Categories
Blockchain and DLT

Enterprise Blockchains: Everything you will ever need to know

A quick search on the internet about the most popular technologies will almost inevitably yield blockchain as one. Brought into existence by Satoshi Nakamoto, the creator of Bitcoin, blockchain was once dismissed as a fleeting fad, but now it’s one of the most talked-about and valued technologies. So much that industry after industry is exploring to see how it can help them accomplish tasks in faster, cheaper, more transparent, and more accurate fashions. 

In this article, we’ll be looking at the application of blockchain in enterprises, types of blockchain, and which ones are suitable for enterprises, challenges facing full-scale adoption of enterprise blockchain, and more, but first, what is enterprise blockchain?

What is Enterprise Blockchain?

Enterprise blockchain is a blockchain system that can be used to drive or support enterprise-level processes.

Blockchain will soon positively disrupt the enterprise sector thanks to its revolutionary qualities of immutability, transparency, and decentralization.

Different Types of Blockchains for Blockchain Enterprises

Let’s take a look at the blockchain options available for enterprise blockchains today, namely public and private blockchains.  

We’ll look at their similarities as well as what sets them apart, and why one type is more suitable than the other for enterprise-level use.

Similarities:

  • They offer a decentralized, peer-to-peer platform
  • Each network participant has a copy of the blockchain
  • They both guarantee immutability – or inalterability of records  

Public Blockchains

When you think of Bitcoin, Ethereum, and Litecoin, etc. you’re thinking of public blockchains. Public blockchains are open ecosystems in which anyone and everyone can participate. But public chains are impractical for enterprise use. This is because:

  • Block sizes found in these chains are simply inadequate to store the massive data handled in enterprises
  • There are scalability and throughput issues. For example, Bitcoin can process just seven transactions per second. Its confirmation time for blocks is 10 minutes – which is an unacceptable latency for the millions of transactions that enterprises need to put out.
  • They require massive amounts of computational energy – rendering them unsuitable for long-term and massive scale use
  • Their openness, while good for transparency, is also a problem because it compromises on privacy

Private Blockchains

Private blockchains, also called permissioned blockchains are just that – private. Unlike public chains, access to a private blockchain requires authorization. Access could be given through either:

  • Being an existing participant
  • Being given access by an authorized person
  • Being part of a consortium

Linux Foundation’s Hyperledger Fabric is a good example of a permissioned blockchain network. This blockchain is designed specifically for enterprise applications. 

Required Features of Enterprise-level Blockchains

i) High Performance

For blockchains to be able to be adopted for enterprise use, they need to demonstrate strong and fast performances. This means:

  • The ability to compartmentalize tasks
  • The ability to effect asynchronous communication between elements
  • Faster consensus protocols
  • The ability to carry out varied computations simultaneously
  • Ability to self-execute

ii) High Resilience

High resilience means blockchains must have the ability to bounce back fast from downtimes and failure. It also means that the blockchains must be able to avoid these instances in the first place.

iii) Privacy and Security

Privacy is non-negotiable when it comes to enterprise blockchains. This means they must be able to support secure communications and storage as well as the integrity of a company’s data and profile.

Examples of Enterprise Blockchains in Use

Some companies have already jumped on the enterprise blockchain bandwagon.

Let’s look at examples in various categories:

Finance: Santander, JP Morgan, Royal Bank of Canada, Goldman Sachs, and First Bank of America are just a few of the hundreds of banks that are deploying blockchain technology. Such banks are either involved with the Ethereum Enterprise Alliance, Hyperledger, or the R3 Corda project.

Payments: American Express and Visa are examples of payment companies that are using blockchain to implement various payment procedures.

Automobiles: Volkswagen, Renault, and Lamborghini are examples of vehicle companies that are employing blockchain tech to enhance accuracy, better telematics and mileage tracking, and so on.

Aviation: Airbus, Lufthansa, and Air France are exploring blockchain for purposes such as jet plane part tracking, registration of components, record-keeping of maintenance schedules, flight conditions, and so on.

Features of Blockchain Technology

In this section, we are going to look at the features of blockchain that businesses would want to exploit.

☑️Decentralization

Decentralization means having a peer-to-peer distributed network. This structure has no central authority; neither is it subject to the idealistic whims of one particular person or entity. On the other hand, a centralized system has a single point of failure. This makes it vulnerable to hacking, downtimes, and other vulnerabilities. It is also subject to censorship from authorities.

☑️Immutability

This means once information is stored on the blockchain, it is inalterable. This reduces the chances of corruption, fraud, and meddling. 

☑️Transparency

Blockchain puts up everything for everyone in the network to see. A great example is a transparency in the food industry. Blockchain can help track food from farm to table. This not only boosts consumer confidence but also saves money for suppliers and farmers since when a certain batch of food is infected, it’s easy to trace the exact source of that food.

☑️Blockchain is Cheaper

This point can be best illustrated by banks – which use millions of dollars to conduct Know Your Customer and Customer Due Diligence procedures. With blockchain, customers would simply need to upload their credentials on the site, and banks would access it from there, as opposed to investing in staff and machines to do so – a costly process in terms of time and money.

☑️Blockchain is Faster

To illustrate this, consider the case for SAP collaborating with ATB Financial and Ripple to send a blockchain payment from Alberta, Canada, to Reisebank in Germany. The €667 transaction took 10 seconds – and this would have taken 2 to 6 business days in a traditional payment channel. Ten seconds compared to 2-6 business days is worth paying attention to. 

Implementation Challenges

While blockchain is a revolutionary idea for enterprises, it can be harder implementing it than you imagine. Let’s look at the challenges impeding wide-scale adoption of blockchain in the business world:

Lack of interoperability: If we’re to have blockchains supporting enterprise processes in every sector of our lives, we need blockchains to be interoperable – that means having the ability to interact with each other and having the knowledge of what’s going on in the other chains. That would facilitate more streamlined processes.

Legacy Networks: Let’s be realistic; the current systems run on legacy; that is, legacy networks that are supported by old technology. Changing this infrastructure from the ground up would require a massive investment of time and money – which is not exactly a priority for many businesses.

Skillset: Blockchain is not the easiest skill to master. If you’re to integrate blockchain solutions in your company, you would need to hire people with blockchain skills. It can be not only daunting looking for one but also prohibitively expensive.

Final Thoughts

Enterprise blockchains could help businesses streamline processes and, in the process, realize more profits and build confidence in customers. Multiple companies from a diverse range of platforms have already onboarded the technology, while others are in the exploration stage. Given the positive transformation that blockchain is capable of ushering in, the technology has yet to see its best days in terms of adoption and even wider recognition, its current obstacles notwithstanding.

Categories
Crypto Daily Topic

How Ponzi Schemes Work – Everything Explained in steps

Ponzi schemes are financial fraud schemes that many investors know they need to watch out for, but they don’t actually know what exactly they are, or even how to watch out for one. Never mind that clever scammers are constantly improvising new ways to cheat unsuspecting investors out of their savings. And though the idea behind a Ponzi scheme is the same, it can be bent in many ways to con others.

A Ponzi scheme is an investment scam that promises high returns for little or zero risk. The schemer sustains this lie by taking new money from new investors and using it to pay older investors, and on and on it goes until it’s no longer sustainable and it goes bust.

So how do you know that a potential investment you’re angling for is really a Ponzi scheme? And how do Ponzi schemes pull it off? Also, why is it called a Ponzi scheme? 

Origins of the Ponzi scheme 

The Ponzi scheme is named after Charles Ponzi, who orchestrated one in 1919. Ponzi raked in millions of dollars after he duped investors with a stamp collection speculation scheme. 

Those days, the postal service had an international reply coupon system that allowed people to pre-purchase coupons and include it in their correspondence. The recipient would take the coupon to a local post office and have it exchanged with the official postage stamps required to send a reply. In other words, the international reply coupon was a voucher that enabled the recipient to purchase a stamp required to post the reply. 

Postage prices would naturally fluctuate, meaning stamps were cheaper in some countries than others. Ponzi would purchase cheaper reply coupons in other countries and sell them in the United States at a profit. 

This type of trade is known as arbitrage, and it’s a perfectly legal practice. But Ponzi took it to an illegal and greedy level.     

Ponzi sucked in investors by promising returns of 50% in 45 days or 100% in 90 days. Since his postage stamp scheme was a success, investors rushed in droves. Every day, more investors would hear of the potentially lucrative investment and hand over their cash to him. But instead of investing the money, he redistributed it to initial investors – claiming to have made profits – while keeping some to himself.

Just like a house of cards, the scheme finally crumbled when people started to wonder how he was buying and selling millions of coupons out of the 27,000 that actually existed in the whole world. The Boston Post began investigating his company – the ‘Securities Exchange Company.’ This investigation exposed him as a fraudster, and he was subsequently arrested on August 12, 1920, and charged with mail fraud, larceny, and other crimes.  

The Working of a Ponzi Scheme

The Ponzi scheme has inspired countless other swindlers from all corners of the world, only this time they don’t have to front their deceitful scheme with international reply coupons. 

Ponzi schemes rely on a basic framework – which involves paying off initial investors with the funds you collect from new investors. All one has to do is attract new investors who are willing to invest in what looks to be a very attractive business venture, lack of sufficient information on the investment notwithstanding. All that matters to these investors is the unbelievably good returns on investment.

After the scammer has convinced a few people to shell out their money, they might take some of the funds and buy some flashy car or rent a fancy office space. These props are meant to impress the next round of investors. They will then use the next round of money from new investors to give some returns to the earlier investors while keeping a slice of it for themselves. 

The second round of investors will, of course, need a payout. The schemer will go hunting for the next batch of investors – whose money they will use to pay the second batch investors. It’s a matter of wash, rinse, and repeat. 

Of course, things will start getting complicated soon enough. The schemer has to keep recruiting new investors to the Ponzi scheme so as to pay back previous investors. This is no easy task for a mere mortal. (Which is why most successful Ponzi schemes are masterminded by several people working together – but even those schemes have the same ending.) The scheme simply eventually becomes unsustainable and collapses. 

How to Detect a Ponzi scheme

For the inexperienced, it can be hard to spot a Ponzi scheme. But if you know what to look for, you can easily avoid one. Here are the red, flashing signs: 

☑️Unregistered investments: This one is obvious – any investment should be duly registered with state regulators. An investment that’s operating in the shadows – without official info on company management, products, services, history, financial reports, etc. is the first sign that you need to run.  

☑️Unrealistic returns: If it sounds to be good to be true, it probably is. When you’re approached with an opportunity that looks off the charts, you need to treat it very suspiciously. Investigate it thoroughly before you invest a single cent. 

☑️Very steady returns: Naturally, real investments fluctuate with market sentiment, and so on. If your returns from an investment are always steady and consistent, it’s time for a double-check. 

☑️Guaranteed returns: Every investment bears a certain degree of risk. Be wary of investment opportunities boasting of “guaranteed” returns with little or no risk. 

☑️Unlicensed sellers: Federal and state laws require investment firms to be licensed under the relevant authorities. An unlicensed individual or firm could be a Ponzi scheme.  

☑️Secretive and/or too complex strategies: If an investment is described using words or vocabulary that you don’t understand, avoid it. The same goes for investments whose information you can’t get. 

☑️Issues with paperwork: When you keep getting things like account statement errors, it could be a sign that your money is not where it was promised. 

☑️Difficulty receiving payments: If you’re having issues receiving payments or cashing out, you should be suspicious. Sometimes Ponzi scheme engineers will try to convince investors not to cash out with vacuous promises of even higher returns. 

Ponzi schemes vs. Pyramid Schemes 

Many people associate Ponzi schemes with pyramid schemes and even use the two terms interchangeably. While both are rip-off schemes, they are not exactly the same. 

In a Ponzi scheme, the schemer will only ask you to put your money in an investment. They will not require anything of you beyond that. On the other hand, a pyramid schemer will make you think you have the power to make money yourself. The schemer will tell you to recruit new members and bring in money – which is the same thing you will tell your recruiters. Eventually, the pool of potential recruiters dries up due to market saturation, and the whole thing crumbles. 

Final Thoughts

Even though you may know how to detect a Ponzi scheme, you need to know these types of schemes can happen even to the best. So how can you protect yourself? By diversification. Every financial adviser worth their salt will tell you to diversify your portfolio. This means investing in multiple assets in different sectors. No one investment should constitute more than 5% of your whole portfolio. This way, even if you end up the victim of a Ponzi scheme, you don’t lose all your savings. But even then, always remember to conduct your due diligence before putting your money in any investment.

Categories
Crypto Daily Topic

Blockchain and Finance

Since Satoshi Nakamoto introduced blockchain to the world ten years ago, the technology has found utility in all sorts of interesting places – from supply chains to healthcare to media to finance. Blockchain, a technology whose idea was floated in the computing world but only brought to life in 2009, possesses certain features that have made it a highly sought after technology. And now, dozens of industries are scrambling to get a piece of it.

Finance, being one of the industries that literally keep the world moving, is at the forefront in the exploration of blockchain.

But before we see how that is, let’s get a closer look at blockchain and see why it’s so special.

What Is Blockchain?

A blockchain is a distributed ledger that stores time-stamped transactions in the form of blocks and is open to everyone on the network. Blockchain’s records are immutable – meaning once information is entered, it’s unalterable – or extremely difficult to change. Each block of transactions is linked to each other using cryptography.

Cryptography itself is the coding of information so that unauthorized third parties cannot interpret it. The technique goes back to 44 BC when Julius Caesar used cryptography to communicate to his generals in a manner that his enemies would not crack the meaning.

Ten years after the first application of blockchain by Bitcoin, the technology has become such a hit due to the following reasons:

  • It is decentralized – meaning it’s not controlled by any one single authority
  • Information is secured using the highest levels of cryptography
  • It is immutable – hence tamper-proof – which reduces chances of fraud
  • It is transparent – meaning it’s open for all network participants

Blockchain has three identifying features that have made it so popular. These are:

Decentralization: In a decentralized system, information is distributed across the network such that everyone in the system has access to the information. Transacting parties can do so directly with each other without the intervention of a third party. Also, you and only you have control over your money. You don’t have to go through the bank to spend or send money to anyone.  

Transparency: When it comes to transparency in blockchain, it means that an individual’s transaction history is in the public domain through their public address. The world has simply never had this level of transparency before. This means the global financial system can finally be held to more accountability.

Immutability: Immutability in blockchain means that information that has been entered on the blockchain cannot be altered or tampered with. This is a very welcome feature in finance because it would ensure the integrity of financial records and eliminate fraud.

Blockchain and Banking

One of the sectors that blockchain would help is finance, which is somewhat ironic since blockchain was first introduced to bypass the existing system. The Harvard Review puts it this way: “The blockchain will do to the financial system what the internet did to the media.” 

The internet came and democratized information. Today, all anyone needs to access certain information is to enter a keyword on a search engine. If blockchain adoption goes mainstream, getting access to financial services – no matter where you are in the world – would be as easy as tapping a button.

So, where can blockchain be applied in finance?

Blockchain tech can be applied to an endless list of finance areas– from insurance to payments, to record-keeping, and so on. In this article, we’ll focus on three areas: faster cross-border payments, cheaper Know Your Customer procedures, and trade finance. 

Faster Cross-Border Payments

If you’ve ever sent or received money from overseas, then you know how tedious and expensive the process can be. On average, a recipient receives their money after about 2-5 working days. And if the money is sent on a Friday, you will receive it on Tuesday since financial institutions are closed on weekends. 

Why does it take so long? Because there are numerous intermediaries involved. And every intermediary has thousands, if not millions, of similar transactions that they are processing. 

But with blockchain, transactions take place in a peer-to-peer, decentralized environment – which saves time and money. Transactions are settled instantly, removing the need for third-party intermediaries. 

Cheaper Know Your Customer (KYC) Procedures 

Banks lose an astonishing amount of money through KYC procedures. The average bank spends an average of £40m a year on KYC compliance, and some banks can even spend up to £300m. These jaw-dropping expenses are to be blamed on ever-changing regulation policies, and some banks still following outdated compliance methods, like paper-based processes. 

Blockchain will solve this problem by empowering people to have control over their personally-identifying information. Customers can upload their identities on the blockchain, and banks can request access to it. 

Also, banks can be granted KYC access to a common repository on a blockchain that they are a part of. Since the information is not controlled by anyone, anyone who is part of the network can access it and share it with anyone. 

According to a Santander-Innoventures report, banks can save up to $15 to 20 billion a year in infrastructure costs by 2022. 

Trade Finance

Just like with cross-border payments, the current trade finance is encumbered with a bunch of parties who make the process slow and tedious. And these parties don’t even trust each other – so they have to involve even more intermediaries like banks and clearinghouses. Blockchain can help solve this problem through the use of smart contracts.  

Smart contracts are self-verifying and self-executing contracts. These contracts are loaded agreements in the form of code. Once all parties involved meet their end of the bargain, the contract self-executes.

How would smart contracts help with trade finance? Since they are self-executing, they can transfer values such as money, title deeds, and so on – removing the need for intermediaries such as banks clearinghouses and with it, the would-be fees. This process is not just cheaper, but also time-saving. An ecosystem is created in which trust is not a prerequisite for doing business.

These three examples highlight how various capabilities of blockchain can be harnessed to transform finance.

Below, let’s take a look at the broader benefits of the technology for the finance sector.

Benefits of Blockchain

Security: Blockchain’s distributed architecture eliminates single points of failure since data is spread all over multiple nodes. Also, its immutable nature is tamper-proof, which removes the possibility of manipulation and fraud.

Transparency: Blockchain utilizes mutualized processes – acting as a single source of truth for all authorized participants

Trust: Blockchain’s immutability and transparency provides a climate of confidence and trust

Streamlined processes: Blockchain processes are faster have reduced downtimes, and have reduced potential for error and delay. It also removes a lot of procedures that would waste time in a traditional setting.

Challenges Blocking Blockchain’s Adoption

While blockchain technology promises a new dawn for finance, it faces obstacles that make it unsuitable for mainstream financial adoption. These obstacles are as follows: 

  1. Lack of scalability: the current blockchain architecture is currently simply unable to cope with high large volumes of demand – i.e., customers in their millions – in one second.
  2. The use of key cryptography: One can only access their assets with their private key. If those keys are lost, misplaced or damaged, you lose your funds – and there’s no recourse
  3. Lack of interoperability: Currently, it’s impossible for blockchains to know what’s going on on other blockchains. This impedes their widespread adoption.

Final Thoughts 

Even though blockchain was introduced to outpace traditional finance, the latter could actually use the former and be better suited to cope with the ever-changing dynamics of customer preferences and needs. When blockchain wizards come up with ways to beat the current obstacles faced by blockchain, it will be an exciting time for finance. 

 

 

Categories
Crypto Daily Topic

The Role of Cross-chain Technology in Blockchain 

What would it be like if all blockchain projects could work together? Think of a universal blockchain system – one that would be used everywhere across all industries. Take Stellar blockchain, for instance, a project that makes it easy for users to come up with cross-border transactions even in remote, high-latency areas. Vechain blockchain, on the other hand, has almost similar capabilities, but with the aim to enhance supply chain management and business processes.

Now, if the two, and indeed all blockchains, could work in harmony, some of the technical and economical scalability problems within the entire blockchain ecosystem would be solved.

Unfortunately, these two projects – like all other blockchain projects, operate in isolation – denying users the opportunity to benefit fully from the capabilities of the decentralized ledger technology. More so, if blockchain as a whole is to achieve mainstream adoption, all blockchain networks need to work in harmony.

Is Blockchain Interoperability Worth It?

Simply put, blockchain interoperability is the ability of different blockchain networks to interact with each other and share information without restrictions.

With the rise of numerous blockchain projects, none of these networks have knowledge of the information in other networks. While blockchain networks can communicate and share information, the problem is this has to be done with the intervention of a third-party e.g., crypto-exchanges – which are platforms on which traders exchange digital currency pairs

As is always the case; however, whenever there is an intermediary between two parties, expensive transaction costs are inevitable. Besides, the fact that an intermediary is involved undermines ‘decentralization,’ which is the core principle of blockchain technology.

Now, the increase in the number of blockchain projects is a good thing since it expands the growth of the technology – but it also fragments the market. This is especially true with each new project seeking to outdo the former – by solving a problem that the predecessor project apparently couldn’t solve.

Ironically, these projects end up making a trade-off between their security, speed, or level of decentralization as they attempt to out-do each other. Eventually, user experience is eroded – while also hindering the transition of the industry into the mainstream.

As you can see, blockchain interoperability is important not just for improving user experience but also for establishing a unified ecosystem. This would remove the need for blockchain projects to compete against each other, as well as protect the value of the entire blockchain industry.

What is Cross-chain Technology?

Cross-chain is an emerging technology that aims to facilitate interoperability between blockchains. As such, different blockchain networks can exchange information and value without the need for an intermediary.

Say, for example, you’ve been using the Bitcoin blockchain network, but you want to complete a transaction that requires smart contract capabilities provided by the Ethereum blockchain. With cross-chain technology, you can transfer your Bitcoins over to the Ethereum blockchain to complete the smart contract transaction without the involvement of an exchange platform.

As such, cross-chain technology facilitates the transfer of information as well as value from Bitcoin’s network to Ethereum blockchain – two networks sharing a common protocol- improving user experience and enhancing efficiency.

The most popular case of cross-chain in action is the atomic swap that was executed in 2017 between Litecoin and Decred. Another one followed where Bitcoins were exchanged for Litecoins. Note that in these two instances, only tokens were exchanged, and assets didn’t have to be moved from one blockchain to the other. But it is anticipated that with advanced cross-chain technology, it will be possible to move an asset from one blockchain to another.

Currently, we have a few exciting cross-chain technology platforms within the crypto-space and even in traditional fiat currency transactions. Here are some of them:

Fusion

Fusion is an ambitious crypto-financial platform that aims to enable cross-chain transactions between decentralized assets such as blockchain tokens and cryptocurrencies as well as centralized assets such as bonds, securities, among others.

To achieve this, Fusion allows APIs to integrate several data sources, blockchain tokens, and off-chain values into a single public blockchain network. This way, it is possible to trace any asset and tokens on the network. In the process, multi-coin smart contracts are created, enabling users of different blockchains to interact with each other on a trustless basis.

For security, Fusion utilizes bookkeeping nodes to control the private network keys. These nodes are the parties involved in the transaction. To ensure that a single node does not obtain full control of the assets in the network, Fusion uses a proprietary technology known as Distributed Control Rights Management (DCRM). As the name suggests, the tool distributes the control of private keys throughout the public blockchain so that all parties have equal control of assets.

WanChain

Much like Fusion, WanChain cross-chain project is tailored towards the finance and banking industry. The project aims to bring all digital assets under one blockchain so that users can exchange the assets across different blockchains using the platform’s native coin – Wancoin. All cross-chain transactions are recorded on a tamper-proof distributed ledger system, which makes the platform ideal for banks and other large institutions.

On the security front, WanChain distributes the control of private keys to all nodes on the network, so that one party doesn’t have full control over the digital assets. Unlike Fusion, which supports cross-chain transactions involving traditional assets, WanChain solely focuses on crypto-assets.

Polkadot

Polkadot is a cross-chain project that focuses on enabling the scalability of decentralized computation. To achieve this, the project utilizes a proprietary technology known as parallelizable chains, or in a simpler term, ‘parachains.’

Parachains are smaller forms of blockchains. This means that transactions can be spread over a wide area in the Polkadot blockchain while ensuring high levels of security as provided by the relay chains on which parachains are attached to. The relay chains also enable the parachains to perform independent computations since their communication is secured. By nature, parachains differ in characteristics, making them efficient without being tied down to a specific blockchain language or virtual machine.

Conclusion

For blockchain technology to succeed, it needs to be united under one protocol. This calls for integration and seamless communication of all blockchain projects, incentivizing the wider market to adopt blockchain technology since they can all share relevant information regardless of the project they are using.

Fortunately, with cross-chain technology, blockchain interoperability is becoming a reality allowing users to not only exchange value and information but also save money and time – which would be impossible with independent blockchain projects.

 

Categories
Cryptocurrencies

Is Neo an Ethereum Killer? 

If you’re active in the crypto space, then you’ve definitely heard of Neo, a.k.a Ethereum Killer, a.k.a Ethereum of China. Ethereum seems the common denominator in both tags – probably because the two platforms have so much in common so much that China sees it as the challenger and the Asian equivalent of Ethereum. 

However, the platform has taken a different path from Ethereum in some ways, and it’s those ways that merit it some closer examination. 

The name Neo is Greek, and it means new, young, fresh, recent.

Is Neo really fresh? And is it worth the unofficial crown of Ethereum Killer? There is a lot of hype surrounding Neo, but when you lift the lid, you find there are actually some interesting things to discover.

What is Neo?

History of the Neo Blockchain

Neo is the brainchild of Da Hongfei and Erik Zhang. The two have extensive experience in blockchain, having previously formed Onchain, a successful blockchain research, and development company. The Neo project was funded by two ICOs, the first one which happened in a 10-days span in October 2015 and raised $555,000, while the second ICO raised $4. 5 million. 

Components of the NEO System

Neo has a few interesting technical features that make up the Neo ecosystem. These are:  

A Delegated Byzantine Fault Tolerance (DBFT) algorithm – Neo uses a DBFT consensus mechanism that enables the network to resist malicious attempts 

Neo Contract – A mechanism through which developers can create smart contracts in a safe, scalable and high-performance environment using a variety of programming languages 

NeoFS – A decentralized storage that utilizes distributed hash table technology  

NeoQ – a cryptographic mechanism that creates problems that are unsolvable by quantum computers, ensuring the Neo blockchain is quantum-proof. Quantum computing poses a real threat to the blockchain. Many experts agree that it could unravel the blockchain as we know it. NeoQ aims to prevent quantum computing from destroying the Neo ecosystem.   

The Neo Smart Contract System

Neo’s smart contract system comprises three parts: NeoVM (Neo Virtual Machine), IntereopService, and DevPack. Let’s take a closer look at each: 

  • NeoVM

NeoVM is a lightweight virtual machine that’s similar to a virtual CPU and executes smart contracts on the Neo platform. 

  • InteropService 

This is a function that helps smart contracts on the platform have more utility. It enables smart contracts to interact with data from outside the Neo blockchain without putting the system at security risks. This data couple be either transaction, asset, or contract information, and so on. InteropService also hosts smart contracts as storage.

  • DevPack 

This a language compiler that enables developers to create contracts in various languages. 

Neo: Tokenomics

As of March 6, 2020, Neo was trading at $12.28 and ranking at#19 with a market cap of $858, 998, 683. It had a 24-hour volume of $800, 365, 774, a circulating supply of 70, 538, 831, a total supply of 100m, and a maximum supply of the same value. Its all-time high was Jan 15, 2018 (Jan 2015), while its all-time low was $0. 072287 (Oct 21, 2016)

Neo’s Smart Economy

Neo wants to facilitate what it refers to as the “smart economy.” The smart economy comprises these components: 

  • Digital assets
  • Digital identity 
  • Smart contracts 

Digital Assets

A digital asset is anything that’s formatted in a binary form and comes with the right to use it. A digital asset must include the right to use, so it is considered as one. 

Blockchain has enabled a safer environment where individuals own digital assets. With technology, digital assets can be stored in a decentralized, secure, trusted, and third-party-free environment. 

There exists two forms of digital assets that an individual can utilize: 

  1. Global assets 
  2. Contract assets 

Global assets are recognizable by other smart contracts and clients in the system, while a contract asset is recognized only by the smart contract owner. 

Neo Blockchain and Digital Identity

IGI Global defines digital identity as “the data that uniquely describes a person or thing and contains information about the subject’s relationships.”

Digital identities are essential for the digitization of assets to work. 

The Neo platform utilizes the X.509 digital identity standard as well as the Web of Trust point-to-point certificate issuance models. 

Neo verifies identity-based on these features: 

  • Facial features
  • Fingerprints 
  • Voice activation 
  • SMS and others 

Smart Contracts 

Smart contacts that are contracts that take place on a blockchain – making them digital, trustless, and borderless. These contracts are coded so that they will self-execute when specific conditions are met. 

A smart contract must be immutable (unalterable) and be able to run on multiple computers without compromising the integrity of the network. As such, a smart contract needs to have the following qualities: 

  1. Deterministic
  2. Terminable
  3. Isolated  

What does each of these mean? Let’s get a closer look: 

Deterministic: This means that a program will always produce the same output to a given input. E.g., if 4+2=6, then 4+2 will be six every single time. Deterministic systems are designed to eliminate randomness out of a system.  

Terminable: This means that a contract should be able to come to completion after a set period so that it doesn’t go into an endless loop that will waste time and drain resources.    

Isolated: This means that individual contracts will be kept isolated in case of any bugs and malware that they may contain, knowingly or unknowingly. This is so to save the system from being affected by such bugs. 

Is Neo Similar to Ethereum?

Both Neo and Ethereum inevitably have several things in common, but they also differ in some key ways. 

Similarities 

  • Both blockchains provide a platform for developers all over the world to create smart contracts and decentralized applications
  • Both have native coins that power transactions: Ethereum has Ether, and Neo has GAS. 
  • Both have Turing complete, meaning any problem can be solved as long as the machine has enough memory space 

But what makes Neo interesting is not its similarities with Ethereum, but the differences. Neo is one of those projects that get branded “Ethereum Killer” since they do way better than Ethereum in regard to certain functionalities. 

For example, developers can use any codebase out of so many in the Neo platform, including C#, VB.Net, F#, Java, Kotlin, and more. Ethereum, on the other hand, only supports Solidity, its proprietary programming code that requires developers to master it before they can create applications on the platform. This is sort of a barrier to entry that could lock out many developers from the Ethereum ecosystem. 

The Two Tokens: Neo and Gas

The Neo ecosystem has two native tokens: Neo and GAS. These tokens serve different but complementary roles. 

Neo tokens are used to transfer value in the network. Having Neo tokens gives you a stake in the Neo blockchain. Users need to hold Neo tokens to be rewarded with GAS.

GAS tokens are used to enable seamless transactions in the Neo network. You pay GAS for using the Neo blockchain, e.g., subscription fees.  

Is Neo the Ethereum of China? 

Neo is often called the Ethereum of China due to its similarities with Ethereum. It is known in the crypto space that the Chinese government – which is well-known for its chilly attitude towards cryptocurrency – has warmed up to Neo and seeks to position it as the smart contract and DApps industry leader. Of course, this attitude could be a double-edged sword: it could legitimize the platform, but it could also alienate it from the rest of the world.  

How to Buy and Store Neo

You can buy or trade other cryptocurrencies such as Bitcoin and Ethereum in popular exchanges such as eToro, Coinswitch, Huobi, Changelly, Kucoin, Binance, Bitfinex, and so on. 

Some platforms allow you to purchase Neo with fiat money, while others only allow crypto.

Once you’ve bought Neo, it is recommended that you don’t let it sit on the exchange since exchanges are prone to hacking and other attacks. And since crypto transactions are irreversible, once your crypto is gone, it’s gone. 

We recommend storing your funds in tried-and-true wallets such as Guarda, Atomic wallet, NEON Gui – the official Neo wallet for desktop, and so on. Hardware wallets are always the safest option, though, and we recommend Ledger Nano X and Ledger Nano S. 

Neo: Final Thoughts

Neo is certainly ahead of other blockchain and cryptocurrency projects even if just by virtue of its unique Delegated Byzantine Fault Tolerance Mechanism or its getting ahead of the potentially harmful quantum computing. It excels yet again by allowing individuals to digitize assets and developers to build decentralized apps on its network using super-versatile tools. Perhaps Neo is ‘fresh’ after all. The question is, will it keep fresh? Its cheerleaders are banking on that. 

 

 

Categories
Crypto Daily Topic Cryptocurrencies

Ethereum Vs Ethereum Classic

Crypto newcomers will immediately notice two types of Ethereum in the space: Ethereum and Ethereum and Ethereum Classic. What they won’t know is the unfortunate story, turned intrigue, that spawned the existence of these two cryptocurrencies. Ethereum, the most popular blockchain after Bitcoin, was forced to split into Ethereum (ETH) and Ethereum Classic (ETC) in one of the most pivotal events in blockchain and cryptocurrency history. 

What is Ethereum? 

In broad strokes, Ethereum is an open software blockchain platform on which developers can build and deploy smart contracts and decentralized applications. 

Smart contracts are digital contracts that are self-verifying, self-executing, and do not require intermediaries to represent the contracting parties. Smart contracts are run and are deployed on the blockchain, and they automatically self-enforce when conditions of the agreement are met. Since they run on a blockchain, smart contracts are immune from censorship, fraud, and any sort of outside interference.

Decentralized applications (DApps) on their part are applications that run on a decentralized, peer-to-peer, and deregulated platform. DApps allow the user to retain their personal data, as opposed to centralized applications where user data is in the hands of the organization. Smart contract is the technology that connects DApps to the blockchain.

Enter DAO 

The formation of Ethereum and Ethereum Classic can be traced back to an organization called DAO, or the Decentralized Autonomous Organization. 

DAO was an automated and decentralized organization. It was a sort of venture capital fund that ran without the organizational hierarchy that’s typical with normal organizations. DAO was going to fund DApps built on the Ethereum blockchain. 

DAO was set up to give investors decision-making power over which potential DApp projects would receive funding. Investors would need to purchase DAO tokens – which gave them a stake in the DAO system. DAO tokens were purchased using Ether. 

For a DApp to be green-lit for funding, it had to be whitelisted by ‘curators’ who were basically reputable figureheads in the Ethereum space. Next, the approved DApps would be voted on DAO investors – or the token holders. If the proposal received a 20% approval, it would receive funding, so it gets started. 

This flexible process, together with the transparency and the overall potential of the DAO, was unprecedented, and scores of investors jumped in, hoping to get a piece of the action. In a record 28 days, the project had raised over $150 million of ether. 

Of course, that was all fine and dandy, but what if an investor wanted to get out? What if an approved DApp did not exactly tickle your fancy, was there a way to opt out? As with anything blockchain, the DAO was a democratic process, so yes, there was a way out – called the “split function.”  

Using this function, you could not only get back your ether, but you could also create your version of DAO known as “Child DAO.” If enough DAO token holders joined you, you could even start accepting your own proposals. The only condition was you had to hold out on spending your ether for the next 28 days.  

But it was this same Split Function that brought DAO to its knees. It exposed a huge loophole in the system that could be manipulated by a bad actor. Many people pointed this out, but DAO creators brushed it aside as not a big issue. Except it was, and it was exploited, and the aftermath was the undesirable split of Ethereum into Ethereum and Ethereum and Ethereum Classic. 

The Big and Bad DAO Attack 

The reckoning came on June 17, 2016. A person, or persons, exploited the Split Function and managed to siphon $50m dollars. And because hindsight is 20/20, it’s very clear to see how straightforward the attack was, and how it could have easily been avoided. 

Now, if one wanted to opt-out Of DAO, all they had to do was to submit a request. The Split Function would then do the following: 

  • Refund the user their ether in exchange for their DAO tokens 
  • Update the transaction in the blockchain, as well as the internal token balance 

What the attacker did was they made a recursive function of the request – meaning they made the request repeatedly for the same amount of DAO tokens 

  • The split function happened this way: 
  • DAO receives DAO tokens and gives the user the requested ether 
  • Before DAO can update the transaction, the user makes other requests for the same amount of Ether, making the code repeat the process over and over. 

By the end of it all, $50 million worth of ether was transferred to a child DAO. As you can imagine, the entire Ethereum and DAO community was sent into a panicking frenzy after it was discovered what was going on.   

Now’ it’s very important to point out that the attack took place courtesy to loopholes in the DAO and not Ethereum. 

DAO ran on Ethereum, and DAO had issues. Ethereum was merely the host of the DAO. 

Dao Attack: The Aftermath

Now after the attack happened, people naturally had questions about whether Ethereum and cryptocurrencies, in general, could be trusted. Even though Ethereum was not to blame, a lot of people couldn’t pick apart between it and DAO. Ether nosedived from $20 to $13. 

Now despite the hacker executing the attack, they couldn’t get access to the funds since the DAO smart contract had enforced the 28-day rule – that you couldn’t spend the ether after exiting DAO. This gave the community three options moving forward: 

  • No step would be taken: Some people were against making any changes since that would mean contravening the immutability tenet of blockchain. These people took the “code is law approach.”
  • Execute a soft fork: The majority of the community voted to implement a soft fork. The idea was to segregate the blocks that were involved in the hacker’s transactions so they wouldn’t be able to move the funds. However, this posed another problem: a soft fork opened way for a denial-of-service (DoS) attack, which meant an attacker could manipulate miners to perform malicious transactions. 
  • Implement a hard fork: A hard fork was now the only way to go. Hard forking meant a section of the Ethereum blockchain would branch out at a particular point – which was the point just before the DAO attack. 

After the fork, two completely different chains were born. The new chain went with the name Ethereum, or ETH. A section of the Ethereum community that was against the fork remained ‘loyal’ to the old chain, which in turn took up the name Ethereum Classic (ETC).  

The fork enabled DAO to refund investors the money that had been taken away. For every 100 of DAO, DAO token holders would be given 1 ETH. This caused a sharp disagreement, which added more fuel to the Anti-Hard Fork drive and contributed to the formation of Ethereum Classic.

You need to understand the magnitude of this hard fork. Remember, Ethereum was the most important cryptocurrency after Bitcoin. A hard fork shook not just the Ethereum community but the entire blockchain and crypto space. Gavin Wood, Ethereum’s co-founder, called this moment “the single most important moment in cryptocurrency history since the birth of Bitcoin.”

ETC vs. ETH – An Ideological Split 

The Ethereum split came down to a difference in ideology. The people that stuck with the old chain believed that cryptocurrency is supposed to be resilient against the whimsical decisions of people. According to them, a hard fork was a sellout, a betrayal of what cryptocurrency stood for. If you were splitting the Ethereum blockchain, you were defeating the very purpose of its existence – to represent a non-corrupt finance system. 

