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Pet Stablecoins: Why Some Banks Issue Their Own Digital Tokens, While Others Don’t

A number of banks revealed plans to issue their own tokens, following JPMorgan Chase’s move.

This week, a number of banks shed light on their respective crypto-related projects, following the recent expansion of JPMorgan Chase into the field.

IBM was the big mover. A joint announcement by IBM and Stellar (XMR) said that as many as six global banks might issue their own stablecoins on IBM’s blockchain-powered payments network, dubbed “Blockchain World Wire” (BWW).

The question now is whether this marks a turning point for cryptocurrency’s use, or if it merely continues the experiments that have marked the early stages of digital money. While quite a few financial institutions seem ready to go blockchain and create tokens in a bid to streamline cross-border payments, some still choose to set the technology aside.

Citigroup, the corporation behind one of the world’s top-20 banks by asset value, revealed earlier this week that it was abandoning its “Citicoin” project to focus on more conventional remittance methods like SWIFT. The bank’s reasoning seemed focused on preserving the current forms of inter-bank transfers as a proven and universal method.

Can those bank-issued coins be called “cryptocurrencies”?

When JPMorgan Chase announced that it built its own digital token based on a private Ethereum (ETH) blockchain last month, the crypto community seemed largely skeptical.

Nathaniel Popper, author of the book “Digital Gold, a History of Bitcoin,” tweeted back then:

“The JPM Coin makes it possible to move dollars between JPMorgan bank accounts instantly. That raises the question: Why was it not already possible to move dollars between two JPMorgan bank accounts instantly?”

Given that the JPM Coin is only available for private use within the inner circle of the banks’ clients, one should be hesitant to even call it a cryptocurrency, according to at least one expert.

Hartej Sawhney, a blockchain expert and co-founder of Hosho, a startup protecting investments and providing multiple smart contract services, told Cointelegraph in an email:

“Recently, banks and media have had a field day misusing the word cryptocurrency. There is no such thing as a ‘cryptocurrency’ without open consensus or permissionless participation. Announcing a new ‘coin’ was simply a marketing play for J.P. Morgan. Bitcoin for example, is open source, permissionless, strictly limited in quantity, and has no account fees.”

Not only is the JPM Coin permissioned and available only to institutional customers who have been cleared via JPMorgan Chase’s Know Your Customer (KYC) precautions, Sawhney added, it is also pegged 1:1 to fiat currencies held by the bank. That is fundamentally different from what cryptocurrencies constitute, he argued:

“Anyone can use a cryptocurrency, and anyone can participate in its consensus system without seeking permission from anyone else.”

Regulated institutions will act

Michael Dowling, CEO and founder of FairX, a financial services company involved with banking and digital assets, and former chief technology officer at IBM’s blockchain arm, also distinguishes bank-issued coins from conventional, “pure-play” cryptocurrencies akin to Bitcoin (BTC), XRP and XMR. Bank-backed tokens are “cryptocurrency implementations of fiat currency,” which are commonly referred to as “stablecoins.” He told Cointelegraph:

“A lot of people are obsessed with this ‘token’ thing, but at the end of the day a bank is a really fancy ledgering company with amazing security; the key to bank’s successful use of blockchain tech, in a practical way, is to shift some of the authentication of a user from the centralized bank to the user’s own device, proven by a cryptographic ledger. That’s really what this bank-issued coin is really all about — it’s still the same USD ledger, its authentication for who is allowed to change the ledger has shifted from username/password at the bank to pub-pri key cryptography in a distributed fashion.”

Downey then summarized his statement: “I do NOT believe regulated institutions will announce their own pure-play cryptocurrencies, but I am absolutely certain they will announce their own deposits on ledger.”

Interestingly, while JPMorgan Chase’s move was largely reported as a first for a United States bank (and any major lender), New York-based Signature Bank rolled out a similar feature earlier in December 2018. Dubbed the Signet Platform, the private blockchain allows the banks’ clients to move their money “in 30 seconds,” just like the JPM Coin — and it is also pegged to the U.S. dollar. It comes as no surprise that Signature’s coin was largely overlooked, given how the bank compares to JPMorgan Chase size-wise: The former has just $45 billion in assets, while the latter wields more than $2 trillion.

