Chinese Government May Wield Power to Destroy Bitcoin

Chinese Government May Wield Power to Destroy Bitcoin

China has played a critical role in the crypto markets for several years now. A new paper written by academics from Princeton University and Florida International University suggests that China’s growing influence over Bitcoin’s key infrastructure has given the Chinese government the ability to heavily shape, or even destroy, Bitcoin.


Bitcoin (BTC) 00 was designed to be impervious to any form of centralized control. Bitcoin’s core infrastructure was built to give all participants in the system a strong set of incentives to maintain the health and stability of the ecosystem. Bitcoin is now over a decade old and has yet to suffer any type of successful hack or attack, which has fed market perceptions that Bitcoin is completely secure. Researchers suggest that this perception is less and less accurate.

The key to understanding this change is the shifting nature of Bitcoin mining. Bitcoin mining originally could be managed using off-the-shelf computers, but the increasing computational power required to mine Bitcoin has led to the creation of increasingly specialized, and expensive, mining equipment. The paper describes how this has led to increasing miner consolidation.

Mining Power Consolidated in China

“Bitcoin mining has become heavily centralized due to advances in specialized hardware that render commodity hardware obsolete. As a result, miners have congregated into mining pools: consortia of miners who work together and share profits. As of June 2018, over 80% of Bitcoin mining is performed by six mining pools and five of those six pools are managed by individuals or organizations located in China. “

If such a concentration of mining power was in a country with an open economy and predictable rule making and policy implementation, there would be less cause for concern. China’s government, however, takes a far more direct role in managing economic activity than its western counterparts and in many ways is more motivated by ideological concerns. China’s government manages internet and information access for its citizens and has powerful tools to compel obedience to state diktats.

China

Potential Attacks

The researches breakdown the potential methods through which the Chinese government could influence Bitcoin into four categories: disrupt competing miners, undermine consensus and destabilize Bitcoin, de-anonymization, and censorship. Potential attacks could spring from ideological or commercial motives. China’s technical ability to carry out these attacks is increased by the governments free hand domestically.

For example, China’s ability to execute a double spend attack is increased by its control over its domestic internet architecture. By manipulating the rates at which information is sent to different mining pools, it becomes possible to successfully execute a double spend attack with less hashing power. For example, a malicious actor could send a transaction to two pools, but dramatically slow the speed at which the second pool is able to operate, allowing the first pool to easily override it and invalidate the second transaction.

China has long been wary about Bitcoin. Many of the use cases for Bitcoin are antithetical to Chinese governments aims. Bitcoin and other cryptocurrencies make it easier for Chinese citizens to evade capital controls, for example. The Chinese government has been heavy handed with crypto markets in the past, and the increasing amount of hash-power located in China means they have greater and greater ability to control Bitcoin.

What’s your take on the conclusion of this research? Let us know in the comments below!


Images courtesy of Bitcoinist archives, Shutterstock.

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51% Attack Planned for Einsteineum

The crypto industry has been repeatedly rocked by hacks and theft, undermining trust in the ecosystem. These episodes typically occur without warning, leaving investors to count their losses only after the hack occurs. In a bizarre turn, a 51% attack on Einsteinium (EMC2) has been announced in advance. The hack is scheduled for Saturday, Oct 13. 


The 51% attack on Einsteinium will be live streamed and you can watch the livestream of the attack attempt here.

A 51% hack on a coin does not involve stealing coins or manipulating a coin’s price in the service of a “pump and dump” attack. Rather, a 51% hack involves taking control of enough of a coin’s hashrate to allow the coin to be double spent.

A Message From The Attacker

A message from the attacker is posted on the site where the attempted hack will be streamed. The hacker notes that if donations come in higher than expected, they may select a larger project to attack.

If we get $300-500 in donations we’ll have the money to buy the required hashing power to attack Vertcoin. If you want to chip in, Bitcoin:18YvVAxEMYxowSYEmWVtY75ZUdKXXk2vQc, if we go under our goal we’ll do a larger coin but not Vertcoin, if we go over, the remaining money will go to the EFF.

A 51% attack works like this: An attacker rents enough hashing power to gain the majority of hashing power on the targeted coin, in this case Einsteineum. The attacker then exchanges these Einsteineum coins for another cryptocurrency on an exchange, typically Bitcoin.

Once the attacker has exchanged her Einsteineum for Bitcoin, she simply uses her command of the Einsteineum she has attacked to fork the chain and reverse the initial transfer of Einsteineum into the exchange. The attacker now has both the Bitcoin and the Einsteineum he or she used to finance her Bitcoin purchase.

Einsteinium (EMC2)

Previous 51% Attacks

There have been numerous successful 51% attacks on various cryptocurrencies. Perhaps the largest successful attack was on Bitcoin Gold in May 2018. After the attacker gained enough control of Bitcoin Gold’s hash power, they were able to successfully double spend Bitcoin Gold for several days — eventually stealing more than 18 million USD worth of coins. Bitcoin Gold is currently the twenty-fourth largest coin by market capitalization, according to Coinmarketcap.

The cost to finance a 51% attack on many cryptocurrencies is surprisingly low. Despite these relatively low costs, 51% attacks remain surprisingly rare and have typically been confined to relatively small capitalization coins. Increasing strict AML and KYC by exchanges makes it more difficult for attackers to anonymously launder coins through exchanges.

The planned Einsteinium attacker’s stated goal behind the Einsteinium attack is to raise awareness of how easy a 51% attack is to execute and spark a discussion on how to prevent more 51% attacks in the future. The planned attack is only a few days away, it will be interesting to see if Einsteinium can prevent the successful attack despite being forewarned.

Will you be watching the upcoming attack? How can coins and projects make themselves less vulnerable to attack? Let us know in the comments below! 


Images courtesy of Shutterstock, CoinMarketCap.

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Soulja Boy Embraces Bitcoin on New Track

Soulja Boy

Soulja Boy, the American rapper who rose to worldwide fame thanks to his mega-hit, “Crank That,” released a new album titled “Young Drako.” While much of the album focuses on traditional rap subjects, one track on the album, “Bitcoin,” focuses on the artists’ love of the cryptocurrency — as well as his purported success making money as a trader.


