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Decentralization First: Privacy Coin Monero Cuts Out ASIC Miners to Stay Independent

On March 9, Monero was successfully upgraded via a hard fork.

On March 9, Monero (XMR) network was successfully upgraded via a hard fork. The new code curbed application-specific integrated circuit (ASIC)-powered mining with a new proof-of-work (PoW) algorithm. Additionally, new dynamic block size algorithm and improved privacy — which is considered to be Monero’s key feature — were introduced.

Once the ASIC miners were taken out of the equation, the network’s hash rate dropped over 80 percent — which, however, might be positive for the cryptocurrency in the long term.

Anonymity above all: Monero’s main principle

Monero is a privacy coin, meaning that it is anonymous and untraceable by design. It was originally created in April 2014 under the name of BitMonero. Eventually, BitMonero was forked and became an open-source project dubbed “Monero” (which means “coin” in Esperanto).

Monero is based on the CryptoNight proof-of-work (PoW) hash algorithm, which entails three key features: ring signatures, which are used to mix the spender’s address with a group of others, making it more difficult to trace transactions; stealth addresses, which are generated for each transaction and make it allegedly impossible to track its actual destination by anyone else other than the two parties involved in it; and ring confidential transactions, which are used to conceal the transferred amount.

XMR’s focus on privacy helped it to stand out from more conventional cryptocurrencies and become a relatively popular means of payment within the underground economy, namely on darknet markets like Alphabay and Oasis. In 2016, partly due to being integrated on those trading platforms, XMR experienced more growth in market capitalization and transaction volume than any other cryptocurrency, skyrocketing almost by 2,800 percent, as per CoinMarketCap. Currently, XMR is the 13th-biggest coin by market cap, with equivalent of over $845 million.

Monero Price and Market Capitalization

Monero’s alleged privacy has attracted a lot of controversy. For instance, as previously reported by Cointelegraph, Monero has been endorsed by white supremacists like Christopher Cantwell specifically for its focus on anonymity.

Consequently, it has also drawn pushback from mainstream players such as Japan-based Coincheck, which chose to remove XMR and three other anonymity-focused altcoins due to Counter-Terrorist Financing (CTF) and Anti-Money Laundering (AML) procedures imposed by the local financial regulator. More recently, the Finance Committee of France’s National Assembly suggested a ban on anonymous cryptocurrencies, including Monero.

Notably, the United States Drug Enforcement Administration (DEA) has claimed that, although privacy coins are less liquid and more anonymous than BTC, the agency “still has ways of tracking” altcoins, including Monero specifically.

New update: ASIC resistance at all costs

The upgrade v 0.14.0, dubbed “Boron Butterfly,” was activated at block height 1,788,000 on March 9, as per the previously released schedule. Given that it was a noncontentious fork, no chain split occurred. Monero’s hard forks are normally planned every six months in order to ensure sustainability.

According to the log, Monero’s privacy was enhanced via payment ID changes, and a new dynamic block size algorithm was introduced to prevent blockchain bloating attacks.

More importantly, the upgrade introduced a new PoW algorithm, CryptoNightR, also known as Cryptonight variant 4 (CNv4). Specifically, this algorithm introduced ASIC-resistance in a bid to keep the network decentralized. Monero has been pushing out ASIC-powered mining from the XMR network since its birth, but the code has to be updated regularly to ensure that.

The Monero developer known as Binaryfate confirmed to Cointelegraph that the new algorithm is designed to render useless any existing ASIC that would have been mining XMR before the fork, as well as reduce the efficiency gap with graphics processing units (GPUs) and central processing units (CPUs) if new ASICs were designed for the new algorithm:

“The point of making Monero ASIC-resistant is to ensure sufficient decentralization of the network, since ASICs are far from being commoditized. As one of the goals of the project is to be a fungible currency, it is also important to be censorship resistant (for instance so nobody can try to enforce or be pressured to enforce only a subset of whitelisted transactions to be mined).”

“The CryptoNightR algorithm is essentially another tweak that aims to reduce the efficiency gap for ASICs. One of its features is including random code generation, which presumably makes it more difficult for ASIC manufacturers to design and build a device,” an active Monero community member told Cointelegraph via direct messages on Reddit.

ASIC resistance is currently the philosophy of the community.”