When announcing the feature, Signature Bank co-founder and CEO Joseph J. DePaolo seemed particularly bullish on the use of private blockchains for financial institutions. He told Forbes:

“We have to do this, otherwise we’re not going to exist. […] If you’re not involved in blockchain, in five years, you won’t be around as a bank.”

DePaolo’s viewpoint seems to echo the findings of Citigroup’s “Bank of the Future” report, which suggests that fintech companies that are actively disrupting the banking market with new technologies are driving out its longstanding participants — or at least compelling them to give up a large portion of their margins, a traditionally important source of income for banks. Specifically, the paper estimates that by 2025, major North American banks could lose 34 percent of profit from mainstream areas such as payments, investments and personal lending.

What is a bank-issued coin’s purpose?

Primarily, banks tend to pick up blockchain for instantaneous cross-border payments. The technology shows a lot of potential within that field. Blockchain reportedly allows performing international remittance “in near real-time,” according to the IBM website, while normally they take three to five working days to complete within the existing infrastructure. Moreover, transaction costs can be saved as third-party intermediaries get removed from the process (according to research from McKinsey, the average cost for a bank to execute a cross-border payment through correspondent banking costs $25 to $35).

The two largest blockchain projects aiming to streamline cross-border remittance for global banks are hosted by Ripple and IBM Blockchain. Ripple has at least two blockchain-powered payment tools for those purposes, called xRapid and xCurrent (the main difference between them is that xRapid uses XRP, the company’s native token, while the latter works with fiat currencies). IBM, in turn, oversees its Blockchain World Wire (BWW) payment network operating on the Stellar (XMR) blockchain, which completed its beta in September 2018.

At this point, both Ripple and IBM Blockchain seem to be a force to be reckoned with: RippleNet reportedly has more than 200 clients, while BWW, which has been around for considerably less time, is currently used by 54 banks, as Jesse Lund, global vice president of IBM Blockchain, told Cointelegraph. Both of them are networks that are open to a wider amount of financial institutions, while some banks — like the aforementioned JPMorgan Chase — want to deploy their own private ledgers.

Notably, unlike Ripple, IBM’s BWW supports different digital assets within its blockchain, including bank-issued coins: Just recently, Cheddar reported that six international banks — such as Brazil’s Banco Bradesco, South Korea’s Bank Busan and the Philippines’ Rizal Commercial Banking Corporation — have signed letters of intent to issue their own stablecoins backed by their national fiat currencies on IBM’s network. “These are expected to add Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real stable coins to the network,” Lund told Cointelegraph in an email, adding:

“Ultimately, we hope to see a global financial network that represents a real-time facility for moving money from anywhere to anywhere — where foreign exchange is just an inherent part of the process that happens automatically through the use of an expanding digital asset ecosystem.

“World Wire can use fiat currency, lumens or stable coins. This is a completely new kind of payments infrastructure than traditionally used, and it differs from SWIFT and other approaches.”

Downey also highlighted this feature as a major advantage for the network:

“While IBM’s service does use a pure-play crypto as a settlement asset as an option, I believe the legitimate institutions will use fiat-stablecoins issued by banks as settlement assets instead. That stabs Ripple in the heart — why use XRP if I can use….an acknowledged and accepted currency?”

Cointelegraph has reached out to Ripple to get a further comment for this article, but they failed to prepare a statement before press time.

Ripple’s CEO, Brad Garlinghouse, has criticized the concept of bank-issued digital coins (which he calls “bank coins”) and specifically the JPM Coin in the past, citing its centralized structure, among other things. He has also argued that the JPM Coin lacks the interoperability that would make it a significant innovation:

“This guy from Morgan Stanley was interviewing me last week, and I asked him, so is Morgan Stanley going to use the JPM Coin? Probably not. Will Citi use it? […] Will PNC? And the answer is no. So we’re going to have all these different coins, and we’re back to where we are: there’s a lack of interoperability.”

Downey agrees with that statement. “It [the JPM Coin] MUST be interoperable between banking institutions for it to work properly,” he told Cointelegraph. “Otherwise, we’re just swapping bank currencies.”

Bank-issued stablecoins vs. public stablecoins

Stablecoins — with their ability to overcome crypto’s infamous volatility — have become widespread during the bear market, especially among more compliance-oriented players.