While the lyrics remain light on the details regarding Soulja Boy’s trading strategies, the rapper’s enthusiasm for crypto is evident throughout the track. The song was uploaded to YouTube yesterday. The overall project seems to have received a tepid response from the hip hop community, with the overall user rating from hotnewhiphop.com currently sitting at “not feeling it.”

Soulja’s Trading Success

In the track’s chorus Soulja claims to have “spent 6000 on a bitcoin,” although it is unclear if that means Soulja’s initial purchase price cleared at $6,000. Either way, the price of bitcoin (BTC) 00 was roughly $6,550 at noon EST. At a $6,000 purchase price, Soulja is sitting on an approximately 9.2% gain on his investment.

On the first verse, Soulja’s makes a reference to using Cash App and PayPal for managing his cryptocurrency transactions. Aside from referencing his purchase of BTC through his computer, the rest of the verse covers well-tread ground for rappers, with Soulja claiming that his BTC derived fortune had allowed him to successfully woo a rival’s paramour.

On the tracks second and final verse, Soulja makes more direct claims about his love of cryptocurrency, noting that he holds both Bitcoin and Litecoin in his portfolio.

Wake up in the morning and I count my funds
Running to the money like a marathon
I got light coins, bitcoins, they my favorite ones

The verse captures feelings that seem commonplace among traders, not just amongst the crypto-currency, especially the thrill of profitable trades and wealth accumulation. The song also contains allusions to Bitcoin’s performance versus the stock market, as well as the 24/7 nature of the cryptocurrency markets. What crypto trader doesn’t relate to checking Bitcoin’s price immediately upon waking up in the morning?

Soulja Boy

Are Rappers Embracing Crypto?

This is not the first time the rap community has engaged with the crypto industry. Ripple famously hired Snoop Dogg to perform at their company party during 2018 Blockchain week in New York City. Another rap star, Eminem mentioned Bitcoin in his most recent album, “Kamikaze.”

Soulja Boy has been in the news for his other, non-rap based entrepreneurial ventures. In September of 2018 Soulja Boy revealed that he had purchased a Subway sandwich shop — although he apparently has had difficulty maintaining an orderly work schedule for the shop’s employees.

What is next for Soulja’s foray into the cryptocurrency market? Soulja leaves a cryptic hint in the songs outcry, rapping “I got bitcoin, I got Litecoin, I’m going digital, Soulja!”

What do you think of Soulja Boy’s boasts? Let us know in the comments below!


Images courtesy of Shutterstock.

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Yale Endowment Banks on Crypto

Ivy League endowment funds have long been pioneers of the investing community. Many endowments were early investors in private equity and hedge fund managers, helping to popularize these two now conventional asset classes. On Friday, Yale University continued this tradition when it announced that it’s investing in a crypto-focused fund.


Yale currently has the second largest endowment for colleges and universities worldwide, behind only Harvard. Yale’s endowment currently sat slightly north of $27.2 billion at the end of 2017, which worked out to a value of $2,191,268 per current student. Harvard’s endowment is significantly larger, sitting at approximately $36 billion at the end of 2017.

Paradigm’s Team

Yale was one of the initial investors in a recently launched cryptocurrency fund, called Paradigm. Paradigm was co-founded by Fred Ehrsam, a co-founder of Coinbase, Matt Huang, a former partner at Sequoia, and Charles Noye, who joined Paradigm from crypto hedge fund Pantera. According to a Bloomberg report in June, Paradigm intends to invest in early-stage projects in the crypto industry, including new exchanges, new blockchains, and other early projects.

The Wall Street Journal reported in June of 2018 that Huang and Ehrsam and partnered to launch their new fund. According to the WSJ report, Sequoia planned to make a substantial investment Paradigm, with Sequoia continuing to make Blockchain investments independently.

Eden_Ivy

Pioneering Alternative Investments

The size of Yale’s investment in Paradigm has not been disclosed, but the fund is reported to have raised a total of $400 million. For 2019, Yale has allocated roughly sixty percent of their endowment’s assets for alternative investments. The percentage of the fund dedicated to direct equity ownership, in contrast, has fallen to only 13 percent.

Yale’s fund has been managed by David Swensen, who has been managing Yale’s endowment since 1985. When Swensen began managing Yale’s fund, the endowment had approximately $1 billion under management.

Swensen has been part of the vanguard of fund managers tapping unconventional investment strategies in the search of higher returns. Yale recently reported strong yearly performance for the fund, ending in June of 2018 at 12.3%. Swensen’s focus on investing in larger, more illiquid assets is widely credited with driving the endowments strong performance under his stewardship.

Yale University

Yale’s Second Crypto Investment

Yale’s newest investment is not the first endowment exposed to cryptocurrency. Yale has long invested in funds managed by noted venture capital firm Andreesen Horowitz. Andreesen Horowitz recently launched a $300 million crypto-focused investment fund in which Yale was an investor, according to CNBC.

Crypto funds have continued to proliferate despite the recent market shake-up. CNBC reports that as of September 1st, 2018 there are 389 global crypto funds. In 2016 there were just 23 such funds in existence.

Bitcoinist recently reported on a study from Yale advising investors to have at least 6% of their portfolio dedicated to bitcoin.

Yale’s investment represents another small step towards mainstream acceptance of crypto invests by the institutional investment community. Given Yale’s pioneering role in popularizing new assets classes in the past, it will be interesting to see if other Universities begin to follow Yale’s lead.

What do you think of Yale’s endowment announcement? Don’t hesitate to let us know in the comments below!


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Binance Invests in Travel Startup TravelbyBit

Binance Invests in Travel Startup TravelbyBit

Binance announced it has invested $2.5 million USD in Brisbane, Australia based company TravelbyBit. TravelbyBit services the travel and tourism industry, allowing travelers to book their journeys using crypto as payment. TravelbyBit has also built a point-of-sale (POS) terminal for merchants who wish to accept crypto as payment.


Binance intends for the cash infusion to help TravelbyBit expand its crypto POS system in airports worldwide. TravelbyBit has already successfully installed one of their POS terminals at Brisbane Airport.

