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Bitcoin gets slower, smaller and more like Ethereum

Posted by on Mar 11, 2019 in Bitcoin, blockchain, Blockstream, cryptocurrency, ethereum, Finance, stellar | 0 comments

Editor’s Note: Our writer Galen Moore (who previously wrote an analysis of STOs) attended the MIT Bitcoin Expo this weekend. These are his field notes on his interviews with a bunch of the leading thinkers in the Bitcoin community, along with links to the full audio if you want to go deeper. ~ Danny Crichton

The MIT Bitcoin Expo is not really about Bitcoin, per se. Many other cryptocurrencies are discussed. Sometimes, warring factions find themselves in the same room.

On the Friday night before the main event, a Boston Ethereum developers group hosted a bitcoiner VC and the CEO of a private-key custody company for “a conversation on Lightning and the future of Bitcoin.”

It was a frank conversation in front of a room full of people who may have been skeptical about the future of Bitcoin. Castle Island Ventures general partner Nic Carter allowed that Bitcoin’s fixed money supply might become a liability. Jeremy Welch, CEO of Casa, acknowledged that Lightning is not going to solve all of Bitcoin’s problems.

For example, Lightning makes sending and receiving bitcoin faster, cheaper and a little more private, but questions remain as to how such Bitcoin payments will be useful.

Developing (and not developing) the future of Bitcoin

James Prestwich of Summa. Photo by Galen Moore

Carter and Welch’s conversation turned to ossification, a proposed drawdown of developer activity on Bitcoin to guard against future attacks. One Ethereum developer leaned back to ask me what ossification means. “Turning into bone,” I said. He looked a little mystified. Misunderstandings remain between followers of the two largest cryptocurrencies. Ethereum developers remain in a kind of “move fast and break things” mindset, while Bitcoin developers treat their codebase like it was software for air traffic control.

There are some who are trying to bridge the gap. James Prestwich’s consulting firm, Summa, helps Ethereum developers that want to use Bitcoin. Beyond reaching a bigger market, this has technical advantages, Prestwich said. We were drinking pineapple-strawberry Lacroix before his presentation about a better way to handle cross-chain transactions.

“Most Ethereum developers work on contracts and not consensus layer,” he said. “Contracts are not as abstracted from consensus as we like to think they are. It’s a very messy, leaky layer. The advantages here are more on the consensus layer, but that’s going to affect how your smart contract works.” The full audio of my interview with Prestwich is here and a recording of all the presentations at MIT Bitcoin Expo 2019 can be found here.


Source: The Tech Crunch

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The social layer is ironically key to Bitcoin’s security

Posted by on Jan 19, 2019 in Bitcoin, blockchain, cryptocurrency, ethereum, Security | 0 comments

A funny thing happened in the second half of 2018. At some moment, all the people active in crypto looked around and realized there weren’t very many of us. The friends we’d convinced during the last holiday season were no longer speaking to us. They had stopped checking their Coinbase accounts. The tide had gone out from the beach. Tokens and blockchains were supposed to change the world; how come nobody was using them?

In most cases, still, nobody is using them. In this respect, many crypto projects have succeeded admirably. Cryptocurrency’s appeal is understood by many as freedom from human fallibility. There is no central banker, playing politics with the money supply. There is no lawyer, overseeing the contract. Sometimes it feels like crypto developers adopted the defense mechanism of the skunk. It’s working: they are succeeding at keeping people away.

Some now acknowledge the need for human users, the so-called “social layer,” of Bitcoin and other crypto networks. That human component is still regarded as its weakest link. I’m writing to propose that crypto’s human component is its strongest link. For the builders of crypto networks, how to attract the right users is a question that should come before how to defend against attackers (aka, the wrong users). Contrary to what you might hear on Twitter, when evaluating a crypto network, the demographics and ideologies of its users do matter. They are the ultimate line of defense, and the ultimate decision-maker on direction and narrative.

What Ethereum got right

Since the collapse of The DAO, no one in crypto should be allowed to say “code is law” with a straight face. The DAO was a decentralized venture fund that boldly claimed pure governance through code, then imploded when someone found a loophole. Ethereum, a crypto protocol on which The DAO was built, erased this fiasco with a hard fork, walking back the ledger of transactions to the moment before disaster struck. Dissenters from this social-layer intervention kept going on Ethereum’s original, unforked protocol, calling it Ethereum Classic. To so-called “Bitcoin maximalists,” the DAO fork is emblematic of Ethereum’s trust-dependency, and therefore its weakness.

There’s irony, then, in maximalists’ current enthusiasm for narratives describing Bitcoin’s social-layer resiliency. The story goes: in the event of a security failure, Bitcoin’s community of developers, investors, miners and users are an ultimate layer of defense. We, Bitcoin’s community, have the option to fork the protocol—to port our investment of time, capital and computing power onto a new version of Bitcoin. It’s our collective commitment to a trust-minimized monetary system that makes Bitcoin strong. (Disclosure: I hold bitcoin and ether.)

Even this narrative implies trust—in the people who make up that crowd. Historically, Bitcoin Core developers, who maintain the Bitcoin network’s dominant client software, have also exerted influence, shaping Bitcoin’s road map and the story of its use cases. Ethereum’s flavor of minimal trust is different, having a public-facing leadership group whose word is widely imbibed. In either model, the social layer abides. When they forked away The DAO, Ethereum’s leaders had to convince a community to come along.

You can’t believe in the wisdom of the crowd and discount its ability to see through an illegitimate power grab, orchestrated from the outside. When people criticize Ethereum or Bitcoin, they are really criticizing this crowd, accusing it of a propensity to fall for false narratives.