Indeed, as Mark D’Aria, founder and CEO of Bitpro, a New York-based installation and mining operation management firm, told Cointelegraph, ASIC-powered rigs are not necessarily welcome by developers because of their profit-driven nature, especially when it comes to cryptocurrencies with smaller market caps:

“Because ASICs are specialized hardware used to compete in a zero sum game for block rewards, manufacturers are incentivized to keep their development secret to protect their competitive edge. Unlike GPUs which are general purpose hardware, ASICs are basically money printing machines, and nothing more. For an ASIC manufacturer their goal is obviously to make the most money possible — and in most cases, particularly for smaller market cap coins, there’s no way to justify selling the device for less money than they project that it can print.”

Since the Boron Butterfly hard fork has been activated, Monero network’s hash rate initially dropped over a whopping 80 percent — which seems to indicate that the network was once again largely controlled by ASIC-powered rigs despite Monero’s previous efforts, as mining operations eventually get updated to comply with new algorithms.

Monero Hashrate

Binaryfate argues that the drop is not harmful for the network, adding that the hash rate always takes a day or two to adjust, and already looks “pretty stable” at this point:

“The PoW algorithm has changed and you cannot compare the hash rate pre and post fork in terms of absolute numbers. The cost of the energy being burned for mining is a good metric for the security of the network (provided it is also decentralized), and there is no indication that less energy is burned now than before the fork.”

As a Monero community member told Cointelegraph, the hash rate was approximately 350-400 megahash per second (MH/s) before ASIC devices entered the network, and is expected to come eventually back to that level. The hash rate seems to be around 269 MH/s as of press time.

According to D’Aria, the ASICs might still take over eventually — and largely outperform GPUs as per the current PoW:

“The biggest problem of all though – one that is highly problematic for their [Monero’s] cryptonight PoW, no matter how many tweaks they make each 6 months – is that cryptonight ASICs are vastly more efficient than GPUs can ever be. Once the ASICs hit the network, they raise difficulty to such extremes that no GPU can ever be profitable,” he explained, adding how ASIC domination might undermine the token’s integrity:

“By the time of the Monero fork it was estimated that well over 80% of the hashrate was ASIC, and it would have been trivial for them to 51% attack the chain. In theory they could double spend, or even use the threat of the double spend to in essence blackmail the community into not making changes that would hurt their bottom line. Monero could not be taken seriously as a store of value if it was under the control of such entities, thus the situation undermines the entire value proposition of the blockchain.”

Therefore, by cutting out ASIC miners, Monero aims to remain a decentralized and open-source project. As for now, the most evident consequence of its recent hard fork is the shutdown of Coinhive, a JavaScript-based digital currency mining service that banks on a computer code to be installed on websites.

Once set up, the service used some of the computing power of a browser that loads the site in question. Although Coinhive was not an inherently malicious code, it had become popular among hackers for cryptojacking.

On Feb. 26, the mining service announced it will stop its operations on March 8. “The announced hard fork and algorithm update of the Monero network on March 9 has lead us to the conclusion that we need to discontinue Coinhive,” they wrote.

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Ledger Client Address Issue and Fake Deposits: Community Spots Two Vulnerabilities Related to Monero

At least two seperate bugs related to Monero have been detected.

This week, at least two seperate bugs related to Monero (XMR) were reported by crypto community members. The first one allegedly lead to a Ledger hardware wallet user losing around 1,680 XMR (nearly $80,000, as of press time) of his funds after making a transaction. The other vulnerability allowed hackers to make fake XMR deposits to cryptocurrency exchanges.

Anonymity above all: What is Monero and how it works

Monero is a cryptocurrency with an additional focus on anonymity. It was launched in April 2014, when user thankful_for_today forked the codebase of Bytecoin into the name BitMonero. To create the new coin, he relied on the ideas that were first outlined in a 2013 white paper dubbed “Cryptonote” written by anonymous personality Nicolas van Saberhagen. Ironically, BitMonero was soon forked itself by open-source developers and named “Monero” (which means “coin” in Esperanto). It has remained to be an open-source project ever since.

Indeed, Monero has considerably more privacy features compared to conventional cryptocurrencies like Bitcoin (BTC): On top of being a decentralized coin, Monero is designed to be fully anonymous and virtually untraceable. Specifically, it is based on the CryptoNight proof-of-work (PoW) hash algorithm, which allows it to use “ring signatures” (which mix the spender’s address with a group of others, making it more difficult to trace transactions), “stealth addresses” (which are generated for each transaction and make it impossible to discover the actual destination of a transaction by anyone else other than the sender and the receiver), and “ring confidential transactions” (which hide the transferred amount).

In 2016, XMR experienced more growth in market capitalization and transaction volume than any other cryptocurrency, undergoing almost a 2,800 percent increase, as per CoinMarketCap.