ETH Vs. ETC

Because these two are a split of the same chain and given the contentious history between them, it’s only natural that comparisons will be drawn. 

The biggest problem with ETC is that it is not backward compatible with the ETH hard fork. Also, the movers and shakers of the Ethereum community went with the new chain. This means users of the old chain will not have access to any updates on the new chain, like the upcoming move from Proof of Work to Proof of Stake. 

For ETH, the issue is the new chain violated the “code is law” principle. There is also the glaring question of: how can we know the chain will not be capriciously hard forked again in the future? Are there already hard forks forming different versions of ETH? Even though the latter is conspiracy theories, it creates a climate of distrust in the public, which could lead to a devaluation of the coin.    

Having said that, let’s look at the pros and cons of each cryptocurrency: 

ETC

Pros

  • Adheres to the immutability tenet of blockchain 
  • Has the support of some big-time loyalists 

Cons

  • Users cannot enjoy any updates on ETH
  • The support of the vast majority of heavyweights in the community moved to ETH

ETH 

Pros

  • Has the support of the majority of the earliest big-time developers including Ethereum’s founder Vitalik Buterin 
  • It is possible to update the software with new changes 
  • Enjoys a higher hash rate
  • Has the backing of the Enterprise Ethereum Alliance (EEA)  

Cons

  • Betrayed the philosophy of immutability 

How Do ETH and ETC Stack Up in the Market? 

As of February 06, 2020, ETH is the more successful cryptocurrency of the two coins – at a market rank position #2 next only to Bitcoin. The crypto is trading at $236.42, while ETC is trading at $8.17 while ranking at #18. ETH has a market cap of 26 billion, while ETC stands at $950 million. 

ETH has enjoyed an all-time high of $1.432.88 (Jan 13, 2018), while ETC’S all-time was only $47.77 (Dec 21, 2017). 

ETC Vs. ETH – Final Words

In the never-ending ETC vs. ETH competition, ETH always comes out the winner as the vast majority of Ethereum developers, users and supporters have stuck by its side. ETH may have violated some blockchain principles, but the community bundled together and made something great out of the absolute disaster that was the DAO hack. That is a victory it will always have up in its notch. 

ETC, on the other hand, remains stained by the DAO attack, and the argument that it’s held together by sympathizers, blockchain loyalists, and pure market speculation. 

What’s for certain is that both chains have their loyal bases, and each of them has clout that’s unique to them. As for the battle between them, the common phrase, “it’s not over yet,” applies.

 

 

Categories
Crypto Daily Topic

How Safe Are Bitcoin Casinos? 

According to a recent research article, about $4 billion worth of cryptocurrencies were stolen through security breaches in 2019. Mostly, these hacks targeted exchanges that hold a significant amount of cryptos in hot wallets – which are vulnerable to attacks thanks to their online status.  And hackers are continually innovating new ways of leveraging loopholes, and even outdoing the current cybersecurity measures used by most crypto-asset holding services. 

In light of this, it would be understandable if you worried about entrusting your Bitcoins to any third party, regardless of the industry. 

While there is yet to be a major heist targeted at Bitcoin casinos, it doesn’t mean that your wagers are entirely safe.  In this article, we look into how you can protect your Bitcoin holdings when interacting with any Bitcoin casino as well as how to choose legitimate Bitcoin casinos.  

Choosing a Legitimate Bitcoin Casino 

Although nothing can guarantee you that you’ll win every bet you place, it helps to choose a trustworthy Bitcoin casino. So, keep the following considerations in mind for your safety while playing in an online Bitcoin casino: 

Transparency 

Ideally, online casinos run on self-developed software known as a provably fair algorithm to manage games and even act as a dealer in a pool of players. But, you shouldn’t take their word for it. 

As such, any online bitcoin casino worth its salt will go the extra mile to win users’ trust by publishing how their software algorithm works. This way, users can vet and verify that each outcome is randomly selected without interference from third-parties. 

License and Registration

Similar to any other business, an online casino must be licensed and registered with a governing body that oversees its operations. However, there are a few discrepancies as far as the regulation of bitcoin casinos is concerned. This is because some countries have completely banned the use of Bitcoin or other cryptocurrencies. 

Nonetheless, a good number of bitcoin casinos have certifications showing that they have passed the strict evaluations of Gaming Laboratories International (GLI). GLI is a game licensing body committed to ensuring a fair online gaming environment. What sets this regulator apart from the rest is that its testing and inspection are carried out independently, based on the stringent standards set by the licensing body itself. 

Funding and Withdrawal Terms

Most bitcoin casinos accept cryptocurrency deposits, but withdrawals are made through your bank or online wallets such as PayPal. In such a case, your banking details can be intercepted by an authorized party, if the casino has put in place privacy and security measures. 

The industry-standard technology for establishing a secure connection is the Secure Sockets Layer (SSL). A Bitcoin casino with this technology in place ensures that you make private and anonymous deposits and withdrawals using your credit card or bank, without an interception. This security protocol also protects the entire site from cybersecurity threats – safeguarding your wagers while also ensuring the site works perfectly.  

Also, pay attention to the withdrawal terms. Some casinos impose terms that prompt users to extend their playtime before they can cash out. Extended playtime often lowers your chances of winning. So, be wary of unfair withdrawal conditions. 

Your Wallet of Choice

Unbeknownst to many, the type of Bitcoin wallet you use to fund your casino account determines your safety when using the platform. 

There are two main types of crypto wallets, hot and cold wallets. The hot wallets are considered to be less safe than their cold counterparts since they are constantly connected to the internet. 

Cold wallets are likened to a saving account, in the sense that they can be used to store cryptos for a long time with minimal interference. Every time you want to spend the stored digital assets, you’ll have to verify your identity by clicking on a button on the hardware wallet. 

Even though you are provided with a hot wallet upon setting up your bitcoin casino account, it’s best that you deposit only a small amount of Bitcoins in this wallet and keep the rest in a cold wallet. 

Responsive Customer Support

It gives you peace of mind knowing that you can rely on competent client service representatives in case of delayed payouts, technical glitches, or any other issues. Moreover, considering the anonymity of Bitcoin casinos, customer support is the only physical link you have with the casino operators. 

A casino with responsive customer support shows the commitment of the operators to ensure that the platform works efficiently and that the users’ interests are a priority. 

Check Out Reviews

Genuine reviews from previous and current users are the surest way of ascertaining whether a casino is safe or not. 

A simple Google search of the casino of your choice is a good place to start. But you might consider going an extra step to contact various users of the platform, especially if they have no problem sharing their experience with the casino. Usually, if a lot of users have a problem with a casino, it’s better to avoid it than risking. Still, if a casino has fewer reviews, you should probably play safe by risking smaller amounts of Bitcoins or avoiding it altogether. 

Most importantly, keep an eye on phony bitcoin casinos, as listed on Casino.org, the world’s largest independent online gaming authority. Currently, there are a few blacklisted casinos on the site deemed to be unsafe due to their unsavoury business practices. 

Conclusion

Bitcoin has revolutionized the online gambling industry thanks to its underlying blockchain protocol. Transactions are faster and more affordable compared to traditional casinos since there are no third-parties involved in the cash-out process. More so, due to the cryptographic nature of cryptocurrencies, Bitcoin casinos are more secure than those using fiat currencies. 

Yet, the same high level of security and privacy offered by Bitcoin casinos can sometimes be detrimental to users’ safety, considering that the transactions are anonymous and irreversible. For this reason, choosing a reputable Bitcoin casino is paramount in safeguarding your wagers from unfair play or game manipulation. 

Even when using a trusted casino, it is recommended that you refrain from storing your Bitcoin holdings in the provided wallet for a long time. Ideally, you should withdraw winnings straight away and store them in your private wallet. 

Categories
Blockchain and DLT

Introducing Cosmos, the Internet of Blockchains

When Satoshi Nakamoto introduced Bitcoin to the world, he likely did not see the extent to which the technology would be adopted in the coming years. The Ethereum blockchain entered a few years later and demonstrated to everyone that blockchain is a versatile technology. Right now, these are the two most dominant blockchains in terms of market cap and public awareness. But they are also the foster children for the shortcomings of blockchain tech.

Every week we hear of another blockchain project that’s going to be better than Bitcoin and Ethereum. Some projects have gone on to be a roaring success in this regard – while others fall by the wayside.

Cosmos is one of the latest projects to make bold claims about being able to fix two of the biggest blockchain flaws: lack of interoperability and scalability. This article is going to lay bare every relevant thing you need to know about Cosmos: how it works, its core components, and its potential use cases. But first, let’s get a brief understanding of the scalability and interoperability problem.

The Scalability and Interoperability Problem of the Blockchain

The existing blockchain model is, to say the least, flawed. Consider, for instance, Bitcoin and Ethereum, which have transactions per second speeds of 7 and 15, respectively. Compare that with Visa, which processes around 1,700 transactions per second. This speaks to the scalability problem of these blockchains. 

To address this problem, several proposals have been advanced, including SegWit and the Lightning Network. And while these offer ingenious solutions, they have their weaknesses that render them useful only for a limited period of time. Segwit, for example, will eventually lead to massive consumption of resources as everything, including transactions and bandwidth, increases. For its part, the Lightning Network can currently only handle microtransactions.

The other issue with the blockchain is the lack of interoperability. Today, cryptocurrencies such as Ethereum, Litecoin, Dash, etc. have no way of interacting with others. This makes each blockchain a ‘silo’ that cannot share information with the other. The lack of interoperability also means banks have no way to interact with blockchains – a fact that has given rise to crypto exchanges.

But again, that right there is another problem. Exchanges are centralized – which does not just contravene the principles of cryptocurrencies but also renders them susceptible to hacking and other malicious attacks. Also, they’re prone to downtimes during spikes in demand and blackouts when the system is undergoing upgrades.

What is Cosmos?

Cosmos is a blockchain project with the ambition to be the “internet of blockchains.” The Cosmos architecture comprises multiple parallel blockchains called ‘Zones’ connected to a central blockchain referred to as ‘Hub.’

Zones can exchange value i.e., tokens with each other and generally interact with each other without impinging in each other’s sovereignty.

Who’s Behind Cosmos?

Cosmos is the idea of the Interchain Foundation (ICF), a foundation that funds and collaborates with projects in research, engineering, social good, and community. ICF has contracted the Tendermint team to work on Cosmos.

Tendermint is the team behind the Tendermint consensus algorithm.

The Tendermint team comprises three chief players: Jae Kwon, Ethan Buchman, and Peng Zhong. Kwon is the co-founder of “I done this,” a productivity app for work teams. He has also made contributions to projects like Scamble.io, Flywheel networks, and Yelp. Buchman has 2+ years of experience in science research and blockchain. Zhong is the founder of Nylira, a web development firm.

How the Cosmos Blockchain Works

Tendermint is the basis of the Cosmos infrastructure.

It is a customizable platform on which to build blockchain applications. First, you need to know any blockchain protocol has the three main layers: network, consensus, and the application layer. Tendermint prepackages the first two layers so that developers can fully concentrate on applications by saving a ton of time on complex code. Tendermint has the following benefits:

  • It can handle 10,000 transactions per second
  • It is a simple light client, making it suitable for mobile and IoT
  • It has fork-accountability which helps prevent attacks such as attempts at double-spending

What is IBC and Hubs and Zones?

IBC (Inter-Blockchain Communications protocol) is another important player in the Cosmos ecosystem. IBC is a software that connects the ‘zones’ and ‘hubs’ in the network to allow the exchange of coins among various chains.

In Cosmos speak, varying chains are referred to as heterogeneous chains. This is because each chain is sovereign and features its own architecture.

Now let’s get into hubs and zones.

The Cosmos architecture follows what’s called a Hubs and Zones model. The Hub is a central blockchain on which multiple independent blockchains, called Zones, are connected. The Zones can communicate with each other via the Hub by utilizing IBC.

Now obviously, the Hub occupies a very important role in the Cosmos ecosystem, and for this reason, it’s very important that it’s highly secured. This is achieved by having a globally distributed and decentralized cluster of validators. This cushions it against would-be attacks such as censorships or attempts at splitting the network.

The Atom Token

 Atom is the native token for the Cosmos network. It is neither a store of value nor a medium of exchange, but rather for staking coins. To become a validator for the Zones, participants must stake a certain number of coins. Upon validation of blocks, validators earn Atom block rewards and a fraction of transaction fees.

As of March 5, 2020, the following were the tokenomics for the Atom token. Atom traded at $3.85 with a market capitalization of 735m. It ranked at #23 in the market, with a 24-hour volume of $150, 596,824, a circulating supply of 190, 688, 439, and a total supply of 237, 928, 231. Its all-time high was $.8.31 on March 16, 2019, while its all-time low was $1.91 on September 5, 2019.

Governance of the Blockchain Ecosystem

The Cosmos blockchain has a strict governance model and rightfully so – given its crucial role. Validators are tasked with preserving the well-being of the system and approving changes to the protocol via a vote. For this to happen, the following conditions must be met:

  • Validators commit a certain value of tokens – either Atom or any other
  • If validators fail to vote for a proposal within a given timeframe, they receive the punishment of temporary suspension

For proposals, validators may answer with either of the following:

  • Yea
  • YeaWithForce
  • Nay
  • NayWithForce
  • Abstain

Based on the result, the following scenarios may emerge:

  • If a strict majority votes Yea or YeaWithForce, the proposal is passed
  • If a strict majority votes Nay of NayWithForce, the proposal is dropped
  • More than a third of validators can, however, veto a majority decision “with force.”
  • When a strict majority decision is vetoed, everyone involved is punished by losing a day’s worth of block fees

Some Use Cases for Cosmos Blockchain

The Cosmos blockchain could potentially improve the blockchain space in these interesting ways:

  • Decentralized exchanges: Since Cosmos excels at connecting multiple chains, it can obviously link many other ecosystems together. This includes decentralized (authorization-less, peer-to-peer) exchanges.
  • Cross-chain transactions: Perhaps the most obvious use case, chains in the Cosmos network can easily avail services of each other through the Hub
  • Ethereum Scaling: Any Ethereum-based chain connected to the Hub will also be supported by the Tendermint system, allowing it to scale faster

Final Thoughts

Cosmos’ selling point is impressive, but it’s not the only blockchain proposal promising to be the panacea of blockchain problems. However, its integration of the Tendermint core is certainly a highlight and will be critical to improving the scaling and interoperability of blockchain. Cosmos’ success hinges heavily on its adoption by a big number of blockchains – especially the big names. Can Cosmos pull this off, is it worth the fanfare? We can only watch.

Categories
Crypto Daily Topic

The Best Books to Read and Understand Blockchain

Ten years after blockchain arrived, it’s still one of the most misunderstood or plainly ununderstood technologies of our time. This is because it arrived with the fuss of Bitcoin – which was the first of what everyone knew about cryptocurrencies – themselves a misunderstood and sometimes frowned-upon phenomenon.

For instance, blockchain is still synonymized with Bitcoin despite the two meaning completely different things. Blockchain is the technology that powers Bitcoin and other cryptocurrencies like Ethereum, Dash, and so on.

Blockchain always spurred curiosity from the first day. And it still does – especially with all sorts of industries – from finance to healthcare to supply chains to media exploring the technology. And even more significantly, entire organizations have been established just to further the technology.

As such, many people are increasingly looking to understand this technology better. If you’re one of those people, then you’re in luck. This article brings you the best ten books that you should read to get a firm grip on blockchain tech, as well as on cryptocurrencies – its first application.

That said, why wait? Here are the best books to read and understand blockchain.

i) Blockchain Revolution by Don and Alex Tapscott

This book is written by a father and son duo, and it attempts to illuminate the impact of cryptocurrencies on the world. Per the “Blockchain Revolution,” blockchain technology opens a bigger space that will change what we do on the internet, how we do it, and who can do it. The Tapscotts contend that blockchain will massively change – for the good – the delivery of financial services and how we treat personal identity and data. The technology will also change how we enter into business contracts and will be integral to the Internet of Things technologies.

Blockchain Revolution also discusses how technology is shifting the world of money, transactions, and business. The Tapscotts see blockchain as a simple yet revolutionary technology that provides financial transactions with both anonymity and security. The authors observe that the technology is still nascent, and they recognize that technology is yet to be fully exploited and that it holds even more potential for the future.

ii) The Book of Satoshi by Phil Champagne

Champagne took upon himself the role of compiling the various writings of Satoshi Nakamoto, the still-mysterious originator of Bitcoin. These writings are important because they provide crypto fans with the thinking of the person(s) who brought the world blockchain technology.

As of early 2020, the Nakamoto persona is still shrouded in mystery as far as real life is concerned.  The only way for anyone to get nearly close to knowing this persona is by reading the publications he made in the early days of Bitcoin – when he was corresponding with other developers concerning the cryptocurrency.

The Book of Satoshi comprises chronologically organized emails, online posts, as well as the very original Bitcoin white paper by Nakamoto. It also includes Nakamoto’s illustrations on how Bitcoin works.

iii) The Truth Machine by Michael Casey and Paul Vigna

This book is penned by two Wall Street Journal journalists – both of who have covered the blockchain space for years. In “The Truth Machine,” Casey and Vigna talk about the blockchain wave and its vast potential. They demystify the blockchain and talk about why it can bring back our control of identities, personal data, and assets, and how it can include people who have been excluded from the global financial system.

In a truly journalistic fashion, the two talk about the potential for blockchain to help society rediscover faith in itself. They lay bare the disruption that blockchain promises for all kinds of industries, from legal to finance to shipping.

The duo discusses the potential of blockchain to replace the systems we’ve relied on centuries – some trusted and others not so much – with a radical model powered by blockchain. The two also opine that we should care about blockchain – because it moves humanity forward, not backward.

iv) Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond by Chris Burniske and Jack Tartar

In “Cryptoassets,” Burniske and Tatar explore blockchain from a financial point of view, but they also dive into various technological concepts once in a while. Cryptoassets is written for anyone who is interested in investing in Bitcoin and other cryptocurrencies.

The authors kick off their book by going down the Bitcoin road: its birth during the 2008 financial crisis and its very basics. They do an excellent job of helping the reader understand the key differences between Bitcoin and blockchain technology – which is welcome because many people still mistakenly think the two are the same thing. The two further dive into other assets that have emerged after Bitcoin – including crypto tokens and crypto commodities.

You will find every practical detail about investing in cryptocurrencies here – from crypto wallets to crypto exchanges, to initial coin offerings.

v) The Blockchain Developer by Elad Elrom

This book caters to blockchain developers, which is why you’ll find all the nitty-gritty about how you can create your own blockchain, decentralized applications, and more. The book starts with a broad overview of blockchain technology and its structure before going full force into the granular information that every aspiring developer will be pleased to find.

Some sections in the book also focus on the most well-known blockchains. The author hopes these sections will be helpful to developers who want to create apps for already existing blockchains. Another section of the book also explores blockchain applications beyond cryptocurrencies.

vi) Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money by Nathaniel Popper

Despite its tongue-in-cheek title, this book is very popular among many blockchain cheerleaders many crypto investors and traders owe thanks to this book.  That’s because the book provides an insider view of sorts – Popper brings to readers the first-hand opinions, perspectives, and ideas of some of the earliest movers and shakers in the Bitcoin space.

His engaging manner enables you to see why Bitcoin and, indeed, the blockchain industry have risen to where they are today. Digital Gold is one of the books that went there before other books had, and it’s one of the best starting points for understanding the blockchain.

vii) The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous

This is another publication that’s right up there with the best in terms of blockchain and blockchain investments. Bitcoin Standard dives deep into the historical context of Bitcoin as well as the unique economic features that have enabled it to become the successful asset it is today. The book also looks at the economic, social, and political implications of the cryptocurrency.

Ammous takes a thrilling walk down the stairs of the history of finance – from when people traded with primitive shells to government debt. With this solid background, he lays down next to the workings of Bitcoin in an intuitive way. He also addresses pertinent questions such as: is Bitcoin wasting energy? Is it for criminals? Who controls it? Can it be killed?

viii) Ethereum: Blockchains, Digital Assets, Smart Contracts, Decentralized Autonomous Organizations by Henning Diedrich

This book is all about recognizing Ethereum for being the blockchain that opened blockchain technology into far more applications than as a platform for digital money. It’s Ethereum that provided developers from all over the world the ability to create smart contracts and ERC-20 token standard through which they can build decentralized apps (DApps) on the Ethereum blockchain.

And this is just what Diedrich gets deep into – the Ethereum platform, smart contracts, decentralized applications, and decentralized autonomous organizations (DAOs). He has attempted to explain this book in the simplest manner possible, making it easy to understand even for newcomers. Better yet, if you’re planning to build your own Dapp on Ethereum, this is your go-to book.

ix) The Internet of Money by Andreas M. Antonopoulos

Andreas M. Antonopoulos is one of the most respected voices in the Bitcoin and blockchain space and a host of the “Let’s Talk Bitcoin” podcast. He’s a Bitcoin evangelist who left his job as a tech consultant to embark fully on popularizing Bitcoin and blockchain.

The Internet of Money, a phrase which, by the way, he was among the first to use, is a collection of cryptocurrency and blockchain talks that he gave in crypto forums all over the world from 2013 to early 2016. In the book, Antonopoulos advocates for and takes an optimistic view of the future of Bitcoin.

x) The Basics of Bitcoins and Blockchains by Antony Lewis

Lewis is one of the founders of itBit, one of the earliest crypto exchanges – and has contributed to the crypto and blockchain space in various ways for almost a decade. In the book, Lewis breaks down blockchain in an enjoyable and easy-to-understand way.

The Basics breaks down cryptocurrencies, Initial Coin Offerings, tokens, enterprise blockchains, and other essentials – without the hype. The book assumes no prior knowledge of the reader in blockchain, cryptocurrencies, cryptography, finance, or any other relevant area. For this reason, it’s a trusty companion for readers who are looking to understand blockchain from the ground up. On his website, Lewis even suggests reading this book “will make you taller, funnier, better-looking and richer.” If you aspire to these qualities, then you should probably try this book.

Final Thoughts

Whether you’re a newcomer in the blockchain space or a long-time enthusiast, these books will provide a fresh perspective into how you conceive the phenomenon. Blockchain is here to stay, and it’s one that’s very likely to take over our entire industries in the future. And despite the technology being discussed every day all over the media, nothing will initiate you better than a good, old-fashioned book.

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Cryptocurrencies

Breaking down ZCash

The first-ever blockchain, Bitcoin, is pretty much an open ledger where all and sundry can see your transactions, and those transactions can be traced back to you, if need be. While this level of transparency is partly what endeared many to Bitcoin, it is not amenable to the notions of privacy that are increasingly prevalent in today’s world.

Is there a way we can take advantage of blockchain technology without sacrificing privacy? Several cryptocurrencies intending to answer that very question have sprung up in recent years. Zcash, a crypto-based on the Bitcoin code base, is one of them.

This article scratches beneath the surface of this privacy coin to look at how it works, who created it, and how it stacks up against other cryptocurrencies in terms of performance.

What is Zcash?

Zcash is a decentralized, peer-to-peer, and privacy-focused cryptocurrency. It is based on the Bitcoin code and was launched in October 2016. It was first called the Zerocoin protocol, then the Zerocash system before finally going by the name Zcash.

Zooko Wilcox, the founder of Zcash, describes it as “another blockchain and cryptographic money which permits private exchanges (and by and large private information) in an open blockchain. This permits organizations, buyers, and new applications to control who gets the chance to see the points of interest of their exchanges, even while utilizing a worldwide, authorization-less blockchain.”

The Team behind Zcash

Zcash is the product of a mix of engineers, scientists, and designers around the world. In the team are graduates from some of the leading universities from around the world, including MIT, Johns Hopkins, and Tel Aviv University. The team’s leader and also founder OF Zcash is Zooko Wilcox, who has 20+ years of experience in open and decentralized systems as well as cryptography.

There’s also the Zcash Foundation, a non-profit whose mandate is maintaining and constantly improving the Zcash protocol to accurately represent the interests of current and future users as well as the community. The foundation was launched in 2017.

How Zcash Works and Its Privacy Model

Zcash works by encrypting transaction details via zk-SNARK – a zero-knowledge proof protocol. Before we talk about zk-SNARK, let’s first get an idea of what zero-knowledge proof is.

What is Zero-Knowledge Proof (ZKP)

 The concept of zero-knowledge proof harks back to the 1980s when 3 MIT researchers – Shafi Goldwasser, Silvio Micali, and Charles Rackoff were working on interactive proof systems, and they stumbled on the idea of having knowledge of proof without revealing that knowledge.

The zero-knowledge proof concept has two parties: the prover and the verifier. A prover can prove to the verifier that they possess certain information without revealing what that information is. A ZKP must possess the following parameters:

  • Completeness: The statement must be true so that a verifier can be convinced of it without proof
  • Soundness: The statement must be true in a way that a lie in its stead would not convince the verifier
  • Zero-knowledge: The verifier has no idea what the information is

What is Zk-Snarks?

Zk-Snark stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” Zk-Snarks are mathematical proof constructs that see to it that a transaction takes place without its details being divulged. These details include sender, recipient, and amount. Zk-Snarks also plays the role of preventing double-spending.

The Problem with Bitcoin’s Transparency

Bitcoin is the first cryptocurrency and one that a lot of cryptocurrencies are modeled after. On the Bitcoin blockchain, the world can see the details of transactions that took place, such as the public key. This transparency is a welcome idea, especially when preventing criminal activity from being conducted using the currency. But it’s also the crypto’s pitfall, especially in modern times when privacy is highly valued and protected.

Businesses also have the need to keep their most sensitive information away from the eyes of competitors and other interested parties. Companies also want to keep employee information, including salaries, from other employees and the public in general. Both these scenarios are not possible on the public Bitcoin blockchain.

Zcash’s Selective Disclosure

On the Zcash platform, transactions can either be “transparent” or “shielded.” Transparent transactions happen through the t-addr, or ‘transparent addresses while shielded addresses happen through the z-addr, or the zero-proof address. This is what’s referred to as “selective disclosure” of Zcash transactions. Users can choose whether to send funds using transparent or shielded addresses. Usually, a user can send funds publicly to a private address and vice versa.

This selective disclosure affords users the choice to comply with industry, tax, and legal obligations when and if required. For example, a user can prove that they own at least a thousand dollars without revealing the exact amount. As well, you can use this feature to comply with auditing requirements by providing payments.

Tokenomics of Zcash

Zcash is a fork of Bitcoin and has the same maximum supply of 21 million as Bitcoin. Zcash’s coins will all be mined by 2032, and block rewards get halved every four years as a deflationary measure. As of March 3, 2020, Zcash is trading at $51.85 with a market cap of $478, 526, 912, and #27 ranking. Its 24-hour volume is $370, 092, 058, and it has a circulating supply of 9, 228, 331, and a total supply of the same value. Zcash has an all-time high of $5, 942.80 on October 29, 2016, and an all-time low of $25.45 on November 25, 2019.

Where to Buy and Store Zcash (ZEC)

You can purchase ZEC from these exchanges, among other popular ones: Coinbase, Cointree, Gemini, Bithumb, Kraken, Huobi, YoBit.Net, Changelly, and etoro. Some exchanges will allow you to buy directly with fiat currency, while others will require you to first purchase Bitcoin or another crypto such as Ethereum to trade it for Zcash.

You can store your ZEC on the Linux command line client wallet known as zcashd. This option is good for you only if you know your way around computers or are sufficiently tech-savvy. There’s also a desktop wallet by the Cash foundation that supports Linux, Windows, and Mac. Other desktop options include Jaxx and Exodus.

If you’re more into hardware wallets – and you should – since they’re the safest option, you’re in luck because user favorites such as Ledger and Trezor both support the coin.

The Bottom Line

Zcash is a cryptocurrency that provides the decentralized, peer-to-peer model of transactions while keeping them private. Users, businesses, and organizations looking to combine the benefits of blockchain technology with privacy are right at home with Z-cash. They also get to comply with regulations without giving everything away. Zcash offers the world the benefits of blockchain without sacrificing their privacy. And with the world valuing privacy more than ever, Zcash is set to move only forward.

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Cryptocurrencies

Weaknesses of Blockchain

Blockchain, the technology that underlies cryptocurrencies, constitutes distributed ledgers shared across nodes (computers) participating in the network. These ledgers record data in a sequential fashion after cryptographically securing it. Once data is recorded on the blockchain, it can’t be deleted. This, among many other features of blockchain, like transparency and being deregulated, has given blockchain tech a revolutionary reputation.

But some of these features have also proven to be the Achilles heel for blockchain. This article dives into some of the weaknesses of blockchain as it stands today.

i) 51% Attack

Consensus algorithms that help protect blockchains, like the bitcoin blockchain, have proven resilient over the years.

However, there’s the 51% attack threat that’s always hanging over these blockchains like the sword of Damocles. A 51% attack would occur if an entity managed to gain control over 50%+ of the network. This would disrupt the network by allowing such things as double-spending, excluding valid transactions, or altering the correct order of transactions.

ii) Data Modification, Or Lack of It

Once data is recorded on the blockchain, it’s immutable. Immutable means it’s unalterable. While this promotes accountability and reduces chances of fraud, it’s not always favorable for blockchain. Humans are prone to making mistakes, and once inaccurate information is stored on the blockchain, it can never be changed.

iii) No Customer Protection

Blockchain technology operates on the basis of the individual holding power over the asset they are verifying on the blockchain – whether it’s a title deed, a cryptocurrency, etc. Naturally, transactions go sour sometimes. In a scenario where this happens, the only way to overturn the transaction is if both parties agree, which might prove a tall order. This is unlike a centralized system where an arbiter mediates between two conflicting sides.

iv) Slow Settlements

Before any transaction is verified on the blockchain, all nodes must come to a consensus about the validity of the transaction. This is way slower than say, a bank verifying your transaction at the counter. And in the time between when a transaction is lodged and when it’s verified, a malicious actor can enter and execute malicious transactions.

v) Miners Can Be Selfish

On blockchains such as Bitcoin’s, mining is a process that incentivizes network participants to commit computer processing power and then gets rewards in the form of coins or a fraction of transaction keys. However, this has a downside. Miners may not be very concerned about settling the optimal number of transactions. All they care about might be finding the next block as quickly as possible in order to verify it and get rewarded.

There’s also the case of Selfish Mining, a.k.a block withholding attack, in which a miner finds and validates a block but does not broadcast it to the rest of the network. This results in the miner having more ‘proof-of-work’ than other miners in the pool and increasing their odds of unfairly getting more block rewards.

vi) Private Keys

Blockchain uses what are known as private keys to give crypto owners full control over their funds and data. Users need their private keys to access their funds and conduct transactions. This means if you own cryptocurrency, the security of funds is solely on you. In other words, you’re your own bank.  Once a user loses their private key (either by forgetting the seed phrase or misplacing their hardware wallet), their crypto holdings are effectively lost, and there is no recourse.

vii) Inefficiency

Blockchains that, for instance, use proof-of-work consensus mechanisms, are incredibly inefficient. This is because they store the entire history of transactions that ever occurred on the blockchain. This takes up massive storage capacities across devices. To make a transaction, the entire downloading and verification process needs to be completed. This could take several days – spelling crippling inefficiency about the network.

Viii) Storage Issues

As blockchains get more popular, it means more and more users are interacting with the network. This increases the size of the blockchain. We’re talking about hundreds of gigabytes of storage. This puts the network at the risk of losing nodes when people find the ledger too huge to download and store in their devices. And this puts the health of the blockchain in jeopardy since the health of a blockchain partly depends on how many nodes are supporting the network.

ix) Scalability Issues

To demonstrate the scalability issue of blockchain, let’s look at the most widely applied blockchain – the Bitcoin blockchain. It takes around 10 minutes for a transaction to be verified, translating into an average of 7 transactions per second. Compare this with Visa, which processes an average of 2,000 transactions per second. What this means is blockchains are still a long way off from achieving the level of scalability that they would need to be able to serve millions of customers around the world.

Final Thoughts

The idea here is not to discredit blockchain but point out how the technology could improve. Blockchain is not referred to as revolutionary for no reason. Developers are coming up with new solutions for blockchain’s weak spots every other day. Some of these are the Lightning Network, a technology that promises to improve Bitcoin’s scalability by offloading some transaction data off the blockchain so as to facilitate faster transactions. Industries of all types are also exploring technology so as to achieve more efficiency in processes. Despite its weaknesses, blockchain remains a technology to reckon with.

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Crypto Daily Topic

What Does It Take to become a Blockchain Developer? [Updated]

In the crypto world, blockchain technology is essentially a ledger system on which cryptocurrency transaction data is recorded. Every entry is permanent and immutable, meaning it can’t be altered in any way. The data is then verified through consensus by multiple nodes, which are basically computers, making the technology secure and reliable. 

Given its benefits, virtually all industries, from banking, real estate, health-care, music, to logistics, are working towards integrating blockchain technology into their framework. As technology permeates across industries, there is a rising demand for skilled blockchain developers to help optimize the protocol to suit the needs of a specific industry. 

Considering that the technology is still in its budding stage, starting a career as a blockchain developer places you at the front seat to drive its growth. For those working in the tech field, chances are, they have the necessary foundation required to start a career as a blockchain developer. However, if you have no tech skills whatsoever, it’s still possible to become a blockchain developer, but it’ll take a bit more work and dedication to learn the basics. A good place to start is first understanding the most common programming languages used in most cryptocurrency projects. These languages include; Java, Python, JavaScript, Swift, and Solidity. 

Regardless of your skills level here’s are the essential skills required to kick-start your career as a Bitcoin developer: 

Understand the Principles of Blockchain 

Since most of the developer’s work involves interacting with blockchain technology, it makes sense to have a good grasp of how the entire protocol works. You also need to understand the foundational concepts of blockchain architecture such as; cryptographic hash functions, consensus, and distributed ledger technology. 

To understand these concepts, it’s advised to read through the Bitcoin Whitepaper. However, you’ll need a little bit of guidance to direct your learning curve, which is signing up for short-term certification courses on the same will be helpful. 

Data Structures Proficiency 

Data structures are an integral part of development. In the case of blockchain development, it becomes even more important since blockchain relies on data structures to build scalable and tamper-proof records. 

Besides, as a blockchain developer, you’ll spend most of your time working with data structures such as Merkle trees and petricia trees, among others, as you try to configure the network to meet specific needs. 

Smart Contract Development 

Smart contracts are one of the key components of blockchain technology, especially in a business-focused environment. The concept came into the spotlight after Ethereum used it in its protocol. Since then, almost all upcoming blockchain projects are striving to incorporate smart contracts in their functionality. Solidity, Viper, and Chaincode; are among the top programming languages used to develop smart contracts. So, it pays to invest time in learning these languages. 

Cryptography 

In a blockchain network, cryptography and data structures complement each other, to establish the integrity of the network. Asymmetric cryptography, in particular, is used in blockchain to generate digital signatures for verifying transactions. Also, cryptography algorithms help secure data on the blockchain. 

Web Development 

The majority of blockchain developers end up working in designing decentralized applications. Additionally, blockchain technology uses a huge variety of web-based services and APIs. As a blockchain developer, this demands that you understand both front-end and back-end development, which involves creating an intuitive user interface, request handling for the decentralized apps, and API handling. 

Once you have a good understanding of the concepts above, you need to know that there are two main types of blockchain developers. These are core blockchain developers and blockchain software, developers. Let’s look at what each one of them entails: 

i) Core Blockchain Developers

Core blockchain developers focus on developing the blockchain technology itself, including designing the consensus protocols. They can also advise companies on how to structure their Initial Coin Offerings (ICOs) as well as supervise and plan blockchain projects. 

ii) Blockchain Software Developers

Blockchain software developers use the blockchain protocol to build or design decentralized apps. As such, they can work together with the core developers to come up with unique software based on the protocol developed by the core developers. It is also the role of a blockchain software developer to design smart contracts and the other web development roles, as mentioned earlier.

Currently, most job opportunities lie in decentralized app development, as various industries and businesses strive to incorporate blockchain into their processes. 

Self-taught or Formal Education for Blockchain Developers 

Deciding to become a blockchain developer is one thing, choosing a mode of learning is a whole different thing. 

For starters, taking the self-taught route is appealing to those who already have a career in the tech industry. There are numerous online courses to guide you, so you only learn the required content. You can sign up for Coursera or Udemy courses or checkout GitHub repositories for guided content. Online learning platforms on the same, can also help sharpen your self-taught skills as you interact with other blockchain developers. 

If you are completely new to the tech world and possess no skills, formal education focused on basic concepts such as programming and software development is your best bet if you want to start a career as a blockchain developer. Some colleges these days even offer blockchain development courses as certification programs. So, once you enroll in such a college, you’ll not only learn the basic tech skills but also become a blockchain developer at the end of your program.

Nonetheless, you can as well learn the basic tech skills from online courses and other dedicated pages. Once you have mastered the concepts, including those mentioned above, you can then transition to become a blockchain developer by taking up courses on the same. 

Whether you sign up for online courses or enroll for formal education, remember the only way to perfect your skills and boost your resume is by getting hands-on experience. So, try working on solo projects or collaborating with like-minded developers. There are various online open-source projects you can contribute to sharpen your skills and get the much-needed experience. 

Conclusion

Blockchain is considered the next wave of tech innovation. This explains why well-established tech companies such as IBM, Microsoft, and Samsung are showing interest in this revolutionary technology, as they look to be at the forefront of the growing innovation. Moreover, as the technology is maturing and finding its roots across various industries, this is the best time to start your career as a blockchain developer. 

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Crypto Daily Topic

Ether Futures: The Definitive Guide

Speaking at an interview late last year, the new chairman of the U.S Commodity Futures Trading Commission (CFTC), Heath Tarbert, said that Ethereum Futures are likely to be launched sometime this year. 