How do you protect Bitcoin’s codebase?

In September, Bitcoin Core developers patched and disclosed a vulnerability that would have enabled an attacker to crash the Bitcoin network. That vulnerability originated in March, 2017, with Bitcoin Core 0.14. It sat there for 18 months until it was discovered.

There’s no doubt Bitcoin Core attracts some of the best and brightest developers in the world, but they are fallible and, importantly, some of them are pseudonymous. Could a state actor, working pseudonymously, produce code good enough to be accepted into Bitcoin’s protocol? Could he or she slip in another vulnerability, undetected, for later exploitation? The answer is undoubtedly yes, it is possible, and it would be naïve to believe otherwise. (I doubt Bitcoin Core developers themselves are so naïve.)

Why is it that no government has yet attempted to take down Bitcoin by exploiting such a weakness? Could it be that governments and other powerful potential attackers are, if not friendly, at least tolerant towards Bitcoin’s continued growth? There’s a strong narrative in Bitcoin culture of crypto persisting against hostility. Is that narrative even real?

The social layer is key to crypto success

Some argue that sexism and racism don’t matter to Bitcoin. They do. Bitcoin’s hodlers should think carefully about the books we recommend and the words we write and speak. If your social layer is full of assholes, your network is vulnerable. Not all hacks are technical. Societies can be hacked, too, with bad or unsecure ideas. (There are more and more numerous examples of this, outside of crypto.)

Not all white papers are as elegant as Satoshi Nakamoto’s Bitcoin white paper. Many run over 50 pages, dedicating lengthy sections to imagining various potential attacks and how the network’s internal “crypto-economic” system of incentives and penalties would render them bootless. They remind me of the vast digital fortresses my eight-year-old son constructs in Minecraft, bristling with trap doors and turrets.

I love my son (and his Minecraft creations), but the question both he and crypto developers may be forgetting to ask is, why would anyone want to enter this forbidding fortress—let alone attack it? Who will enter, bearing talents, ETH or gold? Focusing on the user isn’t yak shaving, when the user is the ultimate security defense. I’m not suggesting security should be an afterthought, but perhaps a network should be built to bring people in, rather than shut them out.

The author thanks Tadge Dryja and Emin Gün Sirer, who provided feedback that helped hone some of the ideas in this article.


Source: The Tech Crunch

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Opera brings a flurry of crypto features to its Android mobile browser

Posted by on Dec 13, 2018 in android, api, Apps, author, Bitcoin, blockchain, blockchains, coinbase, computing, cryptocurrencies, cryptocurrency, cryptokitties, decentralization, ethereum, joseph lubin, note, Software, Technology | 0 comments

Crypto markets may be down down down, but that isn’t stopping Opera’s crypto features — first released in beta in July — from rolling out to all users of its core mobile browser today as the company bids to capture the ‘decentralized internet’ flag early on.

Opera — the world’s fifth most-used browser, according to Statcounter — released the new Opera Browser for Android that includes a built-in crypto wallet for receiving and sending Bitcoin and other tokens, while it also allows for crypto-based commerce where supported. So on e-commerce sites that accept payment via Coinbase Commerce, or other payment providers, Opera users can buy using a password or even their fingerprint.

Those are the headline features that’ll get the most use in the here and now, but Opera is also talking up its support for “Web 3.0” — the so-called decentralized internet of the future based on blockchain technology.

For that, Opera has integrated the Ethereum web3 API which will allow users of the browser to access decentralized apps (dapps) based on Ethereum. There’s also token support for Cryptokitties, the once-hot collectible game that seemingly every single decentralized internet product works with in one way or another.

But, to be quite honest, there really isn’t much to see or use on Web 3.0 right now, the big bet is that there will be in the future.

Ethereum, like other cryptocurrencies, in a funk right now thanks to the bearish crypto market, but the popular refrain from developers is that low season is a good time to build. Well, Opera has just shipped the means to access Ethereum dapps, will the community respond and give people a reason to care?

Pessimism aside, this launch is notable because it has the potential to get blockchain-based tech into the daily habits of “millions” of people, Charles Hamel — Opera’s product lead for crypto — told TechCrunch over email.

While Opera can’t match the user base of Apple’s Safari or Google Chrome — both of which have the advantage of bundling a browser with a mobile OS — Opera does have a very loyal following, which makes this release one of the most impactful blockchain launches to date.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.


Source: The Tech Crunch

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Feds like cryptocurrencies and blockchain tech and so should antitrust agencies

Posted by on Dec 13, 2018 in author, Bitcoin, blockchain, Column, computing, cryptocurrencies, decentralization, digital rights, economy, ethereum, fed, General Data Protection Regulation, Germany, human rights, money, Privacy, St. Louis | 0 comments

While statements and position papers from most central banks were generally skeptical of cryptocurrencies, the times may be changing.

Earlier this year, the Federal Reserve of Saint Louis published a study that relates the positive effects of cryptocurrencies for privacy protection.

Even with the precipitous decline in value of Bitcoin, Ethereum and other currencies, the Federal Reserve author emphasized the new competitive offering these currencies created exactly because of the way they function, and accordingly, why they are here to stay.

And antitrust authorities should welcome cryptocurrencies and blockchain technologies for the same reason.

Fact: crypto-currencies are good for (legitimate) privacy protection

In the July article from Federal Reserve research fellow Charles M. Kahn, cryptocurrencies were held up as an exemplar of a degree of privacy protection that not even the central banks can provide to customers.

Kahn further stressed that “privacy in payments is desired not just for illegal transactions, but also for protection from malfeasance or negligence by counterparties or by the payments system provider itself.”

