – well up from a loss of $68.2 million in the same quarter last year.
  • Volume at subsidiary Galaxy Digital Trading (GDT) was up 75% compared with Q3 2019 to a record $1.4 billion, which the firm put down to the soaring bitcoin market.
  • Novogratz said the acquisitions would help the firm “further meet what we believe will be an even bigger wave of institutional demand.”

Also read: Galaxy Digital, IOSG Lead $1.2M Raise for Startup Creating Automated Ethereum Services

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Bitcoin Rally Falters as Price Drops Below $16K

5 years 10 months ago

Bitcoin’s price quickly dropped below $16,000 Saturday morning, putting the rapid rally seen in recent weeks on pause.

  • Around 10:00 UTC, the cryptocurrency dropped as low as $15,750, having hit highs over $16,300 in the Asian trading hours.
  • As reported earlier this week, analysts had been expecting bitcoin to move into consolidation for a time, and possible to see a pullback.
  • That’s because the rally from $9,800 to over $16,000 over the past two months looked overstretched on the technical charts.
  • They anticipated, however, that the run toward bitcoin’s record high of around $20,000 would pick up the pace again, likely in December.
  • The bitcoin options market is also extremely bullish longer term, as data showed Thursday that net demand for call options (bullish bets) was outstripping net demand for puts (bearish bets) by the highest level on record.
  • At press time, bitcoin prices had risen slightly to $15,860, down 2.87% over 24 hours.

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

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Market Wrap: Bitcoin Fails to Reach $16.5K; Wrapped BTC Hits $2 Billion

5 years 10 months ago

Analysts are bullish on bitcoin’s price but the options market is decidedly bearish on the remaining weeks of 2020. Ethereum’s wrapped bitcoin token crosses $2 billion locked.

  • Bitcoin (BTC) trading around $16,240 as of 21:00 UTC (4 p.m. ET). Gaining 0.30% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $15,971-$16,487
  • BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price trended up for the third straight day, hitting as high as $16,487, according to data from CoinDesk 20. It dipped somewhat since hitting that level and traded at $16,240 as of press time. 

“Bitcoin rose significantly above the $16,100 mark. Buyers pushed the price due to the large volume,” noted Constantin Kogan, managing partner at investment firm Wave Financial. 

Related: First Mover: Why the Fed Cares About Remote Working – And What It Means for Bitcoin

Major exchange daily spot volumes on Friday were at $668 million as of press time, but not close to Thursday’s $1.1 billion in volume.

George McDonaugh, managing director at investment firm KR1, highlighted a key difference between the price run-up in 2020 versus the mooning that occurred back in 2017. “Bitcoin has spent 0.32% of its life at $16,000 and above, which means there were relatively very few buyers at that level back in 2017,” he told CoinDesk. “This correlates to there being very few sellers at this level now, meaning there isn’t a strong resistance band for the bulls to push the price higher.”

“I’m seeing an increasing demand from more traditional family offices making their first investments into bitcoin as a long-term hedge or as insurance for their existing portfolio of investments,” Michael Gord, chief executive officer of Global Digital Assets, told CoinDesk. “I expect this trend to continue as bitcoin keeps maintaining its value and being uncorrelated to most other asset classes.” 

Read More: $300M BTC Flow to Binance From Huobi as China Toughens on Exchanges

Related: Market Wrap: Bitcoin Hits $16.2K; Uniswap Crosses $3B Locked

Bitcoin isn’t entirely uncorrelated from other asset classes like equities, but lately the correlation between the world’s oldest cryptocurrency and the S&P 500 has dropped a little bit.

KR1’s McDonaugh is expecting bitcoin’s price to reach $20,000, but it might take some time to get there as some profit-taking is likely to ensue. “$20,000 is a far more psychological barrier, so it is likely to be ‘HODLers’ – people holding bitcoin forever – that may de-risk at that level and produce some selling pressure,” he said. 

Bitcoin options traders aren’t fully convinced that it will trade at $20,000 in 2020. The probabilities calculated using December expiration have pegged only a 16% chance of $20,000 bitcoin, a 29% for $18,000 and a 39% of $17,000 according to data aggregator Skew.