Projects like USD Coin (USDC), launched by payments company Circle in conjunction with Coinbase, the Winklevoss twins-backed Gemini dollar, Paxos and Facebook’s secretive project are among the most notable examples.

Recently, Jeremy Allaire, co-founder and CEO of Circle, has argued that, as the sector continues to see new market participants, stablecoins using an open-standards approach will prevail, while also welcoming Facebook’s still-to-be-confirmed plans:

“That’s [Facebook’s reported plans are] very, very positive in our view overall. The approach that we’ve taken is to create a consortium model. When we think about a standard for how fiat money works on the internet, it’s really critical that it’s an open standard that many companies can implement, that has an self-governance mechanism around it that can evolve both a technical standard as well as a membership framework.”

Essentially, Allair argued that creating “an HTTP for money on the internet” that could support global participation from multiple actors is “ultimately going to be much more successful than a single company issuing a cryptocurrency themselves.”  

However, Downey told Cointelegraph that stablecoins that are not issued by banking institutions might have a significant disadvantage over the public ones run by startups:

“Only banks can ‘take deposits,’ which have a specific meaning with specific legal protections around the assets held on deposit in case of bankruptcy.  Some, such as Gemini, have set up ‘trusts’ to park the cash, but it requires costly monthly attestations that come, frankly, for free as a bank. In addition, the Gemenis, the Circles, etc. all seem to be releasing their coins for the purpose of de-risking within their platforms. Very short term thinking, and no one is going to do real business (with real volumes with real value) using that setup. That’s what banks are for.”

Notably, Ron Karpovich, global head of e-commerce solutions at JPMorgan Chase, has recently raised a similar point in an interview with CNBC’s Squawk Box.

In response to a question as to how the top U.S. bank is ready to compete with new actors that can employ blockchain and cryptocurrencies to offer the same services as the industry’s veterans, but with cheaper fees, Karpovich said:

“Ultimately behind the scenes, they [crypto innovators] are going to have to use a bank to move funds. There’s more partnership instead of competition in that space. […] When it comes to margins and capabilities — payments is never something that grows in margin, nobody wants to pay for a payment. That’s one of the hardest parts of this process: you have limited resources in the capability to sell, so you need highly efficient and large players.”

“Citicoin”: The four-year project cut short in favor of more traditional remittance methods

Citigroup, unlike other mainstream institutions that couldn’t resist mentioning the word “blockchain” in their press releases at the time when it was popular to do so, has kept its cryptocurrency operation underground. It first surfaced back in July 2015, when International Business Times interviewed Ken Moore, head of Citi Innovation Labs. Moore told the publication that they were studying distributed ledger technology (DLT) for “the last few years.” Moreover, he added, the lab had constructed three separate blockchains and a cryptocurrency for test purposes:

“They [the three blockchains] are all within the labs just now so there is no real money passing through these systems yet, they are at a pre-production level to be clear. […] We also have an equivalent to bitcoin up and running, again within the labs, so we can mine what we call a ‘Citicoin’, for want of a better term. It’s in the labs, but it’s to make sure we are at the leading edge of this technology and that we can exploit the opportunities within it.”

Moore also specified that “most of our efforts have been focused on payments; trade probably being a second runner.”

Now, when JPMorgan Chase has just rolled out its own cryptocurrency to speed up its in-house transactions, Citigroup announced it was putting its crypto project on hold. Specifically, Gulru Atak, global head of innovation for treasury and trade solutions, said in one report that they were reviewing methods for cross-border payments, but with a shorter-term effect. Citigroup is not abandoning blockchain, she said. But, for now, it is looked at as merely an adjunct to SWIFT.

Indeed, SWIFT is a 46-year-old interbank messaging service and a co-operative owned by about 11,000 member banks in more than 200 countries. Its network handles as much as $5 trillion worth of transactions per day worldwide, as per U.S. Department of Treasury data, which allegedly includes more than half of all high-value, cross-border payments, making SWIFT a top player when it comes to sending money from country A to country B.

“Citi’s experience was just like JPM’s, with one big difference,” Downey told Cointelegraph:

“Both were prototypes, and both focused on internal transfers. JPM has been investing in blockchain tech for years now, and I think they needed to start justifying those investments, and that’s why they announced — with much fanfare — a prototype that works….only within JPM.  Citi’s approach is to focus on faster payments through SWIFT. I don’t believe it was a ‘this solution can’t work,’ it was more of a ‘we choose to focus on different solutions while other players focus on cash on chain’.”

