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Arthur Hayes on Financial Privacy and the Possibility of BTC Hard Fork

BitMEx’s Arthur Hayes explained to Cointelegraph the importance of financial privacy in detail and predicted that Bitcoin should hard fork in order to be fully anonymous.

At the Tangle in Taipei on July 3, American economist and crypto sceptic Nouriel Roubini (aka “Dr. Doom”) and BitMEX CEO and co-founder Arthur Hayes didn’t agree on anything except that “Facebook’s Libra is not cryptocurrency.” One of the reasons on that is, while Roubini took for granted that the success of Bitcoin should be measured by its transaction speed only, Hayes argued that there was a different measurement. Roubini continued to criticize Bitcoin based on his assumption and said, as he has often pointed out, “this conference is not even accepting Bitcoin.” But for Hayes, that is not the only use case. 

For Hayes, the success of Bitcoin hinges on whether or not it can protect financial privacy, especially when cash — the most anonymous means of payment — disappears from society. So, it is no wonder why the two could not reach any agreement on Bitcoin. It may be worth noting that Andrew Neil, a veteran journalist who hosted the debate, also seemed to underestimate the importance of Hayes’ point, as he called the market for financial privacy a niche. 

A day before the Tangle at the Asia Blockchain Summit 2019, Hayes explained to Cointelegraph the importance of financial privacy in detail and predicted that anonymous features would be added to Bitcoin through a hard fork. 

Financial privacy and cryptocurrency

Hisashi Oki: Why is financial privacy important? 

Arthur Hayes: Society obviously values privacy. That is why some people like to use cash. They don’t want governments, families or someone else to know what they are buying. If you are merchants, you may want to offer services that might not be allowed, you want a way to transact values that are not censored. Especially, politically exposed groups want to fund themselves. 

In China, WeChat Pay or any other systems are being rolled out . If everyone is in the same network, all financial transactions are completely transparent, and people can remove you from that financial system for any arbitrary reason that they decide on. 

That is why I think financial privacy from a societal point of view is very important, and as people start becoming concerned about data leakages, different financial institutions being hacked, losing customer data or being negligent about the way they secure digital properties, people now understand that data is important, the security of data is important — it is something about their lives to keep to themselves. 

HO: How do people realize the importance of financial privacy? Is it going to be a gradual process or a sudden wake-up call? 

AH: I think it is going to be a sort of wake-up call. It will be some sort of event like companies losing a bunch of data. Maybe people will wake up and realize one day that “Oh, shit. I wanted to watch some porno” and the government said, “Okay, we are no longer allowing payments to pornography websites.” They used to be able to pay cash, or whatever the method was, but all of their payments were now done with this app, so they were just going to cut off the people they wanted to deal with. 

You will start seeing things people like to do in their privacy or their home, those freedoms curtailed by the wishes of bureaucrats. At that point, they are going to start searching for how they can protect their privacy. 

HO: “Financial privacy” sounds like Western philosophy to me. I am not sure if people in Asia, for example, take it seriously. 

AH: I would argue that it is not. You look at many countries in Asia. Because of the instability of governments and high inflations, most wealthy families change their own properties into gold and hide it from people.

I think the Western societies trust the government far more than any people in the Asia pacific region, where there has been a real history of trying to safeguard properties from ever-changing tides of which governments or which systems of governments are in power. 

I think people in the West trust governments — at least in the United States, where I am from. American people trust that America is a great place. They believe, “They are not gonna screw me.” Look at India, China, and the consumption of gold. Ownership percentage is far above we would see in America or Western Europe. 

I think, in general, demands for Bitcoin and cryptos come from Asia. If you think about many countries where there is instability banking system or is not fully functioning, a very small percentage of people have access to financial services. So, being able to log onto your phones anytime of your day and go onto an exchange, you are not being screwed by a broker or somebody else seeing exactly what is going on. And being able to trade freely Bitcoin or other cryptos is extremely appealing. 