Nevertheless, analysts project that bitcoin can soon surpass at least $16,500 consistently. “Given market sentiment and current trends, I am still bullish on BTC,” said Andrew Tu, an executive at trading firm Efficient Frontier. “Though we may range between $16,000 and $16,500 for a bit before breaking resistance.”

Wrapped bitcoin hits $2 billion locked

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Friday, trading around $470 and climbing 2.6% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

Read More: Payments Provider BitPay Rolls Out Cryptocurrency Payroll Service

The amount of bitcoin “locked” in the Ethereum-based wrapped bitcoin contract passed $2 billion Thursday, and is staying at that level Friday. In order to use bitcoin on Ethereum, it must be “wrapped” and used as a token on the network using a standard called ERC-20.

Brian Mosoff, chief executive officer of investment firm Ether Capital, says the parking of bitcoin on Ethereum is giving the network a huge leg up over its up-and-coming smart contract competitors, including Polkadot, Cardano and Cosmos, among others. 

“It’s proving that Ethereum is the thing everyone is plugging into and (networks like) Polkadot may not have its day in the sun,” Mosoff told CoinDesk.

Other markets

Digital assets on the CoinDesk 20 are mostly green Friday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

Notable loser:

Read More: Mike Novogratz’s Galaxy Digital Nets $44.3M in Q3

Equities:

Commodities:

  • Oil was down 1.7%. Price per barrel of West Texas Intermediate crude: $40.21.
  • Gold was in the green 0.60% and at $1,888 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Friday jumping to 0.896 and in the green 2%.
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Token Projects Are Not Happy With KuCoin’s Handling of $280M Hack

5 years 10 months ago

The latest face-saving communique from Seychelles-domiciled crypto exchange KuCoin – hacked almost two months ago for over $280 million – is that 84% of the affected assets have been recovered. Some victims will be glad the situation seems to be moving towards resolution. Others, not so much.

Leaving aside the conspiracy theories, death threats and alleged lack of communication on the part of the exchange, the KuCoin debacle raises troubling issues around blockchain decentralization and how token projects often rely on fallible intermediaries.

Following the hack, many projects whose tokens were stolen from the exchange were urged to react quickly and change their smart contracts – effectively replacing stolen tokens with new versions, known as a token swap. (A list of projects that speedily updated their tokens following the Sept. 26 hack can be found here.)

Related: Hackers, Scammers Have Stolen $7.6B in Crypto Since 2011

The majority of ERC-20 projects affected by the KuCoin hack (around 60%) have bowed to pressure and upgraded their tokens. While it goes against the principles of those projects to essentially cover KuCoin’s back by updating their smart contracts or replacing their tokens, they chose the easiest solution available to them. But in some cases, it’s not a straightforward process and would lead to a very messy fix.

Read more: KuCoin CEO Says Suspects in $281M Hack Identified; Authorities on the Case

“We consciously built our smart contract in a way that’s truly decentralized and we, as a team, can’t just halt transactions, blacklist, whitelist people and so on,” said Paul Claudius, co-founder of DIA, a crowd-driven Wikipedia for financial data and information. “As a team, we obviously trust ourselves, but we don’t think the world should have to trust us. And that’s the reason we build our smart contracts that way.”

KuCoin calls all remediating efforts “token swaps,” said Claudius, but the exchange is confusing two different things. 

Related: Audius Has Big Numbers by Crypto Standards but Can It Take On SoundCloud?

In some cases, it’s possible to upgrade the contract, reissue the token and create a blockchain state similar to that prior to the hack. That’s very different from a situation where reissuing the token would create two tokens.

“Then it’s like a fork,” said Claudius. “Which is the real token at the end? People would be trading the old token, not knowing this. It’s just not an option.”

In the case of DIA, some 3 million tokens were taken by the hacker, at a value of around $4 million; while this amount was not “life-threatening,” the team members had to watch powerless as the hacker sold their tokens. 

“I can see why projects who had, say, 50% of their tokens affected by the hack, would choose the option to basically just pull the plug,” Claudius said. “Their backs were against the wall.”

Read more: Decentralized Governance in the Wild – Lessons From the KuCoin Hack

The DMM Foundation, the organization behind Decentralized Money Market, said KuCoin’s strategy has been to switch the onus onto the decentralized governance communities behind these projects, pressuring them to swap tokens, effectively crediting KuCoin’s balance.