In September, Bitcoinist reported that cryptocurrency use in Australia has recently doubled.

The Brisbane Airport is Australia’s third largest by volume. TravelbyBit is also working to install terminals in retail shops throughout Australia.

The TravelbyBit terminals currently support payments in Bitcoin (BTC) 00, Ethereum and Litecoin. Following the Binance investment, TravelbyBit intends for the platforms to begin supporting Binance’s creatively-named propriety coin, “Binance Coin,” for payments to merchants as well creatively.

Use Crypto To Remove Travel Pain

In a press release announcing Binance’s investment, Binance CEO Changpeng Zhao stated:

Real, on-the-ground, just-when-you-need-it use case is key for further crypto adoption. In this light, there is no better fit than being able to use your crypto when traveling just after you land in a foreign country, where you may not have the local currency.

A global crypto payment network is seen as a particularly attractive option for international travelers. International travel with multiple stops or layovers frequently involves multiple rounds of expensive currency conversion, with extra bank fees on top for credit and debit card transactions.

At most airports, fiat can only be exchanged at off-market rates with large spreads. Trying to make a small purchase during an international layover while traveling frequently involves informing your bank ahead of time about your intended layover. Crypto payment processing promises to smooth this expensive and sometimes irritating process.

Brisbane, Australia

Binance Invests in Innovation

In addition to Binance’s $2.5 million capital infusion, TravelbyBit announced an AUD $100,000 grant from the Advance Queensland Ignite Ideas program. Advance Queensland Ignite Ideas was established by the Queensland Government in an attempt to help grow innovative companies in Queensland.

Encouraging the mass adoption of cryptocurrency is critical for all market participants. Binance’s large user base, with close to ten million trading accounts and tremendous financial firepower, make it uniquely positioned to help lead the charge for greater adoption. Binance recently launched Binance Labs to find and scale real-world applications for crypto use with the aim of propelling greater mass adoption.

As the crypto community continues to grow, it will be exciting to see the impact TravelbyBit’s terminals end up having on mass adoption.

What do you think of Binance’s investment in TravelbyBit? Will you use crypto for your travel payments? Let us know in the comments below.


Images courtesy of Shutterstock, Twitter/@TravelbyBit.

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KZen Wallet Hopes to Break Ground

Breaking ground

A new entrant has emerged in the already crowded crypto wallet space. KZen, a company co-founded by a former TechCrunch editor Ouriel Ohayon, recently announced that it has completed a $4 million funding round while hard at work building a more intuitive and user-friendly crypto wallet. KZen is planning on offering the world the first non-custodial digital wallet where users are not required to manage their own private keys.


The firm declined to use an ICO to fund its wallet project, instead relying on traditional start-up funding mechanisms. Ohayon laid out his rational for not pursuing an ICO in a Medium post on August 7th. KZen’s funding round was led by Benson Oak Ventures, and the group attracted a prominent group additional investor, including Elron, BlockNation, FJ Labs and Samsung Next. The firm also has several noteworthy individual investors.

In addition to the capital raised from their investor group, the KZen team has received research grants from leading crypto projects, including Tezos and Zilliqa. Additionally, Benson Oak Manager Partner Robert Cohen will be joining KZen’s board as an advisory member.

There are three co-founders in addition to Ohayon. Co-founder Gary Benattar is heading up engineering for the project, with Tal Be’ery in charge of security, and Omer Shlomovits overseeing cryptography. The project will be open source, so interested collaborators can review the teams Github page for a look at the progress to date.

Private Beta Launch Coming Soon

While the announcement of the capital raise was issued on the company’s blog on Sept 29th, the KZen already expects to have a beta version of the wallet available for review for a select group in the coming weeks. Interested participants can register for the Beta launch via the firm’s site.

There are already a bevy of wallet options for crypto traders, as KZen readily admits. KZen’s goal is to build a superior wallet that can be used and understand by the average retail consumer. Taking even a cursory glance across the wallet ecosystem, one easily finds dozens of available options.

A New On-Ramp?

The sheer number of available wallets combined with the vast array of features that must be compared before selecting a wallet serves constitutes a roadblock for crypto adoption. By building a faster, simpler, and easier to use wallet, KZen could position itself as an on-ramp for first-time crypto buyers. KZen claims that its new wallet will utilize new ways to manage private keys, which will significantly cut down on the risk of both human error and security breaches.

It will be exciting to follow the KZen team as they attempt to build a market leading wallet solution. The team’s expertise and financial firepower give them a good shot at building an easy to use, secure wallet that may expedite further crypto adoption by the investing public.

What do you think of KZen’s announcement? What are some of your favorite crypto wallets? Let us know in the comments below. 


Images courtesy of Shutterstock.

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Institutional Traders Haven’t Rescued Crypto Yet

Throughout 2018’s price slump, investors in digital assets hoped for an influx of institutional investors to rescue crypto prices. Retail investors pinning their hopes on large investors breaking digital assets out of their price slump are beginning to make peace with an uncomfortable fact — the institutional investors are already here.


Hedge funds and proprietary trading shops are increasingly becoming some of the largest traders of cryptocurrencies, taking the other side of larger trades in the market. The impact of professional and institutional investors on crypto markets is reflected in collapsing bid-ask spreads and increasing price convergence across exchanges. Spreads on bitcoin (BTC) 00 future contracts trading on the CME have collapsed by as much as eighty percent since the contracts began trading.

Many of the institutional firms entering the crypto space are proprietary trading firms, whose primary business lines typically include market making and arbitraging pricing inefficiencies across markets. Proprietary firms have been trading digital assets using primarily using over-the-counter (OTC) markets, rather than utilizing traditional exchanges. In over-the-counter OTC trades, trades are made directly by buyers and sellers, rather than routing through an exchange or open marketplace.

Ethereum Classic Steadily Rises To Surprise Top Ten Crypto Markets

Better Pricing Through OTC Markets

Some of the biggest sellers on OTC markets are coin miners. Coin miners are increasingly using private sales to distribute their inventory, rather than offloading the newly minted coins directly onto retail exchanges.