If you look at the U.S. or Europe, they are used to trading on very regulated stock exchanges. There are all different types of financial products available that are heavily banked. The value proposition is just not there. That is why greater adoption and different types of companies are coming to the market here in Asia. 

Bitcoin hard fork

HO: How can Bitcoin achieve financial privacy? 

AH: I think Bitcoin is the most promising to adopt. It has electronic cash-like features. It has such a large user base, large base of developers and organizations building on top of the network. 

But I think Bitcoin, right now, is not financially private. Actually, it is very bad because of the nature of blockchain. One of the reasons why lots of financial institutions don’t take Bitcoin or accept Bitcoin is that they can’t cover their ass. 

When you walk into the bank with millions of U.S. dollars in cash, the banks have to do Know Your Customer (KYC) checks on you. With Bitcoin, because its entire history of that money can be seen in public, if someone or some entity that is not permissioned by the government touches that money, that bank or financial institutions can possibly be liable because there is actually information for them to assess that. 

If you want to break Bitcoin, all you have to do is to start telling financial service institutions that they cannot deal with certain addresses. At a certain point, when one Bitcoin is not equal to another Bitcoin and not fungible across the world, then the entire protocol will be worthless. 

So, I think financial privacy, in terms of Bitcoin, is far from perfect. And Bitcoin will be under attack by malicious governments and other agencies. If they want to stymie the growth of Bitcoin, all they have to do is to start banning addresses. Once you start doing that, you destroy it. So, for Bitcoin to succeed, it is going to be a long run. I think it has to have complete and total anonymity. 

HO: Who would ban Bitcoin addresses?

AH: I think what is really dangerous is the organization called the Office of Foreign Assets Control (OFAC) in the United States. Put one or two Bitcoin addresses on the list of banned individuals or organizations — whatever you want to call it — and any funds held in those particular addresses cannot be touched. So, theoretically speaking, you have now removed certain Bitcoin circulations because exchanges and organizations that are publicly dealing with Bitcoin have to now abide by these rules or go to jail, or whatever. So, automatically, now you basically start to destroy the fungibility of Bitcoin. 

You can’t do the same thing with the U.S. dollar. The U.S. government can’t just say “Oh, this particular U.S. dollar,” because they can’t prove that it has been touched by certain groups. That is why my cash is great for my financial privacy and why governments want to get rid of it. 

HO: How will Bitcoin solve the problem of fungibility then? 

AH: It is a great testing ground for all these anonymous coins that prove what is actually really anonymous. And from my opinion, if Bitcoin really succeeds and takes it into the next level, those anonymity features need to be added via a hard fork of Bitcoin. 

I am not smart enough to know if the cryptography is sound. Maybe we can think of Monero, Zcash, Dash — there are all these different coins, but over time, one of them will prove successful. And as the fungibility of Bitcoin erodes and more and more Bitcoin gets pulled out of circularization because of the addresses that are touched in the past, people will realize that Bitcoin will be slowly being killed, and the only way to liberate it is to do a hard fork and become a truly anonymous Bitcoin. 

The interview has been edited and condensed.

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Bitcoin Lightning Nodes Claimed 2.22 BTC in ‘Justice’ Against Thieves: BitMEX

Bitcoin Lightning Network nodes have claimed 2.2 BTC in “justice transactions” to deter potential thieves since Dec. 2017, according to BitMEX Research.

Bitcoin (BTC) Lightning Network nodes have claimed 2.2 BTC in “justice transactions” to deter potential thieves, a BitMex Research analysis revealed on July 15.

A so-dubbed “justice transaction” is a punitive mechanism involving the closure of a lightning channel that is suspected to be attempting theft. As the report outlines:

“… by design, when a thief attempts to steal funds on the lightning network, if caught, they do not only lose the money they tried to steal, they lose all the funds in the relevant channel. This “punishment” is expected to act as a deterrent and is sometimes called “justice”.