The act of payment engages the liability of the person who makes it. As a consequence, parties insert numerous contractual clauses to limit their liability. This creates a real issue due to the fact that some “parties to the transaction are no longer able to support the lawyers’ fees necessary to uphold the arrangement.” Smart contracts may address this issue by automating conflict resolution, but for anyone who doesn’t have access to them, crypto-currencies solve the problem differently. They make it possible to make a transaction without revealing your identity.

Above all, crypto-currencies are a reaction to fears of privacy invasion, whether by governments or big companies, according to Kahn. And indeed, following Cambridge Analytica and fake news revelations, we are hearing more and more opinions expressing concerns. The General Data Protection Regulation is set to protect private citizens, but in practice, “more and more individuals will turn to payments technologies for privacy protection in specific transactions.” In this regard, cryptocurrencies provide an alternative solution that competes directly with what the market currently offers.

Consequence: blockchain is good for competition and consumers

Indeed, cryptocurrencies may be the least among many blockchain applications. The diffusion of data among a decentralized network that is independently verified by some or all of the network’s participating stakeholders is precisely the aspect of the technology that provides privacy protection and competes with applications outside the blockchain by offering a different kind of service.

The Fed of St. Louis’ study underlines that “because privacy needs are different in type and degree, we should expect a variety of platforms to emerge for specific purposes, and we should expect continued competition between traditional and start-up providers.”

And how not to love variety? In an era where antitrust authorities are increasingly interested in consumers’ privacy, crypto-currencies (and more generally blockchains) offer a much more effective protection than antitrust law and/or the GDPR combined.

These agencies should be happy about that, but they don’t say a word about it. That silence could lead to flawed judgements, because ignoring the speed of blockchain development — and its increasingly varied use — leads to misjudge the real nature of the competitive field.

And in fact, because they ignore the existence of blockchain (applications), they tend to engage in more and more procedures where privacy is seen as an antitrust concern (see what’s happening in Germany). But blockchain is actually providing an answer to this issue ; it can’t be said accordingly that the market is failing. And without a market failure, antitrust agencies’ intervention is not legitimate.

The roles of the fed and antitrust agencies could change

This new privacy offering from blockchain technologies should also lead to changes in the role of agencies. As the Fed study stressed:

“the future of central banks and payments authorities is no longer in privacy provision but in privacy regulation, in holding the ring as different payments platforms offer solutions appropriate to different niches with different mixes of expenses and safety, and with attention to different parts of the public’s demand for privacy.”

Some constituencies may criticize the expanding role of central banks in enforcing and ensuring privacy online, but those banks would be even harder pressed if they handled the task themselves instead of trying to relinquish it to the network.

The same applies to antitrust authorities. It is not for them to judge what the business model of digital companies should be and what degree of privacy protection they should offer. Their role is to ensure that alternatives exist, here, that blockchain can be deployed without misinformed regulation to slow it down.

Perhaps antitrust agencies should be more vocal about the benefits of cryptocurrencies and blockchain and advise governments not to prevent them.

After all, if even a Fed is now pro-crypto-currencies, antitrust regulators should jump on the wagon without fear. After all, blockchain creates a new alternative by offering real privacy protections, which ultimately put more power in the hands of consumers. If antitrust agencies can’t recognize that, we will soon ask ourselves: who are they really protecting?


Source: The Tech Crunch

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WTF is happening to crypto?

Posted by on Nov 20, 2018 in Binance, Bitcoin, Bitmain, ceo, coinbase, cryptocurrencies, cryptocurrency, currency, economy, ethereum, founder, jon evans, joseph lubin, linux, TC, texas, U.S. Securities and Exchange Commission, United States, university of texas, us government | 0 comments

Four days ago the crypto markets were crashing hard. Now they’re crashing harder. Bitcoin, which hasn’t fallen past $6,000 for months, has dumped to $4,413.99 as of this morning, and nearly everything else is falling in unison. Ethereum, flying high at $700 a few months ago, is at $140. Coinbase, that bastion of crypto stability, is currently sporting a series of charts that look like Aspen black-diamond ski runs.

What is happening? There are a number of theories, and I’ll lay out a few of them here. Ultimately, sentiment is bleak in the crypto world, with bull runs being seen as a thing of a distant past. As regulators clamp down, pie-in-the-sky ideas crash and shady dealers take their shady dealings elsewhere, the things that made cryptocurrencies so much fun — and so dangerous — are slowly draining away. What’s left is anyone’s guess, but at least it will make things less interesting.

The bag holder theory

November was supposed to be a good month for crypto. Garbage sites like FortuneJack were crowing about bitcoin stability while the old crypto hands were optimistic and pessimistic at the same time. Eric Vorhees, founder of ShapeShift, felt that the inevitable collapse of the global financial system is good for folks with at least a few BTC in their wallets.

Others, like the Binance CEO Changpeng Zhao, are expecting a bull run next year and said his company was particularly profitable.

Ultimately, crypto hype moves the market far more than it has any right to, and this is a huge problem.

So who do you believe, these guys or your own lying eyes? That’s a complex question. First, understand that crypto is a technical product weaponized by cash. Companies like Binance and Coinbase will work mightily to maintain revenue streams, especially considering Coinbase’s current level of outside investment. These are startups that can literally affect their own value over time. We’ll talk about that shortly. Ultimately, crypto hype hasn’t been matching reality of late, a major concern to the skittish investor.

“I think that the downturn is due to things not going up as much as people had wanted. Everyone was expecting November to be a bull month,” said Travin Keith, founder of Altrean. “When things indicated that it wasn’t going that way, those who were on borrowed time, such as those needing some buffer, or those in the crypto business needing some money, needed to sell.”