By trading with proprietary firms and brokerages — rather than on exchange — miners and other big sellers can lock in pricing before completing the transaction. This eliminates the need for sellers to attempt to time market highs and can make earnings smoother and more predictable. Miners have reportedly begun setting up their own liquidity management teams to streamline their OTC trading operations.

Institutional traders also provide a valuable service to larger buyers hoping to enter the market. Large buyers frequently find that, due to the fragmented nature of crypto markets, they can not purchase large blocks of coins through exchanges without significantly driving up acquisition costs.

Chicago

Chicago’s Increasing Role

One of the largest OTC market participants is Cumberland, a subsidiary of DRW. DRW has been opening offices globally to build its position as a global market maker for digital assets. Cumberland currently has a staff of approximately fifty people, the majority of whom are based out of Cumberland’s Chicago headquarters.

Other notable entrants include Jump Trading, XR Trading and Transmarket. Many of the market makers entering the space are based in Chicago, which has a large pool of proprietary trading firms and market makers. These emerged from Chicago’s dominant global futures exchanges.

Chicago’s increasing importance in the world’s digital asset infrastructure was highlighted by the launch earlier this year of Coinbase’s Chicago office. Coinbase’s OTC arm is headed by Paul Bauerschmidt, who spent thirteen years working at the Chicago Mercantile Exchange. Coinbase expects to eventually add up to thirty staff at its new office.

While the impact of the entrance of institutional investors hasn’t caused the hoped-for price resurgence, it is a powerful sign of the long-term viability of the crypto markets. Collapsing spreads and greater market liquidity will ultimately benefit all market participants.

Can institutional investors rescue crypto prices? Let us know your thoughts in the comments below.


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Brexit Driving Crypto Uncertainty

As the clock races down to Brexit next spring, uncertainty around the nature of Great Britain’s relationship following its exit from the EU is increasingly shaping business and investment decisions. Much of the media coverage of Brexit has focused on impact it will have on London’s once-dominant financial services industry. It is becoming increasingly clear that Brexit will have a tremendous impact on more than just the City of London, with the crypto world preparing itself for the impact of a messy British exit.  


On March 29, 2019, Great Britain is set to exit from the European Union. The British decision to leave the EU occurred via a referendum in 2016, despite no clear framework for what the nations ongoing relationship with the European Union would look like after exiting.

Bungled and incompetent negotiating by the British government, combined with an increasingly hardline EU line on continued British access to the single market means markets are beginning to price in the fact that in less than six months, trade between the EU and Britain will become much more expensive and difficult.

The uncertainty around both Brexit and the future regulatory status of crypto-currency is increasingly shaping the investment decision of firms in the crypto-space. As European nations vie to attract cryptocurrency related investment, continued access to the EU single market has become the most important qualification for investment.

The British government has recently begun discussing the need for Blockchain regulation, and whether the industry should be overseen by the Financial Conduct Authority (FCA,) the British are increasingly ceding ground to faster and more motivated rivals.

Former UBS Bankers Raise Funds for Innovative Bank in Zug

Traditional Havens Suffer

Traditional offshore jurisdictions such as Gibraltar and Switzerland both suffer from this lack of clarity. Gibraltar is a small British possession off the cost of Spain southern coast. Gibraltar has been a British possession since the early 18th century and has traditionally functioned as an offshore jurisdiction under British law. Other prominent British offshore jurisdictions include the Isle of Man, Guernsey, and Jersey. These territories have long served as a conduit to London’s financial markets but have been criticized as tax havens that facilitate unsavory deals.

Switzerland has been widely praised for its light touch regulatory approach to the crypto industry. In turn the country has seen a subsequent blossoming of the industry, notably in Zug. The Swiss Governments’ relation with the EU is becoming increasingly fraught, however, with the EU beginning to alter the ability of Swiss equity traders to participate in EU markets.

The Race for Business

In a Pre-Brexit world, these island jurisdictions would have been natural candidates for crypto investment. With the prospect of hard Brexit rapidly approaching, and a loss of access to the single market, investment is now flowing to jurisdictions with clearer regulatory guidelines. Malta has emerged as the clear front runner in this space, drawing significant investment as exchanges and other operators move to take advantage of Malta’s clear regulatory guidelines and assured single market access.

Even France, which has long been seen as having an unfavorable investment climate for the financial services and emerging technology industries, has been striving to attract its fair share of the emerging crypto industry. The Pro Business government of Emmanuel Macron has been aggressively courting financial services firms to move to Paris to secure their access to the single market. The French government has been working hard to clarify its crypto rules and drive investment in the space.

The battle to become the EU crypto hub is still far from over. As rules and regulations clarify, investment will naturally flow to the jurisdiction where it can be most effectively deployed. While we don’t know which country will end up becoming the ultimate winner, it is increasingly clear that it will not be the UK.

Which country will be take the mantle as the EU hub for Crypto? Let us know in the comments below!


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Ripple’s xRapid Technology Goes Live

On Monday, October 1st Ripple announced that three financial institutions are scheduled to begin using Ripple’s xRapid product to handle international transactions. The announcement was made Monday at Ripple’s annual two-day conference, called Swell. The announcement was made by Ripple CEO Brad Garlinghouse.


Major Breakthrough for Ripple

XRapid will be deployed by Catalyst Corporate Federal Credit Union, Cuallix, and Mercury FX. Mercury FX and Cuallix are both payment providers, while Catalyst Corporate Federal Credit Union is a financial institution that serves cooperative financial institutions across the United States. Cuallix focuses on facilitating remittance payments between the US and Mexico. Both Cuallix and Mercury FX were participants in the pilot phase of the xRapid roll out earlier this year.

Ripple claims that participants in the pilot phase of the xRapid roll-outsaw significant reductions in the cost for sending international payments. Despite rapid advancement in technology globally, international payments are still achingly slow, with international wire transfers typically taking several days to settle. International transfers using xRapid typically take only two minutes to settle. Ripple claims that international transfers using xRapid saw a cost reduction of between forty and seventy percent compared to traditional payments.