Such a bold declaration, coming from the regulator of one of the largest derivatives markets in the world, will undoubtedly attract institutional investors who are looking to hedge losses in their fiat settled portfolios. 

But before we can examine the impact of ether futures on the crypto market, there is a good chance that the futures contract will not be launched as soon as expected. If at all it will even be possible to launch them in the first place. 

The Road to Launching Ether futures Contract

While CFCT is planning on launching Ethereum futures, the contracts have already been launched, and investors started to trade them on exchanges based outside the U.S. By extrapolating the market behavior on these exchanges, it’s safe to say that ether futures won’t trade in high volumes as anticipated.

On BitMEX, Huobi, and Deribit exchanges, where investors are actively trading ether futures, the contracts’ trading volume is less than 10% compared to that of bitcoin futures. It could be because Bitcoin futures were the first crypto derivatives to be launched, and have actually been in existence for quite some time now. As such, many investors view bitcoin futures as the crypto-asset of choice. Also, the difference in trading volume may be due to the fact that Ethereum is still maturing, and maybe it will eventually catch-up at its own time. 

Even without considering the trading volume, the launch of ether futures may not come to fruition due to the coin’s upcoming change in algorithm. The proposed change in algorithm will see Ethereum move from proof-of-work to proof-of-stake algorithm, making the coin more of a security than a commodity. 

Unlike proof-of-work where holders receive coin rewards randomly, once Ether moves to proof-of-stake, the coin holders will receive annualized rewards. As such, since the returns will be more regular and predictable, the entire Ethereum network will fall under the jurisdiction of the U.S. Security Exchange Commission (SEC). As it is widely known, SEC hasn’t warmed up to the whole idea of crypto-assets. This will likely delay the launch of Ether futures for quite a long time.

More so, the change in algorithm, which will be executed via hard forking, makes investing in Ethereum network riskier now than it would be if hard forking was executed when the network was in its infancy stage.  

Effects on The Crypto-market

Assuming that all goes well and ether futures are launched, the most immediate impact will be on Ethereum prices. 

Going back in time, the launch of Bitcoin futures coincided with the coin’s all-time high prices in the year 2017. Bitcoin pessimists were, therefore, able to enter the market via the futures, leading to a fall of  Bitcoin demand in the spot market. The lower the demand, the lower the prices.

The change in Bitcoin’s price dynamics, prompted the pessimists, as well as the initial coin holders, to short-sell in an effort to make returns off the falling prices, making the prices to decline further. 

History may repeat itself in Ethereum’s case, especially considering that the crypto-market is driven mainly by speculative investors. Yet, the Ethereum blockchain platform has the potential to shift the ETH market prices from speculation demand to benefit-driven valuation. This is possible due to the smart contract feature of the coin’s underlying protocol that allows users to complete transactions such as making a purchase without employing a third-party to oversee the whole process.  

Simply put, ETH isn’t just focused on cashing in the chips; instead, it’s focused on having a real-world use. This way, it’ll stick around for a long time and derive value from its transactional benefits. 

As Wall Street continues to work hard towards embracing cryptocurrencies, the launch of ether futures is critical, as it will incentivize deep pocket investors to enter ETH trade without necessarily owning the underlying asset. This might spark off an aggressive short-selling spree, but it might be a healthy thing for the market since it’ll help shift the focus to the real value of Ether. 

Companies who had raised money through ETH tokens – ERC20 – will, however, be affected if eth futures end up triggering short-selling panic. To hedge against further losses, these companies may resort to selling their token’s value for BTC or fiat currencies. In any case, whatever the resultants effect will likely increase Ether’s trading volume. 

With the increasing trading volume, more tools will be developed for seamless trading. Transactions will be faster, and even the current problems in the crypto-market, such as scalability, may eventually be solved. 

Besides the trading volumes and increased investment, Ether futures will help stabilize prices of the coin itself and, to a certain degree, those of Bitcoin. See, futures are, essentially, contracts to buy or sell a certain amount of an asset at a specific day and time. This is particularly useful when the underlying asset is highly volatile, which is the case with Ether. The rationale is that futures enhance liquidity, which is inversely proportional to volatility. 

Conclusion 

There are lots of mixed reactions about the expected launch of Ether futures. With Bitcoin options also hitting the market in the first quarter of 2020, perhaps, it’s best that ether futures are put on hold. 

For ETH, it’s futures may not attract a significant number of investors, since they are not the first of their kind to be launched. Nonetheless, their market debut will signify the maturation of the crypto-market, earning it mainstream acceptance. If the futures turn out to be as successful as Bitcoin’s, it might open the way for ETH options and other sophisticated trading instruments. 

However, before that, Ether will have to first mitigate the regulatory handle brought about by its algorithm change. Currently, analysts fear that the ETH may start out as a commodity but end up having a tangible value as it gets more decentralized. 

 

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Crypto Daily Topic

The Recent Bitcoin Surge: Is it a Mirror of the 2017 Bull Run? 

Towards the tail end of 2019, Bitcoin stagnated in the ranges of $7,000 to $8,000. However, at the beginning of this year, 2020, its price increased steadily to the highs of $9,443.96 and continued to show signs of strength. As the anticipation for even higher prices continues to grow, its quite clear that Bitcoin market was in a bull run, and perhaps will continue to be bullish for the better part of this year. 

The projected bull run can be linked to the fact that the digital coin’s daily entities are close to those leading up to the 2017 bull run. In this case, the daily entities suggest that an increasing number of people are using Bitcoin – a relevant milestone in launching a bull market. On top of it all, the bull may continue to reign for longer if the highly anticipated Bitcoin halving goes as expected.

But before we can ascertain that this year’s bull run is similar or different from that of 2017, we need to go back and look at the factors that led up to bull market in the first place. By doing so, it will enable us to point out the differences/ similarities between the year 2020 bull run and that of 2017

Factors that Stirred the Bitcoin Market in 2017 

Rising from the lows of less than $1,000 to as high as $20,000 all within a year, proved that Bitcoin could defy the traditional laws of asset valuation. However, the surge in price can be explained by several factors:

FOMO is Real

The 2017 bull run was mainly fueled by the Fear of Missing Out (FOMO). Only a sizable number of retailers knew what bitcoin is or understood how it works. The majority of them were trading the digital currency since they saw it rise in value and made other traders rich overnight.

Consequently, there was spiked adoption of Bitcoin by the public leading to the high demand for the coin. The higher the demand, the higher the price. Yet, the coin itself wasn’t quite ready for the wide adoption, which explains the drastic reduction in price in the early beginning of 2018. 

Price Manipulation

According to a recent research, it is likely that a “whale” manipulated Bitcoin’s price in 2017, resulting in the bull run. In this context, a whale is an individual or institution that holds a significant amount of Bitcoin, which is higher than that of the average investor. 

The research reports that the “whale’s” transactions on the blockchain revealed that Tether was used to back up the price and manipulate the Bitcoin market. This report doesn’t seem far-fetched since large transactions of Bitcoin can be loosely interpreted as massive adoption of the coin, resulting in a bull market. 

Less Government Regulation

Looking behind the 2017 bull market, there were three other bitcoin bull cycles, though they weren’t as significant. However, the idea here is that in each of these bull cycles, including that of 2017, the government institutions hadn’t enforced strict measures against cryptocurrencies as they currently have. This provided an ideal atmosphere for increased bitcoin activities between miners and traders, resulting in increased trading volume. 

Nonetheless, since the 2017 bull cycle, Bitcoin and the crypto-market as a whole has evolved and is on its way to a more mature phase.

What has improved since 2017

i) Lower Fees

The most significant change since 2017 is the reduction in Bitcoin transaction fees. The adoption of Segwit, as well as the increase in the number of exchanges, have made the transaction faster and affordable for Bitcoin users. 

Of course, if Bitcoin goes into a full-blown bull run, the transaction fees will increase in equal measure. However, the fees will still remain lower compared to other years, incentivizing more investors to join the market. 

ii) Big Money Interests

In 2017, and years before that, blue-chip companies dissociated themselves from bitcoin and blockchain technology altogether. 

Years after, there have been a lot of big brand companies showing interest in the cryptocurrencies, with an aim for leveraging the underlying protocol – blockchain. A good example is Facebook Inc, whose CEO announced the launch of the company’s digital coin, Libra. Microsoft is also actively building on the Bitcoin blockchain, as other institutions such as JP Morgan continue to show interest in cryptocurrencies. This gives the whole crypto-market the validation it deserves, prompting mass adoption. Increased mass adoption will likely trigger an increase in Bitcoin prices since it’s the most held coin by crypto investors. 

iii) Better Liquidity

It is estimated that there are about 206 exchanges currently in operation. To investors, this means it is a whole lot easier to liquidate your investment than it was a few years ago when only a few exchanges were operational. 

What’s even better is that most of the exchanges accept fiat currency directly, in exchange for cryptocurrencies. Investors can buy cryptos using their debit cards at a lower cost and more efficiently than it was the case in 2017. With better liquidity, especially for BTC, the trading volume is bound to increase, which is an essential feature to complement this year’s bull run. 

iv) More Options

It was not until the near-end of the 2017 bull run that Cboe and CME launched bitcoin futures. Despite being launched a bit late, the derivatives are meant to offer a more stable trading alternative to BTC, making the futures attractive to institutional investors. 

Also, if bitcoin price continues to increase and even reach an all-time high, the derivatives provide an efficient way for investors looking to make returns, by shorting Bitcoin. 

This time it’s Different 

It is evident that the Bitcoin landscape has matured since the phenomenal 2017 bull run. More corporations are entering the market, bringing new infrastructure and technologies to improve not just Bitcoin trading, but also the entire cryptocurrency market. If these changes in the market fundamentals are anything to go with, it is safe to say that the 2020 bull run might surpass that of 2017. But even if it fails to do so, 2020 still remains the best year for Bitcoin in terms of the average price. Compared to 2017, when Bitcoin’s average price was $6,125, this year’s average price is, so far, at $9,120, an indication of better days ahead. 

 

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Crypto Daily Topic

Is There a Looming Race for Digital Currency Supremacy?

Being the first of its kind, Bitcoin can be termed as the king of cryptocurrency – a position that can also be attributed to its large user base. 

Ever since its inception, this digital currency has inspired the launch of similar, or rather improved iterations, of new cryptos. As a result, the market is quite flooded with cryptocurrencies, each offering a unique utility point, in a bid to establish undisputed authority in the crypto-market. 

The race to dominating the crypto-space has grown exponentially to a point that it has attracted the attention of government institutions, who are seeking to regulate blockchain and all crypto assets. 

While most government institutions are playing catch-up, giant tech companies such as Facebook are laying plans on launching their own digital currency. So, the real question is, who is likely to win the digital currency race? Will it be a state or a private entity? 

The Case for Facebook’s Libra coin

Less than a year ago, Facebook announced that it would launch a digital coin called Libra. The coin is aimed at connecting thousands of people who don’t have immediate access to traditional banking systems. From the surface, Libra could indeed be a financial game-changer, as the giant tech company is banking on its massive international user base. This also translates to more profits for the company on top of its record high revenue generated from the advertisement.  

But the road to launching Libra, so far, has been nothing short of challenging. Lawmakers, especially in the U.S., were quick to grill Facebook’s plan on the basis of privacy concerns.

Unfortunately, the company hasn’t been in the good books as far as users’ privacy is concerned. As such, the U.S. Congress viewed its extension into the financial realm will likely result in more cases of consumers’ privacy violation. 

However, looking at what Libra can help users achieve, a good number of businesses will likely buy into it; despite Facebook’s disregard for privacy. For starters, the social media platform connects businesses to millions of potential customers. Put Libra into the picture, and Facebook transforms from just a social media platform to an e-commerce and financial marketplace, where customers can shop online using the built-in digital currency. This will be by far a great opportunity that many small businesses can’t resist. Also, Libra’s white paper outlines big brand partners such as MasterCard Inc, Visa Inc, and Uber Technologies, who’ve signed up to invest in the coin’s growth. 

But, for those who are unwilling to cede their personal details to a company that has always shown it can’t be trusted, the big-name partners can be seen as pathways for mitigating the regulatory measures and privacy criticism that Facebook faces. 

Central Banks Race

Sure, cryptocurrencies, in general, have been met with a lot of skepticism credit to their potential to disrupt global finance. Blockchain – the underlying cryptocurrency technology- is still in its infancy stage, which also attracts more speculation on digital currencies. 

Despite the backlash from finance regulators, a handful of countries are warming up to cryptocurrencies and its potential to revolutionize global finance. 

A good example is China, where the country’s central bank – People’s Bank of China (PBOC) – is closer than ever to digitizing the Yuan, China’s official currency. This move has been endorsed by President Xi Jinping, who believes blockchain is an integral part of China’s plan to become a high-tech superpower. 

Following closely behind is Japan, where the legislators are exploring the idea of issuing Central Bank Digital Currency (CBDC) in the form of a digital Yen. Apparently, the process of digitizing the national currency will be a joint venture between the Japanese Government and several private companies. Nonetheless, the goal is to give Japan an upper-hand in the cryptocurrency industry. 

Many believe that Japan’s plan to issue a CBDC is in response to the fear of competition from China, who are also digitizing the Yuan. Facebook’s Libra coin is also part of the reason why Japan is joining the race for digital currency supremacy. This is due to the fact that Libra is backed by different fiat currencies, making it hard to manage since it can’t be pegged to a single county’s politics. 

Western Countries Response

Western economic powers haven’t been as fast as expected, in adopting or promoting the use of digital currencies. In fact, since the birth of blockchain, some Western Countries have been actively inhibiting the growth of cryptocurrencies through strict regulatory laws. Case in point, the U.K. is determined to ban crypto derivatives in addition to planning on taxing crypto users. Things aren’t any better for crypto users in the U.S., where the IRS has managed to stub out several crypto start-ups. 

Recently, however, the western countries have realized the futility of blocking digital currencies. The European Central Bank (ECB), in particular, is working on a digital currency that could be an alternative to private providers. There have been notable moves by central banks in Canada, Switzerland, and Singapore, where they are looking at adopting a digital currency, as the use of fiat currencies decline. 

As countries and private entities try to establish their dominance in the crypto-market, the world’s largest central bank, Bank of International Settlements, aims at keeping the race co-ordinated and less chaotic. For this reason, the institution has appointed one of the ECB board members, to oversee the development of a digital currency model that other central banks can easily adopt. 

In the U.S., several Congress members expressed in writing to the Fed chairman – Jerome Powell – their interest in pushing for the digitization of the dollar. According to these Congress members, the current skepticism surrounding cryptos will jeopardize the widespread acceptance of digital currencies in the long haul. 

Conclusion

Clearly, the race to establishing a sovereign digital currency has taken root. China is expected to emerge victorious in this race, owing to the political back up blockchain has received in the country. 

Facebook and Japan could be the closest rivals to China as the two already have an established framework to support their digital currency. The former is only held back by legal setbacks, while the later is yet to materialize its plan in comparison to China’s concrete effort to digitize the Yuan. 

Western countries, however slow they might be, will soon catch-up at their own pace. But for now, only time will tell who will win the race. 

 

Categories
Crypto Daily Topic

Is Coinfirm Redefining Crypto Privacy with New Tool?

On top of the list of the features or advantages that made cryptocurrency really take off are the privacy and anonymity benefits that its users enjoy. Most people have come to view the anonymity that blockchain offers as synonymous with digital privacy.

Would you believe that there is a new piece of technology that could spell the end of anonymity in cryptocurrency without compromising the privacy it offers?

Coinfirm, a global leader in analytics and AML for blockchain and cryptocurrencies, is leading the new tech development after having just raised over $4 million to build it. The software is designed to help crypto exchanges meet the new legal regulations that are meant to curb money-laundering using cryptocurrencies and digital assets.

The FATF Regulations of 2019

According to Pawel Kuskowski, the CEO of Coinfirm, his company developed the software with the primary objective to help crypto exchanges comply with the ‘wire transfer rule,’ also known as ‘The Travel Rule’ issued by the Financial Action Task Force back in June 2019. The Financial Action Task Force (FATF) is a large international agency tasked with setting the standards for anti-money laundering regulations around the globe.

In the new regulations targeting virtual assets and related providers such as cryptocurrency exchanges, countries are expected to implement a comprehensive framework of measures meant to combat terrorist financing and money laundering. These include providing essential information about the originator and beneficiary in every digital asset or cryptocurrency transfer.

Other pieces of information that must be provided are the sender’s physical address and identification as well as the date and place of birth. In the new rules, exchanges are also expected to capture the name and account numbers of the recipient.

Anonymity vs. Privacy

While privacy and anonymity are two very different concepts, the FATF regulation has put many cryptocurrency exchanges in a difficult position. This is because they are now required to collect and disclose customer information, something that definitely does not bode well with cryptocurrency users and tends to undermine blockchain’s greatest feature: anonymity.

This requirement has also brought to the fore the need to differentiate between anonymity and privacy as far as digital payments go. Anonymity refers to a situation where a person does not wish to hide what they are doing or what they own, all they try to conceal is their identity. Privacy, on the other hand, is the power to keep various personal things to oneself, regardless of how it impacts society.

According to Kuskowski, if you use cryptocurrency, you need to get used to the idea that the age of anonymity is gone. With the new ‘Travel Rule’ regulation issued by FATF, your favorite exchange will be required to tie your crypto address to your real-world identity. The software that Coinfirm is developing is focused on helping exchanges keep private their users’ information despite the problems anti-anonymity rules seem to cause.

How Coinfirm’s crypto privacy tool works

The new technology that Coinfirm is working on to help crypto exchanges comply with FATF’s new regulations is focused on the customer’s privacy rather than the exchange’s ability to provide it. The software lets virtual asset service providers (VASPs) such as crypto exchanges share only the necessary customer information securely with other VASPs. It also generates detailed security reports that can be used to determine how risky it would be for one VASP to trade with another VASP with customer privacy in focus.

The service is all-rounded. It not only makes it possible for VASPs to trade securely, but it also makes it possible and safer for exchanges to transfer funds to non-VASP establishments and recipients such as anonymous digital wallets.

The FATF Travel Rule requirements may seem to prevent VASPs from transacting with non-VASPs that are not subject to the new rules, but Coinfirm’s secure platform has a solution to this problem. Once the new regulations are in effect, it may be riskier for exchanges to trade with non-VASPs, but the new system is built to make it easy for exchanges to send and receive digital assets to non-compliant users while remaining compliant.

Is this the future of privacy in the crypto world?

It is no secret that blockchain’s top feature – anonymity – was the technology’s most marketed feature that turned out to be a double-edged sword that could cause almost as much harm as its benefits. Criminals – mostly traders in illegal products and services and money launderers – have had a field day thanks to the anonymity and peer-to-peer transaction capability offered by blockchain digital assets. FATF’s regulations have come at the right time just as global governments are grappling with how to deal with the surge in financial crimes brought about by the new digital currency.

Coinfirm’s CEO Kuskowski, is himself experienced in this field, having headed the anti-money laundering department of the Royal Bank of Scotland. He says that the future of financial privacy should be defined solely by how an individual or a business can keep snooping eyes out of their details, and not try to hide it from the system altogether. His company’s technology, if adopted by crypto exchanges, is more of a regulatory compliance system that aims to keep the exchanges in business while helping them protect their customers’ data.

Coinfirm is an established blockchain services company that already works with top exchanges, including Binance and even corporate investigations firm Kroll. They are best placed to provide a solution to the privacy and anonymity issue that exchanges have to explain to their customers because of the expertise it has in the industry and the influence it has on the global financial market.

Regulation is inevitable

Many people mistakenly believed that it is completely impossible to regulate the digital assets market, especially considering how governments and banks have tried and failed to kill blockchain products. Ultimately, they have had to embrace it. This new regulation is not just necessary; it is good for both the privacy of the users and the crypto economy into which the world is headed, according to Kuskowski.

“Coinfirm is focused on providing a solution to a glaring problem with no current solution. Our Solution will be available for the wider market, and not just specially developed for exchanges. Coinfirm is going to kill the market,” he said.

The future of privacy in the digital world will depend on how well the market will receive solutions such as the one developed by Coinfirm. While there is a risk that the new regulations will challenge crypto companies in every industry, it is likely to drag traffic off low-quality exchanges. 

Closing remarks

Kukowski and Coinfirm are very optimistic about the prospects and capability of their new tool. If they get it right, there is a high chance that the company will pioneer the next phase of cryptocurrency adoption with the new regulations. Exchanges that are compliant with the new regulations will be operating on the level of banks, and Coinfirm will be at the center of helping them manage their user data.

“Exchanges will soon be going head to head against banks, the financial field will be leveled,” Kuskowski said, “we will have the best seats in the house to see which financial industry is more effective as far as technology, costs, and user privacy goes. I believe that crypto and crypto exchanges will win hands down!”

Categories
Cryptocurrencies

Blockchain Operating Systems: Everything you’ll ever need to know

The days when blockchain was only associated with Bitcoin seem to be behind us now. Blockchain technology is currently being explored for all manner of applications. We’re currently talking about blockchain operating systems as the next blockchain trend.

A blockchain operating system is one that employs blockchain tech as the support in the background. Think of your Android smartphone or Windows PC. These devices operate on the basis of a supporting system in the background, with all the commands being executed on the surface. A blockchain OS works by capturing all commands locally, but with the authenticating, execution, and recording of the commands happening on the blockchain.

Blockchain operating systems are still very much in the nascent stage, and a quick search through the internet reveals several projects are hoping to claim the title of “the world’s first blockchain operating system.” However, most of these projects are not clear on what solution they provide, while others offer a product that’s so far from the concept.

Having said that, we were able to pin down two blockchain operating systems that are up and running, while another is still in beta, but shows strong promise. Let’s look at those projects right after exploring how a blockchain operating system works.  

How a Blockchain Operating System Works

A blockchain works pretty much like a transaction processing engine. Whether processing a payment, tracking the shipment from the warehouse to your doorstep, blockchain applications are all about authenticating, recording, and processing transactions. It’s the same way that any operating system works – commands (transactions) are issued via mouse clicks or screen taps, and the user performs all tasks on the device.  This is the same concept that blockchain operating systems are based on – with them being viewed as more efficient than traditional operating systems.

Examples of Blockchain Operating Systems

ConsenSys Codefi

ConsenSys Codefi is a blockchain operating system that’s an offshoot of ConsenSys, a blockchain company that’s been in existence since2014.

In a September 2019 release statement, the project describes itself as “a product suite built for the next generation of commerce and finance…utilizing blockchain technology to optimize business processes and payments, digitize financial instruments, and build a customized decentralized applications.

The Codefi platform is built atop Ethereum and aims to help everyone – from entrepreneurs to the banking system, decentralized networks and developers – benefit from the blockchain technology revolution. Through Codefi, organizations and individuals can digitize processes and assets ranging from equities to loans to real estate.

Its product suite comprises four products:

  • Codefi Assets: A platform to create, issue and manage digital assets on public or permissioned networks
  • Codefi Networks: A collection of tools to empower individuals to utilize crypto
  • Codefi Payments: A platform with a single dashboard in which individuals can interact and transact with cryptocurrency
  • Codefi Data: An engine for managing data, analytics, and risk for cryptocurrency and blockchain networks

LibertyOS

LibertyOS calls itself the “world’s first blockchain operating system.”

A look through its landing page shows the project is still in beta and is still asking for people to invest in the project.

It has a native token, the LIB token, through which advertisers can buy ad-space, and users can earn money through watching those ads – in a safe, clean and spam-free environment. Through this model, LibertyOS hopes to be self-sustaining.

The LibertyOS platform intends to be big on privacy and security, even incorporating a TOR browser. User behavior will not be tracked or recorded on the platform.

The team behind LibertyOS has combined skill and experience from industry leaders such as Microsoft, Google, Amazon, and IBM and education from top universities such as UC Berkeley, Stanford, and Harvard.

Nynja Virtual Operating System

Hong Kong-based NYNJA Group Ltd. has collaborated with Amgoo smartphone manufacturers to distribute its blockchain-based virtual operating system on the company’s phones. The vOS has a communications layer supporting voice, text, and video conferencing tools, alongside project management, e-commerce, and smart contract features, as well as developer tools and business solutions.

On the NYNJA platform is also a multi-currency wallet that supports Bitcoin, Ethereum, and all ERC-20 tokens. Individuals can also exchange digital goods like music, templates, photos, code, and services like translation, design, consulting, and so on. The NYNJA marketplace works very much like the Uber model – you can get a pre-qualified professional to work instantly on your project at the touch of a button.

Final Thoughts

With blockchain operating systems, users will have all the advantages of blockchain: security, privacy, decentralized apps, and so on – right on their computers and even mobile phones.

As of early 2020, Blockchain operating system is still a very young technology. It may take a few years before we see fully-fledged blockchain operating systems. After all, computer operating systems took decades before they became mature, functional operating systems. Bitcoin itself took five years before seeing any transaction, and yet it has spawned an entire unstoppable industry. What’s truly certain is that we’re going to be seeing many exciting blockchain operating systems in the future.

Categories
Cryptocurrencies

A Beginner’s Guide to Tezos

Tezos is one of the most controversial cryptocurrencies to grace the scene. After a wildly successful July 2017 ICO that collected $232 million, its launch was postponed with controversy after another. However, the crypto finally launched in September 2018, rising above the cacophony to become the tenth most successful cryptocurrency as of February 26, 2020.

And this crypto-only seems to be growing stronger – it’s one of the cryptos to witness a bullish first quarter of the year.

So, what is Tezos? Let’s do a deep dive into Tezos, its unique selling point, and the controversy that once threatened to derail it.

Who is Behind Tezos?

The team behind Tezos is Arthur Breitman and his wife, Kathleen Breitman. Between them, they have a wealth of computer science, Mathematics, and finance experience. Arthur has previously worked for Goldman Sachs and Morgan Stanley, while Kathleen has work experience from Bridgewater Associates and R3.

Tezo’s On-Chain Governance and Self-Amending Protocol

Before we dive into Tezos, we need to understand the meaning of a ‘fork’ in the context of blockchain.

Blockchain, like software, needs to be updated from time to time to improve its functionality in one way or another. A software upgrade is known as a fork – which can either a soft fork or hard fork. A soft fork is backward compatible, but a hard fork is not.

Backward compatibility means the ability of the new version to interact with the older version. Once a hard fork is implemented, there’s no going back whatsoever. If you don’t upgrade to the new version, you can’t access the latest update or interact with participants in the latest version in any way.

Now you need to understand that forks are not a bad thing: if anything, updates are what makes a blockchain amenable to changing times and user demands.  The only problem is when hard forks cause rancor within a blockchain community.

We are all aware of the most contentious hard forks of all time – the ones that split both Bitcoin and Bitcoin Cash. Bitcoin was split into Bitcoin and Bitcoin Cash, and shortly after, Bitcoin Cash itself split into Bitcoin Cash and Bitcoin Satoshi Vision (SV). The Bitcoin Cash split was especially marked by extreme animosity between the two camps complete with name-calling and threats and the so-called hash wars.

The hash wars were pretty much the two camps using their mining resources to outdo the other chain. Ultimately, it was unnecessary theatrics that actually plunged the whole crypto market and promoted a bad rap against the blockchain and crypto industry.

This is the kind of contention Tezos is trying to avoid. Kathleen Breitman, the Tezos co-founder, said this in an interview with BreakerMag: “The great irony of Bitcoin is that it’s ultimately a tool for community consensus, but it’s [marred by] a tremendous amount of animosity. Tezos allows for innovation to happen in a systemized way as opposed to one born of politics. You’ll not find two people who loathe politicking more than Arthur and me. That’s the idea behind Tezos: let’s formalize this extraordinarily informal process.”

The Tezos’ Way

Tezos hopes to avoid divisive hard forks via what they call ‘self-amendments and on-chain governance.’ The self-amendment concept is meant to prevent the chain from undergoing a hard fork when it needs to upgrade. On-chain governance, at its simplest, means that users will vote over any proposed amendment. Combining the two means that voting can be modified, or the chain can be amended when necessary. The result is a frictionless process that allows the evolution of the blockchain without a hard fork. 

This is how it works:

  • Developers independently submit proposals for protocol upgrades together with an invoice for compensation of their idea
  • The compensation is meant to incentivize developers to contribute to the network  
  • The community puts the proposal into a trial and points out areas that can be improved or removed
  • After rigorous testing, Tezos stakeholders vote on whether the protocol should be implemented or not
  • If the vote favors an upgrade, a ‘hot-swap’ is carried out, and the new protocol is set in motion

This process ensures a decentralized and democratic approach to protocol upgrades by ensuring approval from the bigger section of the community. It’s a peaceful and yet effective approach for improving the Tezos platform.

The Baking process

Amusingly, Tezos calls its staking process “baking.” The baking process is as follows:

  • Bakers are granted block validation rights according to the amount of stake they own in Tezos
  • A block is baked (produced) by a random stakeholder and endorsed by 32 stakeholders (bakers) who are also randomly chosen 
  • Upon verification, the block is recorded on the blockchain
  • If a block is successfully validated and added on the blockchain, the baker is given a block reward and a percentage of the fees from that transaction

Token holders can delegate their baking rights to other token holders without relinquishing their ownership of the tokens. When the baking process is completed, the baker shares its rewards with the other delegates. A baker will be punished for acting dishonestly e.g., not sharing rewards, charging high fees, or attempting a double spend or propagating blocks on different branches. 

Token holders can easily switch delegates and, as such, can threaten to delegate elsewhere – this fosters coordination instead.

Liquid Proof of Stake

To understand Tezo’s liquid proof of stake, we need to understand the proof of stake mechanism (PoS) and then the delegated proof of stake mechanism. PoS was invented to improve on Bitcoin’s proof of work mechanism, which is too slow and consumes too much energy.

The proof of stake mechanism works as follows: 

  • Validators commit some coins as stake
  • They initiate the block validation process i.e., they identify blocks that can be added onto the blockchain, then initiate the verification process by placing a bet on it.
  • When a block is successfully validated and recorded on the chain, the validators receive a reward proportionate to their bets

However, the PoS mechanism includes the entire community and may prove to be problematic for scalability in the long run. For this reason, newer blockchains are designed with a delegated proof of stake (DPoS) protocol. DPoS means delegates are selected beforehand.

The Tezos consensus mechanism is a lot like this but slightly different. Instead of a hard and fast rule about the choosing of delegates, it’s completely up to a network participant to decide if they want to be involved in the validation process or not. In short, delegation is optional, or ‘liquid.’

Tezos’ Architecture

Any blockchain utilizes the following three layers:

  1. Network protocol – responsible for discovering blocks and broadcasting transactions between nodes
  2. Transaction protocol – a transaction layer that defines what a valid transaction is
  3. Consensus protocol – determines how an agreement on the validity of transactions is achieved

Tezos combines the last two protocols to form a ‘Blockchain Protocol.’

Tezos breaks from this using a generic ‘Network Shell’ that’s compatible with the different transaction and consensus protocol mechanisms. The Network Shell facilitates interaction between the network protocol and the blockchain protocol and is agnostic (amenable) to both the transaction and consensus protocols.

Controversy Surrounding Tezos

The Tezos we know today almost never was – thanks to a cloud of controversy, it was mired in from the very beginning. Let’s look at the issues one by one below:

Intellectual Property Row

First off, the company behind Tezos is called Dynamic Ledger Solutions (DLS), while the one that was put in charge of the ICO contributions is the Tezos Foundation.

DLS retained intellectual property rights over the Tezos source code. As per the ICO agreement, the Breitmans would set up a foundation (the Tezos Foundation), which would then buy out DLS (including the property rights) for the sake of the community.

However, the agreement had been that the Breitmans and Tim Draper, a venture capitalist, would receive 8.5% of the funds raised from the ICO as well as 10% of the circulating Tezzos. A document outlining the relationship between DLS and Tezos foundation and for the “interest of privacy” was pulled from the companies’ websites with no explanation. 

Internal Power Wrangles

The next controversy was the Breitmans getting into a public dispute with a member of the board and the President of the Tezos Foundation, Johann Gevers. The story is that Gevers, being in control of the funds from the ICO, would not release the funds.

The squabble caused unrest within the community and caused the coin to plummet in value. The Breitmans put out a censuring statement on Gevers peppered with terms such as “self-dealing, self-promotion, and conflicts of interest.” The prolonged and adverse media attention eventually pushed Gevers, and the Tezos Foundation board members to step down. They were replaced by two community members Michel Mauny and Ryan Jesperson.

KYC/AML

For the next few months, updates from the Tezos foundation were scarce as the community waited for any sign. Then the Tezos foundation unexpectedly announced that Know Your Customer/Anti-Money Laundering checks would be required from the contributors to the ICO from the year prior. This caught investors off-guard since the ICO was already a year old by then. This announcement was met with disapproving reactions from the community. 

Tokenomics of Tezo

Tezos was trading at $2.59 as of February 26, 2020. It was ranking at #10 in market cap with the value of $1, 816, 801, 431, and a 24-hour volume of $237, 062, 869. Its circulating supply was 701, 996, 666, with an all-time of $4.46 on July 01, 2018, and an all-time low of 0.314631 on December 07, 2018.

Where to Buy and Store Tezos

You can buy Tezos directly from or trade another crypto such as Bitcoin or Ethereum and then exchange it for Tezos (XTZ) on crypto exchanges such as Binance, Coinbase, Kraken, Cointree, Huobi, Bittrex and so on.

There’s currently no official wallet for Tezos. Like for any other cryptocurrency, it’s highly recommended you store your XTZ on a hardware wallet. Some great options include Trezor and Ledger Nano.

Concluding Thoughts

Tezos brings an interesting perspective into the blockchain space – the idea of the autonomous amendment and on-chain governance. And its success after another may be an indication that the crypto was cut for the future despite what many believed. Its success will depend on how it continues to innovate in an ultra-competitive crypto space.

 

 

Categories
Cryptocurrencies

Centralized Vs Decentralized Storage: How Blockchain is Redefining Data Storage

Today, data is more valuable than ever before. Whether it’s individual or company data, we treasure our data because it contains memories, sensitive information, transaction records, and financial records, and so on. In some ways, data is more valuable than money itself. And everyone wants fast and secure access to their data.

Data storage is the recording of information in a medium such as a computer or another sort of an electronic system. And decentralized storage is the storage of data in multiple servers or computers where files are protected with blockchain and cryptography. Since data is stored across a network of multiple computers, no one authority can regulate or control it.

Centralized storage represents the existing model of storing data where your data is stored on third-party servers. While the centralized storage solution has served us well since the age of the internet, it has inherent weaknesses that make it less than ideal for fast-changing customer preferences on how and when they want their data.

This article prods a little on the evolution of the internet and how it changed the storage function and explores the fallibility of centralized storage in juxtaposition with decentralized storage. We’ll also look at some of the exciting decentralized storage projects that are using blockchain technology to offer more secure, effective, and easy-to-access storage services.

The Evolution of the Internet

In the early days of data storage, we stored and shared data thorough rather rudimentary devices such as floppy disks. Over the years, we progressed to CDs, hard disk drives, and so on. These had a larger space for storage, but the core concept didn’t change. You still had to move around with the data storage device, rendering your data susceptible to loss and damage.

Upon the advent of the internet, the storage and sharing of data got a new form. We can now connect with computers from all over the world and access information, pictures, and data and more anywhere and anytime. We’ve come far from the days when you had to own and maintain your own server to the current pay-as-you-use model, and then to cloud services like Amazon’s S3 that provide better scalability, security, and performance. However, despite all this progress, the current iteration of the internet is still problematic in a number of ways.

The Problems with Traditional Internet

Censorship

The current centralized model of the internet renders it vulnerable to the whims of authoritarianism. An example is China, in which the online encyclopedia – Wikipedia, is blocked. Or when governments of tyrannical countries shut down the internet during an uprising. With decentralized platforms, people from such countries can still access information.

Relinquishing Control of Data

With centralized storage, companies and users usually hand over data to third party services. From then on, the data is beyond their control, as are the privacy settings protecting that data. Also, the party that you’re entrusting to store your data is more than likely only incentivized by profit. As such, they’ll make decisions that advance their bottom-line without much regard for your business model. A good example is Google’s change in the algorithm, which has put many marketing companies out of business.

Mismanaging of Data

Everyone knows about the Facebook and Cambridge Analytical scandal. Due to negligence by the social media giant, the Cambridge Analytica was able to put its hands on the data of millions of Facebook users and use that data to manipulate elections in several countries. The data was so eerily detailed that the psychographic profiles the company created could accurately suggest what kind of advertisement would be persuasive enough for an individual in a given location for a certain political end.

Another mismanagement debacle is the Deep Roots Analytics case in which the data firm stored details of 198 million Americans on a cloud server for almost two weeks without password protection. The data included names, email, and telephone contacts, home addresses, voter IDs, etc.

Expensive

To put it mildly, centralized data storage is expensive. To begin with, renting cloud storage is expensive on its own. And when you access it over and over again, the bills pile on. Also, costs are arbitrarily determined by the hosting company with little or no say from clients, or no incentive to use the service at all.

Advantages of Centralized Storage

Advanced Security

With decentralized storage, users’ files are split across multiple nodes in the network. Since the data is stored in all those nodes, it’s more secure as there’s no single point of failure. 

Higher Liveness

Liveness is a computing term to describe the ability of a system to stay up and running, even if certain parts of that system are not functioning optimally. In a centralized system, once the server fails for any reason, it brings down the entire system with it.

Decentralized Storage Projects

Rootstock (RSK)

Rootstock is a smart contract platform connected to the bitcoin blockchain through a sidechain. It features a technology stack called Rootstock Infrastructure Framework Open Standard (RIFOS). RIFOS is currently working on a storage application called ‘RIF Storage.’ RIF will improve storage in the following ways:

  • It will feature a unified interface that will allow for the encrypted and decentralized storage and streaming of information
  • It will offer a variety of options for users – from decentralized swarm storage to cloud and physical storage

On the RIF platform, you will also access several decentralized storage services such as IPFS and Swarm.