Tether untethered

Tether has long been the prime suspect in the Bitcoin run up and crash. Created by an exchange called Bitfinex, the currency is pegged to the dollar and, according to the exchange itself, each tether — about $2.7 billion worth — is connected to an actual dollar in someone’s bank account. Whether or not this is true has yet to be proven, and the smart money is on “not true.” I’ll let Jon Evans explain:

What are those whiffs of misconduct to which I previously referred? I mean. How much time do you have? One passionate critic, known as Bitfinexed, has been writing about this for quite some time now; it’s a pretty deep rabbit hole. University of Texas researchers have accused Bitfinex/Tether of manipulating the price of Bitcoin (upwards.) The two entities have allegedly been subpoenaed by US regulators. In possibly (but also possibly not — again, a fog of mystery) related news, the US Justice Department has opened a criminal investigation into cryptocurrency price manipulation, which critics say is ongoing. Comparisons are also being drawn with Liberty Reserve, the digital currency service shut down for money laundering five years ago:

So what the hell is going on? Good question. On the one hand, people and even companies are innocent until proven guilty, and the opacity of cryptocurrency companies is at least morally consistent with the industry as a whole. A wildly disproportionate number of crypto people are privacy maximalists and/or really hate and fear governments. (I wish the US government didn’t keep making their “all governments become jackbooted surveillance police states!” attitude seem less unhinged and more plausible.)

But on the other … yes, one reason for privacy maximalism is because you fear rubber-hose decryption of your keys, but another, especially when anti-government sentiment is involved, is because you fear the taxman, or the regulator. A third might be that you fear what the invisible hand would do to cryptocurrency prices, if it had full leeway. And it sure doesn’t look good when at least one of your claims, e.g. that your unaudited reserves are “subject to frequent professional audits,” is awfully hard to interpret as anything other than a baldfaced lie.

Now Bloomberg is reporting that the U.S. Justice Department is looking into Bitfinex for manipulating the price of Bitcoin. The belief is that Bitfinex has allegedly been performing wash trades that propped up the price of Bitcoin all the way to its previous $20,000 heights. “[Researchers] claimed that Tether was used to buy Bitcoin at pivotal periods, and that about half of Bitcoin’s 1,400 percent gain last year was attributable to such transactions,” wrote Bloomberg. “Griffin briefed the CFTC on his findings earlier this year, according to two people with direct knowledge of the matter.”

This alone could point to the primary reason Bitcoin and crypto are currently in free fall: without artificial controls, the real price of the commodity becomes clear. A Twitter user called Bitfinex’d has been calling for the death of Tether for years. He’s not very bullish on the currency in 2019.

“I don’t know the when,” Bitfinex’d said. “But I know Tether dies along with Bitfinex.”

Le shitcoin est mort

As we learned last week, the SEC is sick of fake utility tokens. While the going was great for ICOs over the past few years with multiple companies raising millions if not billions in a few minutes, these salad days are probably over. Arguably, a seed-stage startup with millions of dollars in cash is more like a small VC than a product company, but ultimately the good times couldn’t last.

What the SEC ruling means is that folks with a lot of crypto can’t slide it into “investments” anymore. However, this also means that those same companies can be more serious about products and production rather than simply fundraising.

SEC intervention dampens hype, and in a market that thrives on hype, this is a bad thing. That said, it does mean that things will become a lot clearer for smaller players in the space, folks who haven’t been able to raise seed and are instead praying that token sales are the way forward. In truth they are, buttoning up the token sale for future users and, by creating regulation around it, they will begin to prevent the Wild West activity we’ve seen so far. Ultimately, it’s a messy process, but a necessary one.

“It all contributes to greater BTC antifragility, doesn’t it?,” said crypto speculator Carl Bullen. “We need the worst actors imaginable. And we got ’em.”

Bitmain

One other interesting data point involves Bitmain. Bitmain makes cryptocurrency mining gear and most recently planned a massive IPO that was supposed to be the biggest in history. Instead, the company put these plans on hold.

Interestingly, Bitmain currently folds the cryptocurrency it mines back into the company, creating a false scarcity. The plan, however, was for Bitmain to begin releasing the Bitcoin it mined into the general population, thereby changing the price drastically. According to an investor I spoke with this summer, the Bitmain IPO would have been a massive driver of Bitcoin success. Now it is on ice.

While this tale was apocryphal, it’s clear that these chicken and egg problems are only going to get worse. As successful startups face down a bear market, they’re less likely to take risks. And, as we all know, crypto is all about risk.

Abandon all hope? Ehhhhh….

Ultimately, crypto and the attendant technologies have created an industry. That this industry is connected directly to stores of value, either real or imagined, has enervated it to a degree unprecedented in tech. After all, to use a common comparison between Linux and blockchain, Linus Torvalds didn’t make millions of dollars overnight for writing a device driver in 1993. He — and the entire open-source industry — made billions of dollars over the past 27 years. The same should be true of crypto, but the cash is clouding the issue.

Ultimately, say many thinkers in the space, the question isn’t whether the price goes up or down. Instead, of primary concern is whether the technology is progressing.

“Crypto capitulation is once again upon us, but before the markets can rise again we must pass through the darkest depths of despair,” said crypto guru Jameson Lopp. “Investors will continue to speculate while developers continue to build.”


Source: The Tech Crunch

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Blockchain media startup Civil is issuing full refunds to all buyers of its cryptocurrency

Posted by on Oct 16, 2018 in blockchain, blockchains, civil, consensys, cryptocurrencies, cryptocurrency, decentralization, Dow-Jones, ethereum, initial coin offering, Matthew Iles, Startups | 0 comments

Many doubted The Civil Media Company‘s ambitious plan to sell $8 million worth of its cryptocurrency, called CVL. 