“This leaves the community in an uproar, asking why we are not upgrading our token, when in fact it shouldn’t be our responsibility; it’s actually KuCoin’s problem,” a member of DMM, who wanted to remain nameless, told CoinDesk, adding:

“We are a DeFi protocol. We can’t do that so easily without completely disrupting our user base and potentially exposing areas of weakness for our community.” 

Token quandary 

It’s one of the paradoxes at the heart of crypto, that decentralized projects list on centralized exchanges and must rely on centralized custody as a potential point of failure. 

Of course, that’s why decentralized exchanges (DEXs) are becoming increasingly popular as technological advances bring speed (and, in turn, attract liquidity for prominent tokens). For some smaller projects, though, listing on KuCoin is a big deal. Perhaps it is their only trading venue with significant liquidity. So what are they going to do?

Read more: Ocean Protocol Forks to Retrieve Tokens Stolen From KuCoin Exchange

There are a number of projects that are holding out from doing a token swap, and KuCoin’s strategy seems to be to wait until they all eventually fold. During this waiting game, the exchange has employed some egregious tactics, said Jag Singh, CEO of Vid, a project that delisted from KuCoin before the hack took place. 

“We delisted from KuCoin because we noticed a lot of suspicious stuff going on with our token price – pumps and dumps – that we concluded could only be [caused by] the exchange itself,” said Singh. “This [delisting] meant they had less leverage over us.”

Like many others affected by the hack, Singh claims KuCoin is selling phantom tokens. If the entire balance of a token was stolen by the hacker and that project has not done a token swap, KuCoin is “trading on thin air,” Singh said. He claims this is a deliberate tactic to induce token swaps and reduce the amount the exchange has to reimburse.

CoinDesk asked KuCoin for comment, to which the exchange asked for questions to be emailed. There has been no response to the questions but a KuCoin representative did share some comments from KuCoin CEO Johnny Lyu comparing the hack to events like the Ethereum DAO compromise of 2016.

“Actually, in the history of crypto, token swap or hard fork situations emerged several times among Bitcoin and Ethereum communities at critical timings,” Lyu said in a live-streamed update on Sept. 30. “With that, communities survived from serious crises, and everyone felt thankful to those teams that made contributions.”

The irony and hypocrisy of such comparisons is stunning, said Richard Sanders, founder of blockchain analytics company CipherBlade.

“The important thing is that we’re dealing with decentralized tech,” said Sanders. “So setting a precedent every single time an exchange is hacked or somebody is negligent for some centralized action goes against the very foundation of what this technology is supposed to be about. Everything KuCoin is doing really boils down to them trying to save face.”

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Payza Founders Sentenced in $250M Money Laundering Case

5 years 10 months ago

The founders of digital payments processor Payza will serve year-plus prison terms and forfeit $4.5 million in seized assets for breaking federal money transmission laws, the U.S. Department of Justice said.

Brothers Firoz and Ferhan Patel, both Canadian, had pleaded guilty in July to a lineup of financial crimes stemming from Payza, their international payments startup. Prosecutors said the unlicensed firm processed more than $250 million, including funds known to be associated with crime, an allegation to which the brothers ultimately admitted.

On Tuesday, Firoz received a 36-month sentence and Ferhan an 18-month sentence from U.S. District Court in Washington, D.C. Their company Payza (aka MH Pillars) will be in corporate probation for the next three years.

Related: US Charges 6 With Laundering Mexican Drug Cartel Cash Using Crypto and Casinos

Read more: US Hits Crypto Buying Service Payza With Money Laundering Lawsuit

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Blockchain Bites: Bankrupted Cred’s Missing Millions, Bitcoin Miners’ Quarterly Losses and More

5 years 10 months ago

Crypto lender Cred’s bankruptcy is more than it appears. Two publicly traded bitcoin mining firms reported this week: Neither are profitable. ECB President Christine Lagarde has a “hunch” about the digital euro. 