BitMEX researchers claim to have potentially identified 241 justice transactions since the second-layer network’s in December 2017 — all the while noting that there is a possibility the data “includes false positives” and that other, more robust tools exist to identify such transactions than the “basic search methodology” used for their report.

BitMEX’s data apparently reveals that the highest number of justice transactions — over 60 apparent instances — occurred in October 2018. April 2018 saw the second-highest number of justice transactions — over 30.

Notably, while the period from February to April 2019 saw a relatively high number of justice transactions — between 20 and 30 instances — it eclipsed both October 2018 and April 2018 in terms of the absolute value in BTC claimed by honest nodes via the mechanism. February 2019 alone represented the absolute peak in terms of monthly total, at roughly 0.67BTC:

BTC reclaimed by honest nodes using justice transactions

BTC reclaimed by honest nodes using justice transactions. Source: BitMEX Research

BitMEX’s report further qualifies the findings by noting that 2.22 BTC does not necessarily indicate that thieves tried and failed to steal that amount — given that potential thieves may have been punished by an amount larger than the value they tried to steal. 

Instead, the figure represents:

“… the total funds claimed by honest non channel closing nodes, part of this value is funds originally owned by the dis-honest nodes and part of the value will be the value they tried to steal.”

In conclusion, the report notes that the total number of justice transactions on Lightning since its inception represent just 0.7% of the number of currently active channels: while an optimal proportion of justice transactions is hard to determine, BitMEX Research notes, this current level appears to be a reasonable figure sufficient to prevent the risk of “large systemic channel thefts” in future.

As reported, Bitrefill has recently made it possible for users of major American crypto exchange Coinbase to access its full suite of Lightning services directly from within their native exchange accounts. 

A couple of crypto payment processors have meanwhile this year released intermediary services to enable Lightning payments for products sold on Amazon.

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BitMEX Owner Awards $60K Grant to Bitcoin Developer Michael Ford

Bitcoin Core contributor, Michael Ford, has been awarded a $60,000 grant by the parent firm of top crypto derivatives platform BitMEX.

Bitcoin Core contributor Michael Ford, aka “fanquake,” has been awarded a $60,000 grant by the parent firm of top crypto derivatives platform BitMEX.

In an official announcement published on July 12, BitMEX owner and operator HDR Global Trading revealed its decision to award Ford the grant, noting that he has just recently been made the latest official maintainer of the Bitcoin Core software project. 

This means that the developer’s key has been added to the “trusted keys list” file on GitHub — giving him the ability to merge in changes to the Bitcoin Core codebase.

HDR Global Trading has presented its decision as a way of offering material support to those who work — usually on a voluntary basis — to further the development of cryptocurrency:

“HDR Global Trading Limited, like all other companies in the cryptocurrency space, relies heavily on the (mostly-volunteer) work of coders dedicated to the mission and ideals of Bitcoin. This work is difficult, demanding, and often thankless. We believe it is the duty of corporations to give back to the projects from which they benefit – and from which their very business model stems.”

The post outlines that the grant is exclusive and requires Ford to work on Bitcoin Core in his capacity as a Core software maintainer — pointing to issues such as further developing the network’s robustness, scalability and privacy.

Equally, HDR Global Trading claims that the grant is awarded on a “no-strings-attached” basis — presumably implying that Ford will not be expected to contribute to BitMEX itself.

The announcement emphasizes that it is only thanks to the critical development work of developers such as Ford that platforms such as BitMEX have sealed their success:

“Without the millions of free man-hours from dedicated OSS developers powering everything from our operating systems, to our web servers, to our ops tools and Bitcoin itself, the BitMEX trading platform could not have been built.”

HDR Global Trading has also recently made an “unconditional” donation to the MIT Digital Currency initiative — which conducts research into the development of the global crypto ecosystem — noting at the time that it was particularly keen to help support the work of Bitcoin Core developers Wladimir van der Laan and Cory Fields. 