How xRapid Works

XRapid utilizes XRP to power international transfers. An institution that wishes to make an international payment first connects to a digital asset exchange, exchanging the originating transfer currency for XRP. The newly converted XRP is then sent to a digital asset exchange in the country where the payment is being received, where it is converted into local fiat.

Ripple has yet to announce any banking partners for its xRapid product. To date banking institutions have been experimenting with Ripple’s xCurrent product. xCurrent allows banks and financial institutions to easily monitor and track payments without the need of a counter-party, greatly speeding settlement times.

XRP Price Surge and  Volatility

XRP has seen tremendous price volatility during the past week, surging on rumors that Ripple was on the cusp of announcing major partnerships for xRapid. XRP’s price surge caused it to briefly displace Ethereum (ETH) 00 as the second largest cryptocurrency by market capitalization. XRP’s market capitalization exceed Ethereum’s on both September 21st and September 26th, but XRP’s price has retrenched since then, with Ethereum solidifying its position as the second largest cryptocurrency by market capitalization.

Financial institutions and payment providers will not need to hold XRP directly to use the xRapid system. Institutions using xRapid will only need to purchase XRP from market makers trading on digital asset exchanges to complete international transfers. On August 16th Ripple announced that Bittrex would be the preferred exchange for transfers involving dollars, with Bitso the preferred exchange for Mexican Pesos and Coins.ph the preferred exchange for transactions involving Philippine Pesos.

This is the first time that XRP will be used by financial services firms for commercial applications. Many in the crypto industry have long held that blockchain technology will revolutionize the traditional financial services sector. This announcement is the first breakthrough in that process. The market will be watching closely to see if Ripple can maintain its momentum following this news.

What do you think of Ripple’s announcement? Let us know in the comments below.


Images courtesy of Bitcoinist archives, Shutterstock.

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‘Pivot to Asia,’ says Arrington After SEC Subpoena

Noted Crypto investor Michael Arrington announced in a tweet on Friday that his firm Arrington XRP Capital is no longer investing in U.S. token deals. The news comes after the firm received its second subpoena from the SEC. Arrington states that the subpoena was seeking information regarding the firm’s role as an investor in a US based company.


Arrington’s announcement is disheartening, but not particularly surprising. The crypto industry continues to expand and mature, but the US government so far has been reluctant to establish clear regulatory guidelines for firms operating in the space.

Continued Regulatory Uncertainty

Government policy regarding the crypto industry to date has largely been limited to select enforcement actions, leaving investors and traders to guess which actions are legal. It remains unclear which regulatory body will ultimately have jurisdiction over the market. Crypto’s role as both a currency and a mechanism for fundraising via an ICO means that either the CFTC or SEC could plausibly claim to have jurisdiction.

US Government policy incoherence was highlighted during the recent 1Broker takedown. 1Broker is facing suits from both the SEC and CFTC, as well as asset seizure and criminal charges from the FBI. The SEC and CFTC suits that 1Broker violated rules and regulations that do not obviously pertain to 1Brokers alleged activities. The CFTC’s suit, for example, cites 1Brokers failure to register itself with the CFTC, a process that does not appear possible under current regulations.

Even some of the most basic questions, such as capital gains taxation for crypto traders, remain unsolved. Traders and investors who wish to operate in compliance with regulations are essentially forced to make their best on questions of compliance, hardly an ideal investing environment.

Arrington’s firm has been one of the most prominent figures to rule out investing in the United States, but there is growing fear in the industry that more and more investors may follow his course.

Growing Concerns

At a recent industry round-table held in Washington D.C., several attendees voiced their concerns about the declining regulatory competitiveness of the United States. Several representatives voiced concerns that their firms were at a competitive disadvantage with firms abroad who can raise capital more freely.

While the US has moved only slowly and sporadically towards a coherent crypto regulatory regime, other countries have been much more proactive. Switzerland and Malta are both examples of countries that established friendly regulatory environments relatively quickly. Both jurisdictions have seen a surge of blockchain activity with entrepreneurs and startups flocking to set up shop.

Malta and Switzerland – Guides Going Forward?

Malta’s “Virtual Financial Assets Act” and “Innovative Technology Arrangement and Services Act,” which both were passed by the Maltese government in June, will be going into effect on November 1st, 2018. The rapid turnaround time highlights the ability of smaller jurisdictions to quickly make changes to attract industry. Malta is already home to both Binance and BitBay.

It will always be easier for smaller countries to amend and changes their rules than the United States, a massive country with a slow and deliberative legislative process. Nevertheless, it is becoming increasingly clear that without regulatory clarity and relief, US-based investors and traders will be increasingly cut off from exciting developments in the crypto industry.

What country has the best crypto regulations? What should the US do to compete? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter/@arrington.

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‘Nothing At All’ Going on With Crypto Regulation, Says D.C. Insider

'Nothing At All' Going on With Crypto Regulation, Says D.C. Insider

Despite the growing importance of the cryptocurrency industry, the US government’s position on crypto regulation remains frustratingly opaque. According to a D.C. insider, a movement towards real regulation or greater regulatory guidance is still quite far away.


Regulatory Uncertain

Questions about how the government intends to regulate the crypto industry abound. For example, it is still unclear to many investors whether crypto regulation will ultimately come from the SEC or the CFTC.

While there remains no widespread movement in Washington towards reforming the crypto regulatory environment, there are encouraging signs that pockets of Congress are beginning to take interest in the cause.

Beginnings of Congressional Action?

On September 24th, Rep. Warren Davidson (R-OH) hosted industry leaders from Wall Street, Silicon Valley, and the crypto industry for a roundtable discussion on the crypto regulatory environment. Davidson’s roundtable, titled “Legislating Certainty for Cryptocurrencies,” was held at the Library of Congress. Roughly eighty thought leaders from the private sector attended the roundtable, with multiple members of Congress and their aids in attendance as well.

Davidson stressed the importance of industry being involved in crafting the government rules that will eventually govern the crypto space.