The partnership between RIF and Swarm, a distributed storage platform and content distribution infrastructure, will see to the following:

  • An incentivization system for users, combined with  a settlement and payment mechanism
  • The building of accounting functionalities between nodes
  • Enhance interoperability and antifragility to strengthen Swarm as a multi-blockchain decentralized storage platform.

Sia

Sia is a decentralized, blockchain-based cloud storage platform. Here, users can interact with each other in a peer-to-peer (P2P), secure and censorship-resistant environment. The Sia model works this way: individuals with extra hard drive space can rent it out and earn money from it, and individuals who need storage space can lease it at little cost.

And unlike centralized storage platforms where you pay more when you access your files for more than a preset frequency, the Sia platform allows you to upload and download files however much you want, as long as the contract funds remain in place. Also, renters are protected from fraud thanks to Sia’s proof-of-storage concept that ensures hosts only receive payment when they present proof of storage.

In this peer-to-peer model, the hosts have the right to advertise their services and also turn down storage requests for data that’s too sensitive, ethically ambiguous, or illegal. On their part, renters have the right to split up their files between various hosts, increasing their safety. They can also pay extra to receive special treatment, such as faster upload speeds and other preferential treatment.

Storj

Storj is an open-source, decentralized storage solution built on Ethereum. It features a suite of decentralized applications that allow you to store and share data in a secure environment thanks to encryption, sharding, and a distributed hash table.

Sharding is a process that fragments the files so that they are shared between users in the network. Anytime you want to access a file, Storj locates all the shards and pieces them together using the hash tables. The files are encrypted before they are shared, and only the owner can access or view them. And even if one of the nodes sharing the files goes down, you can still access the file.

Concluding Thoughts

Decentralized storage could turn upside down the storage function as we know it, thanks to a P2P, a highly secure model, and the freedom to access info and data anywhere and anytime. These projects are some of the trailblazers in this space, and we can be assured of other projects with more amazing and user-interactive features. It will be fascinating to see how this space evolves in the coming years.

 

Categories
Cryptocurrencies

Is Celer Network the Most Advanced Layer-2 Scaling Platform?

While the first generation of blockchains inspired us with dazzling qualities such as decentralization, immutability, and radical transparency, it has also proven to have scaling issues as interest in cryptocurrency surges. For this reason, many cryptos have sprung up to address the scaling issue and even do even more. 

The Celer Network is one such crypto project, and it promises to provide a new blockchain experience for users through interactivity, topnotch security, and low or zero fees to create and interact with decentralized applications and smart contracts.  

The Celer Network is the brainchild of a team with PhDs from some of the most prestigious universities in the world, including MIT, UC Berkeley, Princeton, and experience from tech giants like Google, Amazon, Cisco, HP, and more.

In this article, we go deeper into the Celer Network and discover what makes it stand out from other crypto projects.

Crypto’s Scalability Problem

As cryptocurrency has become more popular in recent years, it has become clear that the traditional architecture of blockchain cannot really support millions of users. Nothing has made this clearer than Cryptokitties, a game atop Ethereum’s blockchain that allows users to buy, breed, and sell virtual cats. 

This game became so popular, with a massive surge in users, that the Ethereum blockchain couldn’t support it optimally anymore. As such, transactions took days to be completed. The developing team had to increase transaction fees to reduce the traffic on the blockchain. 

The Celer Network

Breaking down Celer

At its very core, the Celer Network comprises two components: 

  • cStack – Celer’s off-chain architecture that can be integrated on different blockchains
  • cEconomy – the network’s cryptoeconomics (combination of cryptography and economics) model. 

cStack

cStack features these layers: 

  1. cChannel: A generalized state channel and a side chain suite that maximizes utilization of liquidity
  2. cRoute: An optimal transfer route with high throughput 
  3. cOS: A developed framework that supports off-chain enabled applications
What is cChannel? 

As an off-chain solution, cChannel utilizes the two underlying components of off-chain platforms: state channel and sidechains. 

A state channel is one that allows two-way communication between participants, allowing them to conduct transactions outside of the blockchain. A state channel has these characteristics: 

  • A segment of the blockchain is locked up via a smart contract arrangement
  • Participants in a transaction sign off transactions among each other without involving miners at all 
  • After the channel closes, the final state is added on the main chain  

Some state channels deal with payments only. Celer’s state channel tracks all the programs that may occur between the parties, including payments. 

Why Are State Channels Important? 

To understand why state channels are useful, think of the blockchain. As an example, on the Bitcoin and Ethereum blockchains, users have to wait until a supermajority of nodes in the network vote for transactions to go through. Also, as more users interact with the network, this voting process takes longer. As you can see, this process is slow and unideal.

This is where state channels come in. Since transactions are taking place between two parties instead of passing through the mining verification process, they are simple, direct, and quick.

State channels also provide strong privacy. Blockchain transactions are available on a public ledger, and thus, anyone can see them. But state channel transactions are only known between the two transacting parties.

Celer network hopes to create a ‘state channel network,’ which is a network of individual state channels designed such that they can route state changes through each other. Via such a network, users may not have open channels with each other, but they can open a virtual channel between themselves.  

What is cRoute?

To understand the Celer network’s cRoute, let’s do a quick run-through of the problems with existing state channels, mainly the Lightning Network and the Raiden network. 

State channels depend on state routing, which determines the speed and volume of transactions on a state channel, which is why it needs to be designed efficiently.

The Lightning Network uses “Flare,” a type of Landmark Protocol, while the Raiden Network utilizes the A* tree search, a mechanism designed to look for the shortest routing path. 

Both these mechanisms are scrambling to find the “shortest route between two points.” While this mechanism helps put out a good throughput, it changes network topology (arrangement of the elements in a communication network) and, as such, interferes with the overall balance of the network. 

Distributed Balanced Routing 

Celer hopes to remedy this using the Distributed Balanced Routing (DBR). DBR provides for transparency and network balancing in the routing process. DBR is akin to a river flowing downhill. It doesn’t know its final destination. It just follows gravity. Here are the benefits of the DBR algorithm:

  • Provably optimal: It tracks the most optimal route for transfer requests
  • Channel balancing: Each state channel is built to maintain balanced transfers for the network’s topology
  • Complete decentralization: Its decentralized algorithm provides for each node to only need to communicate with its neighbors.
  • Failure-resistant: the DBR algorithm can detect and adapt to unresponsive nodes ultra-fast. If some nodes fail, the remaining nodes will pick the slack and still deliver the maximum possible throughput.
  • Privacy: Thanks to DBR’s multi-channels, transactions are accorded a high level of privacy without the need for additional privacy settings or tools. It can also integrate Tor-like routing to ensure anonymity.

cOS

coS is a framework that aims to help developers build decentralized applications (DApps) of a high level of abstraction. (Abstraction means creating a system such that the average person can use without the need to know the complex technology behind the scenes.)

Via cOS, developers will be able to create two categories of DApps:

  • Simple pay-per-use applications: These applications will allow users to receive small payments from the real world and stream them through the payment network.
  • Complex multi-party applications: These applications will improve the current smart contract models with new techniques such as metaprogramming and annotation processing.

cEconomy

cEconomy is the second most important value proposition of Celer. This cryptoeconomic model aims to ensure that the network’s ecosystem remains stable and functional at all times. It plans to achieve these trade-offs via these mechanisms:

Proof of Liquidity Commitment (PoLC), which is a virtual mining process tasked with acquiring liquidity for the off-chain ecosystem. The Celer Network has members known as “Network Liquidity Backers” who commit their liquidity (like ETH) to the Collateral Commitment for a certain time, after which are rewarded with CELR tokens as a reward. This is what maintains liquidity in the network.

Liquidity Backing Auction (LiBA), which helps off-chain service providers obtain liquidity through a crowdlending model. A lender’s priority status is determined based on the amount of solicited liquidity and the size of the stake in CELR.

State Guardian Network, a special side-chain that protects off-chain states when users are offline to ensure the availability of the network. To become state guardians, CELR token holders need to stake their CELR with the SGN, upon which they become eligible guardians.

What is CelerX? 

CelerX is a Celer app and the only layer-2 application available on Android and iOS. Through the app, users can: 

  1. Use Celer Pay to instantly money with zero costs
  2. Play a variety of games with zero or ‘millisecond’ latency and stand a chance to win prizes

Since its launch, CelerX has reached $1.4m+ in total prizes awarded, 11,000 players, and 300,000 matches from 88 countries. 

Funds deposited on Celer Pay are in your complete control at all times. CelerX uses the ERC-20 Game Token (GT) through which users can practice games like Solitaire Win, Fishjump, Diamond Break, Frog Jump, Fruit Punch, etc. in the app. 

The app provides competitions for approximately 80% of the world and 38 US states. As of February 25, 2020, users from these US states are not eligible for the games due to gaming restrictions in the states: Arizona, Arkansas, Connecticut, Delaware, Florida, Lousiana, Maryland, Montana, South Carolina, South Dakota, and Tennessee. Users from Maine and Indiana are prohibited from card games.  

Crypto-based games have proved to be a hit with the masses (cue Cryptokitties), and CelerX hopes to capitalize on this by providing a platform for skill-based gaming mobile-based e-sports. Through the app, users can buy cryptocurrencies through credit cards, Paypal, and ApplePay – a first not only in blockchain-based gaming but the mobile gaming industry itself.  

Tokenomics of Celer

The Celer token helps keep the network’s liquidity stable while also acting as a medium for payments and transaction fees.

These are the Celer token values as of February 25, 2020. The token is trading at $0.003660 at a market rank of #289. Its market cap is $13, 262, 362, and its 24-hour volume is 4, 825, 975, with a circulating supply of 3, 624, 044, 542. It has a total supply of 10 billion and a maximum supply of the same value. Its all-time high is $0.0302469 on March 25, 2019, while its all-time low was $0.003150 on January 24, 2020.

Closing Thoughts

Celer Network is not another run-of-the-mill crypto scalability project. It utilizes clever layer-2 solutions that put security and privacy at the forefront, always. Its CelerX app model is peerless, as is its cStack and cEconomy components. The project shows a lot of promise, and it will be interesting to see how it pans out in the future. 

Categories
Cryptocurrencies

A Comprehensive Guide To Siacoin 

Blockchain’s first case was Bitcoin – which hoped to solve the problem of double-spending and the centralization of finance. Since then, thousands of cryptos have mushroomed, each with a promise to solve a problem that we may have not even known existed before, but whose solution we truly need.

Not many people know they can rent that extra space in their hard drive and get paid, and not many know they can buy storage space from someone on the other side of the world, and very affordably for that matter.

This is what Sia promises to do – provide a decentralized, peer-to-peer marketplace that people can sell and buy cloud storage services. Simply put, if you have idle hard drive space, you can rent it via Sia, and if you need cloud storage space, you can purchase it at a fraction of the cost that you would have spent via a centralized platform.

This article breaks down everything you need to know about Sia, including what the platform is all about, the creative forces behind it, how it works, and how to grab Siacoins.

The Team behind Sia

Sia is a brainchild of David Vorick and Luke Champine of Nebuolus Inc, a Boston-based startup. Both developers are graduates of Rensselaer Polytechnic. The two first presented the idea at HackMIT 2013, where it received positive feedback.

The idea was simple – what if all the idle space in hard drives all over the world could be brought together in an affordable, decentralized cloud storage platform?

The Problem with Centralized Cloud Storage

Before we see why Sia is special, let’s see why the existing cloud storage model is fundamentally flawed:

Giving Over Control of Data

When companies hand over their data to third party companies, they also give over control over that data. Not only are privacy protocols beyond their control, but they may also accidentally share data they never meant to in the first place.

Vulnerability to Hacking

Centralized systems usually have a single point of failure and hence susceptible to hacking. A good illustration of this is the 2017 Equifax hack in which the data of more than 145 million Americans was stolen from the credit report service. Another is the Apple iCloud attack in 2014 that saw private images of famous people posted on sites like 4chan, Imgur and Reddit.

Misuse of User Data

Facebook’s Cambridge Analytica scandal illustrates best how third parties can mismanage their users’ data. Facebook’s design allowed the company to get its hands on more than 87 million users’ data, including public profile, city of residence, page likes, and even news feed, timeline and private messages. They then used this information to create psychographic profiles that were used by politicians to sway elections in several countries.

Bring Your Own Device

Bring Your Own Device (BYOD) is another problem with third-party cloud storage. This is the case when companies tell employees to bring their own devices for work. Companies do this because either they don’t have the resources to buy IT equipment or employee devices’ specs are more powerful than the companies’.  The problem is, BYOD poses certain security risks. For instance, when these devices get lost, it puts clients’ privacy at risk. And in the case of security breaches, it’s difficult to identify the point of failure amongst all the employee devices.

How Sia’s Storage Procedure Works

The Siacoin storage procedure features its peer-to-peer storage model, ‘file contract’ system, and ‘proof of storage.’

File Contracts

File contracts are Sia’s version of smart contracts. Through these contracts, renters (clients) and hosts (providers) can conduct business within the context of a predetermined and well-defined set of rules.  If two parties wish to work together, they draft a file contract. The file contract contains the term of storage agreement and is meant to ensure each party meets its obligations. As the contract is stored in a public ledger, the terms set therein are immutable (unalterable) and hence verifiable by both parties at any time.

  • The client pays a certain amount (‘allowance’) of Siacoins that will finance the storage and bandwidth for the contract period. A contract’s default length is 13 weeks. 
  • The allowance is set up within the wallet, after which the renter’s software instantly identifies 50 optimal hosts for them, based on their scoring.
  • The host takes up a fraction of s Siacoins and sets it as collateral. The higher the collateral, the higher the score during a host’s selection process.
  • The client plus the identified 50 hosts sign the file contract, upon which it is submitted to the blockchain.
  • 3.9% of the total funds of the contract is paid as commission to Siafund holders.

P2P Storage System

The Sia ecosystem comprises of two main components – the renters (clients) and hosts (providers). Renters pay hosts with Siacoins for storage space. They can also negotiate the storage fee with hosts directly.

Hosts play a huge and important role in the Sia ecosystem, and as such, it’s within their purview to:

  • Advertise and promote their storage resources
  • Reject a client’s request if they deem the data in question to be especially sensitive, ethically wrong, or illegal

And on their part, renters have the freedom to:

  • Protect their files by splitting them up and sharing them between two different providers – for an added layer of protection
  • Pay more than the stated fees to providers to receive special treatment such as faster upload speeds

Proof of Storage

Sia has a ‘proof of storage’ concept that’s meant to protect clients from bad actors. Before a host receives payment, they must present to the network proof within the time set in the file contract. If they fail to provide the proof of storage within that specified time, the payment goes to a ‘missed proof address’ until they present proof. Depending on the circumstances, the host can even be fined for negligence. And when they miss too many proofs of storage mandates, the contract may be terminated for good.

However, when a host successfully presents proof of storage, they are awarded payment, which is sent to a valid proof of address. But they have to meet certain ‘spend’ conditions, e.g., time locks and network signatures before they can access the funds. 

Tokenomics of Sia

As of Feb 25, 2020, Siacoin registered the following values. A price of $0. 002452, while placing at #58 in market rank. It had a market cap of $192, 546, 342, and a 24-hour volume of $4, 606, 191. Its total supply was 41, 817, 047, 634 SC, with an all-time high of $0.111708 on Jan 06, 2018, and an all-time low of 0.000011 on Dec 01, 2015.

Siacoin and Siafund

Sia’s platform operates on a dual-token system: Siacoin (SC) and Siafunds (SF). Siacoin functions as the utility token, while Siafunds are to help the development of the project without relying on external donations. Siacoin’s supply is not capped, and all the tokens must eventually be mined. In the beginning, miners got 300,000 coins Siacoins as block rewards, but this reward will decrease up to 30,000 coins.

On the other hand, there are 10,000 SF in existence, all pre-mined. The company behind Sia holds 8835 of these coins, while the rest have been distributed in a crowdfund to help fund the project.

Sia Coin Mining

Siacoin uses the proof of work consensus mechanism. This means they have miners mining Siacoins using specialized mining computers called ASICS (application-specific integrated circuit). The history of Siacoin mining has a bit of controversy.

In 2017, David Vorick, lead developer for Sia, announced that Nebulous would launch a company called Obelisk to manufacture ASICS specifically for mining Sia. Members of the community supported the ASIC project by pre-ordering and contributing millions of dollars.

At the same time, ASIC manufacturing behemoths Bitmain and Innosilicon were already in the process of developing Sia ASICS. Some in the Sia community did not want a future where miners monopolized Sia mining. As such, they demanded a hard fork to prevent this. But the hard fork proposition was also opposed by a significant chunk of the Sia community. Ultimately, the hard fork faction won as Sia’s core developers implemented a hard fork.

The hard fork was conducted on Oct 31. 2018. The goal was to lock out Bitmain miners and only allow Obelisk miners to support the network. Vorick stated that the hard fork was a result of the community’s distrust towards Bitmain, as well as Innosilicon’s dominance over Siacoin, which controlled up to 37.5% of Sia’s mining hash rate. 

A large section of the community was content with the results, but others, especially those who had invested in Innosilicon, dissented. This is the group that stuck with the old Sia chain, which they called SiaClassic.

Why Sia?

Sia offers several advantages over existing cloud storage services.

Privacy: All data that passes through Sia is encrypted, meaning you’re always in control over your data. This is unlike current cloud services where the host has access to any data that you commit to them.

Security: The encryption of data means it’s insured from the pitfalls of the traditional model, such as vulnerability to hacking. Also, the ability to split your data between multiple providers boosts its security.

Affordability: Sia’s storage services are way more pocket-friendly than the traditional model. As an example, storing one terabyte of data via Sia can cost you just $200, while the same amount will cost $2300 on Amazon’s cloud storage service.

Where to Buy and Store Siacoin

You can acquire SC by trading Bitcoin for it in several exchanges, including Binance, Bittrex, Kraken, Cointree, Coinswitch, Poloniex, Huobi, and so on.

You can also get SC via mining from Luxor or SiaMining.

The Sia team has customized two wallets for SC: Sia Daemon and Sia UI. Sia Daemon is offered on Github and can be used per a user’s preferred Command Line Interface (CLI). This wallet supports Mac, Linux, and Windows. Sia UI is for the less than tech-savvy and comes with more user-friendly features.

Final Thoughts

In a space full of unfulfilled promises, Siacoin stands out as a service that you can actually access today. It’s a win for everyone involved: hosts can earn from the extra space in their hard drive, while renters can buy space in a decentralized, highly-secure environment for very little cost. What’s there not to like?

 

Categories
Crypto Daily Topic

An Investor Loses $45m worth of Crypto via a SIM Attack 

The crypto community is still reeling from the news of an alleged theft of $45 million worth of crypto from an investor through a SIM-swap attack. The attack is thought to have been a $30M Bitcoin Cash Attack and a $15m Bitcoin attack.

Using the username zhoujianfu, the alleged victim of the attack posted a link to the transaction history of Bitcoin Cash on Reddit’s Bitcoin community platform, adding: “is my address, goddamnit. It only had three confirmations, if any miners/the community can help somehow, I’ve got the private keys. Help help help…big reward, obviously.” He added, “Also for what it’s worth, they got $15m in BTC too…” The first post has since been deleted. The Reddit account appears to belong to Dreamhost founder, Josh Jones.

Due to the sheer magnitude of the attack, many community members had trouble believing its legitimacy. Some believed it was a troll attempt while others thought it was negligent to entrust crypto holdings in a SIM company.

What is a Crypto Sim Hack?

A crypto SIM attack happens when someone pretends to be you and convinces your mobile service provider that you have to transfer your phone number into a new phone. In reality, they’re taking your phone number and associating it with a different SIM card in their possession.  

You’ll know a SIM attack is successful when your phone stops registering the four network bars, and you can’t call or receive a call. Once a hacker gains control of your number, any information tied to it is now in their hands, including data, phone calls, text messages, passwords,  email, social media, bank accounts, and crypto holdings information. Not to mention that your 2-factor SMS authentication with your wallet is now in their hands. A hacker looking to steal cryptocurrency will usually scour for proof of crypto holdings and use your passwords to steal your crypto.

How to Protect Your Crypto from a SIM Attack?

Note that crypto transactions are irreversible, which makes a case for securing your assets even stronger. Storing your crypto information makes them susceptible to attacks – SIM swaps are an unsophisticated but effective method of transferring somebody’s information.

The first thing to know is that you should always store large amounts of crypto holdings in a secure location. Such a location and the safest thus far for crypto is a cold storage wallet. Cold storage wallets are those that when signing in or transacting, you don’t need to interact with an online server, i.e., your private key is stored offline. As such, a hacker can’t gain control of your crypto account through hacking, impersonation, phishing attacks, and so on.

With cold wallets, you can store keys in devices such as a CD, a paper, hard drive, and so on. A paper wallet is a paper document that has your public and private keys written on it. It has a QR code that will be scanned when you want to make transactions. Remember that you need to protect your paper document from damage from fire, water, and wear and tear.

Also, beware that hacking paper-wallet generator pages is likely to happen. A better procedure is to download a paper wallet app, copy it to a computer not connected to the internet or to a virtual machine, blocked from an internet connection, and create the keys there. For more on pitfalls of paper wallets, read this thread.

A hardware wallet uses an offline device to generate your private keys offline. These wallets look and function a lot like a USB device. When looking for a good hardware wallet, go for popular and time-tested wallets such as Ledger Nano, TREZOR, KeepKey, ColdWallet, ColdCard, OpenDime, and so on.

 

Categories
Cryptocurrencies

Private, Public and Consortium Blockchains

Bitcoin brought with it blockchain technology – the technology that allows digital information to be distributed but not edited or copied. After it became a hit with Bitcoin, eager innovators from all over the world have made it their mission to replicate it in nearly every conceivable industry. From finance to healthcare to supply chains, industries are experimenting with blockchain to improve efficiency, transparency, and accountability in their systems.

What is Blockchain? 

A blockchain is a database whose entries cannot be deleted or edited but only distributed. It’s a time-stamped series of transactions that are immutable and whose data is managed by a network of computers.

Cryptocurrency, a form of digital money that prevents double-spending, is so far the dominant application of blockchain. Blockchain as a concept had been floated around the computer science space from as early as 1991, but only materialized 18 years later when Satoshi Nakamoto, the anonymous creator of Bitcoin, employed it as the underlying technology of Bitcoin. 

Now, as its appeal has increased in recent years, it has been borrowed for use in all kinds of digital information.

Today, there are three kinds of blockchains: private, public, and consortium chains. This article sets to exploring each of these. Before that, let’s point out three characteristics all three share. 

☑️ An append-only ledger – this means that on a blockchain, you can’t modify or alter what’s already recorded – you can only add to the last block. This procedure greatly reduces the chances of fraud.

☑️ A network of peers – all network participants (called nodes) hold a copy of the database. This setup promotes fairness and autonomy. 

☑️ A consensus mechanism – a blockchain network must have a mechanism through which nodes can agree upon the authenticity of a transaction. This feature promotes a democratic – everyone-has-a-say – process.

What is a Public Blockchain?

A public blockchain is an open-source blockchain. That means it’s open to the public. Anyone and everyone of every age, nationality, or social status is welcome to join the network, have a say, and take part in core activities. Public blockchains are also called ‘permissionless’ since you don’t need permission from anyone to interact with the protocol.

The idea behind public blockchains is self-governance and autonomy. No one dictates the rules, and anyone can join and leave as they wish. As well, all transactions that take place on a public blockchain are entirely open for anyone to see.

Public blockchains are ‘censorship-resistant’ in that they are run by users all over the world, making it hard for any authority or government to control or shut them down.

Also, public blockchains have a token that incentivizes various participants of the network to keep the network active.

The Good

Public blockchains are highly secure, courtesy of being run by computers from all over the world.

They ensure privacy for users in that you don’t leave your personally-identifying details on the chain, but rather transaction information like wallet number, time, and amount.

Transactions are peer-to-peer, meaning users are in complete control of their money with no one capable of freezing their funds

The Bad

Public blockchains like Bitcoin consume a lot of energy, which is expensive and bad for the environment

The majority of public blockchains are pseudonymous, meaning users do not have absolute and inviolable privacy or anonymity.

Some users of the network might have malicious intent, including hacking, stealing of tokens, or network clogging.

Public Blockchain Use Case

Bitcoin is the first-ever and the most well-known application of a public blockchain. 

Bitcoin transactions can be examined by anyone on the Blockchain Explorer. Other public blockchains are Ethereum, Litecoin, ZCash, Monero, Dash, and so on.

What is a Private Blockchain?

A private blockchain is one in which you need authentic and verified credentials to gain access. A private blockchain differs from a public one in that you need permission, depending on your position in the system’s hierarchy, to contribute and maintain the network. People at the top of the hierarchy or those with express access can also override processes as they deem necessary.

A private blockchain makes sense in a business context where managers want to improve efficiency but don’t want to put company data on the public blockchain. As well, a business has the right to amp up privacy restrictions any time they deem fit.

In a private blockchain, there’s the question of who enters entries, who can see updated transactions, who can begin a process, and so on.

The Good

Since only specific users can control the network, there’s no waiting times or periods of high demand which would slow down the network.

Entities that use private blockchains can keep sensitive data from the public while also realizing improved levels of efficiency.

Private blockchains do not have to provide any incentives to participants; neither do they consume massive amounts of energy. 

There is no possibility of downtimes arising from a spike in demand.

The Bad

Without support from computer users all over the world, a private blockchain is prone to stunted growth. It can also be slow to scale up and meet changing customer needs. 

Since they are centralized, public blockchains are susceptible to human error, manipulation, abuse, and other unfair dealings.

Use Case of a Private Blockchain

The best use case of a private blockchain is Hyperledger Fabric, a permissioned blockchain that businesses can deploy on their platform. The blockchain is also available in a plug and play mode, allowing businesses to set it up anytime and plug off when they don’t need to use it.

Walmart is a well-known user of Hyperledger Fabric. The retail giant can now trace the origin of more than 25 food products, from farm to store, to ensure quality levels and food safety.

What is a Consortium Blockchain?

The consortium blockchain is a type of blockchain that combines elements of both public and private blockchains. This is the distinction between a consortium blockchain and either of the two other types:  in a public blockchain, anyone can contribute to the network by inputting entries, validating blocks, etc. In a private blockchain, only a few entities have access to the chain and have the authority to initiate processes, enter entries, and so on. On a consortium blockchain, it’s a handful of equally powerful participants that can access the chain.

After that distinction, the rules of the system are not cast in stone. Some selected individuals may be the only ones who can view the chain, or it can be everyone in the consortium. As long as decisions are arrived at by consensus, they can be rolled out to the satisfaction of all parties.

Consortium blockchains rely significantly on the integrity of the validators. Provided a certain threshold of the validators can act with integrity, the network will work without issue.

Consortium blockchains make sense in the context where multiple organizations operate in the same industry and see it fit to collaborate on certain aspects of their business. This way, they can save on costs and function better individually and collectively. An organization would be motivated to join such a consortium courtesy of information and insights into the industry that they’d gain from other industry players. Sometimes the organizations involved can be termed “frenemies” since they are working together but also competing against each other.

Use Cases of Consortium Blockchains

There are currently many consortium blockchains that exist all over the world. Let’s briefly look at a few below:

☑️BankChain, a platform for banks whose goal is to explore, build, and implement blockchain software. Members of the BankChain community include Deutsche Bank, Bank of Baroda, Lulu Exchange, Kotak Bank, etc. 

☑️B3i, a community of insurers and reinsurers that attempts to improve industry efficiency through blockchain. Members include Liberty Mutual, Swiss Re, SBI Group, Tokio Marine, Allianz, and so on.

☑️Enterprise Ethereum Alliance (EEA), a consortium that aims to promote Enterprise Ethereum, an organization that delivers both public and private Ethereum blockchain for businesses.

Final Words

Blockchain has evolved a lot from the days when it was associated with Bitcoin only. It’s definitely exciting to see it as the new and hot technology that industries of all types are scrambling to get a piece of. And understandably so, because it embodies features that are a first, and which have the potential to revolutionize not just how we do business but also society itself. 

Companies need to choose what type of blockchain they want to get involved with, depending on their end goal and overall objective. Meanwhile, blockchain enthusiasts will be watching for new developments in this thrilling space.

Categories
Cryptocurrencies

Decred Review: Is It the Ideal Cryptocurrency?

Cryptocurrency represents freedom of finance. Decentralized, censorship-resistant, and peer-to-peer are some of the words that we ascribe to it. But whether the vast majority of cryptocurrencies meet these criteria is a grey area.

Decred is a cryptocurrency launched in February 2016 that attempts to live up to these ideals. Its team of founding developers comprises of former developers of the notable btcsuite, a version of Bitcoin programmed in the Go language.

In this article, we’ll cover the exciting highlights of the Decred project and leave you to decide whether it’s the optimal currency or not. 

The Principles of Decred

Decred endeavors to live by these principles:

☑️ Free and Open Software – All software developed as part of Decred shall be free and open software

☑️ Free Speech and Consideration – Every member has the right to communicate opinions and ideas without fear of censorship, as long as it’s based on fact and reason. 

☑️ Multi-Stakeholder Inclusivity – A diverse set of views and users shall be represented and encouraged.

☑️ Incremental Privacy and Security – Privacy and security are priorities, and they shall be treated as such, and shall be incrementally implemented and on a continuing basis, both proactively and in direct response to attacks.

☑️ Fixed Finite Supply – Issuance of coins is finite, and the total issuance shall not exceed 20, 999,999.99800912 DCR, with a block subsidy that adjusts every 21.33 days by a reducing factor of 100/101.

☑️ Universal Fungibility – Universal fungibility is central to Decred as a store of value, and any attacks against it shall be met with countermeasures.

Breaking down Decred

Decred has a maximum supply of 21 million. The project never held an ICO, but an airdrop of 282.64 DCR was awarded to 2972 selected participants during the launch. Its all-time high was $99.74 on April 25, 2018, and its all-time low at $0. 394796 on December 28, 2016.

As of February 21 21, 2020, the price of Decred is $20.53 at a market rank of #37. Its 24-hour volume is $28, 260, 170, with a circulating supply of 10, 786, 831.

Each time DCR is mined, 60% is awarded to the PoW miner, 30% to PoS voters, and 10% held by Decred for future development.

How to Get Involved With Decred

Decred designates three ways through which you can interact with the platform:

The Wallet – Through the wallet, you can send and receive funds as well as take part in PoS voting.

Proof-of-Work Mining – You can use your computing power to validate transactions on the network and generate new tokens.

Proof-of-Stake Mining – Through ownership OF Decred tokens, you can vote on network development issues and validate transactions. 

All you need to send or receive Decred tokens is an address that you can easily generate from any Decred wallet. Once you own Decred, you’re eligible to join a staking pool and participate in PoS voting and earn rewards while at it.

What Problems Does Decred Intend to Solve?

Decred developers are huge blockchain and Bitcoin fans. However, they identified problems with how Bitcoin operates. As Bitcoin’s popularity has surged, the decision-making process seems to get more centralized by the day. This is evidenced by, for instance, the concentrated power in the hands of powerful mining companies.

In addition, almost any major upgrades to the Bitcoin software have to take place via a hard fork. This is what happened in 2017 when one section of the community proposed the SegWit2x hard fork on the chain. The two opposing sides got involved in hostile debates, peppered with name-calling and threats. The hard fork was finally called off, but not before leaving sharp divides in the Bitcoin community.

According to Decred, such divisions and the power that a particular section of the community might have over the cryptocurrency is counterproductive to the ideals, spirit, and the world of blockchain and cryptocurrency.

We’ve all seen what happens when two opposing sides do not arrive at a consensus. Factions can decide at any time to create a hard fork off the open-source Bitcoin code. Cryptocurrencies like Bitcoin Cash, Bitcoin Gold, Bitcoin Satoshi’s Vision, and Bitcoin Diamond are all offshoots of the original Bitcoin blockchain.

The Problem with Hard Forks

Forking is never the ideal outcome for cryptocurrency. Let’s see below why:

Repeated hard forks are bad for investor sentiment. After the Bitcoin Cash hard fork, Bitcoin prices took a tumble.

Hard forks fracture the Bitcoin community. The flared up tensions, and hard-line stances do no good for the community and the cryptocurrency sphere as a whole.

New hard forks are susceptible to attacks. So far, the biggest public blockchain to succumb to a 51% attack is, you guessed it, a hard fork. This blockchain is Bitcoin gold, and the attack happened in May 2018. The attacker made away with roughly 388,000 BTG worth $17.8 million then.

Hard forking undercuts the economic aspect of cryptocurrencies. For instance, the Bitcoin hard forks are confusing to users and undermine Bitcoin’s principle of a capped supply.

Decred presents a vision and cryptocurrency that’s free of hard forks, especially ones that fracture the community. While a hard fork is possible on Decred, its voting protocol is designed so that users can democratically vote on changes before activation.

Let’s look at the various mechanisms that Decred employ that will help it realize fair, smooth, and efficient governance.

Decred’s Hybrid PoS and PoW System

Decred’s voting system utilizes a hybrid of the two best-known consensus mechanisms: proof of work and proof of stake. 

These are the basics of how these two interact:

  • Miners mine for a block using PoW
  • Five token holders are randomly chosen to verify the block
  • If three of these validators confirm the validity of the block, it is recorded on the blockchain
  • 60% of the block rewards go to the miners, 30% to the validators, and 10% to the Decred project for future development.

With PoS, anyone who holds Decred tokens can participate in the staking system in this way:

  • DCR holders can purchase tickets with their tokens. The tickets give them pass to be part of the system
  • Only 20 tickets can go to any one block at any time. You may have to wait to get mined, but if you wish to get mined faster, you’ll need to pay some fees.
  • Once mined, your ticket is “immature” and will be held outside the random draw pool until 256 blocks have been mined, which is in approximately 20 hours.
  • After your ticket enters the draw pool, you will have to hold out for your chance to be chosen as one of the five validators that are randomly picked to verify the block
  • Your ticket has a 50% chance of being selected within 28 days and a 99.5% chance of being selected before it expires (after around four months).
  • Once your ticket’s chosen, you’ll help validate a block and be rewarded with a price for the ticket and also a staking reward.

The Decred system is also fair in that validators can participate in staking pools. As such, if a validator can’t make it to be part of the validation process, they can simply have their pool validate a block on their behalf.  

So far, you can see that Decred gives the power of participation to both users and miners. Unlike the Bitcoin system, miners do not possess disproportionate power over the network. If, for instance, a miner decides to mine a malicious block i.e., a transaction unrelated to the chain, validators can simply decline to verify the block. As you know already, PoW takes a lot of computational power, and for that, miners have very little incentive to do something that won’t pass with the validators.

How Safe Is the PoW/PoS Hybrid?

Just HOW safe is the PoW/PoS hybrid mechanism? A crypto analyst named Zubair Zia made it his mission to test the security of Decred’s chain vs. Bitcoin’s or a PoW/PoS model vs. a pure PoW model. He wanted to see which chain would more easily succumb to a 51% attack.

He used BITMAIN’s Antminer s9i’s, which has a rate of 14 tera-hashes per second. His calculations demonstrated that it was 22 times as expensive to hit Decred as compared to Bitcoin as of June 2, 2018.

In short, the hybrid system is 22 times more secure than a purely PoW system.

Lightning Network for Transactions

Decred has also implemented the Lightning Network.  The Lightning Network (LN) is an off-chain technology that has been explored by multiple cryptocurrencies to improve scalability. LN helps to settle payments outside of the blockchain so as to reduce traffic and backlog on the main chain.

LN works by having two users set up a payment channel on the network and depositing an equal amount of funds. Any time one user wishes to transact, they simply send a promissory note to the other user indicating a change of the total sum in the shared channel.

Since transactions happen off the chain, users also pay fewer fees since there’s no queue. Transactions are also instant, and there’s even added privacy thanks to a Tor-like routing algorithm for transactions. 

Decred’s Politeia

Thanks to a decision-making system called Politeia, Decred has managed to achieve decentralization more than any other existing cryptocurrency project.

Politeia is an ancient Greek word employed in Greek political writings, especially that of Plato and Aristotle. The term has many senses, from meaning “rights of citizens” to “form of government.”

Decred’s Politeia is designed to be the ultimate form of self-governance and community autonomy over a cryptocurrency project. Users can vote to accept or reject proposals, including budgets, software upgrades, marketing plans, constitutional amendments, and so on. When launching the system, project lead Jake Yocom-Piatt noted: “The direction of Decred now lies with the collective intelligence and creativity of its stakeholders.

We look forward to the exciting projects our community will propose.”

Where to Buy and Store DCR

You can purchase DCR from several exchanges, including Binance, Bittrex, Coinswitch, Changelly, Kucoin, Huobi, and so on by trading Bitcoin for it.

As for storage, the best wallet so far is the Decrediton wallet that’s available for Mac, Linux, Windows, and so on.

Great third party options also include Exodus, Coinomi, Atomic, Ledger Nano, etc.

Final Words

Decred has undoubtedly broken the mold, especially with its first of the kind governance system. Even though not as well-known as of yet, it’s one that has modeled cryptocurrency ideals better than perhaps the whole cryptocurrency pool right now.

The team behind it is also very well-regarded in the blockchain and crypto space, which is just the icing on the cake. With such a sound philosophy and a fantastic team, Decred is poised for success. But this will depend on the community. One can only hope it will mobilize for better and more exciting features for the platform before newer projects arrive and overtake the platform. 

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Crypto Daily Topic

The Two ‘Flash Loan’ Attacks That Shook DeFi

Two attacks took the DeFi world by storm recently in what is the first DeFi major security incident. bZx, a decentralized finance protocol on Ethereum’s blockchain, endured two separate attacks after unknown persons manipulated “flash loans” and managed to drain nearly hundreds of thousands of Ether.