SWIFT is aware of blockchain and its advances within the cross-border payments industry. At some point, the banking juggernaut even ran a proof-of-concept (PoC) of blockchain to see if it could pick up the technology for itself, but was left somewhat disappointed with the results. In March 2018, the co-operative declared that blockchain was not ready for mainstream use as “further progress is needed before it will be ready to support production-grade applications in large-scale, mission-critical global infrastructures,” although the tests went “extremely well.”

That seems to be the main consensus for traditional banking players that have chosen to stay away from blockchain: The technology has a lot of potential but is not mature enough to be picked up for industrial-scale use. The list of such lenders includes the Bank of Canada (BoC), the Spanish bank BBVA and the Bank of England, among others.

Sawhney told Cointelegraph that, whatever the outcome of the competition among blockchain-powered platforms and SWIFT is, the nearly 50-year-old conventional system is now being forced to update. Indeed, apart from testing blockchain, in February 2017, the banking network launched its Global Payments Innovation (GPI) service. While GPI promised “faster, same day use of funds,” it is technically a messaging system, and despite supporting real-time, end-to-end tracking, it is not blockchain-based.

“The battle is on for near-instant transactions, complete transparency and thorough transaction tracking, low clearing costs, and compatibility with any currency or asset type,” Sawhney said. “It has just begun, we are still a long way from getting a firm answer on which solution will dominate the future of the global payments industry.”

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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 Bitcointalk.org 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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#DeleteCoinbase: Exchange Users Respond to Acquisition of a Firm Run by Former Spyware Developers

Coinbase had acquired Neutrino, a startup run by ex-Hacking Team members.

Last week, Coinbase announced that it had acquired Neutrino, a blockchain intelligence startup, which at first seemed like a regular purchase for the ever-growing United States cryptocurrency exchange.

However, soon the crypto community learned that Neurino’s key staff are directly affiliated with Hacking Team, a controversial information technology outfit that sells offensive surveillance capabilities to governments, law enforcement agencies and corporations across the world.

A hashtag #DeleteCoinbase has been launched as a result, prompting users to cut ties with the platform. However, some clients have since reported that they are struggling to delete their accounts.

Neutrino’s key staff have been involved with Hacking Team, the Italy-based controversial outfit

On Feb. 19, Coinbase reported acquiring the Italy-based firm Neutrino to improve safety and boost its Anti Money-Laundering (AML) and Know Your Customer (KYC) measures. The accompanying statement read:

“By analyzing data on public blockchains, Neutrino will help us prevent theft of funds from peoples’ accounts, investigate ransomware attacks, and identify bad actors. It will also help us bring more cryptocurrencies and features to more people while helping ensure compliance with local laws and regulations.”

Neutrino was founded in 2016 by Giancarlo Russo, Marco Valleri (also known as “NaGa”) and Alberto Ornaghi (also known as “ALoR”). All of them are directly related to Hacking Team.

First, in 2001, ALoR and NaGa created Ettercap, a “comprehensive suite for man-in-the-middle attacks.” The program has since been widely used for intercepting traffic, capturing passwords and eavesdropping, becoming “the Swiss army knife” for remote hacking.

Eventually, ALoR and NaGA were allegedly contacted by the Milan police department, who asked the developers to create a Windows driver that would enable them to monitor Skype calls. To put such cooperation on a larger scale, in 2003, ALoR and NaGa founded Hacking Team, a commercial hacking software company. As of now, the company’s technology is “used daily to fight crime in six continents,” as per its website.

According to Russo’s LinkedIn profile, he joined the company in 2009 as its chief financial officer, later becoming its chief operating officer.

In 2015, Hacking Team was hacked, and 500 GB of client files, contracts, financial documents and internal emails were leaked online. At the time, the company was reportedly selling its spyware to countries including Ethiopia, Morocco, the United Arab Emirates and the U.S. — with the Drug Enforcement Administration and Federal Bureau of Investigation among its customers — according to a Motherboard investigation. Following the security breach, Hacking Team purportedly lost some of its key clients.

Notably, Hacking Team’s software has reportedly been used by authoritarian governments to spy on journalists and activists. For instance, according to Motherboard, the firm has been involved in hacking UAE human rights activist Ahmed Mansoor, who was then detained and sentenced to 10 years in prison.