Congress

Congressional Letter to the SEC

Following the roundtable, Davidson and fourteen other Representatives issued a public letter to SEC chairman Jay Clayton requesting that the SEC issue clarification on whether Initial Coin Offerings are considered security sales. The Representatives used the letter to express concern that all tokens were being treated as securities, regardless of whether the designation was applicable or relevant. The letter stated:

Therefore, we believe is important that all policy makers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately through formal guidance or legislation.

The letter went on to express concern that existing guidance on SEC policy is being conveyed solely through enforcement action, leading market participants forced to try to divine SEC policy through the scope of its enforcement actions. The letter continued:

Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.

Legislstion

New Legislation Begins to Emerge

While no major legislation has been introduced to cover the crypto industry, U.S. Representative Tom Emmer (R-MN) has introduced a slate of three bills designed to encourage support for the crypto industry. Emmer’s bills propose only minor changes to how cryptocurrency is regulated in the U.S.

Concerns about the regulatory status of various crypto projects have encouraged many entrepreneurs and firms to decamp to more stable regulatory climes. For example, Switzerland’s “light-touch” regulatory policy has fueled the dramatic growth of the industry in the country.

While it is encouraging to see the government finally begin to take interest in the crypto industry, the Congressional letter stressed that SEC guidance would take time to fully emerge and develop. Start-ups and entrepreneurs hoping for greater regulatory clarity will likely still have a long time to wait.

Will U.S. regulators eventually wake up? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter/@.

The post ‘Nothing At All’ Going on With Crypto Regulation, Says D.C. Insider appeared first on Bitcoinist.com.

‘Nothing At All’ Going on With Crypto Regulation, Says D.C. Insider

'Nothing At All' Going on With Crypto Regulation, Says D.C. Insider

Despite the growing importance of the cryptocurrency industry, the US government’s position on crypto regulation remains frustratingly opaque. According to a D.C. insider, a movement towards real regulation or greater regulatory guidance is still quite far away.


Regulatory Uncertain

Questions about how the government intends to regulate the crypto industry abound. For example, it is still unclear to many investors whether crypto regulation will ultimately come from the SEC or the CFTC.

While there remains no widespread movement in Washington towards reforming the crypto regulatory environment, there are encouraging signs that pockets of Congress are beginning to take interest in the cause.

Beginnings of Congressional Action?

On September 24th, Rep. Warren Davidson (R-OH) hosted industry leaders from Wall Street, Silicon Valley, and the crypto industry for a roundtable discussion on the crypto regulatory environment. Davidson’s roundtable, titled “Legislating Certainty for Cryptocurrencies,” was held at the Library of Congress. Roughly eighty thought leaders from the private sector attended the roundtable, with multiple members of Congress and their aids in attendance as well.

Davidson stressed the importance of industry being involved in crafting the government rules that will eventually govern the crypto space.

Congress

Congressional Letter to the SEC

Following the roundtable, Davidson and fourteen other Representatives issued a public letter to SEC chairman Jay Clayton requesting that the SEC issue clarification on whether Initial Coin Offerings are considered security sales. The Representatives used the letter to express concern that all tokens were being treated as securities, regardless of whether the designation was applicable or relevant. The letter stated:

Therefore, we believe is important that all policy makers work toward developing clearer guidelines between those digital tokens that are securities, and those that are not, through better articulation of SEC policy, and, ultimately through formal guidance or legislation.

The letter went on to express concern that existing guidance on SEC policy is being conveyed solely through enforcement action, leading market participants forced to try to divine SEC policy through the scope of its enforcement actions. The letter continued:

Additionally, we are concerned about the use of enforcement actions alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.

Legislstion

New Legislation Begins to Emerge

While no major legislation has been introduced to cover the crypto industry, U.S. Representative Tom Emmer (R-MN) has introduced a slate of three bills designed to encourage support for the crypto industry. Emmer’s bills propose only minor changes to how cryptocurrency is regulated in the U.S.

Concerns about the regulatory status of various crypto projects have encouraged many entrepreneurs and firms to decamp to more stable regulatory climes. For example, Switzerland’s “light-touch” regulatory policy has fueled the dramatic growth of the industry in the country.

While it is encouraging to see the government finally begin to take interest in the crypto industry, the Congressional letter stressed that SEC guidance would take time to fully emerge and develop. Start-ups and entrepreneurs hoping for greater regulatory clarity will likely still have a long time to wait.

Will U.S. regulators eventually wake up? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter/@.

The post ‘Nothing At All’ Going on With Crypto Regulation, Says D.C. Insider appeared first on Bitcoinist.com.

Full ‘Circle’: Goldman Sachs Backed Startup Launches Stablecoin Cryptocurrency

Circle Launches New Stablecoin Trading

On September 26th, Circle announced the release its new stablecoin USD Coin (USDC), which will begin trading on Circle’s Poloniex exchange immediately. The new USDC stablecoin will be fully collateralized by USD at a 1:1 ratio. The stablecoin market has been particularly active recently, with several other projects launching in past few months.


Circle’s announcement also highlights that the firm has over thirty supporting companies lined up to begin offering trading and support for the new stablecoin. Exchanges that have agreed to begin trading in the new stablecoin. In addition to Poloniex, other exchanges include OKCoin, KuCoin, Digifinex, Coinplug, XDAEX, and CoinEx. Additionally, numerous prominent wallet providers have pledged to begin supporting USDC shortly.

Circle’s stablecoin project began approximately four months ago when Circle announced that it had raised a $110 million funding round, partially to fund the development and launch of its new stablecoin. Circle is notably backed by Goldman Sachs, and its successful funding round is said to have been led by Bitmain Technologies, the Chinese mining giant.

Goldman’s backing and the massive fundraising round have lent considerable gravitas to the project. Circle acquired Poloniex earlier this year, reportedly  acquiring the exchange for approximately $400 million.

Convertibility and Ease of Use

Traders can convert USD to USDC easily using Circle’s conversion platform. Funds are held with Circle’s banking partners. The USDC coins follow the ERC-20 standard, and while there will be no fee for tokenizing USD, there will be a .1% fee charged when USDC is converted back to fiat. By building USDC using the ERC-20 standard, Circle has made it relatively straightforward for exchanges and wallet providers to add support for the new coin.