Top shelf

Chapter…12?
Cred’s Chapter 11 bankruptcy filing doesn’t tell the whole story. With $67.8 million in assets and $136 million in liabilities, the crypto lender called it quits last weekend, leaving hundreds of depositors worrying about their collected $100 million loaned to the company. Cred has officially blamed malfeasance on the part of an outside investor entrusted with 800 BTC, although corporate insiders also say a $39 million line of credit to a Chinese lender went south. “There’s a lot else going on,” Daniyal Inamullah, former head of capital markets at Cred, said. CoinDesk’s Nathan DiCamillo investigates.

Bleeding BTC?
Two publicly traded bitcoin mining companies are nearing profitability. Marathon and Hut 8, prominent within the sector, both narrowed quarterly losses, according to quarterly financial statements. Marathon bumped revenues to $835,184 in Q3, a 160% increase from the same period last year, while also recording a net loss of nearly $2 million. The company’s loss per share, however, dropped from 12 cents to 6 cents a share year over year. Meanwhile, Hut 8 saw C$5.3 million (about US$4 million) in Q3 mining revenue, down 43% from the previous quarter, but also managed to trim its losses of C$0.07 a share in Q3 2019 to C$0.01 this quarter.

Related: Money Reimagined: The US’ Kodak Moment

CBDC ‘hunch’
European Central Bank President Christine Lagarde has a “hunch” there will be a digital euro in two to four years. At a virtual panel yesterday, Lagarde said an European Union-wide central bank digital currency should be explored, “If it is going to facilitate cross-border payments.” The ECB previously said it is researching a CBDC. The latest statements are another indicator of what to expect and when: “A digital euro will not be a substitute for cash,” Lagarde said. “It will be a complement.” Separately, Benoit Coeure, head of the Innovation Hub at the Bank for International Settlements (BIS), said any potential CBDC for the supranational bank could involve blockchain. “Everything is possible,” he said.

Audited and attacked
Decentralized finance (DeFi) platform Akropolis suffered a $2 million loss following a sophisticated “flash loan” attack. According to the platform’s founder Ana Andrianova, the attacker pulled out tranches of $50,000 in DAI from the project’s yCurve and sUSD pools, leveraging derivatives platform dYdX. While much is said about the audit trails of novel DeFi protocols, especially after hacks, Akropolis’ code was in fact audited twice: once by CertiK and also by firms SmartDec and Pessimistic.

Exchange flows
Bitcoin flows to Binance from Huobi have reached an all-time high. According to data provided by CryptoQuant, some 18,652 bitcoins, worth nearly $300 million, were transferred from Huobi to Binance from Nov. 2 to Nov. 11. The bustling trade spiked ever since the Huobi chief operating officer, Robin Zhu, went missing at the beginning of the month. For months, Chinese regulators have been clamping down on crypto trading platforms, as part of a broader sweep of the fintech industry.

Quick bites
  • Ant Group’s suspended IPO was the work of slighted CCP officials – but it also links back to China’s digital yuan experiments. (CoinDesk)
  • Uniswap farming ends in four days, potentially freeing up $1.1 billion in ETH (Cointelegraph)
  • Sythentix now has a Brent Crude oil future trading pool. (CoinDesk)
  • “Severe” bug found in core library for Ethereum and Ethereum Classic has been fixed. (Decrypt)
At stake

Dignity and bitcoin
“The systems don’t always work,” Robby Gutmann, co-founder of Stone Ridge Holdings Group, told NLW in his first podcast interview since the company made waves by investing heavily in bitcoin. That’s why the $10 billion alternative asset manager has placed its “primary treasury reserve” in bitcoin.

Related: First Mover: Why the Fed Cares About Remote Working – And What It Means for Bitcoin

In short, bitcoin is an exit from an inflating monetary base that has failed to serve the public. Last month, Stone announced it would stash more than 10,000 BTC with its crypto subsidiary NYDIG. This follows other corporate firms like MicroStrategy and Square moving some of their cash treasuries into bitcoin, also citing monetary debasement.

“The expansion of the money supply in the U.S. hasn’t shown up in growth of CPI in a measurable way, but in other measurements of inflation,” Gutmann said. Notably, Gutmann considers the prospect of living a “dignified” retirement as an ideal marker for inflation.