Monero Charts

Notably, a lot of that gain could have come from the underground economy. Being an altcoin that is tailor-made for fully private transactions, Monero eventually became accepted as a form of currency on darknet markets like Alphabay and Oasis, according to Wired. Specifically, after being integrated on those trading platforms in the summer of 2016, Monero’s value “immediately increased around sixfold.”

“That uptick among people who really need to be private is interesting,” Riccardo “Fluffypony” Spagni, one of the Monero core developers, told Wired in January 2017.

“If it’s good enough for a drug dealer, it’s good enough for everyone else.”

Currently, XMR is the 13th-biggest cryptocurrency by market cap, with equivalent of over $800 million, according to CoinMarketCap data.

Monero’s alleged privacy remains to be a controversial topic, as some suggest that the coin is not, in fact, fully anonymous. In an interview with Bloomberg, United States Drug Enforcement Administration (DEA) Special Agent Lilita Infante noted that, although privacy-focused currencies are less liquid and more anonymous than BTC, the DEA “still has ways of tracking” altcoins such as Monero and Zcash. Infante concluded:

“The blockchain actually gives us a lot of tools to be able to identify people. I actually want them to keep using them [cryptocurrencies].”

Moreover, as previously reported by Cointelegraph, Monero has been endorsed as “The Official Currency of the Alt Right” by white supremacists like Christopher Cantwell for its focus on anonymity.

The privacy-focused nature of Monero has also driven compliance-oriented crypto exchanges to turn the coin down. For instance, in June 2018, Japan-based Coincheck delisted XMR and three other anonymity-focused altcoins to follow Counter-Terrorist Financing (CTF) and Anti-Money Laundering (AML) procedures issued by the local financial regulator.

Bug #1: change address bug with Ledger

Status: pending

On March 3, user MoneroDontCheeseMe started a Reddit thread, claiming that he or she believes to “have just lost ~1680 Monero [around $80,000] due to a bug” while using the Monero app with his or her Ledger hardware wallet.

According to the post, the user transferred about 0.000001 XMR from his or her wallet to a view-only wallet, sent another 10, 200 and then 141.9 XMR. Allegedly, before sending the last transaction, MoneroDontCheeseMe had about 1,690 XMR in the wallet and 141.95 XMR in an unlocked balance, which is why he or she decided to send 141.9 XMR. However, after the transaction had been sent, the user’s wallet is reportedly showing a balance of 0 XMR.

Furthermore, according to the Reddit user, the amounts sent and the transactions recorded on the blockchain “don’t line up.” MoneroDontCheeseMe wrote that the 200 XMR transaction actually deducted 1691.001 XMR from the Ledger Wallet, and also that the amounts reported for the 10 XMR transaction are incongruous. Monero core developer nicknamed binaryfate told Cointelegraph over email:

“My understanding is that the Ledger may have sent the ‘change’ amount to an erroneous one-time destination that the user did not control. For more details you should ask the Ledger team directly, they are working on it and already identified and fixed the bug as far as I know, so it should be pushed shortly.”

Initially, in the comments to the post, Nicolas Bacca, chief technical officer at Ledger, said that their app has been extensively tested, suggesting that could be a synchronization issue.

However, several hours later, Ledger developers published a warning on the Monero subreddit, advising users not to use the Nano S Monero app because “it seems there is a bug with the change address.”

“The change seems to not be correctly send. Do not use Ledger Nano S with client 0.14 until more information is provided.”

The official Monero Twitter account has since retweeted Ledger’s tweet containing a link to the warning.

Thus, according to Monero’s binaryfate, the Ledger team has prepared a patch to fix the issue, and is expected to release it in the near future. Cointelegraph reached out to MoneroDontCheeseMe to ask him or her whether this issue is being fixed by Monero or Ledger developers, but he or she appeared hesitant to answer straight away and requested more time.

Cointelegraph has also contacted Ledger developers for further comment, but they have not prepared any statement as of press time.

Bug #2: wallet bug enabling hackers to make fake deposits to crypto exchanges

Status: fixed

On March 3, the official account of the Ryo (RYO) cryptocurrency published a Medium post, highlighting a bug in the XMR wallet software that could allow for sending fake deposits to crypto exchanges.

According to the post, an email reportedly sent to the Monero Announce mailing list warned platforms using the coin that the Monero Vulnerability Response team received a disclosure concerning a vulnerability. The bug was reportedly related to coinbase transactions (the first transaction in a block, created by miners).

“This essentially means that the attacker can make it appear as if he deposited any sum of his choosing to an exchange,” the post read. The mentioned email also contained the patch preventing the vulnerability from being exploitable.