The skeptics, as it turns out, were right. Civil’s initial coin offering, meant to fund the company’s effort to create a new economy for journalism using the blockchain, failed to attract sufficient interest. The company announced today that it would provide refunds to all CVL token buyers by October 29.

Civil’s goal was to sell 34 million CVL tokens for between $8 million and $24 million. The sale began on September 18 and concluded yesterday. Ultimately, 1,012 buyers purchased $1,435,491 worth of CVL tokens. A spokesperson for Civil told TechCrunch an additional 1,738 buyers successfully registered for the sale, but never completed their transaction.

Civil isn’t giving up. The company says “a new, much simpler token sale is in the works,” details of which will be shared soon. Once those new tokens are distributed, Civil will launch three new features: a blockchain-publishing plugin for WordPress, a community governance application called The Civil Registry and a developer tool for non-blockchain developers to build apps on Civil.

ConsenSys, a blockchain venture studio that invested $5 million in Civil last fall, has agreed to purchase $3.5 million worth of those new tokens. The purchase is not an equity; all capital from the token sale is committed to the Civil Foundation, an independent nonprofit initially funded by Civil that funds grants to the newsrooms in Civil’s network.

In a blog post today, Civil chief executive officer Matthew Iles wrote that the token sale failure was a disappointment but not a shock. Days prior, he’d authored a separate post where he admitted things weren’t looking good.

“This isn’t how we saw this going,” Iles wrote. “The numbers will show clearly enough that we are not where we wanted to be at this point in the sale when we started out. But one thing we want to say at the top is that until the clock strikes midnight on Monday, we are still working nonstop on the goal of making our soft cap of $8 million.”

A recent Wall Street Journal report claimed Civil had reached out to The New York Times, The Washington Post, Dow Jones and Axios, among others, but failed to incite interest in its token.

Separate from its token sale, Civil has inked strategic partnerships with media companies like the Associated Press and Forbes, both of which confirmed to TechCrunch today that the failed token sale doesn’t impact their partnerships with Civil. 

Forbes became the first major media brand to test Civil’s technology when it announced earlier this month that it would experiment with publishing content to the Civil platform. As for the AP, it granted the newsrooms in Civil’s network licenses to its content. 

Civil, of course, isn’t the only blockchain startup targeting journalism. Nwzer, Userfeeds, Factmata and Po.et, which was founded by Jarrod Dicker, a former vice president at The Washington Post, are all trying their hand at bringing the new technology to the content industry.

Which, if any, will actually find success in the complicated space, is the question.


Source: The Tech Crunch

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The collapse of ETH is inevitable

Posted by on Sep 2, 2018 in author, blockchains, Column, cryptocurrencies, distributed computing, driver, economy, erc-20, eth, ethereum, ethereum foundation, kin, miner, mining, neo, smart contract | 0 comments

Here’s a prediction. ETH — the asset, not the Ethereum Network itself — will go to zero.

Those who already think that ETH will not see real adoption — thanks to a failure to scale, to adopt more secure contract authoring practices, or to out-compete its competitors — don’t need to be convinced that a price collapse would follow as a consequence.

But, if one believes that Ethereum will succeed beyond anyone’s wildest dreams as a platform then the proposition that ETH (as a currency) will go to zero will take a bit more convincing running a substantial share of the world’s commerce securely.

So here’s how Ethereum ends up succeeding wildly but ETH becomes worthless. Ethereum’s value proposition, as given by ethereum.org, is as follows:

Build unstoppable applications

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.

These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.

This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.

If Ethereum succeeds on its value proposition it will therefore mitigate external risk factors for decentralized applications.

İstanbul, Turkey – January 28, 2018: Close up shot of Bitcoin, Litecoin and Ethereum memorial coins and shovels on soil. Bitcoin Litecoin and Ethereum are crypto currencies and a worldwide payment system.

No Future for ‘Gas’

There’s no value proposition for ETH in the official description. Perhaps this omission is because ETH’s value seems so obvious to the Ethereum Foundation that it is hardly worth mentioning: $ETH fees (dubbed ‘Gas’) is how you pay for all this.

If the concept of gas isn’t immediately obvious, let’s expand the metaphor: The Ethereum network is like a shared car. When a contract wants to be driven by the shared car, the car uses up fuel, which you have to pay the driver for. How much gas money you owe depends on how far you had to be driven, and how much trash you left in the car.

Gas is a nice metaphor, but the metaphor is insufficient as an argument to support non-zero $ETH prices. Gasoline actually burns inside an internal combustion engine; an internal combustion engine will not work without a combustible fuel. $ETH as Gas is a metaphor for how gasoline is consumed; there is no hard requirement for Gas in an Ethereum contract.

(Photo by Manuel Romano/NurPhoto via Getty Images)

Buying the “BuzzwordCoin”

Suppose we’re building a new decentralized application, BuzzwordCoin. By default, following a standard ERC-20 Token template, every transaction on BuzzwordCoin will pay gas in $ETH. Requiring every BuzzwordCoin transaction to also depend on ETH for fees creates substantial risk, third party dependency, and artificial downwards pressure on the price of the underlying token (if one must sell BuzzwordCoin for ETH ahead of time to run a BuzzwordCoin transaction, then the sell-pressure will happen before the transaction requires it, and must be a larger sale than necessary to ensure sufficient funds to cover the transaction).

Instead of paying for Gas in ETH, we could make every BuzzwordCoin transaction deposit a small amount of BuzzwordCoin directly to the block’s miner’s address to pay for the contract’s execution. Paying for Gas in a non-ETH asset is sometimes referred  to as economic abstraction in the Ethereum community.