The First Attack

The first attack took place on Valentine’s night when the bZx team was attending ETHDenver – an Ethereum conference that brings together minds across the blockchain and DeFi space annually. The attacker took out $350,000 worth of ETH from Fulcrum, bZx’s lending platform by playing together several other DeFi protocols; Compound, Uniswap, and dYdX.

The attack happened this way:

The person borrowed 10,000 ETH from dYdX and then posted half the amount to DeFi protocol Compound and the other half to bZx. They then borrowed 112 wrapped Bitcoin (WBTC, which are ERC-20 tokens backed on a 1:1 ratio by Bitcoin.) With the amount on bZx, they entered into a short position for 112 WBTC, after which they sold the 112 WBTC from Compound on Uniswap. This move made the bZx sale very profitable. The attacker then repaid their dYdX loan and kept the proceeds from the short sale – 1,300 ETH. All this happened in a single transaction.

bZx admits the attack was “one of the most sophisticated” they’ve ever seen, which is big. Whoever pulled the attack must’ve had a very in-depth knowledge of all the protocols involved, together with their various tools. It also demonstrates the high levels of interoperability possible among various DeFi protocols – which is ideal, except when that interoperability can be maliciously manipulated. The attack had no precedent in DeFi, prompting the DeFi space to ask hard questions about the security future of DeFi.

In response to the attack, bZx in a slightly controversial move shut down Fulcrum.  Users and analysts noted bZx shut down the platform using a non-decentralized master key. But the firm defended the move, arguing, “the core of the debate here is whether we should be ruled by machines or economics. When you have an immutable contract that can’t be upgraded, you are ruled by machines. When the power to exist is distributed among representative stakeholders, you are ruled by economics. Both are valid methods for implementing decentralization.”

The Second Attack

And just when trading had resumed over the weekend and operations back to normal, attackers targeted bZx again, this time netting $633,000. This one took place just after 03:00 UTC Tuesday. The person(s) took out a flash loan of 7,500 ETH using 3, 518 ETH to purchase the stablecoin sUSD stablecoin from the issuer, which they then deposited as collateral for a bZx loan.

They then used 900 ETH to bid up the value of sUSD through Uniswap/Kyber then borrowed another 6,796 of ETH from bZx, using it to repay the 7,500 ETH loan and then pocketed the remaining value: 2, 378 ETH.

What’s shocking but also impressive is that the entire attack took place in just over a minute.

What are Flash Loans?

Flash loans are loans that users take and pay back in the same transaction so as to amplify their payouts. With a flash loan, a borrower loses nothing. The network can usually see whether or not a flash loan will be instantly repaid, and if not, it can reject all transactions associated with it. If it goes through, however, the lender gets a small fee, and the trader gains a profit, and everybody is happy.

But things aren’t always as simple as demonstrated by the bZx scenario. A flash loan carries great risk, especially with exploitable bugs in a platform’s code, or unreliable price feeds. In this case, the attacker(s) did not intend to simply buy low or sell high, but to deliberately manipulate vulnerable price markets.

Aftermath

Shortly after the first attack, investors started jumping from the bZx ship, but things seemed to get back to normal after the firm released a statement acknowledging the issue and addressing the way forward. 

As for the future of DeFi security, DeFi experts agree that this is a new territory; hence mistakes are bound to occur. Speaking to CoinDesk, Staked CEO asserted: “These are big risks. It’s a new category, it’s moving fast, and some things are going to break.”

The bZx team is now focused on securing the network and deterring future attacks. The firm already implemented a check that will disallow even overcollateralized loans in the future and has already put a cap on maximum trade sizes so as to limit the scope of potential attacks. It will also be implementing a Chainlink oracle to supplement Kyber’s price feed to be able to get time-weighted price info at any given time.

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Crypto Daily Topic

ETH’s Bullish Behavior and the Case of Flash Loans

ETH has pulled a surprise on everyone Tuesday by posting bullish prices as high as $287 up from Monday’s low of $245.

This surge couldn’t have come at a weirder time; when Ethereum was on the spot for two attacks or ‘exploits’ on the Ethereum-based DeFI protocol bZx that saw it lose almost $1m worth of ETH.

 

The CEO of the crypto site The Block, Mike Dudas, tweeted Tuesday in acknowledgment of ETH’s Tuesday rally.

Respected economist Alex Kruger’s response to Dud’s tweet may explain this bullish behavior, though. While saying ETH did not actually ‘shrug off’ the exploit, he stated the attacks were naturally bullish for Ether since it’s “great advertising” and it “should generate interest in Ethereum from the finance industry and thus increase demand for ETH, even if the many DeFi platforms die in the near term because of this.” In essence, the attack raised Ethereum’s profile, its DeFi use case will be damned (at least in the short term.)

Flash Loans

The DeFi attack that helped reverse fortunes for ETH Tuesday was a result of the manipulation of flash loans. To understand flash loans, let’s look again at what Kruger had to say about them. In the same thread, he said, “flash loans provide access to instantaneous liquidity and collateral, and work on top of deterministic transactions that fully eliminate risk for both borrower and lender. This is extremely valuable, and the very best expression of programmable money…”

Flash loans are a new entry in the crypto world, a new decentralized finance innovation atop Ethereum’s blockchain. A flash loan allows a trader to take an uncollateralized loan to maximize the profits from a trade. They are ‘flash’ because they’re super-fast – in that the borrower repays the loan in the same transaction.

What happened with bZx is that the attackers exploited weak points in the protocol, making away with $300, 000 and around $650,000 worth of Ether.

Ensuing Fear, Uncertainty, and Doubt

After the Ethereum debacle, some individuals took the chance to pontificate about DeFi being an inherently flawed technology. But just like with the DAO attack in 2015, such incidents invariably point to weaknesses in a system, which in turn helps make it better and more resilient. Like with any technology, DeFi is undergoing ‘growing pains,’ and it helps to provide solutions to such imperfections rather than knocking everything down.  

What’s next for bZx

As for bZx, the firm will mitigate the damage of the attack in several ways, like liquidating collateral to cover a loan that the attack left uncovered, as well spread the loss across its user accounts. (Users will barely feel the impact of the loss, despite the magnitude of the attack.) The firm has also indicated plans of setting up an insurance fund as a long-term solution in case of a similar future incident. 

Perhaps DeFi proponents can look at the bright side: the attacks are a testament to DeFi taking up space in finance. The nascent technology is developing enough clout to warrant exploiting attacks.

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Crypto Daily Topic Cryptocurrencies

What is Bumo Blockchain?

Before we say a single thing about Bumo blockchain, we need to talk about blockchain. Blockchain is a publicly distributed ledger that records transactions between parties permanently, transparently, and in a peer-to-peer manner.  

The concept of blockchain existed in the developer community for years. Still, it only came to life in 2008 when a person/people under the pseudonym Satoshi Nakamoto created a blockchain to serve as the underlying technology under the world’s first cryptocurrency – Bitcoin.

Since then, numerous cryptocurrencies have been created by developers all over the world – either running on their own blockchains or other cryptocurrencies’ blockchains.  The technology has also broken out of the cryptocurrency application and has been adopted in other industries – from finance to healthcare to supply chain and so on. These applications represent the private, enterprise side, of blockchain.

What is Bumo?

Bumo is a next-generation enterprise-grade public blockchain that hopes to host what it calls a ‘ubiquitous’ value transfer, smart contracts, and decentralized applications platform. The Bumo project is still in beta, i.e., still in development. 

Let’s look at some of Bumo’s unique selling points right off the park:

  • Two or more users can create an account together, thanks to what the platform calls “individual account weightage”
  • A Merkle-Patricia Tree to help store data efficiently
  • A “trailer” system that helps segregate on-chain and off-chain data
  • An ‘Orbit’ infrastructure helping support Bumo’s 2-layer multiform architecture
  • A 2-layer multi-chain consensus structure that’ll enable up to 10,000 transactions per second
  • A “Canal” system to facilitate interoperability
  • A robust and friendly toolkit for developers to create smart contracts
  • The ability for developers to build apps that aren’t necessarily backed by a smart contract

In this guide, we’ll look at these features in greater detail and see what Bumo hopes to do differently for the blockchain ecosystem. To do that, we first need to talk about the inherent problems with blockchain right now.  

Problems with the Blockchain

Scalability

The first and second-generation blockchain’s scalability issue refers to their inability to handle high-volume transactions within a short period of time – hence they can’t be used to serve millions of people all over the world.

One reason for this is the mining-based verification mechanism that requires miners to verify transactions and then record the verified transactions in the blockchain. This creates a backlog of transactions and a slow, overloaded network since a miner can only mine a certain number of transactions at any time.

The other reason is the 1MB sized blocks on the Bitcoin blockchain, which severely limits how much data any one block can hold. This means your transactions have to wait in a queue for roughly 10 minutes. On the Ethereum blockchain, there are no block size limits, but transactions may take an average of 15 seconds before verification. 

Lack of Interoperability

Interoperability, or lack of it, is another issue with existing blockchains. Existing blockchains e.g., Bitcoin and Ethereum, are not built to be able to interact with each other. This is why crypto exchanges have the power that they do since they provide a much-needed portal on which different cryptos can interact with each other.

But exchanges are centralized entities, which goes against the decentralization principle of cryptocurrencies. Besides, centralization makes cryptocurrencies vulnerable to hacking and blackouts, which can stall services.

The lack of interoperability also means mainstream adoption of the blockchain is impossible. This is because, for blockchain technology to be integrated into the mainstream, it needs to be able to interact with existing systems.

BUMO is a next-generation blockchain that’s going to be catering to businesses. It comprises of two-layer chains that will help streamline transactions on the blockchain. The Bumo system will also be interoperable with both heterogeneous and homogeneous blockchain.  

The Team behind Bumo

Bumo is a vision of four core people: Steven Li, Steven Guo, John Zhao, and Yuliang Zheng. This team has between them a wealth of experience in Physics, blockchain, cryptography, and hashing technology.

Core Features of Bumo

Let’s dive deeper into the core features the Bumo blockchain that makes it stand out: 

A Multisig account

A multisig (multi-signature) is an account owned and controlled by more than one party. The Bumo blockchain uses something known as ‘account weightage’ to give more power of access to some signature holders over others. For example, if three people own a business and they have an account on the Bumo blockchain, the CEO’s approval, for instance, will count more than the other two’s.  This is an approach that the Bumo team hopes will appeal to big companies.

The Merkle Patricia Trie (MPT)

The Merkle Patricia Trie is a tool that combines the technologies of Merkle Tree and Patricia (Practical Algorithm to Retrieve Information Coded in Alphanumeric) Tree. This combination makes it easier to find particular transactions by reducing the time that would be taken to ascertain if that transaction belongs to a particular block or not.

Trailer System for Off-Chain and On-Chain Data

Depending on the characteristics of the data, the Bumo blockchain will differentiate data into off-chain and on-chain data, providing a streamlined system for handling heavy and complex data. This differentiation will help reduce the burden on the blockchain and save on hardware costs because the node network will experience less strain.

Interoperability Feature of the Bumo Blockchain

The Bumo blockchain has the Canal system, which is two-layered – with main chains and cross chains. The main chains comprise collection and validation nodes. The validation nodes provide “high-level” consensus for transactions on the cross-chain.

Cross chains are akin to the routers in a traditional network system. They route data from various blockchains towards the target blockchain. 

BUMO and Smart Contracts

BUMO hopes to be the best destination for smart contracts. The platform will feature these properties which are specifically geared to help it achieve this purpose:

i) Turing complete, or ‘computationally universal,’ which means a contract can solve any problem with the right tools

ii) Fast deployment 

iii) Flexible calls

iv) Reliable execution of smart contracts

v) The Bumo platform features a virtual machine called the BuVM (Bumo Virtual Machine). BuVM has the following properties to enable what Bumo calls “Eco-Friendly Smart Contracts.”

  • More advanced smart contract performance
  • Increased security for smart contracts
  • Multi-language support for smart contracts
  • Developer-friendly tools and environment

Also, the Bumo platform will provide a unique space for app developers, thanks to the following features:

  • Native application programming interface tools
  • WebSocket-like features
  • Ability to create an app or tokenize assets without the need for a smart contract. This is what Bumo calls “Account-based Tokenization Protocol,” in which users will be able to issue tokens by the mere virtue of having an account on the Bumo blockchain.

Benefits of Bumo

☑️The ability to tokenize assets quickly, safely and reliably

☑️A friendly environment for developers to create decentralized applications

☑️The ability to handle up to 10,000 transactions per second

☑️Reduce the costs of operation, maintenance, and exchange of data in the blockchain

☑️It will allow the connection of Internet of Things devices that will create value for thousands of people

☑️It is user-friendly

☑️People can exchange smart contract values faster and safely

☑️It promotes the free flow of digital assets

Final Thoughts

The Bumo blockchain is poised to reinvent several aspects of blockchain and stir the crypto space for the better. If Bumo succeeds, it’s very likely the blockchain world will bid goodbye problems like scalability issues, lack of interoperability, and the need to be well-versed in programing language so as to create applications. Will the Bumo team deliver, or is it another overhyped blockchain project? As with many things in blockchain tech, only time will tell. 

Categories
Crypto Daily Topic Cryptocurrencies

What Is Rootstock (RSK): Understanding The Most Popular Bitcoin Blockchain

Bitcoin technology has played a phenomenal role in revolutionizing the global finance industry. Finance industry players, retail companies, and individuals understand this, hence its massive adoption across all industries. But Rootstock (RSK) sidechain developers believe that Bitcoin blockchain could be doing more. And that limitations in scalability, transaction processing, and lack of support for smart contracts the dominant cryptocoin is facing today are its biggest hindrances.

RSK developers also believe that the pioneer blockchain is money-dominated, implying that people concentrate more on Bitcoin Value than the technological revolution it promises the finance sector. And to address these issues, RSK labs sought to create a Bitcoin sidechain – Rootstock, also known as the ‘SMARTER BITCOIN.’ According to the company, the Sidechain will help Bitcoin overcome these limitations and boost its functionality and interoperability.

But what is RSK, and what progress has it made in making these feasible?

What Is RSK?

RSK is a Bitcoin sidechain connected to the BTC blockchain by a two-way peg. It can also be said to be an innovative virtual machine (RVM), tethered to the root of bitcoin blockchain with the aim of introducing the smart contract concept to the pioneer blockchain while effectively boosting its scalability. Plus, its through RSK sidechain that the crypto community will be able to create and run Bitcoin blockchain-backed smart contracts.

How does RSK hope to achieve these?

Ideally, the RSK sidechain seeks to marry the functionalities of the Ethereum blockchain with the security and efficiency of the bitcoin blockchain. To make this possible, the smart contract sidechain is tethered to the main blockchain by a two-way peg. This ensures that the side chain runs parallel to the main blockchain and that there is interchangeability of assets between both parent and side chain. It also has the backing of a semi-trusted third party that oversees the reliability of all transactions between RSK sidechain and Bitcoin blockchain in the execution of these smart contracts.

Hybrid federation to actualize smart contracts:

The semi-trusted-third-party (STTP) comprises of 25 highly accredited crypto community members of proven crypto knowledge and unquestionable integrity. And they serve as an interlink between RSK sidechain and Bitcoin blockchain, where they determine when to lock or release smart contract funds.

Why does the execution of smart contracts need a third party, you might ask? Well, because Bitcoin blockchain does not support the creation of smart contracts on its platform, RSK platform users needed an assurance that the Sidechain was operating in their best interests. And who to better provide such oversight and regularly audit the transactions carried out on the platform than the crème del crème of the crypto industry.

The 25 STTPs effectively form the hybrid federation that, in turn, operates the multi-signature wallet used to authorize the locking and release of funds. Each multi-sig wallet member has one vote, and it takes a simple majority to authorize the execution of a smart contract.

Two-way peg to actualize scalability and transaction speeds

The RSK Labs has been involved in the audit and analysis of both Bitcoin and Ethereum blockchains. In RSK sidechain, they have come up with a highly scalable platform that seeks to boost on-chain transaction processing speeds to 2000 in the long-run from the 3 TPS recorded by bitcoin blockchain today. They also intend to increase block confirmation speeds from 10 minutes per block to less than 10 seconds per block. To achieve this, RSK Labs developers utilized the GHOST protocol used on the Ethereum blockchain to speed up transaction processing speeds, and the DÉCOR+ block reward sharing protocol.

Note that RSK is a sidechain and will not be modifying the bitcoin blockchain code. How then does its scalability and transaction speeds impact Bitcoin? Well, the 2-way peg ensures the two blockchains run parallel to each other, and share assets like the blockchain database. This implies that if a transaction is recorded on the sidechain block, it automatically records on the main bitcoin blockchain, effectively eliminating chances of duplication. The tokens are also interchangeable, where 1 BTC = 1 SBTC (the token used on the RSK sidechain network).

RSK key features and components

Virtual machine:

RSK is to bitcoin, what EVM is Ethereum. A virtual machine through which bitcoin smart contracts can be executed. RSK, however, goes a notch higher to provide a platform on which the crypto community can create Bitcoin-based decentralized apps. And this effectively earns it the title –SmartBitcoin.

No commercializing tokens:

The fact that RSK is a sidechain that complements the Bitcoin blockchain means that its tokens won’t be commercially available. They will be restricted within the RSK to boost network operations like DApps creation. And to allow for easier interchangeability, 1 SBTC will always hold the same value as 1BTC. Let’s say you had 5 BTC and that you wanted to transact but want to leverage the speed and efficiency of the RSK sidechain. You simply exchange them for an equivalent amount of SBTC, and once done, convert your SBTC balance back to BTC.

Transactions not fully trustless:

The fact that Bitcoin’s blockchain does not support the creation of smart contracts on its native network necessitates the use of the Hybrid Federation interlink. When you exchange your BTC for SBTC or vice versa, your coins are locked in a multi-signature wallet within the 2-way peg. The federation, consisting of 25 highly accredited crypto community members, holds the keys to the multi-sig wallet. And locking and releasing funds held in the wallet only requires the authorization of a simple majority.  It provides a semi-trustless oversight over the funds as opposed to the fully independent, trustless, and automated oversight needed in a smart contract.

Merge-mining security:

 Bitcoin miners don’t need special applications or hardware to mine SBTC tokens. The RSK token mining applications are completely compatible with the bitcoin mining infrastructure. And as Bitcoin mining halves and block confirmation become harder, SBTC mining is a well-timed incentive.

The bridge between bitcoin and Ethereum:

RSK also supports the Turing Complete Programming language used by Ethereum Virtual Machine (EVM) and Ethereum DAPPs. This makes it possible for Ethereum blockchain users to easily migrate their systems to the RSK network. It is a viable option for Ethereum users, uncertain about the efficiency and reliability of the upcoming shift by Ethreum from proof of work to proof of stake.

What is the future of RSK?

Federation transitions to a drivechain/sidechain model?

Currently, RSK transactions over the 2-way peg are audited by the semi-trustless federation. Moving forward, however, and as the Sidechain gains traction and usage, RSK hopes to shift the custody of the locked coins on the 2-way peg to the merge-miners. A significant move aimed at reducing the need for trust.

RSK Educate:

RSK also looks forward to educating the crypto community on the effectiveness of its innovative Sidechain. To this end, RSK has published all the whitepapers related to this project and even created a blog where they share tips and educate the masses on how to interact with the Sidechain.

Why hasn’t RSK picked?

When RSK made public their intention to create and actualize the implementation of smart contracts, every crypto community member expected a flawless process. In its stead, RSK Labs, the developers of RSK sidechain, decided to include the semi-trustless federation of signees to maintain custody of the coins exchanged between Bitcoin main net and Sidechain.

The inherent risk associated with such an arrangement, especially considering their small and compromisable size of just 25 participants,  have seen the crypto community shy off the platform. Most of these lie in wait of the proposed upgrade to the 2-way link that elbows out the federation in favor of BTC and SBTC merge miners. 

Bottom line

It is about time Bitcoin blockchain took advantage of its massive industry support and incorporated smart contract features. And the Rootstock sidechain is here to give the blockchain its much-needed push towards execution of smart contracts. By adopting RSK, users of the already dominant legacy coin stand to benefit from such features only available with the newer blockchain models as faster transaction processing speeds, a DApps building platform, and the ability to execute bitcoin blockchain-backed smart contracts. Looking at the Bitcoin community, however, one can’t help but notice the pockets of resistance and doubts forming around the effectiveness and reliability of the Sidechain. And these are majorly attributable to its reliance on the federation of signees as custodians of the locked coins. Only time will tell if this will change once RSK migrates to verification by merge-miners.

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Crypto Daily Topic Forex Price Action

Calculate Risk-Reward along with Candle’s Attributes

In today’s lesson, we are going to demonstrate an example of the importance of risk-reward. To be successful in price action trading, traders are to calculate risk-reward before every single entry they execute. Let us find out from the charts below the importance of risk-reward.

The price heads towards the South with an average bearish momentum. Ideally, it is the sellers’ territory. However, it has come a long way. The buyers must wait for a strong bullish reversal candle to go long on this chart.

This is an extremely strong bullish reversal candle. The buyers may wait for the price to consolidate and produce a bullish reversal candle. Within a candle, things are very different now.

The chart produces a bearish inside bar. Thus, buyers may get more optimistic. They are to wait for a bullish engulfing candle closing above the last swing high to trigger a long entry. The price may travel towards the drawn level, which is a significant level of resistance on the chart.

The chart produces a bullish engulfing candle closing well above the last resistance. As explained earlier, the buyers are to set their stop loss below the last candle and trigger a short entry right after the candle closes. The question is whether they shall take a long entry here or not. Think about it. The last candle closes within the level of resistance. Technically, there is no space for the price for traveling towards the North unless it makes another breakout here. The reward is zero here.

As anticipated, the price consolidates again and struggles to make another breakout. The last candle comes out as a bearish candle. Thus, things do not look good for the buyers. It may change its direction. If it makes a bullish breakout, that is another ball game, though. Let us proceed to the next chart.

The price does not make a bullish breakout but changes its trend. It is the sellers’ territory again. By looking at the last candle, the sellers may trigger a short entry by setting their take profit at the last swing low.

In this lesson, we have seen that the trend-initiating candle and the signal candle both get 10 on 10. However, the chart does not offer an entry because there is no space for the price for traveling towards the upside. Consequently, the sellers take over and drive the price towards the downside. To sum up, we not only look at the candle’s attributes but also calculate risk-reward.

Categories
Crypto Daily Topic Cryptocurrencies

Your Complete Guide to Using Cryptocurrency Trading Bots

While trading cryptocurrency is fairly straightforward, it can be quite a draining task trying to keep tabs on market trends, considering that the crypto market never closes. On top of it all, the unpredictable market’s volatility doesn’t make things easier for both new and experienced crypto traders. This is where trading bots come into play. 

Generally, a trading bot is a special algorithm designed to read different market indicators and to mark trade entry and exit points, as well as complete trading transactions on behalf of the user. 

The biggest advantage of trading bots, besides deeply analyzing intricate trading data, is the accuracy and high speed at which they execute trading processes. Such a high degree of efficiency is appreciated by traders whose strategies involve time-sensitive processes such as limit order and stop-loss order. 

It’s easy to create your own trading bot, especially if you have a good grasp of coding and programming languages. But this doesn’t mean the less tech-savvy traders are locked out from trading using bots. 

There are a good number of pre-programmed trading bots that cryptocurrency traders can utilize and even customize to fit their trading strategies. 

But before you pick the first trading bot that shows up from your search, there are a few things you should consider to ensure you make the right decision. 

Factors to Consider When Choosing a Trading Bot

☑️Ease of Use

The idea of leveraging the efficiency of bots is to automate your trading process. However, it doesn’t mean that you will entirely leave the bot to handle everything. You need a trading bot that you can easily manipulate its functionalities and tweak it in line with your trading objectives. 

So, ensure your trading bot of choice has an intuitive interface, allowing you to control it without the need for any technical knowledge. 

☑️Security

Cryptocurrency, much like anything else on the cyber-space, is prone to hacking among other cybersecurity threats. Besides, using a trading bot means that you are giving the bot access to your funds. This can be risky, especially if the bot’s security is questionable. 

The true test of a bot’s security is examining the company behind the bot. Ideally, the bot should be built by reputable developers who stand behind their work. You can also check users’ reviews on the bot’s security. 

☑️Reliability 

Even with its efficiency, a trading bot isn’t helpful if it frequently experiences downtime or goes offline for whatever reason. An unreliable bot means that you’ll miss out on a trading opportunity. 

Again, users’ reviews can help you know whether a particular bot is reliable or not. 

☑️Profitability

The main reason for using a trading bot in the first place is to maximize profits by utilizing the bot’s efficiency. 

One way to know if a bot is profitable is by checking whether it allows for the customization of trading strategies. Also, look out for handy trading features that give you an edge when trading. 

☑️Compatibility with Exchanges

Although most crypto trading bots are compatible with major exchanges, it’s always good to ensure that your bot of choice is compatible with the exchange you want to trade on. 

Best cryptocurrency trading bots in the market:

1. Cryptohopper 

The definition of a reliable bot, as we know it, is changing thanks to this cloud-based cryptocurrency trading bot. The bot continues to trade even when your computer is switched off, ensuring you don’t miss any trading opportunity. Additionally, since the bot doesn’t run on local storage, your computer is able to maintain its peak performance, which isn’t the case when using typical bots.

Being cloud-based, you might be tempted to think that the bot is reserved for the tech-savvy traders. Well, that isn’t the case! In fact, Cryptohopper is among the first trading bots to integrate external trading signaller that allows novice traders to run the bot on autopilot. Experienced traders also have the freedom to configure their own trading signals based on multiple technical indicators. 

One of the most unique features of this trading bot is its backtesting capabilities that allow you to reconstruct trades that could have occurred in the past, using historical data and rules of a given trading strategy. The results allows you to determine the effectiveness of the strategy, saving you potential losses. Other handy features include trailing stops, intuitive templates, and technical analysis. The bot can also be configured to only sell with profit.

In addition to its features, Cryptohopper is compatible with major exchanges such as Coinbase, Bitfinex, Kraken, Bittrex, and even less popular ones like KuCoin, Poloniex, and Cryptopia. 

Cryptohopper charges a relatively affordable fee for using the bot. But first, you’re offered a 7-day free trial, so you can familiarize yourself with the features as you test out its profitability.  Once you are ready to use it, you can subscribe to the basic monthly plan dubbed “Explorer’ for just $16.58/month or upgrade to the “Adventurer” package for $41.58/month. The premium plan goes for $83.25 and comes with more functionalities compared to the other subscription plans. 

2. 3Commas

3Commas is a web-based trading bot that’s compatible with numerous exchanges. Recently, the company behind this bot collaborated with Binance exchange, a partnership aimed at ensuring convenient trading conditions. 

The bot has a user-friendly interface that allows you to replicate the trading strategies of other successful traders, as well as customize your own. Its best capabilities are the stop loss and take profit targets, which can be set simultaneously. You can also trade various cryptocurrencies at the same time to maximize your profits. 

To guarantee reliability, 3Commas can run both on Android and iOS devices, allowing you to monitor your trading progress on the go. The best part is that the bot runs 24/7 regardless of the device you are using. You can access all your trades across various exchanges conveniently from the trader’s diary that comes with the bot. This comes in handy in tracking your profits and other transactions. 

The bot’s monthly plan will set you back $29/month, the ‘Advanced Package’ gives you access to long and short algorithms as well as view and copy functionalities, for $49/month. The ‘Pro Package’ gives you access to all premium features such as margin trading bot, composite bots, and ability to use Bitmex, Binance Futures, and Bybit bots.

3. Gunbot 

Gunbot has been around for quite some time and not even once in its long history had the bot fallen victim to hacks or security breaches of users’ wallets. Professional and beginner traders will certainly have it easy using the bot due to its simple layout. If you encounter any problem when using the bot, you can seek help from the vast community of Gunbot users on their social media platforms. 

Nonetheless, even with its basic interface, the bot houses configuration abilities based on technical indicators used that are used by manual traders.

The unique selling point of this bot is that it charges a one-time, flat rate for using it. The fee is paid in terms of Bitcoins, usually 0.1BTC or 0.3 BTC, depending on the features you would like in your bot. Upon purchase, you’ll be offered the company’s digital coin known as Gunthy coin. With this coin, you can easily sell your bot, should there come a time you want to quit trading. 

Its only downside is that the bot cannot efficiently stop losses on a highly volatile market.

4. Gekko

Although it is user-friendly to traders regardless of their skill level, traders with advanced tech knowledge will get the most out of this free trading bot.

To start with, Gekko can be downloaded for free on GitHub – a platform designed for tech gurus. You don’t need any technical knowledge to navigate the platform and download the bot. However, being open-source software, a great deal of configurations and improvements require a good grasp of coding. 

Nonetheless, even without any tech skills, you can still use the bot to perform basic trading functions such as backtesting and set it on autopilot.  

The bot is designed to run on virtually all operating systems, including Linux, MacOS, and Windows, in addition to being compatible with major exchanges such as Bitfinex, Kraken, and Bitstamp. 

Conclusion

Trading bots offer the much-needed efficiency to stay on top of the dynamic cryptocurrency market trends. Compared to brick and mortar type of trading, trading bots make more rational trading decisions since they aren’t subject to emotional waves that come with the market fluctuations. 

To an extent, the lack of emotions can be a flaw since they aren’t attached to the money, and so, the bots can continue trading even when making losses. It’s for this reason that bots require periodic monitoring just to ensure they are trading in accordance with your overall trading goals. Most importantly, ensure you are familiar with all the trading basics before using any trading bot. 

Categories
Cryptocurrencies

What are Bitcoin Futures? 

Futures markets have, for long, been in existence in more established asset classes such as securities and bonds. However, it was not until late December of 2017 that Bitcoin futures were introduced on regulated trading avenues. Although it is the only one of their kind in the digital currency space, Bitcoin Futures is regarded as a significant milestone in bringing cryptocurrencies closer to mainstream investing. 

Similar to any commodity/asset futures, Bitcoin futures are not necessarily for maximizing profits but rather serve as a risk management tool to hedge against the risk of the volatile crypto market.  

To understand what exactly are Bitcoin futures, it demands we explore how typical futures contracts work in the first place. 

What are Futures Contracts?

Futures contracts are basically an agreement between two parties to buy or sell an underlying asset at a predetermined price on a precise future date. Once the contract expires, both parties are obligated to fulfill the terms of the contract at the agreed price, regardless of the actual price at the time of contract execution.

The parties involved usually take one of the two positions of a futures contract; long or short. If you take the long position, it means that you agree to buy the underlying asset/commodity at a specific price in the future, while the short position means the other party agrees to sell the asset at a specific price once the contract expires. 

The idea here is to hedge risks associated with adverse price movements of the commodity. If, for instance, you expect the price of a commodity to rise, you can take the long position in a futures contract at the current market price. Upon the expiration of the contract, if the price rose, you’ll have saved some money since the contract will be executed at the lower market price as agreed.   

In the same vein, futures can also be used to speculate price movements to realize profits. For instance, if the buying party anticipates that the price of the asset will rise leading up to the expiration date of the contract. They can profit off the price difference, if indeed the price rises, by selling the contract at a higher price to another party, before the expiration date. 

How do bitcoin futures contracts work?

Bitcoin futures are similar to traditional financial futures, in that they allow you to speculate the Bitcoin’s price without having to own any Bitcoin. 

Investors can either take the long position on Bitcoin futures contract, if expecting prices to increase or short position if they own Bitcoins and want to mitigate potential losses from the anticipated drop in BTC prices. 

For instance, say, you own 10 Bitcoins at a market value of $5,000 for each coin, and you anticipate the price will drop to $4,000 in two months. You can take a short position, and agree to sell your Bitcoins at the prevailing market price. Close to the expiration date of the contract, you can decide to buy back (long position) the futures at the now low BTC price, thus earning you $10,000 while saving you the losses caused by the drop in price. 

Bitcoin futures unique advantages

I. Regulation

The crypto universe is torn between two major groups; those that want the coin to remain unregulated and those that believe regulation of BTC is an essential step towards mass adoption. 

Bitcoin futures are regulated by the Commodity Futures Trading Commission (CFTC). This places BTC on a path to mass adoption. It should be noted that CFTC is not as strict as its alternative, Security Exchange Commission (SEC). So, Bitcoin maintains a good deal of its liberal nature. 

II. Enhanced Liquidity

Thanks to the regulatory rules imposed by CFTC, Bitcoin futures are becoming more appealing to professional traders and big money Wall Street investors. With their more dollar volume input, BTC futures may become even more liquid than Bitcoin itself. 

III. Price Transparency

Bitcoin futures contracts are settled each trading day using a transparent reference price, which is written into all Bitcoin contracts in other markets. This will make it easy to use Bitcoin as a payment method since transparency creates a unified price that is essential in mitigating the volatility of spot prices. 

Getting started with Bitcoin futures trading

Now that you understand how to place and execute a Bitcoin futures contract, there are a few crucial things you need to know for profitable trading. 

Get Familiar with the Trading Rules

Trading Bitcoin futures is a bit different from trading typical equities and bond futures. This is due to the fact that they have a significantly higher margin requirement compared to a regular futures contract. 

Chicago Mercantile Exchange (CME) and Chicago Board of Exchange (Cboe), the main Bitcoin futures trading avenues, requires one to put up a 35% and 44% margin, respectively, of the futures contract value. Although this margin can be achieved by trading other financial products on the exchange, the products aren’t offered to new traders. 

Margin is basically the amount of money a trader must pay first as collateral when taking a futures position. Usually, for most traded assets, the margin is under 10%. 

So, this is to say that if a contract was trading at $10,000 on CME, a trader wishing to take a long or short position, will have to pay $3,500. The trader can also be subjected to additional margin calls if the account falls below a certain level. 

Understanding Price Limits

Price limits are the maximum price ranges allowed for a futures contract in a trading session. Bitcoin futures are subject to limits on how far the price can move before triggering a temporary or permanent halt. 

In the case of Cboe, a contract will be halted for two minutes if the best bid, leading to the contract expiration date, moves 10% up or down the previous day’s prices. 

Build a Trading Strategy

Developing a trading strategy is fundamental when trading any type of financing product, including Bitcoin futures. 

Your trading strategy should revolve around what you want to achieve – prevent loss or make a profit- while paying attention to your risk appetite. For this reason, consulting an experienced futures broker is recommended, so as to design a personalized strategy that is aligned to your objectives. 

Besides, trading directly on CME is almost out of reach due to the high cost a trader is required to pay before they can trade on the platform. As an individual investor, you, therefore, need to find a broker who trades on CME. 

Takeaways

One of the best things about Bitcoin futures is that you don’t need a wallet nor BTC coins to participate in the trade. Bitcoin futures, like most futures contracts, are settled in cash equivalents, so no tangible coins are exchanged between parties, saving you the hassle of owning or storing digital coins. Traders collect their gains once the other party honors their contract obligation. Also, you can conveniently place a short without necessarily borrowing the underlying asset ( Bitcoins), meaning you don’t have to own any coins. 

As lucrative as it may sound, it is important to keep in mind that Bitcoin futures are a highly risky investment instrument. As such, it is advised to only invest that amount you can afford to lose, should the contract go opposite of what you initially speculated. However, there is always the option to close out a position before the expiration date, in an effort to minimize or entirely avoid losses. 

Categories
Crypto Daily Topic Crypto Guides

Is Crypto Money Laundering A Real Problem?

What is Money Laundering?

Money Laundering is the legitimization of money earned through illegal means. Generally, it is the separation of money obtained through illegal activities and mixed with the money made from legal sources like small businesses that accepts cash as the primary mode of payment. The legitimized money is again funneled to the criminal enterprises to fund illegal activities.

Different Ways of Money laundering

Money laundering is prevailing for many decades in our financial history. Governments have been continuously upgrading the technology to avoid the money laundering cases, especially to reduce the funding of illegal activities. Cash still occupies the first place when it comes to laundering the money. Because it is difficult to trace the money that is transacted in cash. Hence selling/buying drugs, trafficking, and theft are mostly dealt with cash.

Gold is another popular form of laundering money. Other than these, we have large banks that don’t question with the source of the wealth when the cash is deposited in their vaults, casinos, tax havens, etc. But ever since the revolution of Cryptocurrency has begun, this asset is paving new ways for money laundering. Let’s discuss more about this below.

Is Money Laundering Using Cryptos A Real Problem? 

There are significant concerns across most of the governments with regard to money laundering using cryptocurrencies. But most of them are not true when it comes to reality. It is estimated that since 2009 approximately $2.5 billion worth of Bitcoins are laundered, whereas ~ $100-$300 billion dollars are being laundered every year in different ways.

Hence, if we compare the stats, the amount of money laundered using Cryptocurrency is very sparse. Moreover, it is not advisable to launder money using Cryptocurrency as all the crypto networks are permissionless and transparent for literally anyone to check. It is easy to put together the Bitcoin transactions as the transactions are only pseudo-anonymous.

How are cryptocurrencies used to launder money?

These are some of the ways how Cryptocurrency is used for money laundering:

₿ While most of the cryptocurrencies are regulated there are some exchanges that aren’t. This means they don’t perform KYC procedures and none of the details of their customers is collected while they perform crypto transactions. This makes it challenging to match the transactions made by their customers to their id’s. When several such transactions are made using unregulated crypto exchanges, a degree of privacy is added which may eventually result in using that money for illegal activities.

Exchanging the Cryptocurrency with different altcoins, thus making it difficult to know the origins of the actual cryptos. This can also quickly be done by participating in an ICO.

Using Bitcoin ATM’s, we can deposit fiat cash and take Cryptocurrency at any place where a crypto ATM is available.

As the cryptocurrency market is too volatile, it is easy to show that the illicit income is a result of some profitable venture or some other currency appreciation.

With ever-increasing online payments using Cryptocurrency, we can easily create an online company which accepts Bitcoin and convert black money into clean Bitcoin.

How are the governments controlling the crypto money laundering?