As binaryfate explained to Cointelegraph, first, somebody made a responsible disclosure following the Monero Vulnerability Response Process. Then, an email was sent to the Monero Announce mailing list “warning in advance that both a patch and details of the bug would be released together on the 6th of March.” After that, the Monero developer added that Ryo published details “right away”:

“Due to this article, the details had been made public and delaying would have caused unnecessary risk. Hence a patch was publicly merged on github, and a new version of Monero tagged right away.”

Indeed, a few hours later, the official Monero account tweeted that the fix for the vulnerability had been written and was awaiting review. As per the GitHub page dedicated to the patch, it appears that the code has been already merged with the main branch, which means that the fix is ready and only needs the new release to be published.

Ryo is a code fork of Monero, as per its website. According to the Medium entry, its team fixed the same vulnerability seven months ago. The post also notes that they avoided making a responsible disclosure to the Monero team earlier because of Monero’s “long history of toxic behaviour towards security researchers.”

Furthermore, the post also claims that when discussing the exploit in the Ryo public channel, the author of the post accidentally disclosed another vulnerability, concluding that “Monero might want to get that one patched too.” When asked whether they knew anything about such a bug, the Monero representative answered by saying “you would have to ask the author of the article.” Ryo has not returned Cointelegraph’s request for comment as of press time.

Previous Monero bugs and cryptojacking problems

Monero, being an open-source project, tends to collaborate with its community members to tackle security breaches. Thus, in September 2018, Monero developers successfully eliminated at least two bugs that were reported on its subreddit page.

First, there was a burning bug, which Monero promptly fixed and notified “as many exchanges, services and merchants as possible,” to apply the new patch. Secondly, the XMR community reported that the Mega Chrome extension was compromised, leading to its quick removal from the Chrome webstore.

Further, Monero’s privacy features have made it popular among cryptojackers. Thus, last year, more than 526,000 computers were reportedly infected with a cryptocurrency botnet malware called Smominru, which allowed hackers to mine more than $2 million worth of XMR.

In February 2019, tech corporation Microsoft removed eight Windows 10 applications from its official app store after cybersecurity firm Symantec identified the presence of hidden XMR coin mining code. The firm’s analysis identified the strain of mining malware enclosed in the apps as being the web browser-based Coinhive XMR mining code. Later that month, Coinhive announced it will stop all its operations on March 8, saying that the project is not “economically viable anymore.”

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Mastercard Files Patent for Increasing Anonymity of Blockchain Transactions

Mastercard has filed a patent that aims to anonymize transactions on a blockchain, rather than just the user behind any individual wallet.

Mastercard has filed a patent for a method of anonymizing transactions on a blockchain, according to an application published by the United States Patent and Trademark Office (USPTO) Dec. 9.

The filing outlines that “the use of one or more intermediary addresses to obscure the source and destination of funds in a blockchain transaction” can be used in order to “increase anonymity of entities associated with blockchain addresses.” The proposed technical solution would entail a series of “anonymization request[s]” designed to anonymize the transactions themselves, rather than just the user behind any individual wallet.

This would “result in showing the user only transferring funds to and receiving funds from a small number of addresses that are also involved in a significantly large volume of transactions with various other users, thereby rendering the data innocuous.” Analysis of the wallet, Mastercard suggests, would thus yield “little to no information” about the user behind the wallet.

As context, Mastercard notes that while many “are flocking” to various blockchain-based cryptocurrencies, such as Bitcoin (BTC), for the perceived “high level” of anonymity they can provide, “the nature of the blockchain as an immutable ledger is such that every transaction can” – ultimately – “be traced and followed back to the genesis block.”

This fact, Mastercard suggests “run[s] counter to the the primary aim of many users in using a blockchain: anonymity.” Blockchain data can, once accumulated and analyzed, “eventually reveal the user behind a wallet or at least provide information about them, such as geographic location, interests, spending habits, etc.” The filing continues to suggest that:

“The existing communications and attribution structure of blockchain technology such as Bitcoin require identification of where the transactions are emanating and terminating, in order to maintain the ledger. This creates a technical problem of competing interests within the technology.”

Mastercard is by no means the first to tackle the limitations of anonymity within blockchain systems; two high profile privacy-focused altcoins, Zcash (ZEC) and Monero (XMR), are both designed with similar concerns in mind.

ZEC uses Zero-knowledge proofs (ZKP) technology, an alternative algorithm for authenticating distributed ledger entries, in which transacting parties provide proof of validity, but all other information remains encrypted, including their identities. Monero, meanwhile, uses stealth addresses to mask identities by enabling a sender to create a random one-time address that is based on the transaction receiver’s published address.