In May 2016, Russo, Valleri (NaGa) and Ornaghi (ALoR) founded Neutrino. The company took a somewhat similar course, albeit on the field of cryptocurrencies. Thus, its key product, XFlow nSpect, has been designed “specifically for Law Enforcement agencies,” representing a “comprehensive solution for monitoring, analyzing and tracking cryptocurrency flows across multiple blockchains,” the website states.

In 2017, Neutrino tracked funds associated with the ransomware hackers known as WannaCry and concluded that they converted their Bitcoin (BTC) into Monero (XMR), a privacy-oriented cryptocurrency, via Switzerland-based crypto exchange ShapeShift.

Community and Coinbase reaction

Soon after Coinbase announced its acquisition, crypto community members started to point out that Neutrino was founded by Hacking Team’s former employees. For instance, Amber Baldet, co-founder and CEO of the startup Clovyr and former lead at JPMorgan Chase‘s Blockchain Center of Excellence (BCOE), tweeted:

“When I said it would be great to have more infosec people involved in the ‘crypto’ space, I didn’t mean the largest US exchange should acquire an analysis tools company run by a former Hacking Team member, but here we are.”

Around Feb. 20, crypto community members kicked off the hashtag #DeleteCoinbase, which has amassed hundreds of tweets as of press time.

Interestingly, Coinbase has commented on the issue, admitting that they knew about Neutrino’s roots. By Feb. 26, the exchange’s spokesperson told Motherboard that his firm “does not condone nor will it defend the actions of Hacking Team,” adding:

“We are aware that Neutrino’s co-founders previously worked at Hacking Team, which we reviewed as part of our security, technical, and hiring diligence.”

The Coinbase representative further explained that Neutrino’s technology basically seemed too good to be ignored:

“Increasingly, third-party blockchain analysis companies are requesting customer data from cryptocurrency companies that they serve. It was important for Coinbase to bring this function in-house to fully control and protect our customers’ data and Neutrino’s technology was the best we encountered in the space to achieve this goal.”

Further problems: Users struggling to delete their accounts

While the number of people who have actually deleted their Coinbase accounts during the #DeleteCoinbase campaign is unknown at the moment, some users have reported having technical problems with deactivation.

Many of those complaints revolve around the fact that in order to close a Coinbase account, a user is required to have a zero balance. Therefore, those users who have “dust” — tiny amounts of cryptocurrencies left from previous transactions — in their accounts are allegedly unable to send it to an external wallet, because the amount is too small to send. As a Coinbase spokesperson explained to Motherboard, those limits have been introduced to “ensure the fees incurred when sending money over the blockchain are covered.”

That issue has prompted Coinbase users to start yet another hashtag, #DeleteCoinbaseTrustChain. Essentially, it helps the exchange’s clients to coordinate and exchange dust in order to close their accounts. The hashtag was initiated by independent developer Udi Wertheimer and resembles a play on #LnTrustChain, a hashtag used by crypto enthusiasts who send small portions of their funds via the Lightning Network trustchain. Wertheimer said:

“I hope that this message makes Coinbase understand that a press release won’t fix this. They need to disassociate themselves from Hacking Team if they have any hope of earning people’s trust again. I don’t know if this can happen, so the alternative is that people at least know about it and get to decide for themselves.”

Moreover, some users claim that they can’t close their accounts even if their balance is free of dust. For instance, Singapore-based Twitter user Saifuddin Jalil argues that his Coinbase account has had no funds “for a more than a year,” but he still can’t close it down. He has allegedly contacted Coinbase support and asked them to delete his private information, to which the exchange replied that they won’t be able to complete his request within 30 days of receipt due to its “complexity.” Similar difficulties were reported by other users.

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EOS Community Is Challenged After Node Announces Financial Rewards for Votes

EOS’ governance model has attracted another round of criticism.

This week, the EOS blockchain protocol angered decentralization proponents yet another time. Specifically, Starteos, one of EOS’ officially sanctioned Block Producers (BPs), appeared to publically offer its token holders financial rewards in return for their votes.

Starteos’ vote-buying tendencies seem to fall in line with previous scandals centring around EOS: This year, the blockchain protocol reversed previously confirmed transactions and started an internal investigation after Huobi, its other BP, was accused of running a corruption scheme, among other things.  