To ensure that USDC retains its 1:1 peg, Circle led the creation of CENTRE, a consortium with numerous other market participants designed to monitor and regulate USDC issuance. Issuers of USDC must comply with the consortium’s rules, including sending audited bank statements proving issuers have enough USD on deposit to maintain the 1:1 peg.

The Increasingly Crowded Stablecoin Field

There has been a tremendous amount of activity in the stablecoin market over the past few months. The launch of Circle’s new stablecoin follows the news of the approval for launch of both Gemini and Paxo’s stablecoins by the New York Department of Financial Services (NYDFS). Two start-ups, Havven and Carbon, have also recently launched their own stablecoins.

Stablecoins have emerged as a key part of the crypto market’s infrastructure, allowing traders to easily move in and out of positions without triggering capital gains tax. Stablecoins also provide utility by giving traders and exchanges an easy medium of exchange that avoids interacting with the traditional financial system.

Tether

Tether Trouble

The dominant stablecoin to date has been Tether (USDT), which has dogged by persistent concerns about the validity of its 1:1 peg. Tether is regarded by some as a systemic risk to the growing crypto markets, with widespread concerns about the impact regulatory action against Tether could have on the broader market.

Concerns over whether Tether truly holds $1 USD on deposit for each USDT has issued were sparked by its decision in early 2018 to sever its relationship with its auditor in early 2018, always a red flag for suspected corporate misgovernance. According to Coinmarketcap, over 2.8 Billion of USDT had been issued as of September 26th.

In an attempt to allay market concerns about Tether’s solvency, Tether released a report by Washington D.C. law firm Freeh, Sporkin & Sullivan LLP attesting to the firm’s solvency, but the report ultimately raised more questions than answers.

The market will be keeping a close eye on how quickly USDC is adopted. The question of which stablecoin will ultimately end up dominant is far from settled, and the stablecoin space promises to remain interesting for the foreseeable future.

What do you think of USDC’s launch? Let us know in the comments below!


Images courtesy of Shutterstock, Twitter/@circlepay.

The post Full ‘Circle’: Goldman Sachs Backed Startup Launches Stablecoin Cryptocurrency appeared first on Bitcoinist.com.

Drivechain Launch Promises Easy Bitcoin Sidechains

On Tuesday, September 25th, Paul Sztorc announced the first Drivechain release on testnet. Drivechain promises to radically reshape the cryptocurrency industry by allowing multiple blockchains to utilize and share the same fixed pool of Bitcoin. Aside from using the same pool of Bitcoins, each sidechain would operate autonomously, under its own unique parameters.


Drivechain technology will allow for soft-forks, facilitating the emergence of sidechains which would operate with unique characteristics. Sidechains would begin by receiving Bitcoin (BTC) 00 deposits from miners, who would then be able to periodically send and receive Bitcoin tokens to and from the main chain.

Sidechains would be free to implement new features and improvements. Sztorc lists “larger blocks, Turing-completeness, and ring signatures,” as features that could all be easily adopted by Bitcoin sidechains.

Benefits of Bitcoin Sidechains

Sztorc sees Drivechain technology as potentially solving several major challenges facing Bitcoin. Proposed changes to Bitcoin Core have sparked prolonged and venomous political fights, reducing the protocol’s ability to adapt and implement new features. Under the current regime, changes to the Bitcoin protocol must go through a lengthy review and debate process, including deciding whether the changes merit a hard fork.

By opening sidechains, developers would be able to launch new soft forked iterations of Bitcoin without the political melodrama inherent in the current system. Counter-intuitively, Sztorc believes this will ultimately add to the stability of base layer Bitcoin, as improvements can simply be soft-forked onto new side chains. The ability to launch new softchains would remove many of the incentives to make changes to the core bitcoin protocol, allowing the protocol to stabilize.

Sztorc sees Drivechain technology as helping to cement Bitcoin’s dominance in the crypto markets. Since anyone will be free to introduce new sidechains to Bitcoin, promising ideas and innovations will naturally flow to Bitcoin as sidechains. The system will create strong incentives for Bitcoin to be constantly absorbing and implementing successful ideas and concepts created by other projects.

sztorc

Sidechain Safety

Drivechain uses an innovative system to ensure that transfers from sidechains back to the mainchain will be handled correctly. When a new sidechain is launched, miners will deposit mainchain BTC as a deposit. The miners who made the deposit then have control over where the BTC is ultimately sent. To secure the system, transfers out of the sidechain will be allowed very infrequently, perhaps two or three times a year.

For miners to send Bitcoin out of the sidechain, they must publicly agree by a super majority where the tokens will be sent. The agreed-upon transaction will be publicly posted and will only be processed if it is not challenged.

At first glance, greatly restricting side to main chain transactions would drain liquidity from the system. However, since market participants would be able to track the Bitcoin flows between the main and side chains, market makers would be able to provide instant liquidity between main and side chain tokens using atomic cross-chain swaps. Market makers will be able to correctly price the spot rate by deriving it from the implied forward rate in the publicized future transfer announcement posted by the miners.

For more information, Sztorc has posted a bevy of useful information and links on his blog announcing the Drivechain launch. Sztorc has posted a usage guide that offers a step-by-step guide to using and understanding Drivechain. Sztorc has also posted a two-hour long video on his site — an adaptation of a presentation he gave earlier in 2018 — which goes into great detail for those seeking more information.

What impact do you think Drivechain will have on Bitcoin’s evolution? Leave a comment below to let us know!


Images courtesy of Shutterstock, Twitter/@PaulFSzt

The post Drivechain Launch Promises Easy Bitcoin Sidechains appeared first on Bitcoinist.com.

Drivechain Launch Promises Easy Bitcoin Sidechains

On Tuesday, September 25th, Paul Sztorc announced the first Drivechain release on testnet. Drivechain promises to radically reshape the cryptocurrency industry by allowing multiple blockchains to utilize and share the same fixed pool of Bitcoin. Aside from using the same pool of Bitcoins, each sidechain would operate autonomously, under its own unique parameters.