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Crypto is a ‘Poor Form of Money’ for Terrorists, Congressional Hearing Concludes

Cryptocurrency is a “poor form of money” for most terrorists, says director of analysis at U.S. think tank FDD’s CSIF Yaya Fanusie.

The U.S. Congress Subcommittee on Terrorism and Illicit Finance has discussed various methods of terrorism financing with cryptocurrency, according to an official press release on the U.S. House of Representatives Financial Services Committee September 7.

In order to monitor threats and methods of terrorist financing, the hearing considered major means of transferring funds by terrorists, including traditional financial institutions and semi-formal methods, such as the hawala exchange system, as well as cryptocurrencies.

However, while al-Qaeda, the Islamic State, and other terrorist groups have all attempted to raise funds through crypto, they have not had great success, as Congress concluded in the meeting.

Yaya Fanusie, director of analysis for the Foundation for Defense of Democracies (FDD) Center on Sanctions and Illicit Finance, stressed that most terrorists, especially those that serve on “jihadist battlefields,” are currently living in environments where crypto is not operable, which means that fiat use is preferable for buying goods.

Fanusie pinpointed fiat money as the most anonymous method for funding, claiming that it is very popular among terrorists.

While Fanusie stated that crypto is a “poor form of money for jihadists” and “cold hard cash is still king,” according to a Forbes article, he still acknowledged that “there are multiple examples of terrorist cryptocurrency funding campaigns.”

The expert further stated that in order to combat the potential successful use of crypto fundraising campaigns by terrorists, the U.S. government bodies that are responsible for terrorist finance investigation should become more skilled in analyzing cryptocurrency transactions. Fanusie noted:

“By preparing now for terrorists’ increasing usage of cryptocurrencies, the U.S. can limit the ability to turn digital currency markets into a sanctuary for illicit finance.”

At this point, Fanusie appeared to recommend that the authorities should focus on minor crypto exchanges that trade alternative tokens or “privacy coins” instead of major exchanges that have significantly boosted their anti-money laundering (AML) and know-your-customer (KYC) policies over the past few years.

Earlier this year, risk management giant LexisNexis partnered with crypto exchange Blockbid in order to introduce security solution for exchanges dubbed “Trade with Confidence,” which intends to prevent terrorism financing, among other illicit activities.

In January 2018, Rep. Ted Budd (R-NC) of the House Financial Services Committee introduced a bill that aims to fight terrorism by offering rewards for information that leads to convictions of cryptocurrency-supported terrorism.

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European Parliament Members, Blockchain Experts Meet to Discuss ICO Regulation

Members of the European Parliament along with blockchain experts met Tuesday, September 4, to discuss possible regulations for Initial Coin Offerings (ICO).

At the recent EU event entitled “Regulating ICOs — Is the Crowdfunding Proposal what we were looking for?” the attendees examined the potential complications currently arising in the ICO industry.

Ashley Fox, a British Member of the European Parliament, pinpointed three main issues to consider at the meeting: challenges faced by ICOs in raising capital, the existing regulatory approaches on the matter, and the future perspectives of the industry.

In his testimony, Peter Kerstens, chairman of the the European Commission’s Taskforce on Fintech, pointed at the “dramatic increase” of ICOs’ volumes in 2018, despite the increasing number of reports on fraudulent ICO projects. According to Kerstens, the growing figures mean that ICOs are “very interesting and promising vehicle instruments” for raising capital.

Kerstens stressed the fact that while the ICO industry faces mainly similar problems with other traditional funding activities, it is still different in terms of the amount of money that can be raised. As a major benefit, Kerstens stressed that while it is “extremely hard to raise millions of euros for a startup,” it is “not that hard” for an ICO project.

Addressing the issue of the main differences between ICOs and crowdfunding, Kerstens stressed the fact that ICO tokens are not “intermediated,” which means there is no third party between issuers and investors, posing the main subject of concern.

According to Kerstens, most of the aspects of ICOs “cannot be covered by crowdfunding proposals” due to the multiple differences between the industries as well as the uncertain status of ICOs as financial instruments, among other reasons.

Turning to the question of ICO regulation, Aeternity’s global communications expert Julio Alejandro has provided a “very original contribution,” claiming that there is no way to stop an ICO project from creation except by banning crypto exchanges.

Alejandro claimed that “you can complain, you can cry, you can believe,” but “the only way that you can actually stop an ICO from creation is stopping an exchange,” adding:

“Whenever you want to stop the diffusion and relocation of information, how are you gonna stop it? Are you gonna ban USBs, the computers? What exact are you gonna ban? You’re banning knowledge.”