Brief introduction to EOS and its key features

EOS.io is a blockchain-powered smart contracts protocol for the development, hosting and execution of decentralized applications (DApps). It was launched in June 2018 as open-source software, while the first testnets and the original white paper emerged earlier in 2017. The platform was developed by block.one, a startup registered in the Cayman Islands and lead by Daniel Larimer and Brendan Blumer.

EOS has raised the most funds during its Initial Coin Offering (ICO): The startup managed to gather around $4.1 billion worth of investments, after fundraising for nearly a year. That number remains unmatched to date.

The protocol is supported by the native cryptocurrency, EOS — currently the sixth largest crypto by total market cap. Those tokens can be staked for using network resources either for personal use or leased out for developer-use — basically, EOS.io attempts to represent a decentralized alternative to cloud hosting services.

EOS employs a consensus model called delegated proof-of-stake (DPoS). Essentially, that means that its investors are rewarded with voting power and decide who gets to mine the EOS blockchain.

Hence, the EOS ecosystem rests upon at least two major entities: the EOS Core Arbitration Forum (ECAF) — effectively its ‘judicial branch’ — and BPs, who produce blocks on the EOS blockchain — just like miners do within the Bitcoin (BTC) blockchain.

BPs earn EOS tokens produced by inflation — according to some estimations, top EOS BPs obtain around 1,000 tokens per day. They are elected through the constant voting process, and their number is capped at 21 — consequently, the top is fluid by design, and BP candidates who earn enough votes can replace the BPs in power at any minute.

Starteos: Major BP’s explicit vote buying

Starteos is a startup based in Chengdu, China. According to its website, the company “entered blockchain industry [sic]” in 2013.  This year, Starteos has reportedly issued at least two products: the self-titled digital wallet and ‘Memory Box,’ a “one-tap access” cold-storage wallet. Currently, Starteos is the fourth-largest BP, as per eosnetworkmonitor data, meaning that it gets a large portion of the BP revenue.

On Nov. 27, Starteos published a Medium post titled “We Gonna Share BP Proceeds With You — This Is the Way We Warm You Up in This ‘Winter’!” In it, the startup team claimed that “after delegating Starteos.io as proxy, you could get continuous and stable EOS revenue.”

“The ‘winter’ of cryptocurrencies has come. How much faith do you left to have [sic]?” the post reads, continuing:

“Now, Starteos is still gonna stay with YOU, our most important and best friends! And we [are] gonna share the proceeds with you and make [it] through the difficulties together.”

Further, the Chinese startup outlines an instruction on how to claim the benefits: After selecting Starteos as a proxy, users can pick “stable income,” “mining” revenue mode or the “random revenue” mode, where they play “Lucky Fruit Slots Machine” with game tokens to get “EOS revenue.”

Explicit vote buying seems to contradict decentralized and democratic blockchain policies advocated by the EOS administration and the project’s original white paper. Its co-founder and  chief technology officer, Daniel Larimer, wrote soon after EOS mainnet went live:

“EOS is fundamentally different from other governments and blockchain communities in that its community wishes to operate at the highest possible ethical standard of voluntary consent and non-violence.”

More specifically, Starteos’ winter promotional campaign seems to violate Article IV of the current EOS constitution titled “No Vote Buying,” which states the following:

“No Member shall offer nor accept anything of value in exchange for a vote of any type, nor shall any Member unduly influence the vote of another.”

Community reaction: Calls for unvoting, constitutional reform

Expectedly, the crypto community, which traditionally values decentralization, was not happy about an EOS BP openly buying votes.

On Nov. 8, weeks before Starteos published a Medium post explicitly describing how users can claim some of the revenue, EOS investor Maple Leaf Capital pointed out that Starteos was launching a slot machine DApp, where users allegedly could set Starteos as a voting proxy to obtain in-game tokens. According to the original article describing the DApp, the rewards to the gamers would come directly from games.eos’s BP reward, which, in turn, is owned by Starteos.

“It may not be bad-intentioned, but it looks awfully close to transferring block-producing reward value to its voters, with a thin veil of gamification & probability attached to it. This could set a bad precedence and deserves some debate.”