Governments are taking various measures by developing multiple tools to link the transactions to the ids of the users using KYC details. Anti-laundering laws are amended to include cryptocurrencies. The US, Canadian, and European governments have made changes to the rules already. Some governments are, in turn, taking measures by legalizing cryptos so that the transactions would be made through regulated exchanges instead of fraudulent ones.

Finally, it can be said that, since the usage of digital cash is going to be inevitable, all measures are being taken to curb the negativities that we see in today’s world with fiat cash. If you have any questions, shoot them in the comments below. Cheers!

Categories
Cryptocurrencies

How to Choose and Accept Cryptocurrency for Your Business

As with any other technology, the digital currencies have revolutionized not just the tech world but also the health, finance, and manufacturing industries. 

Their disruptive aspect can be linked to the underlying protocol, blockchain, which most cryptos run on. 

This technology delivers faster and more secure transactions compared to using fiat currencies. Moreover, there are no central authorities such as banks or government, involved in the transaction. As a result, this lowers the transaction fees saving you money in the long haul.

But, ever since the Bitcoin craze back in 2017, there has been an influx of cryptos in the market. For any business owner, the overwhelming number of cryptocurrency choices can be daunting, especially with reports that some coins are a Ponzi scheme. 

Criteria used to choose the right crypto for your business

So, which criteria should business owners use to choose the right cryptocurrency for their enterprise?

☑️Value of the Coin

Choosing a coin that has high value shields your business from losses caused by the volatile nature of cryptocurrencies. This is especially true since highly valued coins tend to be more stable, meaning their prices don’t change radically. 

The value of a crypto is directly related to its demand. The higher the demand, the higher the value of the coin. 

☑️Usability

The usability of a coin can be viewed in different spectrums, but it all boils down to how users interact with a coin. 

The most basic usability aspect of a coin is in terms of the number of people using the coin. A popular digital coin certainly has a more significant number of users compared to a less popular coin. The idea here is to choose a digital coin that has a good number of users. This way, you can be assured that most of your customers have access to the coin of your choice. 

Also, usability entails the user-friendliness of a cryptocurrency. A coin with a complex interface can be intimidating to a particular demographic of your customer base, thus limiting your products or services to the tech-savvy clientele. 

A coin with an intuitive interface should be easy to perform simple functions such as opening and funding the wallet as well as sending and receiving funds. 

☑️Transfers

One of the primary reasons behind businesses accepting payments in cryptocurrencies is due to the fast transaction associated with the payment process. 

It’s common for business owners to wait for days or even weeks for payments made using a debit card, to reflect in their bank accounts. This can be frustrating, especially if you have urgent bills to pay or need to make a payroll.

While cryptocurrencies offer faster transactions than conventional currency, some aren’t as fast as you would wish. Take bitcoin, for instance. The network on which it operates has a scalability problem, which translates to slower transactions due to its limited blockchain size and frequency. 

Of course, there are altcoins such as Monero, and Litecoin that offer faster transactions and even charge less than bitcoin for sending and receiving funds. These coins take less time to confirm a block, amping up the transaction process. 

How to Accept Cryptocurrency for your Business

There are three main ways of accepting cryptocurrency as a form of tender for products and services. 

Direct Deposit

If you only have a small number of customers using cryptocurrency, direct deposit works best. All you need is to create a wallet and share its address with your customers. 

Ideally, you should partner with an exchange platform to help you create a wallet. This way, it will be easy for you to link your wallet to your bank account, so as to withdraw funds in fiat currency. 

Besides crypto exchanges, you may consider creating a versatile digital wallet with popular providers such as Exodus and Jaxx. With one of these wallets, you can accept any type of cryptocurrency for efficient conversion to conventional currency. 

To make the transactions easier for your customers, you should present your wallet in the form of a QR-code. Customers will just scan the code with their phones, and transfer the agreed amount directly to your wallet. You can request a wallet QR-code from the exchange site you’ve partnered with or use an independent app dedicated to creating one for streamlined cryptocurrency payments. 

Point of Sale (PoS) Equipment

A cryptocurrency PoS equipment is accompanied by a piece of software that automatically links your wallet to your bank account, for a seamless payment experience. The equipment also supports cryptocurrency-based debit cards and even offers withdrawal services in the form of fiat currency. 

Alternatively, instead of buying a cryptocurrency  PoS terminal, you can create a merchant digital wallet and link it to your existing PoS system. Unlike the traditional digital wallet, a merchant wallet comes with unique functionalities that make it compatible with your accounting systems for easy bookkeeping. 

Once you’ve created a merchant digital wallet with your preferred provider, you’ll then receive a public address, private key, and a QR-code. Now, using the instructional manual, integrate these details to your existing PoS system, invoices, and shopping cart. 

Plug-ins and Cash Out

Exchanges such as Binance and Coinbase offer plug-ins that are installed into your online store. It becomes easier to integrate these plug-ins if your store is on popular platforms such as Shopify, WordPress, or eBay. 

Customers can, therefore, shop from your store and check out using crypto, which is then deposited to your wallet address or bank account. 

Boost Your Business by Accepting Cryptocurrency Payments

Accepting cryptocurrency payments gives your business a competitive edge, as technology becomes more integrated into all business operations. Being an international currency, cryptos are also a gateway to broadening your market outreach. 

Of course, there are a few drawbacks with this payment method. Volatility remains the biggest downside to cryptocurrency payment for business services. With such unprecedented price swings, the most viable solution is to convert any cryptos to fiat currency, immediately upon receipt to protect yourself from loss of value. 

In addition to volatility, you should also maintain compliance with regulatory tax schemes that are subject to your jurisdiction. 

Nonetheless, business owners are advised to keep an eye out for cryptocurrency trends and consult experts in the field, to understand every aspect of digital currencies before integrating them into payment systems. 

Categories
Crypto Daily Topic

Bitcoin’s Path to $1 Million: A Mere Speculation or Inevitable Reality? 

nEver since Bitcoin hit an all-time high bull run in 2017, there has been speculation about its potential to hit the $1 million mark. 

John McAfee, with all his controversial personality and expertise in the tech world, has been at the front-seat, fuelling the $ 1 million BTC price speculation. In fact, he’s part of the reason why bitcoin reached $20,000 in December 2017, thanks to his bold prediction on Twitter in November of the same year.

Well, he didn’t exactly predict that it would be worth the $20,000 but instead claimed that the coin would be worth as much as $500,000 by the end of 2020. Although he didn’t get into the specifics of how he had arrived at that number, the prediction spiked a mass adoption of BTC in 2017, resulting in the bull run. 

A few months later, McAfee doubled up the prediction to a $1 million price target. Recently, other notable industry players such as PayPal director & CEO, Wences Caseres, threw in their weight on the prediction, saying it’s possible for BTC to hit $1 million in the next to seven to ten years. 

The Critics

Of course, there are a good number of respectable individuals opposed to the idea that bitcoin is a sound investment, leave alone the price prediction. Warren Buffet, the Oracle of Omaha, describes Bitcoin as a store of fear, not a store of value. Others who doubt bitcoins potential include JP Morgan and Chase Bank CEO Jamie Dimon and Paul Krugman, an esteemed economist and columnist for The New York Times. 

Despite the harsh skepticism facing Bitcoin’s future, it doesn’t mean it is entirely impossible for the cryptocurrency to grow in value, and even surpass the $1 million mark. 

But before that, there are several hurdles the digital currency must overcome to place itself on a path to the highly anticipated price target. 

Scaling Problem

For Bitcoin to experience any massive growth, its market capitalization has to grow first. Case in point, since the first real Bitcoin transaction back in 2010, the infamous Pizza purchase, the crypto’s market cap rose by a whopping 2,300%. This happened after a few weeks of increased adoption/transactions by the general public, who were eager to get a piece of this new digital currency. The increased market cap resulted in an increased BTC price from just $0.0025 to $0.06. 

Unfortunately, Bitcoin’s block size is insufficient to support the high number of transactions required to boost its market cap and eventually achieve the $1 million target. The actual block size is 1 MB, which often causes sluggish transactions even with the current of $178 billion. Keep in mind that the $1 million BTC argument dictates that the market cap must amount to approximately $16 trillion, an equivalent of 13% of global GDP! 

There have been attempts to solve this problem, but its success hasn’t materialized. Two Bitcoin developers created a two-layer solution dubbed the Lightning Network (LN). This off-chain payment tool makes the transfer of BTC funds faster, except that the payment information doesn’t touch the main blockchain unless the transaction link is closed. 

Besides, LN doesn’t completely solve the high bitcoin transaction fee problem, which could jeopardize the network’s adoption among the BTC community. 

Regulation from External Authorities

In line with the idea that there has to be a massive adoption of BTC to propel it to high price points, the current regulatory environment hasn’t been doing any good to the Bitcoin community. As such, more people are finding it hard to fully invest in Bitcoin, considering the negative reviews from government institutions. 

To put into perspective, consider the BitLicense law imposed by the New York State Department of Financial Services (NYSDFS). According to the law, any start-up centered around bitcoin will have to pay an exorbitant fee of about $5,000 to acquire a business permit/license. The worst bit is that it’s not guaranteed that the NYDFS will approve their license request. 

On top of that, there are states with varying bitcoin taxation laws, some of which are unfair. In such states, BTC is treated as an asset, thus subject to capital gain tax. The idea behind this is due to the unpredictable volatility of BTC, which. in an ideal case, would result in a bitcoin holder’s net worth increasing if the coins price were to increase in the first place. Consequently, this discourages business owners who would like to accept Bitcoin payments for their products or services. 

While the government’s interference is aimed at creating a sound atmosphere in the cryptocurrency space, it doesn’t come out well for people who loved Bitcoin’s decentralized nature. That said, there needs to be a bilateral trust between the Bitcoin community and the government, for the digital currency to reach $1 million in value. 

Banking Support

Probably, the major hurdle standing on the way to 1$ million BTC value is the lack of dependable liquidity. If the currency is to be accepted by the masses, they need a reliable option to change their fiat currency to BTC and vice versa. 

Unfortunately, in many countries, the central bank bars the subsidiary banks from offering liquidity options to BTC users. Some credit card companies even probit their users from purchasing cryptocurrencies. There have also been numerous cases of frozen accounts for those trading cryptocurrencies. 

Such strict laws not only discourage new investors but also causes panic selling among the existing Bitcoin holders, resulting in a bearish run in the crypto market. 

The Rationale Behind $ 1 Million BTC Price Prediction

Regardless of the seemingly impossible hurdles to overcome, Bitcoin still stands a chance to come close if not reach the ambitious price target. 

Let’s objectively look at some underlying factors that make the price target more of a reality than a speculation

Technological Growth

In the theoretical stages of technological growth and adoption, every new tech solution or tool starts out with an innovator as the pioneer and first user. Gradually, the tool/solution grows and becomes adopted by the first group of people known as early adopters. The early adopters aren’t big in numbers, but the subsequent mid and late adopters are often in large numbers, thus giving the tech solution in the mainstream attention and usage. 

Bitcoin by itself is a technological solution which in this case, the majority of the coins are held by the early adopters. These are a small group of people who invested in Bitcoin when it was worth pennies. As such, it’s quite safe to say that Bitcoin hasn’t yet achieved mainstream usage and adoption as spelled out in the developmental stages of technology solutions. 

More so, big corporations and the government have realized the importance of blockchain, the underlying cryptocurrency technology, as evident from the launch of Libra ( a digital currency expected to be launched by Facebook, soon). 

The cryptocurrency industry as a whole will, therefore, gain public acceptance placing BTC on its path to $1 million. 

Cushion Against Financial Crisis

Financial recession often results in loss of wealth among the citizens of the affected country. Bitcoin and another cryptocurrency, therefore, stands as a cushion against unpredicted financial crisis since it lacks a central authority controlling it. 

This idea is even more practical in countries such as Zimbabwe and the Philippines, where the local currency has lost much of its value. Bitcoin and other cryptos are an alternative store of value medium, to citizens in such countries. 

The higher the number of people safeguarding their wealth in cryptos, the more likely bitcoin will grow market cap and finally achieve a $1 million valuation. 

Conclusion

Judging from the past bull run, it’s easy to see why Bitcoin’s future cannot be accurately predicted. There are factors beyond the rational market principles that have and could influence Bitcoin prices, making the coin’s price growth subject to speculations. 

Nonetheless, for a stable growth towards high price points, Bitcoins must overcome the setbacks stated above. Only this way, and in combination with factors favoring its growth, will Bitcoin hit and surpass the $1 million price target with little volatility. 

Categories
Crypto Education

eToro Platform Review – Part 1

eToro platform review – part 1/3


eToro is one of the most popular trading platforms in the world. It lets users trade various assets, such as traditional stocks, shares, as well as major cryptocurrencies. When compared to other crypto trading services, it is a fully regulated exchange with a user-base of more than 10 million registered users.

eToro in a nutshell


eToro is aimed at investors who are new to the investment world, as their interface does not consist of many analysis tools. They are rather a simple platform that gives people the option to buy or sell assets on the go. It is a great one-stop-shop as it offers a variety of assets. However, advanced traders may also benefit from eToro by using margin trading. Less experienced traders have the option to use eToro’s social trading where they can follow seasoned investors, their research, as well as insights.

eToro offers various instruments, including:
16 cryptocurrencies (BTC, ETH, BCH, XRP, DASH, LTC, ETC, ADA, EOS, NEO, XLM, IOTA, TRX, ZEC, BNB. XTZ).

47 currency pairs (including EUR, USD, CAD, GBP, AUD, PLN, SGD, SEK, JPY, and many others).

13 stock index CFDs (SPX 500, UK100, NSDQ100, China50, AUS200 and others).
Over 1300 stock CFDs.
83 commodity CFDs (including oil, gold, silver, copper, natural gas, and platinum).
The U.S. customers are allowed to trade cryptocurrencies only for now.

eToro background

The company was founded in 2006 by Yoni Assia (Chief Executive Officer and Founder) and Ronen Assia (Chief Product Officer and Co-Founder). eToro can be proud to say that it has a history stretching further back than the whole crypto industry itself. It started its life as an online FOREX brokerage.

It made its first move towards crypto in January 2014, when it started to offer Bitcoin trading to their user base of three million. At the time, the crypto trading they offered was trading CFD’s, which meant that traders didn’t purchase the underlying asset. However, eToro (slowly but surely) switched to offering direct crypto trades in September 2018. When buying crypto on eToro, you actually own it as well as withdraw the cryptocurrencies you buy into your eToro wallet.
eToro boasts over ten million users today, with its growth primarily driven by the smart marketing moves and the crypto industry. On top of that, its accessibility and great customer support make eToro expand even further.
Check out part 2 of our eToro platform guide, where we will talk about the fees, spreads, and security of the platform.

Categories
Cryptocurrencies

What is Token Burning and How Does it Work?

Token burning, a concept unique to the cryptocurrency market, is gradually becoming an intrinsic feature of newer and future cryptocurrency projects. Even more recently, well-established altcoins such as Binance have adopted this concept making it worth the attention of any cryptocurrency investor. 

As the name suggests, coin/token burning is the process of ‘burning’ coins, or rather, the irreversible destruction of coins/tokens in an effort to eliminate them from circulation. 

To understand this concept better, let’s delve into how the whole ‘burning’ process works. 

How Does Token Burning Work?

Despite the extreme image the phrase paints, token burning doesn’t involve any kind of token disintegration. In fact, it’s impossible to disintegrate coins since blockchain – the underlying cryptocurrency protocol – is immutable, meaning the protocol’s history and data cannot be altered in any way. 

What actually happens is that the coins/tokens are algorithmically taken out of circulation by sending their signatures to a public address known as an ‘eater address.’ The keys to this public address are private and cannot be obtained by anyone. In essence, it means that once the tokens are sent to this address, they are unrecoverable and can never be used. Ever!

All burnt coins/tokens are then recorded on the blockchain transparent ledger system for all nodes to see and confirm that the coins have been indeed destroyed. 

While token burning serves the same purpose, which is the elimination of coins from distribution, it differs in the scope of execution. For instance, some projects will execute a one-time burn after their Initial Coin Offering (ICO), to help eliminate any unsold tokens. Other projects favor periodic burning of tokens based on the token’s utility and size, among other variables. Binance coin (BNB), for example, burns its tokens quarterly, with an aim to reach a threshold of 100 million BNB burned tokens. Alternatively, project developers can buy back their tokens from exchanges and take them out of circulation by sending them to the ‘eater address.’ 

A few other coins, such as Ripple, burn token progressively with each transaction. When parties transact using the coin, they must incur a transaction fee, pretty much like sending Bitcoin to another BTC wallet. However, in the case of Ripple, the transaction fees aren’t awarded to miners. Instead, these fees are automatically burned. 

Why do we need to burn tokens?

It’s quite startling to understand why crypto projects burn their precious tokens. But the process comes with its own benefits, favoring not only the developers but also the coin users. Here are the main motives behind token burning;

☑️Increase the Value of Coins 

The most common reason behind token burning is to boost and encourage the growth of a coin’s value. Going by the economic laws of demand and supply, reducing the supply of a commodity in the market fuels the demand for that particular project. As such, by burning a token, the supply of a coin reduces in equal measure, prompting a demand of the coin since there is a lesser amount of coins to satisfy the people’s demand. Consequently, the price of the coin appreciates, stabilizing its value. 

To the investors, the growth in value encourages them to hold the coins for longer in anticipation of even better prices as the demand increases. Also, holding the coins for longer helps maintain a sound network bandwidth, which is beneficial to the developers.

☑️Provision of Dividends

The provision of dividends is closely tied to the resultant increase in coin value after burning. However, this benefit works best in security tokens rather than in their utility counterparts. 

A security token is classed as an asset, and thus those holding it are regarded as investors. This is not the case with utility tokens. 

Nonetheless, with the increase in a coin’s price after burning some of them, the developers indirectly reward the coin holders, since the value of the asset has appreciated. This move plays out perfectly in countries such as the USA, where cryptos are discouraged from handing out dividends directly to their token holders. 

☑️Protection Against Spam

All cryptocurrencies are under the computing realm, which makes them vulnerable to cybersecurity threats. Having this in mind, it’s easy to understand why tokens can fall victim to Distributed Denial-of-service attack (DDOS), especially with the growing number of cryptocurrency users. 

Basically, DDOS is a cyber-attack in which the perpetrator seeks to flood a system with an influx of requests, so as to prevent the execution of some or all legitimate requests.

In the same vein, a DDOS attack on token targets at clogging the network, preventing the execution of transactions. By burning tokens, the developers end up reducing the overall transactions to a manageable number, thus safeguarding the network from DDOS attacks and spam transactions. 

Ripple is a perfect demonstration of how coin burning prevents spamming. By automatically burning a portion of the transacted amount, Ripple discourages the need to overload the network to gain a quick profit.

☑️Correct Errors

Although in rare cases, sometimes project developers make serious mistakes that can only be corrected by token burning. 

For instance, a project may issue an excess amount of coins or experience an increase in the number of tokens as a result of technical errors. In other cases, tokens unfit for trading. For example, those meant to support a transaction may end up into public circulation. Theoretically, an increased supply translates to lower demands, plummeting the coin prices. 

As a corrective measure, the excess tokens are burnt to avoid some of the consequences brought by the errors incurred. 

☑️Build Trust and Loyalty

Gaining trust from coin holders is the ultimate goal of any cryptocurrency, particularly one that is new in the market. 

After the Initial Coin Offering (ICO) of new crypto, its price is bound to increase. The project developers may decide to make more profits by selling excess coins to exchanges, at the prevailing spiked prices, which is unfair.  More so, by selling the excess coins, it would lead to allegations that the developers are only committed to gaining profits and that their coin has no real value. 

However, burning the excess coins shows that the developers are committed to the long-term growth of the coin. As such, the funds raised from the ICO will be used for business operations. But most importantly, burning excess coins help decentralize the project. 

Conclusion

As hardcore as it may sound, token/coin burning is proving to be an effective method of maintaining a balanced crypto-ecosystem. With time, future cryptocurrencies will certainly adopt this mechanism giving its numerous benefits, especially in a coin’s infancy stage. 

Also, with the hope that cryptocurrency space will stand the test of time, coin burning is arguably the best bet to maintaining the long-term value of a crypto. 

 

Categories
Crypto Daily Topic Cryptocurrencies

Privacy Coins: Here Is Your Complete Guide

Public blockchain cryptocurrencies such as Bitcoin and Ethereum utilizes cryptography technology to disguise users’ identity. To an extent, this protects users’ privacy, making the cryptos ideal for pseudonymous transactions.

However, the transparent nature of these cryptocurrencies’ ledger system compromises users’ complete anonymity. As such, it’s easy for malicious third parties to trace all your transactions and exploit this information to jeopardize your privacy. Now, this is where privacy coins come into play. 

What Exactly are Privacy Coins?

Unlike public digital currencies, privacy coins offer robust anonymity that works by obfuscating your transaction history and amount, making it impossible for third parties to piece together your identity. To achieve it, privacy coins leverage various innovative technologies, giving them a competitive advantage, as far as users’ privacy is concerned. 

While there are a good number of privacy coins in the market, we’ll be taking a comprehensive look into the best five coins, based on their technology, adoption, and market capitalization. 

Monero – XMR

Started in 2014, Monero has grown to become one of the most popular privacy coins backed by a stable market cap. The coin gives its users complete control of their data and anonymity, allowing them to keep their transaction information away from privy eyes.

In addition to its default private key cryptography, the Monero employs CryptoNote proof-of-work protocol, to obscure all details related to a transaction, including the source of funds. To further enhance users’  privacy, the protocol is complemented by unique technologies such as Ring Signatures, Ring Confidential Transactions (RingCT), and Stealth Address. 

As the name suggests, Ring Signature technology works by bringing a group of signers to sign a single transaction. This forms a ring where only the sender can generate and send a one-time-key, while the actual recipient will be the only one who can detect and spend the funds linked to the key. With the technology in place, it becomes difficult for any transaction to be traced back to any user, which in turn secures users’ privacy. 

To guarantee that the coins have not been fraudulently fabricated in the transaction, RingCT creates a cryptographic proof which verifies that the sum of the input and output amounts is equal. The technology does this without disclosing the actual transaction numbers, thereby masking the amount the two parties transacted. 

Stealth Address, on the other hand, is designed to make all transactions untraceable. Basically, a one-time-key is created for each transaction, giving the sender and recipient the freedom to disconnect themselves from a transaction. What’s even better is that the key isn’t linked to the recipient’s wallet address, making it harder for an outside observer to trace the amount sent. 

Dash – DASH

Dash coin is an open-source peer-peer cryptocurrency that was launched after Bitcoin forked in 2014. In fact, the coin borrows heavily from its parent, BTC, in terms of privacy protection. It utilizes a concept known as PrivateSend, which is an improved version of Bitcoin’s CoinJoin, designed to anonymize transactions.

Essentially, the concept works by allowing multiple parties, usually three users, to pre-mix their coins into a single transaction, and then send these coins to new addresses, randomly. The transactions are further taken through a series of such operations, which makes the amount, the sender and destination unknown to third-parties. 

The instant-send feature of the coin facilitates faster transactions, by channeling inputs and outputs along the second tier of the Dash blockchain. 

Although not related to privacy protection, Dash coin also features a management mechanism that oversees future funding and network development through a self-governing community know as Decentralised Governance by Blockchain (DGBB). 

ZCash – ZEC

Being an iteration of Zerocash, ZCash implements it’s predecessor’s protocol that is based on zero-knowledge cryptography known as ZK-SNARKs. As intricate as it may sound, the technology’s functionality is pretty straightforward.

Basically, ZK-SNARKs encrypts all transactional details that are stored on the network, which include information about the sender, the recipient, and the amount transacted. In the process, the technology also verifies that the data being exchanged is authentic, without necessarily broadcasting the said information, besides the fact that it is true.

Keep in mind that using this privacy feature is optional, and thus users can opt to have their transaction recorded publicly. But it’s believed that users who choose the transparent option end up compromising the security of the entire network. 

PIVX – PIVX

Private Instant Verified Transaction (PIVX), which also goes by the same tickle symbol as its acronym, is an open privacy coin with a growing popularity. It was launched as a Dash coin fork but runs on the Proof-of-Stake algorithm rather than Proof-of-Work used by Dash coin. This means that PIVX doesn’t rely on miners to verify transactions and, as such, rewards the coin holders, who are also responsible for validating transactions.

However, to be among the users who are rewarded with coins as well as approve transactions, you must have a stake of at least 10,000 tokens. After achieving the threshold token, you are allowed to own a master node, which gives you the power to on how the development budget will be used and even submit developmental suggestions. 

PIVX also has a near-instant transaction verification feature and can be trusted in safeguarding users’ privacy. 

Verge – XVG

Much of Verge’s popularity can be attributed to the endorsement it received from John McAfee, a reputable businessman in the cyber-space. Although it is quite unstable, the coin has succeeded in providing a fast and decentralized way of making transactions, while maintaining users’ privacy.

By default, Verge integrates the Tor network into its wallet, encrypting your IP address, such that your online transactions can be linked to you. 

Its most privacy protection arsenal is the Wraith protocol that allows users to switch between public and private ledger systems. 

As with Bitcoin, the public ledger system displays your account balance, wallet address, and that of the recipient, in addition to the actual amount you are sending. Choosing the private ledger option keeps these details under wraps, protecting you from third parties who may be trying to trace your transactions. 

Other noteworthy features include 5 Proof-of-work algorithms, which have a limited target block time, improving protection against attacks. 

Takeaway

With the increasing cybersecurity threats, protecting your online privacy becomes a priority, especially when transacting cryptocurrencies. Sure, there is no problem in displaying your transactions history for all to see, since you don’t have anything to hide in the first place. But the idea that third-parties can use your transactions to trace activities should prompt you to keep your cyber-footprints untraceable. 

As such, you may consider investing in some of the digital currencies mentioned above in an effort to protect your personal privacy. 

Categories
Cryptocurrencies

Exciting Use Cases of Decentralized Finance

Today’s finance landscape is inherently unequal – with millions locked out of opportunities due to their location, being undocumented, or having low economic means. 

Few would have foreseen that the technology that brought us Bitcoin could potentially solve this enduring problem. 

Decentralized finance (DeFi) is all of these things: an idea, a belief system, a movement, and a blockchain-based technology that promises to eradicate the aforementioned barriers to financial access, or to put it another way, to democratize finance. Already, decentralized finance is making waves as DeFi platforms and products increase by the day. 

In this guide, we explore some uses cases of this new and exciting technology, as well as some of the real-life applications that are making brave inroads into the space. 

But before we do that, let’s kick off with a primer on what exactly DeFi is, plus why we need it. 

What is Decentralized Finance? 

Decentralized finance is an emerging, blockchain-based ecosystem of finance that seeks to expand finance.  

It aims to make financial services more accessible and inclusive for everyone by making financial markets and products open-source, transparent, and under no particular authority. 

In DeFi world, everyone would have absolute control over their assets and interact with other participants through peer-to-peer (P2P), decentralized applications (DApps). 

What Problems Does DeFi Solve? 

DeFi’s chief goal is to decentralize financial services and make them available to all – an aspect that today’s centralized financial system is sorely lacking. As such, DeFi solves two main problems which we’ll look at in greater detail below: 

Inequality in Finance. Today, millions of people are locked out of access to loans, mortgages, a bank account, savings, insurance, and so on. DeFi aims to eradicate or alleviate this problem by creating a finance system that has no systemic or institutional barriers. All one would need is a smartphone and internet connectivity to access services.  

Financial Censorship. Today’s centralized finance system means that governments, banks, or intermediaries can restrict or prevent an individual’s or a company’s access to their assets. For example, the government could freeze the assets of a company that openly defies it, or an individual that it perceives to be rogue. By contrast, with DeFi, financial products are under no one’s control. Hence no one can arbitrarily restrict an individual’s or company’s assets. 

What Are the Advantages of DeFi?

Why should you care about DeFi? What difference does it propose to the current financial system? These are some of the advantages of DeFi: 

Autonomy: DeFi applications do not need a go-between party in transactions or an arbitrator in case of disputes. All terms are set in the code, and users have complete autonomy over their funds at any time. This eliminates the costs that would go into providing such intermediary services.   

Security: Since DeFi services are set up on decentralized blockchains, single points of failure are eliminated. Data is recorded on the blockchain and distributed across computers all over the world, reducing the chances of services being compromised.

Tradability: Thanks to DeFi, the tokenization of assets is now possible. Tokenization means one can quickly sell an asset that was previously illiquid (not fast-moving), as well as divide an asset into parts that enable many market participants to buy just the portion they can afford, instead of losing out on a whole investment.

Accessibility. The world’s unbanked can access financial services that they previously couldn’t, thanks to DeFi. 

What Are The Use Cases For DeFi? 

The following are some of the potential use cases for DeFi: 

i. Payments

DeFi platforms or applications can be used to create blockchain-based protocols that allow individuals to have wallets via which they can make instant and cheaper payments. 

ii. Borrowing and Lending

DeFi enables open lending structures that have numerous advantages over the traditional borrowing and lending system, including: 

  • Ultrafast transaction settlements 
  • Ability to back up digital assets with real-life assets 
  • Credit checks are not necessary; hence more people can get access to loans
  • Potential standardization and interoperability of financial services, making them frictionless across various providers 
  • Democratizes the borrowing and lending process by providing borrowers with a wider pool of potential lenders.    

iii. Stablecoins

A stablecoin is an asset that attempts to circumvent the price swings in cryptocurrencies, making them suitable as mediums of exchange and stores of value. Stable coins thus provide the stability associated with fiat currencies while maintaining the benefits of cryptocurrency such as security, fast processing speeds, and overall efficiency. 

iv. Tokenization

This is the process of digitizing a real-world asset to increase its liquidity in the marketplace. Tokenization creates asset-backed tokens – which are digital tokens backed by real-world assets. Through tokenization, assets that traditionally have low liquidity, e.g., jewelry, real estate, and art, can quickly move their position in the marketplace. Also, thanks to the ability to divide assets into portions through tokenization, non-high income earners can get a piece of a product or investment that they previously couldn’t afford.  

v. Decentralized Exchanges (DExes)

Decentralized exchanges are platforms where users can exchange digital assets without relying on a third party, as in a centralized exchange. Instead, trades occur between parties in a P2P, automated process. Examples of DExes include Binance DEX, Radar Relay, and EtherDelta. 

vi. Issuance Platforms

An issuance platform is a service that allows people to tokenize their assets by providing them with the tools to create digital tokens. An issuance platform provides the necessary technical and legal infrastructure to ensure a seamless tokenizing process for users.   

Thanks to these platforms, individuals and companies can raise funds without the costs associated with intermediaries such as banks, credit unions, lawyers, etc. They also open up investment opportunities for investors of all net worth levels, origin, or geographical location. 

vii. Open Marketplaces

With open marketplaces, DeFi reimagines the age-old idea of a marketplace by turning it into a decentralized platform where people can exchange things of value. 

People can buy and sell non-fungible tokens (ones that are unique and thus not interchangeable, as opposed to fungible tokens such as Bitcoins that are interchangeable) such as trading cards, collectibles, domain names, game items, and so on. All transactions take place via blockchain-based smart contracts, removing the need for a central authority who would normally dictate the rules of the marketplace.  

viii. Prediction Markets

A prediction market is a group of participants who speculate on the outcome of future events – from elections to games to weather to natural disasters to commodity prices to major political events. 

DeFi provides a decentralized take on traditional betting markets such as casinos. Decentralized prediction markets are censorship-resistant, thus democratizing the betting space. For instance, individuals can participate in betting on their favorite sports events even if they live in jurisdictions where betting is restricted. It also means that anyone can create a bet without the approval of a central authority like, for instance, the administrator of a betting platform.

ix. Decentralized Autonomous Organizations (DAOs)

These are organizations that allow individuals to create organizations whose rules and bylaws are encoded on the blockchain. DAOs represent the highest degree of organizational transparency, with every process automated and with minimal to no human input needed. They solve the problems of centralized, hierarchical setups such as corruption, arbitrary decision making, delayed decision making, and so on. 

Real-Life Applications of DeFi

The DeFi world is up and running with applications that are already making their impact felt. The following are some of the most popular DeFi use cases out there today:

☑️MakerDAO. This is a decentralized autonomous organization running atop Ethereum’s blockchain. It has a dual coin system that aims to mitigate the volatility of cryptocurrency. The MakerDao platform has two tokens: Maker – which is volatile and fluctuates like any other crypto and is used to govern the Maker platform, and DAI, a decentralized stablecoin whose value is fixed in a 1DAI = 1USD formula. Makercoin utilizes external market economics to allow DAI to be a stablecoin.  

☑️Dharma Protocol. This is a finance application based on the Ethereum blockchain that democratizes borrowing and lending. As a lending platform, Dharma has all the works of a traditional lending platform – except that it expands finance in that anyone, anywhere, can access the Dharma platform as long as they have an internet connection. 

☑️Uniswap. Uniswap is an Ethereum blockchain-based decentralized exchange that allows individuals to trade ether and ERC-20 tokens. Thanks to its decentralized protocol, there is no need for middlemen – which saves costs, and users have complete autonomy over their crypto holdings.

☑️Bloom. Also, Ethereum-based, Bloom is a credit scoring and identity verification platform that aims to reduce credit fees, increase credit access, make credit histories shareable across countries, and make credit risk assessment fairer. Through Bloom, individuals with little to no credit stand a better chance to get access to loans. 

☑️dYdX This is a DEx that allows traders to exchange cryptocurrency derivatives. Derivatives are financial instruments that derive value from an underlying asset, e.g., Bitcoin futures. Via dYdX, traders can exchange their crypto derivatives of choice in a censorship-free, peer-to-peer, and fairly priced environment. 

Final Thoughts

By creating a financial system that’s open to all, accessible, affordable, and transparent, DeFi promises to wrestle economic power from those at the top and give it back to the people. And it proposes a powerful use of blockchain technology – decentralized financial services ranging from lending to asset issuance, to open marketplaces, to prediction markets, to censorship-free crypto exchanges, and more.

Categories
Cryptocurrencies

Your Complete Guide to Tether

The idea behind cryptocurrencies was that they would be used side by side, or better, outmatch fiat currency in everything. cryptocurrencies would be quicker, more secure, more efficient, and so on. But as it grew popular, it soon became apparent that cryptocurrencies were extremely volatile. This volatility renders them untenable for use in daily transactions – necessitating the advent of stablecoins. Today, Tether is the poster child of stablecoins, or so to speak.

This guide walks you through everything you need to know about Tether, this thing called stablecoin and the seemingly endless controversy that Tether finds itself embroiled in.

What is Tether?

Tether is a cryptocurrency whose tokens are pegged to an equivalent amount of fiat currencies like the US dollar, the Chinese Yuan, the Euro, and so on. The Tether network’s native tokens are called Tether, and they trade by the name USDT.

Launched in July 2014 and opened for trading in February 2015, Tether was first called RealCoin, later rebranded as Tether by Tether LTD,  the company behind the project.

Tether belongs to an emerging type of cryptocurrency called ‘stablecoins.’ Stablecoins operate under the premise that cryptocurrency valuations do not have to be as unpredictable as the traditional cryptocurrency.  As such, stablecoins are backed by a reserve of fiat currencies or other cryptocurrencies that rely on external market economics (e.g., MakerDao) to create stable coins.

More on Stablecoins

In today’s crypto scene, the vast majority of cryptocurrencies are used purely as speculative trade instruments without much ‘’real-world” use. But this is not what cryptocurrency was invented for. The idea behind stablecoins is to provide stability for cryptocurrencies, which would make them suitable for use as mediums of exchange and stores of value.

Since cryptocurrencies are characterized by wild price swings, stablecoins attempt to provide price stability and offer fast processing power (for massive use ) and, at the same time, the privacy and security of cryptocurrencies. Also, investors can bet on stablecoins because they won’t experience the same volatility associated with cryptocurrencies.

In short, the original cryptocurrency vision was for it to compete with fiat currencies in purchasing power, be deflationary, and suitable for payments — Stablecoins attempt to model this ideal behavior.

How Does Tether Work?

Tether is based on different blockchain platforms. One version uses the Bitcoin blockchain-based Omni platform, with the other utilizing Ethereum’s blockchain.

The Bitcoin blockchain’s version inherits the stability and security of the world’s first blockchain.

Tether coins are collateralized by one US dollar, meaning a Tether coin is backed by and can be redeemed at any time for a US dollar.

Previously, Tether supported only the US dollar as a redeemable currency but has since added the Euro and the Chinese Yuan to its repertoire. 

What’s the Point of Tether? 

As we previously stated, cryptocurrencies are known for their incredibly wild volatilities. Yet that is partly why they are so popular – because traders and investors can purchase a cryptocurrency and sell it when prices shoot up – making significant profits.

Tether, being predicated on a stable, fixed price offers no thrill sufficient enough for crypto investors.  The cacophony associated with the crypto market – the pumps, dumps, bubbles is absent when it comes to Tether. Owning the crypto is similar to having a bank account that gives you zero returns.

So what’s the point of Tether?

Let’s explore the reason why Tether is useful, after all:

Transaction times. Money deposits and withdrawals on foreign exchanges are notoriously time-consuming processes that can even take up to a week to complete. Also, banks are closed after 5 pm, during the weekends and holidays. Thus, the traditional way is no guarantee for fast, quick, and reliable transactions. On the other hand, Tether transactions take just minutes. Traders can take advantage of this to quickly shift funds and grab arbitrage opportunities in the crypto market.

Transaction fees. The traditional money transfer system is characterized by expensive costs. On top of that, if you’re using another currency not supported by a particular exchange, you’ll be charged an extra conversion fee. By contrast, Tether charges very minimal to zero fees for transactions within its wallets.

Price Stability.  While cryptocurrencies’ volatility is a good thing for trading, the reality is not as rosy when you’re at risk of losing money. Countless people have invested in crypto waiting for it to spike – with no avail. Trading cryptos, while exhilarating and potentially lucrative, comes with a great deal of risk. That’s where a stablecoin like Tether comes in useful.