The revised BuzzwordCoin contract has no functional dependence on ETH. We’re able to incentivize miners to mine transactions without paying any fees in ETH whatsoever.

If the BuzzwordCoin contract has non-transactional contractual clauses — that is, a functionality that should be regularly called by any party for tasking like computing and updating cached statistics in the contract — we can specify that the miner performing those clauses receives coins from an inflation or shared gas pool. In the shared pool, all fees for user’s transactions in a specific contract are paid to the contract’s wallet. A fee dispensing contract call performing the non-transactional clauses releases the fee to the miner (this bears some semblance to Child Pays for Parent in the Bitcoin Ecosystem).

Battling the economic abstraction

There are four main counterarguments to economically abstracting Ethereum: the lack of software support for economic abstraction; difficulty in pricing many tokens; the existence of contracts not tied to tokens; and the need for ETH for Proof-of-Stake. While nuanced, all four arguments fall flat.

Software Support: Currently, miners select transactions based on the amount of Gas provided in ETH. As ETH is not a contract (like an ERC-20 token), the code is special-cased for transactions dealing in ETH. However, there are efforts to make Ethereum treat ETH less special-cased and more like other ERC-20 Tokens and vice-versa. Weth, for instance, wraps ETH in a 1:1 pegged ERC-20 compliant token for trading in Decentralized Exchanges.

Detractors of economic abstraction (notably, Vitalik Buterin) argue that the added complexity is not worth the ecosystem gains. This argument is absurd. If the software doesn’t support the needs of rational users, then the software should be amended. Furthermore, the actual wallet software required for any given token is made much more complex, as the wallet must manage balances in both ETH and the application’s token.

Market Pricing: To mine on Ethereum with economic abstraction, miners simply need software which allows them to account for discrepancies in their perceived value of active tokens and include transactions rationally on that basis.  Such software requires dynamically re-ordering pending transactions based on pricing information, gleaned either through the miner’s own outlook or monitoring cryptocurrency exchanges prices.

Vlad Zamfir argues that the potential need to monitor market information on prices makes economic abstraction difficult.

However, miners requiring pricing information is already the status quo — rational actors need a model of future ETH prices before mining (or staking) to maximize profit against electricity costs, hardware costs, and opportunity costs.

Non-Token Contracts: Not all contracts have coins, or if they do, they may not be widely recognized, valuable, and traded on exchanges. Can such contracts pay fees without ETH?

Users of a tokenless contract can pay fees in whichever tokens they want. For example, a user of TokenlessContract can pay their fees in a 50/50 mix of LemonadeCoin and TeaBucks. To ensure liquidity between users and miners with different assets they would pay or accept fees with, a user can simply issue multiple mutually-exclusive transactions paying with fees in different assets.

Specialized wallet contracts could also negotiate fees with miners directly .  A miner could also process transactions paying fee with an asset they do not want if there is an open Decentralized Exchange (DEX) offer to exchange the fee asset for something they prefer —  it is possible to create DEX orders for paying fees which allowing only a block’s miner to fill a user’s offers in proportion to the fees that a user has paid in that block preventing the case where a user’s fee diversifying offers are taken by non-miners.

Proof-of-Stake: Without ETH, a modified version of Proof-of-Stake with a multitude of assets could still decide consensus if each node selects a weight vector for the voting power of all assets (let’s call it HD-PoS, or Heterogeneous Deposit Proof Of Stake). While it is an open research question to

show under which conditions HD-PoS would maintain consensus, consensus may be possible if the weight vectors are similar enough.

Proofs of HD-PoS may be possible by assuming a bound on the pairwise euclidean distance of the weight vectors or the maximum difference between any two prices. If such a consensus algorithm proves impossible, the failure to find such an algorithm points to a more general vulnerability in Ethereum PoS.  

Assuming a future where ETH’s main utility is governance voting, why wouldn’t all the other valuable applications on Ethereum have a say in the consensus process? Rolling back actions in a valuable token contract by burning ETH stake could be a lucrative business; if HD-PoS is used such attacks are impossible.

Vitalik Buterin (Ethereum Foundation) at TechCrunch Disrupt SF 2017

ETH’s ethereal value

If all the applications and their transactions can run without ETH, there’s no reason for ETH to be valuable unless the miners enforce some sort of racket to require users to pay in ETH. But if miners are uncoordinated, mutually disinterested, and rational, they would prefer to be paid in assets of their own choosing rather than in something like ETH. Furthermore, risk-averse users would want to minimize their exposure to volatile assets they don’t have to use. Lastly, token developers benefit because pricing in their native asset should serve to reduce sell-pressure. Thus, in a stateless ecosystem, replacing ETH is a Pareto Improvement (i.e., all parties are better off). The only party disadvantaged is existing ETH holders.

  • The author holds Stellar and Bitcoin,  but has relatively little holdings in other cryptocurrencies. He has previously done a Virtual Lapel Pin Sale (like an ICO) for his cause, “Fuck Nazis”, on top of Ethereum which faced both government censorship and censorship from the Ethereum community. 


Source: The Tech Crunch

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Thailand is becoming a critical country for blockchain

Posted by on Sep 1, 2018 in Asia, Bitcoin, blockchain, cryptocurrency, ethereum, Finance, IBM, OmiseGo, TC, Thailand | 0 comments

While United States regulators are still trying to figure out how to think about cryptocurrencies, Thailand’s government is already mapping out its own central bank digital currency.

This is just one of numerous examples how Thailand has emerged as one the most interesting cryptocurrency and blockchain countries in Southeast Asia in 2018.