In late June, BitMEX — the world’s single biggest bitcoin derivatives provider — posted record volumes across its operations as bitcoin (BTC) hit $13,000. The platform reported $1 billion of open interest in the market, with trading topping $13 billion and above $16 billion across the BitMEX’s full product range.

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‘PayPal is F*cked’: BitMEX CEO Says Facebook Libra Will Make Banks ‘Dumb Nodes’

Arthur Hayes claimed that even if Libra has limited success, PayPal in particular has no chance of succeeding.

Facebook’s Libra payment protocol could make central and commercial banks irrelevant, but PayPal has no future anyway, the CEO of derivatives giant BitMEX thinks. Arthur Hayes made the comments in a new interview with Taiwanese news network BlockTempo TV on July 9.

Speaking during this year’s Asia Blockchain Summit (ABS), Hayes made grim forecasts for both banks and fiat-based payment networks. 

Libra, which saw its whitepaper release last month but has yet to launch, has drawn both praise and criticism from across the international economy. 

For Hayes, participants who should be most worried are banks themselves. Even if Libra is a centralized platform which can freeze out specific transactions and users, banks will still face major upheaval.

“All a bank is relegated to is a dumb node that holds fiat currency in electronic form at a central bank,” he said.

A digital token forms just the first offering for Libra, with Hayes considering the future will see Facebook providing loans and other services currently the domain of the banking sector. 

“It has the potential to completely disintermediate commercial banks entirely, and destroy their revenue-generating possibilities,” he continued.

His most damning prognosis, however, was reserved for PayPal, the payment network seeing increasing competition from crypto-friendly players such as Square

“PayPal’s f*cked anyway,” he said, explaining its fate did not even depend on Libra’s success.

The BitMEX CEO is well known for his soundbites pronouncing the death of traditional finance. Last week, however, he courted controversy over the recording of a debate he had at ABS with serial bitcoin naysayer, Nouriel Roubini.

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Bitcoin Strong Pump to $11,900 Liquidates $50M in BTC Shorts

Bitcoin Pumps to $11,900, Finally Breaks Out

For a while now, most Bitcoin (BTC) traders actively expect bloody Mondays. Mondays are, of course, objectively the worse day of the week, and the day that Wall Street opens up shop, presumably to take profits from the weekend’s price action.

This time, however, blood did not grace the cryptocurrency streets on Monday. On the contrary actually. A few hours back, Bitcoin shot higher, moving past $11,900 for the first time in a number of days.

This strong surge upwards, which didn’t occur prior to the close of the weekly candle and CME weekend open as Bitcoin has done, comes after days of lower highs and higher lows, suggesting that this small yet important spike is a breakout.

Due to this move, which caught many traders with their pants down due to expectations of further consolidation, over $44 million worth of shorts on BitMEX were liquidated. Youch. Presumably, many traders were short $11,000 on high leverage, resulting in mass liquidations when BTC spiked on Monday morning.

While around $50 million is evidently no small sum, this liquidation event wasn’t the end all and be all of liquidation events. On the days that BTC was pumping 10% to 20% within a day’s time, BitMEX saw hundreds of millions of dollars worth of liquidations, as bears were caught off guard.

So, what exactly is next?

Well, according to analysts, a bullish confirmation would be Bitcoin closing a key short-term candle, like the four-hour or 12-hour, above the $11,700 range.

Dave The Wave believes that if BTC closes above $11,600 on the daily, the asset could continue its parabolic rise. Such a move would mark the cryptocurrency breaking past a declining trend line that has acted as resistance since last month’s blow-off top at $13,800.

Should the parabolic rise continue, Bitcoin could hit $14,000 by the middle of July, which is just over a mere week away.

Considering that this surge took place within a matter of a few minutes, implying manipulation by whales, this market could retrace these gains. Thus, investors may need to stay on their toes for the time being.