For example, imagine you’re trading Bitcoin for Litecoin. You convert BTC to buy LTC. Litecoin rises by 20%. You wish to make a profit and sell your LTC for BTC. While your trade is undergoing, Bitcoin suddenly falls by 30%. While you were right about LTC’s direction, you suffer a loss as a result of BTC taking a dip. 

Tokenomics of Tether

As of 3rd January 2020, Tether ranks at an impressive #6 position in terms of market capitalization, with the number standing at $4, 639, 755, 545. Its 24-hour volume is $39, 402, 491, 795, with a circulating supply of 4, 642, 367, 414. Tether’s total supply is 4, 776, 930, 644 USDT. Its all-time high was $1.21 in May 217, 2017.

Where to Buy and Store Tether

The most common way to acquire Tether is to exchange another cryptocurrency for it. There are hundreds of cryptocurrencies that are paired with the crypto.

You’ll find Tether at some of the most popular exchanges, including Binance, Bitfinex, Kraken, Bittrex, Coinut, Poloniex, Exmo, and so on.

The ERC20 version of Tether can be stored in any Ethereum-compatible wallet, including MyEtherWallet, Trust Wallet, MetaMask, Atomic Wallet, Mist, and so on.

It is also highly recommended you store your coins in hardware wallets – which are immune from online vulnerabilities such as hacking, phishing, etc. Some reputable options include Ledger Nano, Trezor, Coinomi, Exodus, etc.

There’s also the option of storing your crypto on the dedicated Tether wallet web interface. However, you might rethink this option not only because it supports just Tether, but because its security history is less than satisfactory.

The Myriad Controversies of Tether

This guide would be remiss if we didn’t mention the litany of controversies that have beset Tether since its launch. 

Let’s look at some of the controversies below:

In May 2016, the International Consortium of Investigative Journalists leaked documents that pointed to Tether Ltd and Bitfinex as having the same CFO, CEO, and CSO. In what is called the Paradise Papers, it was revealed that both companies are operated by the same group of people and were not separate entities as the cryptoverse had been led to believe.

  • In April of 2017, Wells Fargo withdrew as the correspondent bank between US customers and Tether/Bitfinex. The two companies filed a lawsuit against the bank, only to withdraw it later.
  • Tether inexplicably terminated its relationship with a third-party audit firm that was to conduct an independent audit on its reserves. The audit was meant to establish if indeed Tether tokens in circulation were collateralized by real reserves.  Since then, no audit has ever been conducted to this day. 
  • In November 2017, a hacker made away with $31 million worth of USDT. The company quietly created a temporary hard fork to blacklist the address that had the funds – drawing criticism for that move.
  • In December 2017, the Commodity Futures Trading Commission issued a subpoena to Tether and Bitfinex on the grounds of lack of audit and what seemed to be its manipulation of Bitcoin’s price.
  • In June 2018, Bloomberg published a report titled “Crypto Coin Tether Defies Logic on Kraken’s Market, Raising Red Flags.” The report was published in response to what seemed as an unchanging price of Tether regardless of changes in the volume of buy and sell orders.
  • In April 2019, the New York Attorney General’s office accused Tether and Bitfinex of engaging in a collaborative cover-up of the loss of $850 million of co-mingled client and investor funds. The sum was previously held by a Panamian entity called Crypto Capital Corp. Per the court filings, authorities seized the money in various countries. Bitfinex had allegedly received $700 million from Tether’s reserves to hide the loss.

What’s the Future for Tether?

To date, Tether is yet to release any evidence that all Tether coins in circulation are backed by real reserves, but it insists so. In June 2019, the law firm Freeh, Sporkin, and Sullivan composed “The Tether Transparency” report – which indicated that Tether had real reserves backing the token. However, crypto experts were not satisfied with the report, which they insisted was no audit, but mere data obtained from Tether’s bank accounts.

As well, many of the controversies surrounding Tether have been debunked as FUD (Fear, Uncertainty, and Doubt) that’s so rife in cryptoverse.

Tether appears to be going steady despite all the storms. This can be attributed to the crypto community’s support for it as the most popular stablecoin, and the crypto project’s fighting back, sometimes with proof, against all allegations.

Summing it all, any external threats that would bring Tether down result mostly to naught, as it remains a favorite within the community.

Categories
Cryptocurrencies

What is QTUM? Demystifying the First-Ever Proof-of-Stake Blockchain

Even the most casual blockchain fan has most likely heard of Bitcoin and Ethereum. The two blockchains are the most popular in the blockchain and crypto space – thanks to their pioneering technologies. Bitcoin’s security and Ethereum’s smart contracts’ capability are peerless, a decade and six years after they were launched, respectively.

Now imagine if the two chains’ capabilities could be harnessed and offered on a single platform. That would be huge. And it’s precisely what Singapore-based crypto and blockchain project, Qtum has done.

In this guide, we’ll delve into the Qtum ecosystem and explore all the exciting details you need to know. 

But first, let’s get the basics out of the way.

What is Qtum?

Qtum,  – pronounced as ‘Quantum,’ is a cryptocurrency and blockchain project that combines Ethereum’s smart contract technology with Bitcoin’s security and stability to support decentralized applications (DApps) and smart contracts platform. The project’s white paper states that Qtum is the first “UTXO-based smart contract systems with a proof-of-stake (PoS) consensus model.”(UTXO stands for ‘unspent transaction output.’ It’s a blockchain model first developed by Satoshi to solve the double-spending problem of digital currencies.)

Bitcoin and Ethereum are the two most valuable cryptocurrencies both in market cap and by being trailblazers in the space. By bridging the functionalities of both chains, Qtum hopes to have the best of both worlds.

The Best of Both Worlds

As we’ve noted above, Bitcoin and Ethereum are the two blockchains that broke the ground for other crypto projects, each in its own way. Bitcoin, while being the oldest, remains the securest of blockchains.

Ethereum, for its part, is the first reliable platform for developers to create smart contracts and decentralized applications.

Qtum has created an “Account Abstraction Layer (AAL)” to facilitate Ethereum’s Virtual Machine integration on Qtum’s UTXO blockchain. Abstraction is a concept in computing that means hiding the complexity of the software to allow for its smooth implementation and use. With abstraction, anyone can use a technology without having to master the technicalities underlying it.

For example, to use a smartphone, you don’t need to be a programmer or developer. If you need to call someone, you don’t need to know how pressing the call icon activates the circuit inside the phone, and so on. In short, abstraction makes complex technologies accessible to the average person.

This simple innovation has enabled it to offer a secure smart contract platform that combines Bitcoin’s and Ethereum’s best, and one that’s interoperable with both chains. For the Qtum community, this is big because scalability technologies on both blockchains e.g., Raiden, Lightning Network, Segwit, and so on, will be operable on QTUM.

Who Is The Team Behind Qtum?

The Qtum project draws its talent from multiple sources. The team comprises members from both the Bitcoin and Ethereum communities as well as outfits like Baidu, Alibaba, Tencent, NASDAQ, and more. The forefront members of the team include Patrick Dai, Jordan Earls, Yungi Ouyang, Baiqiang Dong, Neil Mahi, and Xiaolong Xu. This group combines experience from blockchain, theoretical mechanics, software development, web development, and so on.

Qtum, the First Proof-of-Stake Blockchain

Another remarkable feature of Qtum is its use of a Proof-of-Stake (PoS) consensus protocol. The platform’s implementation of PoS was the first in the blockchain space. PoS is seen as superior to the Proof-of-Work consensus protocol first introduced by Bitcoin. In PoW, miners compete to solve computational puzzles, upon which the first miner to solve a puzzle receives block rewards.

PoW, however, has various challenges, including:

  • It gobbles up excessive amounts of energy – which is too expensive and bad for the environment
  • People or entities that have access to resources have an unfair advantage over those who don’t because they can afford the massive amount of power required as well as powerful specialized mining computers. This goes against the decentralization that cryptocurrency is supposed to embody.
  • It uses real-world resources

Qtum and Mobile

The vast majority of blockchains focus on computer-based applications. Qtum changed this by allowing for mobile users – both individuals and businesses, to be able to run smart contracts and decentralized apps from their mobile phones.

Co-founder Patrick Dai explained QTUM’s ‘Go-Mobile’ strategy to Bitcoin Magazine, saying: “We want Qtum to be the easiest blockchain network to use…Today, everyone and everything is moving, that’s why we can’t have a network that is run by stationary objects.”

How does Qtum achieve this?

Existing DApps and smart contract platforms require you to have a full copy of the blockchain. People that have smaller devices or have no access to high-speed internet cannot hack this. Qtum circumvents this via the Simple Payment Verification (SPV) protocol, which has default access from Qtum thanks to EVM and UTXO integration. This SPV protocol allows for access to EVM with mobile-customized lite wallets and removes the need to download the whole blockchain.

Decentralized Governance Protocol

Another exciting feature of Qtum is its Decentralized Governance Protocol (DGP) that allows for modification of blockchain features like block size, block processing time, gas amounts, and so on without the need for a hard fork and ecosystem disruption. DGP, for instance, can increase block capacity up to 32 MB. Any change to blockchain parameters is done on-chain – without third party software or any contribution from network participants. 

Tokenomics of Qtum

QTUM’s ICO lasted from March 2016 to April 2017. A hundred million coins were distributed, with 51% going to the public. The remainder was split up as follows: 20% for the development team, early supporters, and founders, another 20% reserved for business development, with the remaining 9% going to research, growth strategy, and education.

As of Jan 31, 2020, QTUM ranks at #35 in terms of market cap, Its market cap is $202, 194, 252, with a 24-hour volume of $202, 194, 252 and a circulating supply of 96, 349, 532 QTUM. It has a total supply of 102, 099, 552, while its maximum supply is 107, 822, 406 QTUM. The token has an All-Time High of $99.87 (Jan 07, 2018) and an All-Time Low of $1.47 (Sept 24, 2019).

Last Thoughts

Qtum’s abstraction layer that enables users to use Ethereum’s smart contracts via the Bitcoin blockchain and its DGP platform that facilitates seamless blockchain modification are blockchain firsts. Thanks to these technologies, enterprises and even individuals can take advantage of blockchain technology more straightforwardly than was ever possible. The project has the right tools in its arsenal to make it successful, as long as it continues with the same innovative spirit in an ever-evolving blockchain world.

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Cryptocurrencies

The Three Generations of Blockchain

Subtly introduced to the world a decade ago by the mysterious Satoshi Nakamoto, blockchain is the technology at the core of cryptocurrencies. In its early days, it was the subject of admiration and fervor – thanks to its groundbreaking immutability (irreversibility), utter transparency, and enhanced security attributes.

Today, blockchain is still a young technology. But that doesn’t mean it doesn’t keep changing or improving, just like any other technology.

Consider the internet. The internet we know wasn’t like that in the beginning. When we look back, we can point to milestones that were achieved to culminate into the one we’ve got today.

In the sixties, we witnessed the first wide-area computer networks, followed by the electronic mail cash system and the ethernet in the seventies. The nineties brought with them more advanced developments like the World Wide Web, the first browsers, and so on. Each of these developments made the internet more reliable than it had been prior and contributed to the internet that we know today.

Just like with the internet, we can look back and say blockchain has evolved in certain ways since its inception. Each stage brought with it novel inventions that were limited or nonexistent in its forerunner. Based on this, we can classify blockchain’s existence into three generations.

Before we dive into each, it’s worth pointing out that blockchain’s development is interesting in that each succeeding generation is not necessarily more successful than its predecessor. This was always blockchain’s nature – breaking the mold in every trait. Every generation has carved out its space in the industry, and each is known for its unique contribution to the world of blockchain. With that, let’s dive in and see how the blockchain baby has grown to date.

The First Generation: Bitcoin and Cryptocurrencies

Blockchain, as we know it today, was first proposed by Bitcoin’s developer Satoshi Nakamoto in the cryptocurrency’s white paper. At the heart of the blockchain is a publicly distributed ledger that utilizes cryptography for the security of the network.

A blockchain comprises blocks that are linked together by cryptography. A ‘block’ here is a spreadsheet or a ledger containing information about a certain number of transactions.  The chain is a cryptographic passcode of sorts that must be ‘solved’ before accessing the next block of transactions.

Blockchain enables peer-to-peer transactions between network participants. This means there’s no central party authorizing or overseeing transactions – as a bank does for its customers, for example. For this reason, blockchain has been branded as “the greatest invention of the internet” and the “internet of money.”

In the same way that the internet decentralized information, blockchain might be the herald of decentralized finance.

While Bitcoin, the first application of blockchain, has broken the ground for all manner of blockchain-based applications, it’s hard to gloss over its inefficiencies like its inability to support smart contracts or its rather slow throughput (handling a mere seven transactions per second). As well, Bitcoin utilizes a ‘Proof-of-Work’ (PoW) consensus mechanism that requires computing complex mathematical problems. Due to the complexity involved, PoW is time-consuming and uses colossal amounts of energy comparable to the annual output of an entire country. There’s also the issue of compromised security in the event of a 51% attack.

These inefficiencies raise questions about its long-term sustainability, and its ability to support Bitcoin as a global currency leave alone compete with traditional money systems.

The Second Generation: Ethereum and Smart Contracts

In a way, we could say that we’re currently living in the second generation of blockchain. The second generation was instigated by developers who believed the blockchain was capable of so much more than being a platform for digital money.

The Ethereum blockchain is the embodiment of the technology’s second generation. Its developers, with Vitalik Buterin at the forefront, actualized the idea of smart contracts. Smart contracts are ‘smart’ in the sense that they are self-executing, do not need third parties, and are highly accurate (by virtue of being immutable).

As well, participants in a smart contract can log in at any time to view the terms of the agreement. Smart contracts eliminate any possibility for fraud, thanks to the immutability of the records. In the future, we could very well see agreements like marriages, bonds, trustees, and the like being enforced via smart contracts. And since these types of contracts are self-enforcing, the need for parties like lawyers, middlemen, regulators, etc. is removed.

It’s also on Ethereum’s blockchain that developers can build exciting decentralized applications (DApps). To understand DApps, think of Facebook and Google. These are two centralized applications that wield the power that they do because they are centralized. By contrast, decentralized applications have no central authority that regulates what users do on the platform. At the same time, user data is solely in the hands of who it belongs to – users.

Ethereum’s world of possibilities does not end there. Today, aspiring cryptocurrency and blockchain projects can raise capital via the blockchain using smart contracts. Ethereum also empowers new crypto projects to build their platform atop it. Today, over 200 000 crypto tokens that provide value to users everywhere benefit from Ethereum’s technology.

While Ethereum showed everyone that blockchain was capable of more, it is not without limitations. The network also faces the same scaling challenges as Bitcoin, making it difficult to provide reliable services to millions of users from around the globe. It also uses the same PoW mechanism as Bitcoin, consuming colossal amounts of power in the process.

The Third Generation, and the Future

Currently, the inability to scale is the bane of blockchain’s existence. Many blockchain and cryptocurrency solutions after Bitcoin and Ethereum have attempted to solve this, but with varying results. Going forward, it’s abundantly clear that scalability is the most important development that will emerge out of the third generation of blockchain. Whether that will require shaking the current blockchain setup or the use of ‘second-layer’ technologies, scalability is the main priority for future blockchain.

Newer kids on the block are also trying to improve interoperability across chains. The PoW mechanism is being replaced by the Proof-of-Stake mechanism and other novel consensus protocols that are faster, do not gobble up excessive power, and are generally more effective. Beyond this, new ideas to improve blockchain are always being proposed and implemented.

The Bottom Line

‘Change is the only constant thing’ definitely applies to blockchain too. We can expect developers to keep rolling out innovative ideas for the technology, although it’s difficult to say exactly where any new developments will take us. As usual, blockchain enthusiasts are uber keen to see what the next exciting thing is.

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Crypto Daily Topic

Bitcoin Cash ABC vs. Bitcoin Cash SV – Examining the Bitcoin Cash Hash War

The debate about Bitcoin’s scalability began almost with its very inception. A few years later, that debate tore the Bitcoin community right down the middle. The core of the matter was Bitcoin’s 1MB block size. Satoshi wrote a 1MB limit on the code to prevent the block size from being up to miners’ discretion, which would lead to some miners producing bigger blocks than others and potentially causing the chain to split.

However, Satoshi certainly didn’t envision the firestorms that would later erupt out of this issue. As transaction volumes increased on the chain, it became clear that some things needed to change. But what would change, and how, was the main bone of contention in the community.

This contention gave birth to the Bitcoin Cash hard fork, which, paradoxically, later split into Bitcoin Cash ABC and Bitcoin Satoshi’s Vision – for the same reasons Bitcoin Cash had split from Bitcoin.

What was the lead up to this perplexing chain of events? Let’s dive into the famous ‘hash war,’ how it began, its implications, and its conclusion.

What is Bitcoin Cash, and Its Origin? 

Before we delve into Bitcoin cash and its origin, we need to look at the events that precipitated its creation. These events are the scalability issues facing Bitcoin and the disagreements among ‘factions’ in its camp as to how to address them. 

Bitcoin’s block size limit of 1MB meant that as the network grew in popularity and more people used the network, the network became clogged, leading to slow transactions and high transaction fees. It also meant the network couldn’t compete with payment models like Visa, which processes thousands of transactions per second, as compared to Bitcoin’s seven transactions per second. 

This issue meant a scaling solution had to be created. The problem is the Bitcoin community couldn’t come to a consensus as to how it would be done. One group wanted to maintain the 1MB block sizes and look for a scaling solution that would operate off of the main blockchain. The other group wanted to increase the block size and allow for more transactions in each block while keeping transaction fees low. However, this idea was met with censorship and indignation from the other group.

In 2017, Bitcoin had achieved mainstream status, and its popularity had grown more than ever. The foreseen transactions backlog that would slow down the network were now a reality. Network users were already complaining of several days waiting time before their transactions could be confirmed. For your transaction to be confirmed fast, you had to pay higher transaction fees. This also meant that Bitcoin could not be relied upon to conduct everyday transactions like micropayments. 

At this point, one camp suggested ‘Bitcoin Unlimited,’ an upgrade to increase block sizes. The other camp suggested a Segregated Witness (SegWit), an off-chain technology that would retain the block size, but also allow for faster transactions. 

However, Bitcoin Unlimited meant the network had to hard-fork, which meant the new version would not be compatible with the older version, and users all over the world would have to migrate to the new version. The SegWit camp preferred to maintain the status quo and maintain Satoshi’s version, whilst working on a solution that wouldn’t necessitate hard-forking. Bitcoin Unlimited also meant that miners with large processing power would have an unfair advantage over those with limited resources – which was against the democratization that Satoshi envisioned. 

The SegWit’s camp idea was to ‘segregate’ some part of the transaction (mainly transaction signatures) and store it outside the main chain, hence creating more space in each block. SegWit proponents viewed it as a less risky approach. However, the opposite camp saw it as a temporary solution to a permanent problem. 

The 2017 Hard Fork and SegWit2x

On August, 1, 207, the vast majority of Bitcoin miners indicated their support for SegWit2x. SegWit2x meant a potential implementation of SegWit with an agreement to later increase the block size limit to 2MB. 

However, a pseudonymous contributor going by ‘Shaolin Fry’ suggested a user-activated soft fork (UASF) that would implement SegWit without the contribution of miners. A UASF would comprise users, Bitcoin exchanges, and Bitcoin businesses. Since the users outnumber miners, it was clear a SegWit implementation was going to be effected without the participation of miners. (Miners were against SegWit because it would supposedly expose a ‘covert’ algorithm that ASIC mining machines were using to boost their processing speeds). 

Even then, a part of the community was not satisfied with SegWit – electing to initiate a hard fork of the Bitcoin chain. The new blockchain was called Bitcoin Cash, and it has an 8MB block size compared with Bitcoin’s 1MB. Bitcoin Cash went on to become one of the most successful cryptocurrencies, entering the top ten in terms of market capitalization. 

Bitcoin Cash developers envisioned a blockchain that allowed faster transactions and hence be used as a payment system for everyday transactions. The argument was Bitcoin can be an investment asset, but Bitcoin Cash can be a cheaper and faster payment model as compared to the traditional system. This, they argued, was what Satoshi had intended. 

One Year Later, More Block Size Limit Wars 

When the world thought the Bitcoin block size push-and-pull was over, Bitcoin Cash itself split into Bitcoin Cash ABC (ABC for Adjustable Blocksize Cap) and Bitcoin Cash SV (SV for Satoshi’s vision). Bitcoin Cash ABC proponents wanted to further increase the block size as well as enable the running of smart contracts on the platform. 

Bitcoin Cash ABC (BCH ABC) has implemented some changes such as Canonical Transaction Ordering Route (CTOR). CTOR means that transactions are arranged by following a dictionary sequence, as opposed to the Topological Transaction Ordering Route (TTOR) used by Bitcoin. CTOR is supposedly a more effective and elegant way of arranging transactions. Bitcoin Cash ABC also maintained the simpler name ‘Bitcoin Cash.’ 

But not everyone was enthusiastic about the idea of making the BCH blockchain a smart contracts platform. The leader of the anti-BCH ABC crowd was Craig Wright, a controversial figure who insists he’s the original creator of Bitcoin (earning himself the pejorative moniker ‘Faketoshi’). Another vocal critic of BCH ABC was Calvin Ayre, owner of the powerful mining entity, Coingeek. On his part, Ayre argued that miners would not pick up CTOR. 

The anti-BCH ABC camp led to the creation of Bitcoin SV. The BSV camp argued that it represented the true vision of Satoshi Nakamoto. The new version also had some upgrades to facilitate faster transactions. 

The two most prominent figures in the BCH camp were Roger Ver and Jihan Wu. Ver is the owner of Bitcoin.com, the Bitcoin exchange, while Jihan Wu is the co-founder of Bitmain, a Bitcoin hardware manufacturer owner of mining company Antpool. 

Hash Wars

After the hard forks, what followed next was a battle on who would get to keep the BCH ticker. With both sides having heavyweight owners of mining companies, a ferocious war was impending. Each side used their mining power on their chains to push liquidity of each crypto in the market – hence the name ‘hash rate war.’

Soon, however, the hash war came to naught – with both sides burning millions of dollars into a mining contest that incurred losses amounting to millions, for both forks. According to bitcoinist.com, BCHSV incurred a loss of $2.2 million, while accruing a negative profit margin of 441%.On its part, BCHABC incurred $1.3 million in losses and a negative profit margin of 51%.

Both sides also implemented replay protection on their respective chains to prevent accidental use of coins on both chains by users.

The hash wars also hurt the whole cryptocurrency market. Bitcoin, in particular, tanked to its lowest level that year. And major crypto exchanges like Coinbase, Kraken, and Bittrex assigned the BCH ticker to the BCHABC hard fork.

The BSV side soon agreed to let go of the ‘Bitcoin Cash’ name as well as the BCH ticker and reluctantly agreed to adopt the name ‘Bitcoin SV’ and the BSV ticker.

The two coins went on to compete against each other in the market, just like any other cryptocurrencies.

Bitcoin Cash VS Bitcoin SV Today

After the war between the two coins, Bitcoin Cash stayed ahead in terms of price and market capitalization. Some crypto exchanges like Kraken and Binance have gone on to delist BSV.

BSV surprised everyone in early 2020 by surging past 300% to a price of $372 and briefly overtaking Bitcoin Cash to become the fourth largest crypto by market cap. Many people speculated the rise in BSV is attributable to Craig Wright’s current legal woes – which have helped increased publicity for the coin.

But BCH has since reclaimed its position over BSV. As of January 27, 2020, BCH is trading at $368.55, with a market cap of $6, 724, 517, 583, while BSV is trading for $284.05 with a market cap of $5, 176, 171, 633.

Final Thoughts

We don’t know who Satoshi is, but we’re certain he didn’t anticipate, neither would he have liked the acrimonious factions that arose out of his 1MB block size idea, and one that threatened to bring Bitcoin on its knees. Thankfully, Bitcoin has since rebounded from the hash war implications, as have the two hard forks that arose out of it. We can only wait and see future dynamics playing between both hard forks. 

 

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Cryptocurrencies

Your Complete Guide to Cardano

Launched in 2015, Cardano has defied expectations to rise to the top ten in market capitalization. For those not privy to the inner workings of the Cardano project, it can be hard to pin down what has catapulted its rise to the highest sanctums of cryptocurrency, despite being less than popular on the price side.

Nicknamed the “Ethereum Killer,” Cardano has an intriguing approach and pretty remarkable technology.

So, what is it about Cardano that makes it worthy of the “Ethereum Killer” tag? In this guide, we’ll find the answer to that query, as well as explore some of the exciting innovations of this project.

What is Cardano?

Cardano is a cryptocurrency project and blockchain-based smart contracts platform. Cardano believes digital cash is the future of money and aims to create a platform in which people from all over the world can send and receive money in a fast, direct, and secure manner.

Cardano was conceptualized by Charles Hoskinson, an Ethereum cofounder. He calls it a third-generation cryptocurrency – meaning it exists to improve on the scaling problems and other weaknesses of the first generation (Bitcoin) and second-generation (Ethereum) blockchains.

Cardano uses the new Haskell programming language, a ‘functional language’ that enables mathematical proofing of the code’s future behavior.

The Cardano platform has a native cryptocurrency known as ADA, with which users can send digital funds. It also houses two layers: the Cardano Settlement Layer (CSL) and the Control Layer. CSL is used to settle transactions that are conducted with ADA, while the Control Layer will be used to host smart contracts.

Who is Behind Cardano?

Three distinct organizations have pooled resources together to create Cardano. There’s the Cardano Foundation, a Switzerland-based standards body whose job is to support the Cardano community and fulfill regulatory and compliance requirements. The other is Input Output Hong Kong (IOHK), a well-known organization in the cryptosphere. And then there is Emurgo, a startups investor tasked with assisting businesses to build on the Cardano blockchain.

What’s Special with Cardano?

Unlike its contemporaries, Cardano is a peer-reviewed blockchain. Before protocols are greenlit for release, they’re first reviewed by a network of academics and researchers from various universities. While other blockchain projects present just a white paper, the Cardano team goes the extra mile and crafts several academic papers for researchers, investors, and so on.

The rationale behind this? The team wants to ensure that the platform is secure, scalable, and fit for mass usage once it goes mainstream. As such, there’s much scientific rigor involved as there would for a mission-critical system.

How Does Cardano Work?

As previously mentioned, the Cardano comprises a Cardano Settlement Layer and a Control Layer. In the long term, Cardano hopes to be used as a medium of exchange and a smart contract platform that can be interoperable with the traditional banking system.

At the very heart of Cardano is Ouroboros. Ouroboros is an algorithm-based Proof of Stake Protocol through which miners can mine ADA. The protocol is also custom-built in a manner that saves as much energy and time as possible.

What does Ouroboros entail, you wonder? Let’s find out below.

What is Ouroboros?

Ouroboros works based on ‘slot leaders’ who are akin to miners in the Proof of Work protocol. Slot leaders are the ones who determine which blocks will be added on the blockchain, with a maximum of only one block per slot leader at any time. Time is divided into ‘epochs,’ and every epoch has a slot leader. Also, immediately after one epoch ends, another one begins.

In case a slot leader misses their chance to choose a block leader for one reason or another, they have to wait until the next time they’re eligible to become block leaders. In every epoch, at least more than 50% of blocks has to be generated. 

To be eligible for a slot leader position, a participant has to own at least a two percent stake in Cardano.  Slot leaders are also electors. When an epoch is in progress, electors choose the slot leaders for the next epoch. Also, the more stake you own in Cardano, the bigger your chance of being selected as a slot leader.

Now, slot leaders wield a considerable amount of power. For this reason, extra caution must be exercised to ensure as much fairness as possible. Cardano achieves this by implementing a ‘multiparty computation’ (MPC). In an MPC, each elector conducts a random action known as “coin tossing,” after which they share their results with the rest of the electors. In short, the end result is randomly generated, but the final value is collectively arrived at.

Statistics of Cardano (ADA)

As of 28th January 2020, Cardano is trading at $0.051903, with a 10th place market capitalization of $1, 345, 697, 885. Also, its 24-hour trading volume is $179, 384, 436. Its all-time high was $1.33 on Jan 04, 2018, while its all-time low was $0.017354.

ADA’s circulating supply is 27, 927, 070, 538, while its total supply is 31, 112, 483, 745. The coin has a limited supply of 45 billion.

Is Cardano an Ethereum Killer?

Cardano has been dubbed the “Ethereum Killer” since it offers the same functionalities as Ethereum, but better.

Also, it is the first blockchain platform that utilizes peer-reviewed research, giving it an edge over other cryptos, at least in terms of rigorousness.

As well, Cardano has an impressive speed of 257 transactions per second (TPS), which stacks strongly against Ethereum’s current meager 15. Its Ouroboros proof of stake is superior over the typical proof of stake by being the first consensus mechanism to be mathematically proven as secure.

These features, and more, make Cardano an impressive blockchain. But that doesn’t mean it’s about to dethrone Ethereum, not yet.

First of all, Ethereum is a project under continuous improvement. Its developers are always working to improve its scalability and other functions. For instance, Ethereum plans to migrate from the current Proof Of Work to a Proof of Stake mechanism, which provides better room for scalability, is quicker, and is not as power-hungry as the former.

Moreover, being the first reliable smart contracts platform, Ethereum has somewhat of a loyal following – from the developer community to the crypto market to users.

For these reasons and more, it is unlikely that Ethereum will be unseated anytime soon, whether by Cardano or any other cryptocurrency.

The Coinbase Effect

As of January 2020, Cardano is yet to be listed on Coinbase, despite the exchange signaling it was considering the addition way back in July 2018. Cardano fans are still waiting with bated breath for this to happen.

Coinbase is big, not just in market volume but also in name. So, many wonder what this would mean for the Cardano price if it were to be listed.

First, it’s important to know a coin getting listed on the exchange does not herald its bullish rally for all the time to come. Many coins have been listed, surged in price thereafter, and went on to fizzle out.

It’s likely that ADA will shoot up in price as the exchange’s user rush in to get a piece of the Cardano action at an affordable price. From then on, the coin experienced up and down swings like any other crypto, depending on the improvements its developers will continually integrate on its blockchain. 

Also, Coinbase’s massive user base means massive interaction with the coin, and hence more liquidity. More liquidity means more investors, and more investors mean more support. Support often leads to an increase in value.

Conclusion

Cardano has distinguished itself from other crypto projects by being the first to be built on peer-reviewed protocols and pure mathematics. That fact alone gives it an edge over other similar projects. Also, the people leading it – heavyweights in the crypto scene, add massive credibility to the project. Cardano fans expect only great things from the project.

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Crypto Daily Topic

Craig Wright Compared To Jesus amid His Book Being Dropped By Publisher

One of the tenets of Bitcoin, the world’s first cryptocurrency, is complete transparency. It’s therefore ironic (wonderfully so) that ten years after its launch, the world doesn’t know who its creator is, Or was. Predictably, that has led to a flurry of speculation about who designed Bitcoin, with many names being advanced as the possible candidates for the mystery creator. However, the candidates named as the potential creators have all but declined the suggestion.

Craig Wright, the Self-declared Satoshi

This is in stark contrast with Craig Wright, an Australian computer scientist who has fervently and consistently declared himself the creator of Bitcoin. The Bitcoin community has watched with bewilderment as he makes one claim after another. These claims are confounding, to say the least, especially considering Satoshi Nakamoto’s last publicly known message was in 2011 to Gavin Andresen, one of the developers associated with Bitcoin in the beginning. Also, much of Satoshi’s correspondence with the early Bitcoin community paint a picture of a person who was shy of the spotlight.

By contrast, Craig Wright is a man who laps all the attention and threatens to sue anyone who accuses him of fraud, including Vitalik Buterin, Ethereum’s creator. This is despite him refusing or being unable to provide any tangible proof that he is the creator of Bitcoin. Specifically, he hasn’t provided any proof that he wrote the original Bitcoin white paper or collaborated with any of the early developers.

Is Wright Like Jesus?

But that hasn’t prevented him from garnering sympathizers. One of these is Kevin Pham, a crypto writer who calls himself a Bitcoin SV minimalist and a reformed Bitcoin attack dog. With 26k Twitter followers at the time of writing, the man has a bit of following in the crypto community. It’s for this reason that his recent tweet comparing Craig Wright to Jesus raised eyebrows and generated a succession of disapproving comments. 

In his tweet, Pham boldly declares that Bitcoiners rejecting Wright is akin to Jews rejecting Jesus. He goes on to add history will judge Bitcoiners harshly. Of course, Bitcoiners are not buying it.

Wright’s Book Suspended

Meanwhile, a book purporting to dive into Wright’s place in Bitcoin has been suspended by an Australian publisher a week before it was to be published.  The book titled “Behind the Mask: Craig Wright and the Battle for Bitcoin” had been hotly anticipated by the cryptosphere, but it looks like it will not be forthcoming at least in the foreseeable future.

According to CoinGeek, a crypto publication owned by Wright’s friend, Calvin Ayre, the publisher has dropped the book indefinitely. The book had plenty of orders already placed, with Wright claiming he was one of the people who had ordered a copy.

Ayre published an angry tweet castigating the pulling, writing “how is it possible that a book about Craig and the creation of Bitcoin, was pulled a week before publishing and Craig was cooperating with the production and had ordered some for him and family and he finds out in an article by a nobody site that is blaming him for pulling it?”. He has since vowed to publish the book himself.

Rumors were rife in the crypto community that Wright had threatened the authors with litigation, but he has reportedly denied doing so. Mickey, an Australian news site, first broke the story that Affirm Press, the publisher, had dropped the book. In an email to the site, the publisher had expressed legal fears, stating, “Unfortunately, that book has been canceled from our publication list. The threat of publication was too high.” As for the source of legal fears, that remains a mystery.

Do you think Wright should be compared with Jesus? And do you think he is the creator of Bitcoin? Whatever the case may be, it’s clear the drama has no end in sight.

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Crypto Daily Topic

Is Quantum Technology a Threat to Blockchain and cryptocurrencies?

Bitcoin’s underlying technology – blockchain – is hailed as an unrivaled, ultra-secure technology. And it’s true – Bitcoin’s cryptographic encryptions are some of the strongest in contemporary times. However, as is the norm with technology, the reality of ‘bigger and better’ is always looming.

Quantum computers, the super-powerful computers relying on naturally occurring phenomena to perform calculations, are becoming a reality. When Google announced that it had achieved “quantum supremacy” in 2019, the blockchain and crypto universe had legit cause for concern. This is because quantum computing is sufficiently powerful to compute equations spellbindingly quickly. And for this same reason, the very encryption securing Bitcoin and other cryptocurrencies might not be so strong, at least when it comes to quantum computing.

Is the quantum threat real, though, and if so, how immediate is it? And what does the future hold for blockchain in light of the quantum threat? We’ll answer these questions in this article – right after we dig into this quantum phenomenon.

What is Quantum Computing?

A quantum computer is any device that harnesses quantum mechanics to perform tasks. Quantum computers can achieve massive computational speeds because they rely on ‘quantum bits’ (qubits).

The regular computer uses binary units called bits to perform tasks. Bits can only represent one of two possible states at a single time: 0 or 1. However, qubits can represent both 0 and 1 states at the same time. The phenomenon is known as superposition, and it’s what allows quantum computers to perform calculations at ultra-fast rates.

Another state in quantum theory is entanglement – a state in which two members of a pair exist in the same quantum state. When two particles are entangled, a change of state in one prompts a change of state in the other, even if they are far apart from each other in physical space. Nobody knows the cause of this phenomenon, but pairing qubits this way in a quantum machine leads to exponential growth in the machine’s processing power.

Coming back to superposition – it’s an extremely hard state to achieve and just as hard to maintain. It’s an incredibly fragile state – with the slightest vibration or temperature change causing them to fall out of the superposition state. This is known as the ‘decoherence’ phenomenon. When quantum bits are ‘disturbed’ this way, they decay and eventually disappear. When this happens, the task at hand cannot be successfully completed.

To correct this, physicists use a variety of techniques to protect qubits from the outside world – like placing them in extremely cold fridges and vacuum chambers.

A quantum machine’s computational power is determined by the number of quantum bits it can leverage at the same time. The first experiments in the late 1990s yielded two qubits. These days, the most powerful computer can leverage 72 qubits. This computer is currently owned by Google.

Thanks to its superfast calculating speed, quantum computing can redefine entire industries for the better – from healthcare to finance to supply chain to transportation to weather prediction. 

Quantum Computing Vs. Blockchain

Blockchain and cryptocurrencies are not 100% foolproof (cue the many hacking incidents), but they remain one of the most secure technologies in modern times. People trust blockchain because of its revolutionary qualities like immutability, utter transparency, and high security.

But quantum computers are a real threat to the blockchain.

To begin with, blockchain transactions are encrypted with cryptography based on elliptic curve cryptography (ECC). But ECC is not “quantum-proof,” meaning a powerful quantum machine could potentially decrypt a crypto holder’s private keys and forge signatures. With crypto-based on trust – once that trust is broken, it could very well be the end of Bitcoin and other cryptocurrencies.

Right now, scientists are already aware of a possible algorithm that could break down many existing encryption techniques – including elliptic curve signatures. Researchers and mathematicians are already versed with how quantum machines could look like – and they worry about what that could mean for blockchain.

In fact, the general contention is that no one knows the sheer power that quantum computing could herald. It could very well exceed everyone’s expectations and render blockchain technology obsolete.

How Much Quantum Power Would Be Needed to Break Bitcoin?

Speaking to Forbes in October 2019, Dragos Illie, a quantum and encryption researcher at Imperial College London, said it would take at least 1500 qubits to have any effect on Bitcoin and other cryptocurrencies.