Since the start of the year, the Thai government has become increasingly outspoken and welcoming of cryptocurrency projects and exchanges. In just a few months, Thai regulators have made notable progress, from setting up cryptocurrency company licenses to permitting exchanges and ICOs. More importantly, the country has attracted foreign companies by providing clear and explicit guidelines for foreign blockchain companies to operate. It’s a pattern that we are seeing across Southeast Asia, and one that blockchain and cryptocurrency startup founders should take note as they think about global expansion.

Southeast Asia regulators are keen to understand cryptocurrency and blockchain 

To understand how a small country like Thailand can move so quickly in the blockchain space, it’s crucial to understand the strategy of regulators and local companies. Unlike their U.S. peers, most Asian blockchain companies and exchanges work with local regulators right from the beginning, even as they are first building their products and growing their communities. These teams use formal and informal relationships to get buy-in from their respective local governments in order to bolster their credibility. This pattern is particularly true for Southeast Asian countries such as Thailand.

However, it isn’t just startups that are trying to curry ties with government officials – these relationships work in both directions. Take for example Pundi X, which is a technology company building out a blockchain-based point of sale solution in Southeast Asia and globally. Its CEO, Zac Cheah, is Malaysian and local to the Southeast Asia region, and discussed with me how regulators are engaging with the startup community:

I think government is morphing and changing and many governments that we know are not you know exactly the ones that we say that are lagging behind. They, in fact, have like people, young or not so young people, that are very knowledgeable about what is happening right now. So in fact sometimes when we go to core blockchain meetups, we actually see some very core people from the regulatory side […] they know that this will change the landscape a lot so I think they are trying to think through the, if I may, the ‘tokenomics’ of how they want to get involved.”

No longer Thaied up in regulation

These types of regulatory engagements are encouraging signs for the region and particularly for Thailand, where regulators have been working quickly to provide a legal path for blockchain and cryptocurrency technologies.

In June, Thailand’s government legalized seven cryptocurrencies (Bitcoin, Ethereum, Bitcoin cash, Ethereum classic, Litecoin, Ripple, and Stellar). It has also permitted a limited number of cryptocurrency exchanges and broker-dealers to apply for operating licenses. Then in July, the Thailand SEC permitted additional digital token issuers to file for applications. In the same month, the securities regulator categorized ICOs into three types: investment tokens, utility tokens, and cryptocurrency. As should be clear from this timeline, the speed at which these regulators execute decisions has surpassed that of most countries in the West as well as the rest of Asia.

Part of that speed is that in Thailand, regulators have shown an openness to knowledge exchange. For example, recently the Thailand SEC held a dialogue with Vitalik Buterin and the OmiseGo team on the status of exchanges and Initial Coin Offerings (ICOs). For Thailand, having a local, knowledgeable, and well-established team such as Omise is very helpful to building a clear regulatory environment for companies.

Photo by Juan Antonio Segal used under Creative Commons.

In fact, we are seeing foreign companies already starting to gravitate towards Thailand’s crypto opportunity, with both Western and Eastern businesses seeking opportunities in the country. In early July, Bithumb, the second largest cryptocurrency exchange in Korea, announced that it plans to open in Thailand after receiving the required regulatory approval from the local government. IBM and Krungsri, one of Thailand’s largest financial institutions with 8.6mn credit cards, sales finance, and personal loan accounts, announced a five-year $140 million engagement to build out digital banking, including blockchain technology. The crypto momentum will likely continue in Thailand, and more announcements and developments should come in the second half of the year.

Not only has it become open to private cryptocurrency companies, but the Thailand government is also testing its own blockchain technologies. For example, it has allowed the Thai Bond Market Association to create a “BondCoin,” a custom token on a private blockchain between permissioned participants including issuers and investors alongside regulators and registered firms.

Then just last week, Bank of Thailand (BOT) outlined a preliminary roadmap for ‘Project Inthanon,’ its central bank digital currency (CBDC) initiative. This is following similar projects initiated by other central banks, including the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority of Singapore. BoT plans to work with eight participating banks to start building a prototype. The announcement of Project Inthanon says: “The BOT and the participating banks will collaboratively design and develop a proof-of-concept prototype for wholesale funds transfer by issuing wholesale Central Bank Digital Currency (Wholesale CBDC).”

Phase 1 of Project Inthanon will involve development and testing of key payment features such as a liquidity-saving mechanism and risk management. It is expected to be completed by the first quarter of 2019, and its outcome will be very telling of Thailand’s progress in Southeast Asia.

Building strong local Thais?

For new companies going into the region, it may become increasingly more difficult to enter. Traditionally, a large part of doing business successfully in many parts of Asia requires forming the right connections and business relationships. As the blockchain space evolves, regulators are establishing more stringent requirements and higher standards to accept additional tokens and exchanges into the country. They’ll likely be influenced in their decisions by existing teams that they already have a relationship with. That dynamic is something cryptocurrency companies should think about as they build out their communities in Asia, as the most established countries may not necessarily provide the most opportunities.

One positive though is that we are still in the relatively early stage of adoption in Southeast Asia, and every country in the blockchain adoption phase is at different stages. A healthy competition between Southeast Asian nations is still brewing, which may benefit newcomers. That said, the strategies used to enter one of these markets will almost certainly change and mature compared to when these opportunities were very green.

In the long run, it’s very possible for many cryptocurrency and blockchain companies to develop a codependency with their respective local government. This doesn’t just apply to Thailand and Asia but to the rest of world too. Each region’s regulators will want to further advance their own interest and form allies with local token companies. So for a project that is thinking globally, forming too close of a relationship with a small set of regulators may pull the company in directions that it otherwise would not want to.