Alejandro then stressed the benefits of the ICO industry that are highly valued by the crypto community, such as an ICO’s anonymity, borderless character, mutual transparency, and ability to operate without an intermediary.

Alejandro further stated that if any centralized organization “tries to regulate ICOs in some sense,” the industry would become “obsolete” from its technical perspective.

On September 7, economic and financial affairs ministers from the EU’s 28 member states are set to hold a meeting on the challenges posed by digital assets and the possibility of tightening regulations. The event, scheduled to take place in Vienna, Austria, will discuss the main issues around crypto, such as tax evasion, terrorist financing, and money laundering.

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Code as a Weapon: Amir Taaki Wants You to Join the Real Crypto Revolution

There are many words that could be used to describe Amir Taaki – but today, ambitious is best.

The infamous bitcoin developer – known for co-creating Dark Wallet, Darkleaks and OpenBazaar – took the stage during a hackathon he hosted in the wake of the Privacy Enhancing Technologies Symposium (PETS) in Barcelona last week, the same city where he plans to set up his academy of coders, hackers and philosophers dubbed Autonomous Polytechnics.

It’s a bit of a shift, about 1,800 miles to the West from Taaki’s earlier idea, which was to build the academy in Greece. But with a toolset focused on anonymity and autonomy, it might make more sense to build the project in the capital city of the autonomous Spanish community of Catalonia.

Spending no time mulling over the decision, Taaki took to sketching out his political vision on a dirty whiteboard.

In a series of diagrams, Taaki described the evolution of biological cells, the structure of societies and the impact that technology can have on such systems, sparking runaway trends to monopolization, or its opposite — atomization.

Tying the latter to the UNIX philosophy, a branch of coder theory that vouches for minimal and modular units of software, Taaki then exposed the upcoming product suite his academy will build.

Albeit loose mathematical sequences, the audience could tell the scripts comprised the details of an entire dark machinery, a kind of subterranean web 3.0. Distilling the wide-ranging talk, one attendee quipped, “Plans to anonymize the world.”

And while Taaki insisted the details on the whiteboard not be published for fear they be co-opted – “There’s a lack of ideas in this space,” he told CoinDesk – it’s clear the tooling he’s got in mind would be a revolution, which is exactly what he wants.

Having left bitcoin development to fight alongside a Kurdish militia in Rojava, an autonomous region in northern Syria, Taaki is hoping to spread that region’s practices of democratic confederalism, a political theory that advocates for small, self-governing communities.

“Every revolutionary movement needs to have a technological arm, and we are the technological arm of the democratic confederalist movement,” Taaki told CoinDesk,

“This is our objective as an organization, which is using technology for autonomous democracy and the collapse of the system of nation states around the world.”

Politics and tech

To make this happen, Taaki expects participants of the academy to undergo a strict training. Newcomers are subject to a three-month introduction period, one that repeats every six months to one year.

“It’s a vehicle for developing them as leaders, to develop their skills technically, socially and being able to effectively organize other human beings and coordinate together tightly,” Taaki told CoinDesk.

While there’s room for ideological diversity within the organization — for example, Taaki wants to set up multiple tiers of participation and a system of allied academies globally — core attendees will need to follow careful timetables, give up other engagements and dedicate themselves fully to the project.

“Together we can elevate each other higher, we can learn from each other, we can dedicate ourselves to a sense of purpose and become stronger,” Taaki said. “And because we gain something from this, we are willing to forgo certain comforts of life, certain smaller freedoms for an even bigger freedom that we want to grasp.”

For himself, Taaki lives a rigid lifestyle: lifting weights, measuring his meals, avoiding weed and alcohol. And with the occasional snide remarks about “lazy hacker culture,” he doesn’t hide his disdain for those who don’t.

“You can’t party and have the revolution at the same time. They’re mutually incompatible things,” he told CoinDesk.

That’s one of the outcomes he fears for bitcoin, and even the cryptocurrency community as a whole – that while it has attracted some of the best minds in technology, there’s a risk that it will simply devolve into play.

“There’s a danger that bitcoin as this transformative tool to liberate humanity will just be turned into a nice subculture where we meet up with friends at conferences and a few geeky people play around, make investments, but it’s nothing more, and the potential that exists, that truly exists inside of bitcoin, does not get realized,” he said.

That’s why instead he wants his followers to have a serious drive.

That drive is a mix of both the democratic confederalism of the Rojava movement and a distinct theory of technology theorized by American philosopher Lewis Mumford.

The basic premise of democratic confederalism is self-governance, but the theory also elevates environmentalism and feminism.