Going by achievements in quantum physics, it would take even decades before we can reach that milestone. As previously mentioned, the largest quantum machine has 72 qubits.

What do Researchers Say?

Researchers from the Russian Quantum Centre have noted that one of blockchain’s weaknesses is that it relies on one-way mathematical functions that are easy to run but difficult to run in reverse. These formulas are used to generate digital signatures as well as verify transactions.

A bad actor armed with a quantum device could perform these reverse calculations in a matter of seconds. They could also forge transaction signatures, impersonate crypto holders, and gain access to their wallets. Such an actor could also very easily meddle with the mining process. They could commandeer the public ledger and manipulate records.

The researchers suggested developing countermeasures to this threat immediately. One solution would be replacing the current digital signatures with “quantum-safe” cryptography. This cryptography would conceivably be able to withstand attacks from a powerful quantum machine. Another solution would be based on quantum internet – although that’s decades away. It would entail quantum-based wireless communication architecture that would unlock new possibilities for blockchain technology.

Other quantum researchers – Del Rajan and Matt Viser from Victoria University propose leaping straight to making blockchain a quantum-based system. Their idea envisions a blockchain-based on qubits that are entangled not just in physical space – but also in time itself. They rationalize that it would be difficult for malicious actors to retroactively alter records on the blockchain – as to do this would require destroying the particle altogether. However, this would only be possible after the actualization of a quantum internet.

What Do Practitioners Say?

While researchers propose solutions that are only possible in the far future, there’s a lot of hands-on research in this field that’s already going on. Quantum experts are already developing quantum cryptography to curb the threat of quantum computing on blockchain. However, experts differ on just how immediate the quantum threat is.

For instance, Yaniv Altshuler, founder of predictive analysis Endor Protocol said to Cointelegraph, the crypto website: “Quantum computers are becoming incredibly powerful…but there is no evidence that quantum computing can compromise the blockchain.”

Stewart Allen, CEO at quantum computing firm IonQ, believes that by the time quantum computing becomes powerful enough to pose a danger to the blockchain, security algorithms will have advanced to be able to counter them:

“There is no real threat of quantum computers breaking blockchain cryptography in the short-term…We’re at least a decade from quantum computers being able to break blockchain cryptography.”

Bitcoin advocate Andreas M. Antonopoulos believes the quantum threat is grossly overstated. In a 2018 YouTube Q&A, Antonopoulos said: “We can migrate quite easily to another algorithm. It’s not really as big a threat as people think it is.”

But other experts believe the quantum threat is real and immediate.

Norbert Goffa, executive manager of on-chain data storage system – ILCoin, has concerns over quantum-based mining pools. “Today, we do not have any quantum-based mining machines. On the other hand, a lot of companies are working on quantum-based computing technology. We believe that in the next five years, it could be real…”

Rakesh Ramachandran, CEO of QBRICS, an enterprise blockchain platform, believes that quantum computing will cause a systemic shift in blockchain tech.

“Quantum computers will be redefining cryptography…wherever there is an application of cryptography…The challenge lies in how blockchain will migrate to the new version of cryptography.”

Final Thoughts

Quantum computing is an exciting technology with the ability to compute equations super-fast – and plenty of industries are poised to benefit greatly from the technology when and if it develops. However, that same technology could be maliciously used to unravel the whole world of blockchain. Thankfully, brilliant researchers are hard at work, figuring out how to protect blockchain and cryptocurrencies from the quantum wave. In essence, there is no big cause of worry. 

 

Categories
Cryptocurrencies

A Complete Guide to Asset-Backed Tokens 

Blockchain technology heralded a new era of transparency, fairness, and democratization of finance. Currently, there are numerous applications of blockchain that are helping make the world a better place while reducing financial barriers. One of these is tokenization, a process that enables asset owners to sell a portion or the whole asset and get compensated fairly. Also, assets that could only be afforded by the high net worth individuals can now be afforded by the average investor, thanks to asset-based tokenization. 

In this article, we break down asset-based tokens, the rationale behind tokenizing assets, and take a look at assets with great potential for successful tokenization. 

What Are Asset-Based Tokens? 

Asset-based tokens are tokens whose value is backed by a real-world, tangible asset. Essentially, they are crypto coins whose value is pegged against an existing asset value. People tokenize real-world holdings so as to increase their liquidity (the real-world assets) in a market place. 

Asset-backed tokens are offered during a Security Token Offering (STO). 

An STO is a process where an investor exchanges money for tokens representing an investment. As such, we can describe security token offerings as events that distribute securities. And since tokens represent real-world property, STOs represent a secure investment option. 

Why Tokenize an Asset? 

Asset owners or managers tokenize assets to increase liquidity for the underlying asset. Liquidity is the degree to which an asset can be quickly and easily purchased or sold at a price reflecting its true value. Securities like stocks and bonds have high liquidity as opposed to assets like cars, real estate, jewelry, and so on. Liquidity commonly affects an asset’s trading volume. Good liquidity can also enhance an asset’s value since it’s easier to convert such an asset to cash.

Examples of Tokenization Use Cases

Tokenization is mainly used to back assets that generally have limited liquidity. Some of these assets include derivatives, real estate, art, company shares, commodities, and other assets that usually take long to find a buyer. 

Below are examples of asset tokenization use cases: 

☑️Tokenization of company equity.

☑️Tokenization of real estate investment trusts (REITs) for investors who want to venture into real estate. REITs can be customized to suit client needs or characteristics, such as risk tolerance 

☑️Tokenization of real estate or rental returns. Today’s real estate is prohibitively expensive to scores of people who would otherwise be interested in a smaller percentage of the property. Tokenization allows such property to be “fractionalized,” allowing more people to invest in a property. 

☑️Tokenization of intellectual property such as film licensing, royalty payments, etc. This allows fair distribution to every party that has a claim to such a movie, song, album, or book. 

☑️Tokenization of accounts payable and receivable, potentially replacing factoring and other models of supply chain finance. This substitution would allow data to flow seamlessly between accounts payable and accounts receivable in Enterprise Resource Planning (ERP) systems. 

Tokenizing an asset increases its value by opening up previously unattainable markets. Since asset tokenization is based on smart contracts, it also eliminates third parties and intermediaries – saving up money in the process. Moreover, investors who can’t afford these third parties are afforded the opportunity to take part in asset ownership. Not to mention, the automated tokenization process is faster, saving everybody’s time. 

Categories of Asset-Backed Tokens

There are four main categories of potential tokenization of assets; these are:

  • Tokenization of equity and debt
  • Tokenization of commodities
  • Tokenization of non-fungible hard assets
  • Tokenization of non-fungible soft assets

I. Tokenization of Equity and Debt 

Tokenizing equity and debt is a method of fundraising for startup companies. This process removes the need for intermediaries, such as banks and stock exchanges. 

Fractionalization of equity ownership is by no means a new concept – stock certificates, timeshares, mutual funds, etc. have existed for a long time. But asset-backed equity and debt tokens now offer something much more – an immutable, transparent, and liquid digital representation of a company’s debt or equity. Any shareholder can access the blockchain platform and verify ownership and its authority to trade. 

As such, although debt and equity are assets that anyone can purchase and sell today, blockchain technology radically improves the process. Private equity funds are traditionally low liquidity assets that require investors to hold their stake for at least one year. Hedge funds are another type of asset that is moderately liquid – requiring investors to hold for several months. 

Increasing liquidity via tokenization would dramatically increase the value of these asset classes, enabling investors to better adapt to market fluctuations.  

II. Tokenization of Commodities

Commodities that are normally traded on exchanges can also be converted into security tokens. Whether it’s oil, gas, grain, sugar, tea – any commodity that’s already traded through intermediaries can be tokenized. 

Cross-border trading of more fringe commodities such as hydro, wind, or solar power can also be done via a blockchain-based exchange. Governments, utility companies, and consumers can all participate and interact on a single trustless and open platform. 

As for tokens that are backed by real-world assets, physical verification is needed to establish the accuracy of the token value. Already, there are third-party auditors that exist for this end. These auditors can now combine real-life verification with blockchain-based tracking to increase confidence in the marketplace. 

For gold, which commonly trades through exchange-traded funds, tokenizing it completely changes the game. Each token represents part or the whole gold bar that’s stored and audited by a third party “oracle.” The oracle verifies the gold’s weight, purity, authenticity, etc. 

Bitcoin, the ‘digital gold,’ could be even replaced by tokenized gold in the future. The advantage Bitcoin holds over real gold is its ability to be easily divided and transferred. It’s easy, for instance, for a token exchange to take Bitcoin worth $3,000 and send 1% of that to another crypto holder. It’s, however, challenging to do the same with a bar of gold. But once you tokenize it, it becomes much easier to sell and transmit a fraction of that gold, and the same is true for other commodities.

III. Tokenization of Non-fungible Hard Assets

Hard assets are tangible and physical assets. Hard assets also present many opportunities for tokenization. In this category, we will look at two hard assets: real estate and collectibles. 

  • Real Estate Tokenization

Tokenizing real estate could make it a borderless investment, more profitable, and more affordable for all types of investors. Real estate here means things such as rentals, hotel chains, motel chains, care homes, etc. 

  • Collectibles Tokenization 

Traditionally, collectibles such as rare art pieces have been a preserve of the rich. With tokenization, anyone anywhere can hold a percentage of a collectible. 

Also, tokenizing an asset helps it achieve more value in the long term. An art piece, for instance, can be tokenized and distributed on the blockchain with each ‘shareholder’ holding a tradable share of the piece. 

IV. Tokenization of Non-fungible Assets

Soft assets are assets that are intangible and which are usually hard to quantify and establish their value. We’ll look into two types of soft assets: intellectual property and digital asset collectibles. 

  • Intellectual Property (IP) Tokenization

IP assets such as copyrights, royalties, patents, and trademarks have traditionally had low liquidity and have never had a secondary market place on which investors can buy. Tokenizing IP ownership would not only enhance its liquidity but also increase its value.  

  • Digital Asset Collectibles Tokenization

Usually, it’s difficult to prove ownership of digital collectibles – with the only proof being a contract between the provider and the user. However, tokenization could create a market place for these virtual goods, even increasing their liquidity and hence value. 

Challenges and Opportunities for Asset-Backed Assets

Asset-backed tokens go toe to toe with Bitcoin in terms of being fungible, transferable, scarce, and durable. As such, asset owners can find a market place for their assets easier than ever. 

Tokenization could face a hostile environment depending on territory. For instance, China, Qatar, and South Korea have banned STOs outright, while countries like the US, Singapore, Germany, and the EU allow it, albeit with strict regulations. Other countries like India are yet to take a definitive stand on STOs. Some jurisdictions like Malta have granted STOs free rein – placing no limitations or regulations on them whatsoever. 

Tokenization might also be prone to user error, and it’s easy to lose your tokens if you’re not careful with your wallet private key address. 

Asset-backed tokens are immune from the volatility swings experienced by utility tokens and cryptocurrencies. Asset-tokens can trade 24/7 if listed in crypto exchanges. This exposes them to market liquidity from investors all over the world. Also, asset-rich companies may soon adopt tokenization, increasing its visibility. This would popularize the idea of asset-backed tokens, pushing it into the mainstream. 

Conclusion 

Asset tokenization enables a physical asset to be divided into smaller parts, making it easier to convert into cash. Thanks to asset-based tokens, times may be gone when people had to wait for months or years to finally get a move in market position for their assets. And anyone, regardless of geographical location or the capital they possess, can get a share of attractive assets that they previously couldn’t. Tokenization will help create more inclusive, fair, and effective marketplaces.

Categories
Cryptocurrencies

Bitcoin will never be the same: Taproot Upgrade Proposal ‘Nearing Completion’ 

It has been a while since the Bitcoin platform received a major upgrade. There is, however, a major upgrade proposal in the works that is nearing public launch. The proposed bitcoin soft-fork designed to improve the platform security and boost user privacy is already moving through the developer feedback phase and maybe getting ready for public launch soon.

The Bitcoin Taproot/Schnoor upgrade proposal, originally revealed in 2018 by Greg Maxwell, one of the core developers of Bitcoin, is a long-anticipated technical upgrade. It is touted to improve not only the security of the network and the privacy of the users but also the scalability, fungibility, and script innovation in the blockchain platform.

What is the Bitcoin Taproot proposal?

Taproot and Schnorr updates, or simply Taproot, is Bitcoin’s next greatest technological breakthrough that promises ‘a new world of possibilities’ for the digital asset. The proposal remains highly sensational and has been subject to extensive deliberation in the Bitcoin community because it is a major platform upgrade with great implications on transaction architecture and performance.

It is designed to improve Bitcoin’s privacy and boosts platform scalability by making all the transactions on the platform appear the same to an outside observer, regardless of the complexity of the transaction details. The Schnoor update, on the other hand, is a code modification that aggregates transaction signatures to make it possible to implement Taproot.

Here is how Taproot works; in the Bitcoin network, transactions are validated using public-key cryptography. Currently, transactions are validated using an Elliptic Curve Digital Signature Algorithm. This algorithm has a number of glaring shortcomings, especially when it comes to transaction privacy and platform fungibility. Taproot is designed to fix these shortcomings by concealing specific types of transaction details from outside observers, in a way, standardizing and simplifying the details that are visible to outsiders.

For instance, when a transaction has a hot wallet, a cold wallet, and details of a trusted third party wallet key, all these are aggregated into a single Schnoor signature rather than being bundled as separate codes into a transaction. The single Schnoor signature can then singly be used to validate a Taproot output key.

The Taproot output key will be a single code that represents all the complex codes that would otherwise present a transaction as a collection of different keys. An outside observer will only see the single output and would not need to bother with finding out which two keys were used to generate it.

Aside from improving the privacy of the platform, this upgrade would also significantly reduce the size of the transaction file. This goes a long way to reduce the Bitcoin transaction fees as well as making the Bitcoin network more scalable. If you are familiar with the limitations of the Bitcoin platform, you will appreciate that any upgrades implemented to make it more scalable are crucial, especially if it does not involve hard-forking the platform.

Will the Taproot upgrade bring forth a BTC revolution?

When it was first proposed two years ago, the Taproot proposal triggered heated discussions among Bitcoin developers and in the general Bitcoin community. Throughout the time the upgrade was in development, the proposal moved through the Bitcoin ecosystem feedback phase as developers made their recommendations and reviewed possible changes to the proposal draft.

On December 17th, during the final scheduled meeting of the Taproot review group, an update on the project was made public. Bitcoin Core developer Pieter Wuille revealed that the upgrade proposal was ‘nearing completion’ and that developers were already putting the final touches that addressed all the comments and suggestions collected by the review group.

This upgrade could be a major turning point for Bitcoin – despite it not requiring a hard fork – because of the improvements, it makes to the system. When implemented, the Taproot/Schnoor upgrade could accelerate the process of block validation by as much as 250% and cut transaction fees by as much as 30% to 75%, according to Square Crypto product manager Steve Lee. Lee made this prediction in a presentation in the summer of 2019, and it is consistent with what other experts have had to say about the subject.

There is a good chance that the Taproot update could be the upgrade that revolutionizes the Bitcoin platform considering the limitations that are currently holding it back. On top of the list of problems plaguing BTC is scalability, which can be attributed to the Proof-of-Work (PoW) consensus it uses. PoW is so power-hungry and so slow that it limits BTC to between 3.3 and 7 transactions per second (TPS).

Visa, for comparison, processes around 1,700 transactions per second and may be capable of processing as many as 24,000 transactions per second. If Bitcoin is to ever scale globally and match this transaction processing speed, then a major change has to be made. However, there is little that can be done to improve from the current TPS without hard-forking the platform. The Taproot upgrade goes a long way to boost the platform TPS without the need to switch to a different consensus such as Proof-of-Stake (PoS).

How Taproot improves Bitcoin fungibility

Fungibility is an economics term that refers to the property of an asset whose individual units are standardized or essentially interchangeable. It means that each part that makes the whole is indistinguishable from another. In this case, Taproot improves Bitcoin’s fungibility by making all the outputs for spending look identical.

According to Kento U of Coinmonks, Taproot is Bitcoin’s next big update largely for the fungibility benefits it brings to the platform. Being a scheme for signing transaction scripts, Taproot’s most functional role is to homogenize the transaction output from a content perspective. When Bitcoin transactions are made to look exactly similar from the blockchain explorer, it guarantees that the Bitcoin network will be more secure since it will not be easy to tell one transaction from another at a glance.

There is also another great benefit to rolling out the Taproot update on the Bitcoin network; it opens up the possibilities for inscription innovation by allowing for complicated arrangements of keys and signatures in a transaction. This will effectively eliminate the limitation of the number of scripts that can be used to spend Bitcoins.

Why is Taproot update a big deal to the community?

A very small percentage of Bitcoin users pay close attention to system updates on the Bitcoin network, yet they often turn out to be the most bullish indicators for the Bitcoin currency. Most people still mistakenly look at institutional investors, Bakkt futures, and bankster instruments for indicators, yet all these and many other common events rarely ever affect the platform on which Bitcoin runs. The Taproot upgrade has a direct impact on the scalability, decentralization features, and fungibility of Bitcoin, which influence its long-term value.

It is commendable, however, that the interest the community has on this latest update proposal is gaining momentum and attracting wide interest. Developers working on the update and members of the Taproot review group have expressed optimism that the new development has generated impressive interest in the network as it moves to the next step of development.

When the draft is formally proposed as a Bitcoin Improvement Proposal, and a pull request to the Bitcoin Core pulled, the Taproot implementation is expected to undergo another round of reviews and suggestions before it is finally merged with the main branch if all goes well.

Members of the Bitcoin community still have the opportunity to analyze and suggest improvements to the upgrade while the proposal is still in the review phase.

Categories
Crypto Daily Topic

The Top 5 Crypto Trends and Updates to Look out for in 2020

The year 2019 may have been pretty uneventful for those in the crypto space. Still, if you thought the blockchain and cryptocurrency technologies had peaked, the year 2020 promises to bring with it ground shaking surprises in the crypto sphere.

The last year was characterized by a handful of bullish breakouts, some highly publicized exits here and there, and the entrance of a large number of players into the crypto space. However, we can all agree that it was a significant slow down from the crypto fire that raged from 2017 through 2018.

If you are abreast of all the major developments in the world of cryptocurrency and blockchain technologies, you will appreciate that there were a number of notable developments in 2019 that set the stage for this year to be hot! 2020 is the year that a number of notable institutions looked forward to making their presence felt either by investing in it or introducing revolutionary technological advancements. For instance, Radix distributed ledger technology, which is hyped to be a better alternative to blockchain technology, is expected to be publicly released this year.

Enthusiasts of cryptocurrency also look forward to the materialization of several distinct trends that revolutionize the digital money industry and even the global way of life in general. We have put together the top five promising trends and updates to which every crypto investor must pay attention to stay on top of industry developments.

1. Ethereum 2.0 promises to revolutionize decentralized finance 

Being the second-largest cryptocurrency by market cap and popularity, Ethereum is already undergoing a major upgrade that many industry experts believe will revolutionize not just the cryptocurrency arena but the financial world in general. Ethereum 2.0, dubbed ETH2 or Serenity, is a major platform upgrade that brings a ton of new features to the network, the most notable being the shift from the Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus protocol.

Simply put, the shift from PoW to PoS passes the block validation function from blockchain miners to special network validators. This not only makes the blockchain network faster and verifying transactions more efficient but also improves overall platform security as chances of a 51% attack are effectively eliminated.

There are many reasons why Ethereum’s shift from PoW to PoS consensus will shake up the crypto world. First off, the older PoW consensus that is still used by Bitcoin greatly limits the scalability of the platform, and as such, the shift opens Ethereum to a world of transformation that even Bitcoin cannot match.

Considering that more people are embracing blockchain and cryptocurrency every day, it is important to note that the upgrade will improve the performance of the network, thereby making it acceptably fast for real-world use cases. It would be an understatement to say that the improvements on the Ethereum platform, implemented in three phases, are groundbreaking.

The developments, once successfully implemented, will pave the way for mainstream adoption of the blockchain for use in almost any industry and by anyone. This may be the change that finally opens up blockchain for small businesses and even individuals to implement their projects affordably and efficiently. Could this be the sign that 2020 is the year that tokens and assets running on the Ethereum platform will explode?

2. Increased regulation of crypto and impact on anonymity

One of the frequent themes that came up whenever cryptocurrency was discussed on the public media in 2019 was the ever-increasing attempts to regulate blockchain and digital assets. In 2020, as more countries shift from viewing these technologies with suspicion to embracing them, expect more regulations to be passed.

There are still many unregulated exchanges operating today. However, it is just a matter of time before they are forced to either shut down or conform to government regulations designed to protect the growing cryptocurrency user base. Governments, through regulatory bodies, are also keen to collect more revenues from investors and crypto users, and the only way to achieve this is through new regulations.

Presently, many countries around the world have put in place some form of regulations or controls to manage cryptocurrency use. Most of these regulations were meant to be interim laws while the regulatory bodies caught up with the tech world to understand what future there is in cryptocurrencies. Many forward-looking governments are actively debating and researching what regulations they need to put in place and how best they need to implement them to earn from the crypto boom while protecting their citizenry.

Whether you look forward to investing in the crypto market or just need to stay on top of market developments, you have to appreciate the impact that the oversight and regulatory bodies will have on cryptocurrency, and in particular, the aspect of anonymity.

3. Bitcoin halving may propel BTC to over $50,000

Throughout the second half of 2019, the price of Bitcoin was in constant decline. At the time of writing this post, Bitcoin was priced at just over US$8,000. However, with the next halving of Bitcoin expected in May, some experts predict that by the end of 2020, the price of Bitcoin could soar as high as US$50,000. This argument is backed by the fact that the last time Bitcoin cut its mining rewards by half, its price shot up by over 4,000 percent.

Bitcoin’s blockchain platform uses the Proof-of-Work consensus protocol where every block of transactions is verified (mined) and added to the chain rewards the miner with a fixed amount of Bitcoins. To prevent inflation of the currency, every four years, the value of the reward given to the miners for each block mined is reduced by 50 percent. If history is anything to go by, the price of Bitcoin will go up both before and right after the halving process. It may be hard to predict by what percentages the price will shoot up, but it will.

Presently, miners are rewarded with 12.5 Bitcoins for every block verified and added to the chain. This means that in May of 2020, after the halving, each block mined will attract a 6.25 Bitcoins reward. This is expected to lead to a spike in the price of Bitcoin because its supply in the market drops by half while demand keeps rising.

4. Institutional investors expected to flood the cryptosphere

The year 2020 may be the magic year in which institutional investors and leaders in the traditional financial industry dive into the crypto world. Banks, hedge fund managers, endowments, pension fund investors, and pretty much everyone else who makes money from money must stop holding back on cryptocurrency or lose out.

It is no secret that institutional investors have been gradually warming up to cryptocurrency after years of denial and even outright condemnation. The rapid rate in which investors have been investing in digital assets since the crypto boom of 2017 is proof enough that 2020 will be the year in which even the most adamant deniers will be converted into investors.

The ever-rising popularity of blockchain and the adoption of cryptocurrency, and in particular Bitcoin, has encouraged institutions to diversify their portfolios to digital assets. The 2020 prediction is based on the fact that these institutions finally have the professional machinery to invest in large scale and governments are putting in place regulations that will enable them to invest depositor money in digital assets.

5. Retail adoption of crypto to soar as China prepares to dominate

In January 2020, a new set of regulations that represents the about-turn of the Chinese government’s attitude towards blockchain and cryptocurrency, have taken effect. For many years since the introduction of Bitcoin and the gradual but steady rise of cryptocurrency, China was known to be unreceptive towards these two technologies to the point of openly banning them. However, their new legislation targeting blockchain technologies and mining cryptocurrency is a clear indication that the future is bright for digital assets in one of the world’s largest economy.

The opening of the Asian market for cryptocurrency is perhaps the greatest boost for the adoption of digital assets since the late 2017 cryptocurrency boom that drove the price of Bitcoin to almost US$20,000. At the start of the 2010s decade, cryptocurrency adoption stood at about 50 million. However, there is a good chance that it will hit 1 billion by the end of 2020, according to analysts at coinbase. This is largely due to its adoption in the emerging markets where financial systems are mostly broken.

The 2020s decade will be the year of cryptocurrency to shine brighter than ever. Considering that blockchain is one of the greatest and most impactful technological advancements since the invention of the internet, it is just a matter of time before it becomes a way of life for a majority of the global population. The financial and cultural revolution that blockchain and cryptocurrency promised over a decade ago when the bitcoin whitepaper was made public is already here with us.

The rapid evolution of other complementary blockchain tools and products such as privacy-focused browsers, blockchain disruption of pretty much every industry, and all the benefits of decentralization have conspired to create an ideal global environment for digital assets to thrive in 2020. Whether you are an enthusiast still testing the waters or are a forward-looking investor looking to stay on top of new developments in the industry, this is the year to expect the most radical trends in the cryptosphere.

Categories
Cryptocurrencies

Where does Bitcoin gets it’s value?

Ten years after it was introduced, Bitcoin is stronger than ever. Reporting its fastest hash rate ever at the beginning of this year, and leading a rally of other cryptocurrencies to outclass other assets, the idea that Bitcoin is not going anywhere has never held less water.

But Bitcoin’s success alone has not silenced the critics. Every conversation about it inevitably always leads to wrangles over what makes it valuable.

Skeptics say it has no value and that it’s a fraud and a bubble, and something that shouldn’t be called a currency. But believers see it as digital gold and the future of money. Who’s right and who’s wrong?

To answer this question, we need to dig a little into the history of money and the attitudes that have surrounded it over time. We’ll also see if Bitcoin possesses the “holy grail” of what’s considered a currency, and how it stacks against traditional money in this regard.

A Brief History of Money

Before we look at how Bitcoin gets its value, it helps to take a brief look into the history of money. When Bitcoin skeptics question its intrinsic value, arguing only fiat currency has intrinsic value. After all, fiat money wasn’t there at the inception of civilization.

As you may already know, bartering is one of the most significant ways that people transacted with each other. Bartering goes as far back as 6000 BCE when the Phoenicians traded goods across cities across the Mediterranean.

It was also the method of transaction in the Far East, Middle East, and Europe, with people exchanging spices, silks, perfumes, furs, food, silks, salt, and various more desired things among each other.

The Swiss are credited with being the first country in Europe to print banknotes – in 1661, and somewhat responsible for the note revolution. China had experimented with paper money for 500 years – centuries before Europe could catch onto the idea. Before then, the Chinese transacted with copper coins, which were not ideal due to their weight and insecurity, especially when traveling.

Countries then entered the “Gold Standard” era, during which coins representing various values were minted out of gold and silver. But this proved ineffectual as well because the coins were susceptible to tampering. Thus, the coins paved the way for gold certificates – which were paper documents representing a certain worth of gold.

Soon, the Bretton Woods system took over, which dictated that forty-four countries would peg their currencies against the US dollar, which was backed by gold reserves. This meant the US dollar was “strong” and safe because it could be converted to an equivalent of gold at any time.

But the US dollar soon crumbled under the pressure of public debt, inflation, and a negative balance of payments. In 1971, the US administration closed the gold window owing to too many US dollars in the hands of other countries and gold reserves being too low. A new economic plan was hatched – one who could better mitigate inflation and reduce unemployment. This plan gave birth to fiat currency as we know it today.

What Gives Bitcoin Its Value?

The legitimacy of Bitcoin has been questioned along the lines of what makes it valuable? Fiat currency has been “earned” through trial and error, culminating in the stable system of today. Bitcoin entered into existence as purely digital money, commanding attention. Not only has it gone on to eclipse all fiat currencies in value, but it also leads other cryptocurrencies to outperform other asset classes like precious metals, commodities, and so on. The coin has even hit an all-time high of $20,089.

Aside from the question of whether it is a store of value, a successful currency must also meet qualifications related to scarcity, divisibility, utility and transferability, fungibility, and durability. Let’s look at these qualities one at a time.

Scarcity. To maintain its value, a currency must be scarce just enough. It shouldn’t be too scarce, as this would make it ineffective. It shouldn’t be too readily available either, as this would cause massive inflation resulting in economic collapse.

Divisibility. A valuable currency should be able to be divided into smaller incremental units. This divisibility makes it flexible in a way that reflects the true value of every good and service in an economy.

Utility. Utility means a currency is reliable. People should be able to use it to obtain goods and services reliably.

Transferability. A currency should be easy to be transferred between participants in an economy. This applies not only within a country’s borders but also between nations.

Fungibility. A successful currency must have each unit being interchangeable and indistinguishable from the next. For example, an ounce of silver is the same as another ounce of silver.

Durability. As a currency is passed between participants in an economy, it must be able to survive the test of time and not deteriorate too easily.

How it holds its own when compared against fiat currency.

To assess the value of Bitcoin as a currency, we need to see if it meets the above stipulations, and how it holds its own when compared against fiat currency.

Scarcity. Bitcoin’s supply is capped at 21 million coins. On top of that, the rate at which new coins are released is reduced after every four years. The last Bitcoin will be mined around the year 2140. On the other hand, fiat currency can be manipulated by the government or central bank so that its supply increases.

Divisibility. While Bitcoin’s supply of 21 million pales in comparison to most fiat currencies, it is divisible up to the 100 millionths. As such, the smallest unit, a Satoshi, is equal to 0.00000001 BTC. This divisibility is programmed into the currency’s original code. This means quadrillions of Satoshis can be distributed for use in a global economy.

Utility. Bitcoin’s blockchain technology is a public ledger system that’s not regulated by anyone, and it doesn’t need trust to participate in. This is enabled by a reliable system of checks and balances that ensure the efficient running of transactions.

Transferability. Bitcoin is transferable from one party to another thanks to tools such as cryptocurrency exchanges and wallets.

Fungibility. Every Bitcoin has the same exact value as the next Bitcoin, no matter who holds it and how they have acquired it.

Durability. Thanks to a highly secure, immutable, decentralized public ledger, Bitcoin is durable than most – if not all fiat currencies. Also, being a digital currency, a BTC can be used innumerably without wear and tear, theft, or loss – if its owner takes the requisite precautions.

So Where Does Bitcoin Derive Its Value?

To determine what gives Bitcoin its value, we need to look at what drives its price. Bitcoin’s price is driven by good old supply and demand, its monetary policy, and public sentiment.

Since it’s capped at 21 million coins, Bitcoin has a finite supply, and the coins released diminish after every four years, investors may be keen to acquire a share of it, fueling demand.

As well, just like people would back mediums of exchange in past centuries and thus making them universally accepted, such is the case with Bitcoin. The Bitcoin community “backs” up the currency, granting it acceptance and hence value. And as more people accept it, the more it’s distributed, raising its value.

Challenges Plaguing Bitcoin

As you can see, Bitcoin holds up fairly well against fiat currency. But still, what ascribes value to it is a hot point of debate.

One of the biggest challenges is its status as a store of value. Its ability to be a store of value is dependent on it being a medium of exchange. Thanks to its volatility swings, Bitcoin is more used as an investment than a medium through which individuals can transact with on a normal day.

As well, its utility and transferability are not exactly clear cut, as at this stage. Cryptocurrency exchange and storage spaces are vulnerable to hacks, loss of keys, thefts, frauds, and so on. And while fiat money is also susceptible to theft, there are regulations in place that are better suited to pursue redress.

Much also comes down to perception. A large chunk of the population still views Bitcoin as a bubble whose bursting is a matter of when. And governments and regulators across the world approach it in strikingly different ways – from outright hostility to absolute acceptance.

What Is the Deal with Intrinsic Value?

Bitcoin skeptics have always argued Bitcoin has no “intrinsic value,” hence not really a viable currency. The idea of intrinsic value means that a currency should derive value from being inherently useful. In other words, intrinsic value is the perception of a currency’s true value. But Bitcoin proponents argue that its lack of “intrinsic value” is a weak argument.

In truth, “intrinsic value” is not a thing, they say. In the world of money, intrinsic value is only that which we ascribe to an item. For instance, glass beads were used as money in Africa and parts of North America. Limestone coins were used for the same purposes by the Yap people of the Pacific. And paper money itself was treated with misgivings earlier on because it was considered ephemeral and shaky as compared to tangible things of value such as land, gold, sizes of armies, and so on.

As such, intrinsic value is merely a construct. Just because Bitcoin exists purely digitally, is under no one’s control and generally breaks the rules doesn’t mean it’s less a valuable currency.

Final Thoughts

Bitcoin’s path is far from certain. It started as shaky currency, yet today it has attained spell-bounding success and spawned off other successful cryptocurrencies. The question of its value will be around for a long time to come. Its utility, transferability, and other currency attributes are still not surefire. But from the look of things, it’s the world that will adjust to accommodate Bitcoin, not the reverse. And whether or not Bitcoin becomes the world’s currency, as envisioned by its creator, the world of money will not emerge unscathed by the Bitcoin wave.

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Crypto Daily Topic

Cryptojacking Infections Drop by 78% After Interpol Crackdown in Asia

Sting operations coordinated and carried out by international crime-fighting agency Interpol in Southeast Asia to stem the proliferation of cryptojacking malware has resulted in a massive 78 percent drop in infections.

Interpol was forced to take action after more than 20,000 routers were infected with the Coinhive cryptojacking malware that cybercriminals installed in MicroTik routers. In the six months between June 2019 and January 2020, the agency, assisted by TrendMicro, a global leader in cybersecurity and enterprise data security, carried out the sting dubbed Operation Goldfish Alpha that ultimately reduced the number of affected routers by almost four in every five infected routers.

What is cryptojacking?

Cryptojacking, also known as malicious crypto mining, became very rampant around the world from around mid-2017 through 2018 and peaked in 2019. This is an emerging online crime threat that lives discreetly on computers, computer accessories, or mobile devices to use the system resources to mine various kinds of cryptocurrencies.

Cryptojacking is a new form of cybersecurity threat that was brought about by the possibility for hackers to use victims’ computer resources to mine cryptocurrency. According to a report by Kaspersky solutions released in the third quarter of 2019, cryptojacking has already overtaken other forms of cybercrime, including ransomware, in terms of prevalence and frequency.

This previously little-known menace can take over computer browsers, compromise routers to proliferate among devices on a network, and even ‘hijack’ servers to mine digital assets without the owners’ awareness. Like many other malicious attacks on computers, the primary motive for cryptojacking is profit. 

Interpol revealed the outcome of Operation Goldfish Alpha in a press conference in Singapore on January 8th. The agency made the startling revelation that hackers took advantage of a vulnerability in MikroTik routers to infect over 100,000 routers around the world. They pointed out that their operation focused on the ASEAN (Association of Southeast Asian Nations) region after its intelligence showed that the highest number of infections (about 18 percent) were in the region.

International collaboration vital to fighting cryptojacking

Cryptojacking is a new kind of cybercrime that came about with the introduction of cryptocurrency or digital money. It is a kind of threat that the security agencies were not prepared to tackle before. To make operation Goldfish Alpha a success, Interpol’s Global Complex for Innovation (IGCI) and Cyber Foundation projects partnered with various organizations in the private cybersecurity sector, including Cyber Defense Institute and Computer Emergency Response Teams (CERTs).

The operation identified and targeted victims in 10 countries in the Southeast Asia region. They are: Singapore, Indonesia, Brunei, Laos, Cambodia, Malaysia, Philippines, Myanmar, Vietnam, and Thailand. Interpol’s special computer crimes team also sought assistance from the national police of the targeted countries to come up with guidance documents that they used to guide victims in removing the miner script from their routers, patching the vulnerability, and help them prevent re-infections.

Interpol officials announced that by late November and early December 2019, the number of devices infected with the Coinhive malware had reduced by 78 percent. At this time, the operation to remove infections from remaining devices was ongoing, and the agency was optimistic that the number of infected devices would drop even further.

The main takeaway from the conference was that fighting such a crime is easier and more successful when various private security institutions, national police organizations, and international cybercrime prevention agencies collaborate and share intelligence. Detecting and removing the Coinhive malware from infected devices is easier and more straightforward now because of this. Interpol has declared this malware a less serious threat than it was before Operation Goldfish Alpha as more end-users understand what the malware is and how it works.

Cryptojacking remains a serious threat

Despite the Coinhive virus being practically defeated, cryptojacking remains a serious threat to all kinds of devices, and end-users should be vigilant to stay safe from it. During the conference in Singapore, Interpol’s director of cybercrime Craig Jones emphasized on the need for the police everywhere in the world to form strong partnerships with players in the cybersecurity industry to quickly identify and neutralize any emerging cryptojacking scripts before they proliferate as far as Coinhive did.

“By combining expert data on emerging cyber threats collected and analyzed by the private sector with reports of the investigative capabilities of law enforcement, it will be easier to protect communities and individuals from all kinds of cybercrimes – new and existing,” said Craig Jones, the Interpol director.

Interpol listed a number of other notable bodies that played major roles in the success of the Goldfish Alpha operation, including The National Cyber Security Center of Myanmar.

As the world embraces cryptocurrencies and blockchain technologies, it is expected that there will be more cases of new cryptojacking malware that exploit different vulnerabilities and affect different devices. As a matter of fact, there are cases of cryptojacking malware that use up the computer’s resources without actually infecting the computer itself. For instance, there have been cases of websites that drain a user’s computing power when they visit the website without requiring them to install any scripts.

The damage caused by cryptojacking malware

If you are a victim of cryptojacking, you may not notice it right away, if at all. Most cryptojacking malware is designed to operate stealthily in the background, stealing as much computer resources as possible for as long as possible without being detected. The effect is that a computer runs slower than it should while using more power than normal. A user may notice higher electricity bills and a shorter device life without being able to pinpoint where the problem is.

Depending on how subtle the cryptojacking malware is, there are a number of red flags to look for when you suspect that your device is infected. On top of the list is a significant slow down of the device and the cooling fan running faster and longer than normal. Interpol recommends that you diagnose your system to rule out all other potential causes of poor device performance and disconnect from the internet to determine if your device is infected with a cryptojacking malware.