Some have been a tad more optimistic though. Analyst Nunya Bizniz that this breakout was actually a move above the neckline of an inverse head and shoulders, implying that there is more upside to be had. In fact, Bizniz writes that he has a target of $14,000, meaning more than 15% higher than current levels.

Photo by André François McKenzie on Unsplash

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Dr. Doom Lays Into Bitcoin & BitMEX After Tangle in Taipei

Bitcoin V.S. The World

Yesterday, two behemoths in the Bitcoin (BTC) world butted heads: Nouriel “Dr. Doom” Roubini and Arthur Hayes. The former is a career markets cynic that famously called 2008’s Great Recession; The latter is the chief executive of BitMEX, famous for his no-filter attitude and his eerily accurate crypto market calls.

Held at Asia Blockchain Summit, one of the region’s largest cryptocurrency-related events, “The Tangle in Taipei” debate saw the duo try and trash the other, no holds barred.

While both sides claimed victory, Roubini, a New York University professor, claims that he won. In a tweet following the debate, which was actually barred from being livestreamed/recorded, the Bitcoin skeptic urged BitMEX to release the video. Roubini quipped that he “destroyed” Hayes, before calling the industry executive a coward for not publicly releasing the tapes.

The economist continued his tirade in latter tweets, in which Roubini poked fun at BitMEX for offering high leverage on its cryptocurrency markets, which he suggests is much like a drug of gambling. “Hayes spent half of the debate today defending his shady biz model of peddling 100x leverage crypto derivatives to retail suckers,” Roubini wrote, evidently not fine with the fact that debate ended hours ago.

While many in the cryptocurrency community have dismissed Roubini’s attempt to get Hayes to “release the tapes” as nothing but a bluff, attendees of the event have claimed that the spat was actually closer than the two sides say.

Mike Dudas, the chief executive of trade publication The Block, called the parley “dead-even”, noting that both sides made “strong arguments”. Dudas even went as far as to say that Roubini may have squeaked out a win, snagging an anecdotal “52 to 48” victory.

So, what exactly was said? And, which side many better points?

A Historic Spat

Well, according to notes published by Dudas, Roubini centered his sights on how BitMEX is unregulated, offers “risky” products, could be employing insider trading, could be registering fake Bitcoin volumes, and makes money off “suckers”. While there aren’t any direct quotes from the shouting match, the economist was trying to make it clear that the aforementioned exchange is not a net benefit for the cryptocurrency space, but is instead a way in which BitMEX can accumulate wealth for themselves.

Hayes rebutted by explaining that BitMEX’s growth has been entirely natural, his firm’s operations are honest, and that 100x leverage isn’t mandatory. The BitMEX chief went on to explain that abiding by the regulations of the U.S. isn’t mandatory, because the nation’s regulators aren’t the end all and be all of the cryptocurrency game.

The discussion then took a step back, giving the two a chance to talk more about Bitcoin and blockchain as a whole. As normal, Roubini took the stance that Bitcoin isn’t needed in today’s economy, is centralized, not scalable, has better alternatives, and is backed by questionable characters. Hayes also took his normal stance, claiming that in a world where government-surveyed fintech is becoming commonplace, a private money like Bitcoin is needed.

As someone that wasn’t able to attend the debate for logistical reasons, I can’t tell you who won, or if Roubini’s attempt to get the tapes released is logical. But, soon enough, we should have our answers.

Photo by Almos Bechtold on Unsplash

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‘Release the Tape You Coward’ — Roubini Tells BitMEX CEO After Debate

Professional crypto contrarian Nouriel Roubini wants the recording of his debate with the CEO of BitMEX released.