On the other side, Mumford suggests that there are two types of technological process, monotechnics and polytechnics. Whereas the former creates global, top-down, single-purpose technologies, polytechnics conceives technology for users across different socio-political contexts – and it’s the latter that Taaki believes can bring about change.

“We believe in building technology on a human scale, for humans to employ in many different contexts to solve problems that they face,” Taaki told CoinDesk, adding:

“The technology needs to be targeted for socio-political change, not just to find like the perfect mechanism to make people comfortable, for convenience, to make people happy.”

Exhausted ideas

Not only the fears of bitcoin becoming just another fun fad, but Taaki also believes what’s missing from the first and largest cryptocurrency is this idea of polytechnics.

According to Taaki, bitcoin’s failure came from the belief that the technology itself was sufficient to enact a global reorganization of power, and by simply inserting it into systems, human freedom would increase.

“Everybody thought that bitcoin would come as this huge inevitability,” he told CoinDesk. “You saw this also, people talking about the honey badger, the honey badger can’t be stopped, there’s a sense of inevitability or linear historical trajectory.”

However, that vision failed, in part due to an inability for bitcoiners to propagate the political concepts inherent to the technology and adopt the tooling to constantly evolve with the landscape.

“Technology is the means, or the instrument of power that we use for shaping the society, but we are fundamentally the drivers of that technology,” Taaki asserted.

In this way, Taaki’s central tenet maintains that without ideological purpose, technologies cannot survive.

“The problems with bitcoin are in no way technical, they are deeply social and economic problems,” he said, adding:

“The ideas behind bitcoin have exhausted their potentiality to be able to advance that project forward.”

And this seems to stem, according to Taaki, from the prevalence of the “engineering mindset.”

“There is an elite inside bitcoin. They have a very particular way of seeing the world, and that viewpoint of the world, which sees things in a very technical way … in some cases can be extremely limiting,” Taaki said.

He gave the example of the lightning network, which while it solves a much needed technical problem — scalability — it cannot solve the wider societal issues surrounding the cryptocurrency’s lack of adoption. At the same time, corporations and central banks are co-opting the technology, developing more usable products and overtaking the cryptocurrency community.

“Unless there is a fundamental correction in the course of events that we’re heading into now, that is what is going to happen,” Taaki warned.

And that’s a large part of the work he is trying to achieve with Autonomous Polytechnics.

Where’s the money?

At the time of writing, Taaki and the earliest enlisted members of the revolution are squatting at the historic home of the Cooperativa Integral Catalana, a cooperative that spawned a cryptocurrency of its own, FairCoin.

But the plans for their very own academy are laid out.

It’ll be located at the base of Carmel Hill, stretching across 8,600 square feet, containing a shared workspace, living quarters, a garden and if they have enough money, a basement that can host conferences, hackathons and other events.

Taaki has even designed a special flag for the academy, in the colors of the organization, green and black, with a blazing sun, as a symbol of technology, in the center.

And with that, there’s no shortage of interest from potential participants in the program, many of which are currently living with Taaki and told CoinDesk they’re excited to begin. But still, they wait.

“It’s been almost a year now, and we’re still waiting to get started,” Taaki told CoinDesk.

Part of this stems from the construction of the building, which is slow going, but another thing stands in the way too — a lack of funding.

Taaki is looking for $10,000 to $20,000 – merely a drop in the bucket compared to the huge amounts of money being raised by sometimes suspicious initial coin offerings (ICOs) – however, many investors have been unwilling to donate without the promise of something in return.

But the academy’s plans are to create free technology, and even its business arm would merely be a mechanism for funneling excess profits into the support of democratic confederalism around the world.

“Right now to get established we’re trying to get donations which is kind of difficult because despite rhetoric a lot of people in this crypto space are very stingy,” Taaki said.

At the moment, the project is being sustained through donations from Cody Wilson, the co-creator of Dark Wallet and the infamous creator of the 3D printable Liberator pistol.

But Taaki would like to diversify those donation streams, and at this point, he’s running out of options.

Laughing, Taaki concluded:

“Dude, at this point, I would take money from African dictators.”

Amir Taaki with Dark Wallet logo via CoinDesk.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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UK Financial Regulator Advises Banks on How to Manage Risks of ‘Crypto Assets’

The UK’s Financial Conduct Authority (FCA) has issued guidance for banks on how to handle the risks associated with “crypto assets”, according to a letter posted on the FCA’s website June 11.