Drivechain technology will allow for soft-forks, facilitating the emergence of sidechains which would operate with unique characteristics. Sidechains would begin by receiving Bitcoin (BTC) 00 deposits from miners, who would then be able to periodically send and receive Bitcoin tokens to and from the main chain.

Sidechains would be free to implement new features and improvements. Sztorc lists “larger blocks, Turing-completeness, and ring signatures,” as features that could all be easily adopted by Bitcoin sidechains.

Benefits of Bitcoin Sidechains

Sztorc sees Drivechain technology as potentially solving several major challenges facing Bitcoin. Proposed changes to Bitcoin Core have sparked prolonged and venomous political fights, reducing the protocol’s ability to adapt and implement new features. Under the current regime, changes to the Bitcoin protocol must go through a lengthy review and debate process, including deciding whether the changes merit a hard fork.

By opening sidechains, developers would be able to launch new soft forked iterations of Bitcoin without the political melodrama inherent in the current system. Counter-intuitively, Sztorc believes this will ultimately add to the stability of base layer Bitcoin, as improvements can simply be soft-forked onto new side chains. The ability to launch new softchains would remove many of the incentives to make changes to the core bitcoin protocol, allowing the protocol to stabilize.

Sztorc sees Drivechain technology as helping to cement Bitcoin’s dominance in the crypto markets. Since anyone will be free to introduce new sidechains to Bitcoin, promising ideas and innovations will naturally flow to Bitcoin as sidechains. The system will create strong incentives for Bitcoin to be constantly absorbing and implementing successful ideas and concepts created by other projects.

sztorc

Sidechain Safety

Drivechain uses an innovative system to ensure that transfers from sidechains back to the mainchain will be handled correctly. When a new sidechain is launched, miners will deposit mainchain BTC as a deposit. The miners who made the deposit then have control over where the BTC is ultimately sent. To secure the system, transfers out of the sidechain will be allowed very infrequently, perhaps two or three times a year.

For miners to send Bitcoin out of the sidechain, they must publicly agree by a super majority where the tokens will be sent. The agreed-upon transaction will be publicly posted and will only be processed if it is not challenged.

At first glance, greatly restricting side to main chain transactions would drain liquidity from the system. However, since market participants would be able to track the Bitcoin flows between the main and side chains, market makers would be able to provide instant liquidity between main and side chain tokens using atomic cross-chain swaps. Market makers will be able to correctly price the spot rate by deriving it from the implied forward rate in the publicized future transfer announcement posted by the miners.

For more information, Sztorc has posted a bevy of useful information and links on his blog announcing the Drivechain launch. Sztorc has posted a usage guide that offers a step-by-step guide to using and understanding Drivechain. Sztorc has also posted a two-hour long video on his site — an adaptation of a presentation he gave earlier in 2018 — which goes into great detail for those seeking more information.

What impact do you think Drivechain will have on Bitcoin’s evolution? Leave a comment below to let us know!


Images courtesy of Shutterstock, Twitter/@PaulFSzt

The post Drivechain Launch Promises Easy Bitcoin Sidechains appeared first on Bitcoinist.com.

Lamassu Unveils New Line of Bitcoin, Cryptocurrency ATMs

On September 24th, Lamassu announced the introduction of their new line of cryptocurrency ATMs to the public. Lamassu calls its new line of ATMs, “Sintra.” The ATMs herald a new line of ATMs as another crucial step in crypto’s march towards widespread consumer use and accessibility. 


Growing Industry

According to CoinATMrader.com, there are currently roughly 3,750 crypto ATMs installed worldwide. Lamassu has been producing cryptocurrency ATMs since 2013 when they produced their first, which was called the Bitcoin Machine.

While that number sounds impressive, and the number of the crypto ATMs installed continues to grow steadily, it is important to put that number in context. Information from Data.gov, for example, indicates that there are over 5,500 bank-owned ATMs in New York State alone. Crucially, this ATM count does not include independently managed ATMs at convenience stores and other retail locations.

Cost

Pricing for the new crypto ATM’s ranges from 5,200 EU for the cheapest Duoro II model, to 8,900 EU for the highest price Sintra Forte model. The mid-priced Sintra model costs 7,500 EU. The Duoro II model is the newest model of Lamassu’s original Crypto ATM, and features one-way fiat to crypto conversion, while both the Sintra and Sintra Forte feature two-way conversion.

The new models offer a bevy of features, designed to make buying and selling crypto through the machines as painless as possible. The machines feature a sleek, futuristic look, and are all crafted in Portugal. The body of the machines is crafted out of 2.5mm steel for extra durability.

Owners of these machines can configure their ATM’s to take almost any major currency, and support conversions from fiat to Bitcoin, Zcash, Ethereum, Bitcoin Cash, Litecoin, and Dash.

While Lamassu does not directly facilitate transactions on the ATM, it does offer a backend exchange trading engine that can steer conversions to liquidity providers. Lamassu’s engine is currently connected to BitPay, Bitstamp, Kraken, and Coinbase.

Fees and Regulatory Issues

ATM operators have control over the fee structure charged by their machines and can profit by either charging direct fees or adjusting the spread charged by their liquidity provider.

On Lamassu’s website, the estimates indicate that a machine needs roughly $800-$1,000 worth of daily transactions to break-even. Lamassu estimates that the average monthly turnover on their machines is roughly $20,000 and rising.

The Sintra line of ATMs features numerous compliance features, but investors interested in purchasing and managing a machine need to do their due diligence regarding the legality of operating an ATM in their jurisdiction.

Prospective ATM operators in the United States must ensure they are following both federal and state laws. Bitcoin ATMs would currently fall under the criteria of “Exchangers,” according to the Financial Crimes Enforcement Network. In turn, they must register as “Money Service Businesses.” If you are interested in purchasing a machine in the United States, this primer is a handy starting point.

As interest in Crypto continues to grow among the retail investing community, ATMs will likely be a key “on-ramp” for investors into the crypto industry.

What do you think of Lamassu’s New ATMs? Let us know in the comments below!


Images courtesy of Bitcoinist archives, Shutterstock, Lamassu.is

The post Lamassu Unveils New Line of Bitcoin, Cryptocurrency ATMs appeared first on Bitcoinist.com.