American economist and professional crypto contrarian Nouriel Roubini has furiously demanded the release of a recording of his latest debate with BitMEX CEO and co-founder Arthur Hayes

In one of several fulminating tweets posted on July 2, Roubini accused the organizers of the Asia Blockchain Summit in Taiwan of being part of a “mafia hush money racket” and cowing to BitMEX’s censorship by choosing to neither tape nor broadcast his debate with Hayes during the event. One tweet reads:

“Another @CryptoHayes scam: he didnt allow the blockchain conference to record our debate or beam it live. He controls the only recording of it and will only release heavily edited “highlights”. I destroyed @CryptoHayes in the debate and he is hiding. RELEASE THE TAPE YOU COWARD!”

While Roubini’s well-oiled routine of playing the crypto antagonist is well-known across the industry, the economist appears to be particularly keen on having this latest squabble — dubbed the “Tangle in Taipei” — in the public eye.

Hayes — seemingly more relaxed about the affair — responded to Roubini by assuring him that any tape release would expose his “thin grasp of economics and technology.”

According to Cointelegraph’s reporter at the scene, the Tangle in Taipei was largely a rehearsal of Roubini’s view that the crypto industry is rife with scammers and that its technology is neither secure, decentralized, nor scalable. 

He also reiterated his view of its shortcomings as a payments system, and dubbed the entire space of innovation as a manifestation of “stone age technology, not a digital revolution.”

It remains to be seen whether Hayes’ release of debate highlights will grace ears with another of Roubini’s Taipei soundbites — “there’s nothing smart about smart contracts.”

One conference attendee who says she “endured” Roubini’s debate performance, summarized it as “the entitled view of a privileged man speaking for the underprivileged.”

As recently reported, BitMEX posted record volumes across its operations as bitcoin (BTC) hit $13,000 last month. As the world’s single biggest bitcoin derivatives provider, the platform reported more than $1 billion of open interest on the market, prompting Hayes to declare that crypto winter is resolutely over.

Roubini meanwhile provided fresh insights at the Salt conference in New York this spring, claiming that “crypto is the mother and father of all bubbles.” 

In response to the latest fracas over Taipei, one social media commentator picked up on an apparent Roubini tweet of six-year vintage — back when BTC was in the double-digits —  quipping “Nouriel, what’s the % gained between $58 & $10,000?”

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‘Welcome to the 2019 Bull Market’ – BitMEX Trades Record $16 Billion in One Day

Trading reached $16 billion across the platform for the first time as bitcoin passed $13,000.

BitMEX, the world’s largest cryptocurrency trading platform, saw record volumes across its operations as bitcoin (BTC) hit $13,000. The company reported the figures on Twitter on June 26.

On Wednesday, BitMEX, which is the world’s single biggest bitcoin derivatives provider, reported more than $1 billion of open interest on the market. Trading topped $13 billion, with the number topping $16 billion across the platform’s product range. 

Volume had swiftly risen above $10 billion in previous hours, leading CEO Arthur Hayes to declare any signs of the previous cryptocurrency bear market were officially gone. 

“XBTUSD perp swap open interest is now in the 3 comma club. Welcome to the 2019 bull fucking market YeeHaw!” he excitedly summarized.

BitMEX’s successes follow on from records across bitcoin trading, with bitcoin futures provider CME Group similarly reporting all-time volume highs this month and last. 

While analysts remain divided over which investor segment – retail or institutional – is propelling the current bull market, Hayes is gearing up to defend the newly-bullish bitcoin against one of its arch rivals. 

As Cointelegraph reported, July’s Asian Blockchain Summit will feature a showdown with academic and infamous crypto naysayer Nouriel Roubini, known as ‘Doctor Doom.’

Long a thorn in the side of many an industry business, Roubini’s ongoing Twitter rants have now become a talking point of BitMEX’s own publicity material.

“Yet, (Roubini) still believes that cryptocurrencies are a farce,” the tweet containing the trading figures added.

The event will precede another meeting with a mission, this time featuring blockchain network Tron’s CEO, Justin Sun, and many others as they try to convince Warren Buffett of crypto’s merits.