Ultimately, for a cryptocurrency company going into any foreign markets, it is important for one’s team to have a multi-country strategy to avoid developing biases and become overly influenced by one local government. However, to succeed locally, the teams on the ground will also have to be very deeply knowledgeable and experienced in understanding the business culture and regulatory environment there.

As Thailand proves, the ground is changing rapidly on which countries are most open for blockchain and cryptocurrency business, and adapting to these changing market dynamics is critical to the success of startups and companies in the space.


Source: The Tech Crunch

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Coinbase now supports buying and selling Ethereum Classic

Posted by on Aug 17, 2018 in author, balaji srinivasan, blockchains, coinbase, cryptocurrencies, cryptocurrency, CTO, distributed computing, ethereum, ethereum foundation, The DAO | 0 comments

Coinbase has added a new buying option for its customers after the crypto exchange introduced Ethereum Classic to its collection.

The addition was first announced in July but Coinbase took its time to implement its newest addition following criticism over the way it added Bitcoin Cash last year. Allegations of insider trading led the company to investigate the incident which saw service outages and wild price fluctuations for Bitcoin Cash right after its addition to the exchange. It later introduced a framework for adding new tokens.

Nonetheless, Ethereum Classic’s value spiked 20 percent on last month’s news. Today, though, it is down two percent over the last 24 hours, according to Coinmarketcap.com.

Coinbase has taken a conservative approach to adding more crypto. Today’s addition takes it to five tokens — Bitcoin, Ethereum, Litecoin and Bitcoin Cash are the others — but that’s likely to change this year. Last month, it announced it is “exploring” the addition of another five tokens while CTO Balaji Srinivasan hinted that the selection would grow further when I interviewed him at the recent TechCrunch blockchain event in Zug.

“We hear your requests, and are working hard to make more assets available to more customers around the world,” Dan Romero, who heads Coinbase’s consumer business, said in a blog post published today.

A note on Ethereum Classic — it was created in June 2016 following a major hack on The DAO, a fundraising vehicle for the project. In short: the Ethereum Foundation created a new version of Ethereum — known today as Ethereum — that rescued the lost funds, while those who opposed continued on with the original chain which was known as Ethereum Classic.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.


Source: The Tech Crunch

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Sagewise pitches a service to verify claims and arbitrate disputes over blockchain transactions

Posted by on Aug 3, 2018 in blockchain, computing, cryptocurrencies, distributed computing, Entrepreneur, ethereum, executive, lawyer, Los Angeles, managing partner, peer to peer, Recent Funding, Sagewise, scalar capital, smart contract, Startups, TC, U.S. Department of Commerce | 0 comments

Sometimes smart contracts can be pretty dumb.

All of the benefits of a cryptographically secured, publicly verified, anonymized transaction system can be erased by errant code, malicious actors or poorly defined parameters of an executable agreement.

Hoping to beat back the tide of bad contracts, bad code and bad actors, Sagewise, a new Los Angeles-based startup, has raised $1.25 million to bring to market a service that basically hits pause on the execution of a contract so it can be arbitrated in the event that something goes wrong.

Co-founded by a longtime lawyer, Amy Wan, whose experience runs the gamut from the U.S. Department of Commerce to serving as counsel for a peer-to-peer real estate investment platform in Los Angeles, and Dan Rice, a longtime entrepreneur working with blockchain, Sagewise works with both Ethereum and the Hedera Hashgraph (a newer distributed ledger technology, which purports to solve some of the issues around transaction processing speed and security which have bedeviled platforms like Ethereum and Bitcoin).

The company’s technology works as a middleware, including an SDK and a contract notification and monitoring service. “The SDK is analogous to an arbitration clause in code form — when the smart contract executes a function, that execution is delayed for a pre-set amount of time (i.e. 24 hours) and users receive a text/email notification regarding the execution,” Wan wrote to me in an email. “If the execution is not the intent of the parties, they can freeze execution of the smart contract, giving them the luxury of time to fix whatever is wrong.”

Sagewise approaches the contract resolution process as a marketplace where priority is given to larger deals. “Once frozen, parties can fix coding bugs, patch up security vulnerabilities, or amend/terminate the smart contract, or self-resolve a dispute. If a dispute cannot be self-resolved, parties then graduate to a dispute resolution marketplace of third party vendors,” Wan writes. “After all, a $5 bar bet would be resolved differently from a $5M enterprise dispute. Thus, we are dispute process agnostic.”

Wavemaker Genesis led the round, which also included strategic investments from affiliates of Ari Paul (Blocktower Capital), Miko Matsumura (Gumi Cryptos), Youbi Capital, Maja Vujinovic (Cipher Principles), Jordan Clifford (Scalar Capital), Terrence Yang (Yang Ventures) and James Sowers.

“Smart contracts are coded by developers and audited by security auditing firms, but the quality of smart contract coding and auditing varies drastically among service providers,” said Wan, the chief executive of Sagewise, in a statement. “Inevitably, this discrepancy becomes the basis for smart contract disputes, which is where Sagewise steps in to provide the infrastructure that allows the blockchain and smart contract industry to achieve transactional confidence.”

In an email, Wan elaborated on the thesis to me, writing that, “smart contracts may have coding errors, security vulnerabilities, or parties may need to amend or terminate their smart contracts due to changing situations.”

Contracts could also be disputed if their execution was triggered accidentally or due to the actions of attackers trying to hack a platform.

“Sagewise seeks to bring transactional confidence into the blockchain industry by building a smart contract safety net where smart contracts do not fulfill the original transactional intent,” Wan wrote.


Source: The Tech Crunch

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