“The idea of financial security is much broader in bitcoin,” he said, when claiming that only a “single-digit number” of fiat monetary systems are functional or scale. “Can I save my day’s labor in something I can spend tomorrow next week,” isn’t a question most U.S. workers are confronted with, but it may be a legitimate concern elsewhere.

That’s why a bitcoin-based world economy could better serve nations that weren’t part of the industrializing processes of the 19th and 20th centuries.

Gutmann further explained NYDIG’s thesis is in fostering the “long-term development of an open source monetary system.” This includes opening some of its in-house bitcoin infrastructure up to other companies – “we won’t be the last people that have this challenge” – and applying for New York State’s “BitLicense ” and a limited trust charter.

“To the extent we can move the bitcoin project forward, it feels like we can do something measurable in society today around this idea of financial security for people outside the first world,” he said.

The full, hour-long interview can be found here.

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Developers Debate Disclosure Protocols After ‘Accidental’ Ethereum Hard Fork

5 years 10 months ago

Ethereum developers are weighing changes to publicly disclosing critical bugs following the Nov. 11 “accidental hard fork.” 

According to a technical write-up published by Geth – the largest Ethereum client written in the Go language – a denial-of-service (DoS) attack vector was intentionally triggered by a downstream user as a test, resulting in a 30-block sidechain.

Geth had fixed the bug in early October following a disclosure, but it still existed in prior versions of Geth. The bug temporarily caused 80% of the network that runs on Geth to go down a different path than other clients.

Related: First Mover: Bitcoin Breaches $16K as (Committed) Holders Diss Dalio’s Diss

Now, developers are reordering the disclosure process for security vulnerabilities in the aftermath of what some developers have called the biggest threat against Ethereum since 2016’s attack on The DAO. 

Read more: ‘Unannounced Hard Fork’ Was Trying to Prevent the Very Disruption It Caused

That question comes with baggage. A common ethos in open-source software (OSS) such as Ethereum is that vendors are tasked “to notify those affected by vulnerabilities in a timely manner,” Summa founder James Prestwich told CoinDesk in a message. In other words, Geth has a responsibility to give dependent users a heads-up on possible complications.

‘Disclosure is a complex topic’

Yet, blockchains, at their very core, are financial settlement mechanisms. The traditional methods of disclosing bugs in OSS can lead to undesirable outcomes for other players with money on the line.

Related: Israeli Firm Unveils Tech Allowing Users to ‘Undo’ Erroneous Ether Transactions

In Friday’s All Core Developers’ call, Ethereum developer Micah Zoltu and Geth team leader Peter Szilágyi both disagreed with the issuance of a notification list for critical vulnerabilities. Zoltu claimed such a list would create an uneven playing field for projects, while Szilágyi said that every bug disclosure creates a weak point in Ethereum’s infrastructure. 

For example, disclosing the bug early to service provider Infura – which most of decentralized finance (DeFi) uses to connect to the Ethereum blockchain – would be an unfair advantage against its competitors. Moreover, the consequences for the larger ecosystem could be severe if privileged information from the list leaked to adversarial parties.

Given the option again, Szilágyi said he would go about the recent disclosure in the same manner – meaning, keeping the consensus bug under wraps (although he said at one point during the call they should have let users know a past version of Geth held a vulnerability). Geth has done so for other consensus vulnerabilities, he said.

“Disclosure is a complex topic and user safety is paramount,” Prestwich concluded.

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Mike Novogratz’s Galaxy Digital Nets $44.3M in Q3

5 years 10 months ago

Galaxy Digital, the crypto merchant bank headed by noted crypto evangelist Mike Novogratz, reported net income of $44.3 million in the third quarter of 2020, up from a loss of $68.2 million in the year-ago period.

  • Galaxy Digital’s total assets eclipsed $536 million, nearly $225 million of which was in cryptocurrencies.
  • Volume at subsidiary Galaxy Digital Trading (GDT) was up 75% year over year to a record $1.4 billion.
  • Galaxy attributed the soaring trading volume to momentum in bitcoin markets.
  • GDT on Friday acquired crypto trading firms DrawBridge Lending and Blue Fire Capital for an undisclosed sum.
  • GLXY was trading up 30 basis points around $5.37 CAD (US$4.08) on the Toronto Stock Exchange at press time.
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