Per the statement issued by Executive Directors of Supervision Jonathan Davidson and Megan Butler, banks should apply a highly individual approach to clients dealing with crypto assets since “the risk associated with different business relationships in a single broad category can vary.” The statement continues:

“Following a risk-based approach does not mean banks should approach all clients operating in these activities in the same way. Instead, we expect banks to recognise that the risk associated with different business relationships in a single broad category can vary, and to manage those risks appropriately.”

Thus, the regulatory body has suggested a number of “good practice” measures to be carried out by banks in order to avoid the risks of customers using cryptocurrencies for “criminal purposes.” The FCA encouraged banks to develop staff awareness of “crypto assets” to help them identify its risks, and to engage with crypto-dealing clients to understand the nature of their business, among others.

In the statement, the financial regulator also stressed the non-criminal motives for using cryptocurrencies, including funding “innovative technological development” and high-risk “speculative investments.” However, taking into account the globality and anonymity of crypto, the FCA suggested a couple of “high-risk” indicators, such as clients using a state-issued cryptocurrency and possessing large amounts of initial coin offering (ICO) tokens.

The FCA explained that the risk of using a state-sponsored cryptocurrency is that it is “designed to evade international financial sanctions.” Considering the risks associated with ICOs, the regulator stated that this kind of practice involves a “heightened risk of falling victim to investment fraud.”

In late December 2017, when Bitcoin (BTC) was hitting record prices, the FCA warned investors about the risks of losing all their money, claiming that Bitcoin is a bubble, and an “odd” commodity, citing its scarcity.

In April, the Central Bank of Kenya (CBK) issued a similar warning to the banks in the country, warning them against providing services to crypto dealers. CBK Governor Patrick Njoroge said, “There are risks associated with cryptocurrency particularly on consumer protection, fraud, hacking and loss of data and they are prone to be used as pyramid scheme.”

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Hacked Crypto Exchange Coincheck Confirms Removal of Four Anonymity-Focused Altcoins

Recently hacked Japanese crypto exchange Coincheck will end trading for four privacy-oriented cryptocurrencies, Monero (XMR), Zcash (ZEC), Dash (DASH), and Augur (REP), Cointelegraph Japan reported May 18.

Following reports from back in March, the exchange has now officially confirmed the removal of the four anonymity-focused coins will come into effect June 18. According to Coincheck’s blog, the exchange will remove the four cryptocurrencies to comply with counter-terrorist financing (CFT) and anti-money laundering (AML) measures recently issued by Japan’s financial regulator, the Financial Services Agency (FSA).

The FSA has been especially active in regulating domestic crypto exchanges, specifically around customer protection, since Coincheck lost $532 mln in NEM in  a major hack in January of this year.

As part of its efforts, the FSA has stated that local, officially registered exchanges will face restrictions on the trading of privacy-focused altcoins, since they are more difficult to trace than cryptocurrencies like Bitcoin (BTC).

As Friday’s official statement from the exchange says, the targeted cryptocurrencies will be sold at market price and converted to Japanese yen.

Earlier this week, Monex Inc, the company that recently acquired Coincheck, revealed plans to expand the exchange to the U.S., claiming that the U.S. and Europe are more advanced than Japan in terms of regulatory clarity and “attracting institutional investors” to crypto.

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EU Approves AML Legislation Targeting Anonymity In Crypto Market, Local Sources Report

The European Union approved new anti-money laundering (AML) legislation in part targeting in cryptocurrency today, May 14, local news outlets report.

According to Spanish news outlet La Vanguardia, today the 28-member bloc formally ratified the new legislation, which the European Parliament had approved last month. The new rules will reportedly be published in the Official Journal of the EU and the member states will have 18 months to transfer them into their national legislation.

Authorities are specifically targeting anonymity in the use of cryptocurrencies, such as Bitcoin, along with the use of consumer banking products, such as prepaid cards.

Once it comes into effect, entities such as cryptocurrency exchanges will have to abide by AML guidelines, which will likely include full customer verification, according to the content of the package passed in April.

Cointelegraph reported at the time of the Parliament approval that “threats to our citizens and the financial sector” formed the major impetus behind the overwhelming support for the laws.

“This legislation helps address the threats to our citizens and the financial sector by allowing greater access to the information about the people behind firms and by tightening rules regulating virtual currencies and anonymous prepaid cards,” MEP Krišjānis Kariņš said in an accompanying press release.

While the impact on the cryptocurrency sphere in countries governed by EU statutes will become clear later, just last week, two exchanges themselves lobbied for regulations to become more set in stone.

Eric Demuth, CEO of Austrian platform BitPanda, said formalization of as much of the industry as possible would let operators “know where they stand.”