Later, on Nov. 29, the investor announced it would discontinue voting for Starteos, arguing that “swapping block reward for votes in gaming form is detrimental to the long-term economic value for the EOS.”

Steemit user theawakenment stresses that games.eos is holding a paid position, being ranked at the 66th position (game.eos has since moved up to the 50th place). He wrote an open letter after failing to receive a response from the Starteos administration:

“If other BPs copy what Starteos is doing and launch a second or third BP themselves, we will soon end up with the large BPs being owned and run by the same handful of owners.”

After the letter was published, a Starteos representative reportedly did message him:

“[They] admitted to creating the games.eos account and admitted to ‘collaborating’ with games.eos, but they told me they had different owners, which does not match up with what they have stated on their website.”

Australia-based crypto persona Crypto Tim, who covers mostly EOS-related news, published a video titled “EOS BP Starteos Are Vote Buying,” which gathered some commentary from the community on Reddit and YouTube. On Twitter, he called for Starteos “to be removed as a Block Producer.”

Some of the BPs have expressed their views on vote buying as well, albeit without directly mentioning Starteos. On Nov. 27, EOS New York, which is currently the eighth largest BP, wrote that “the EOS constitution is simply not good enough and we deserve a clear document that outlines our basic system of governance,” and then shared their proposal. After being asked in the comment section whether the document features any restrictions on vote buying, EOS New York stated, “There are not. We have it now and we have BPs violating it. No point.”

Moreover, Starteos has reportedly been unvoted by at least one BP, Bulgaria-based EOS Titan. Nevertheless, Starteos continues to hold the third/fourth positions in the BP ranking, which suggests that it is still largely supported by other BPs. The list of Starteos supporters can be monitored via a resource powered by EOS Titan — according to their data, Starteos’ largest ally is Huobi, which has been previously accused of running a mutual voting rig.

Source: EOS Titan

Price drop

The EOS vote-buying scandal has correlated with the token’s massive price drop. While it followed an overall bearish market trend, the losses EOS/USD experienced were more significant comparing to other top coins. EOS is trading at $2.36 as of press time, down around 25 percent over the past seven days.

Source: coin360.io

Previous signs of centralization in the EOS protocol

EOS’ model of governance has attracted controversy before: Just a few weeks ago, in November, a screenshot showing an ECAF moderator reversing transactions — which had already been confirmed — was posted on Reddit and gathered hundreds of comments.

According to Reddit user u/auti9003, a dispute allegedly involving a phished EOS account was referred to one of the platform’s “arbitrators” Ben Gates, who decided to reverse transactions that happened without the owner’s permission. This, the user noted, involved undoing transactions which had already received network confirmations.

That move outraged decentralization maximalists, as Reddit responses mostly claimed that EOS had failed to prove its use case versus other, more traditional centralized structures.

“Why would anyone use this over a bank account and traditional legal system?” the most popular comment read, adding:

“These guys raised [$4 billion] to recreate the legal system using a token that is neither censorship-resistant, nor immutable.”

Moreover, in early October, allegations arose accusing the platform’s major BPs — including Chinese crypto exchange Huobi — of “mutual voting” and “collusion.”

Essentially, an alleged leaked Huobi spreadsheet suggested that main EOS nodes were involved in mutual voting along with payoffs to remain in power of the EOS blockchain and keep their profits. Interestingly, Starteos was also listed in the document.

Soon after, Block.one — the developer of EOS — published a statement, saying it was “aware of some unverified claims regarding irregular block producer voting, and the subsequent denials of those claims.” Nevertheless, there was no further update on the matter, while Huobi remains EOS’ top BP as of press time.

Further, in June, another scandal occurred when EOS BPs overrode an ECAF decision and froze seven accounts associated with phishing scams after the arbitration body failed to promptly come up with a response. The ECAF later retroactively ordered the accounts frozen, but the BP conference call-based decision caused some to question EOS’ decentralized system, and to label the move as “power abuse.”

Less than a week after, another ECAF order to stop processing transactions involving 27 more addresses surfaced. Interestingly, it lacked any explanation for blocking the addresses, promising to do so on a later date.

That attracted another round of harsh criticism from the crypto crowd, and, after an apparent fake ECAF order began to circulate on social media several days later, some BPs — notably EOS New York — announced that they would suspend execution of any such orders, as they couldn’t tell if they were legitimate. Yet again, the ECAF and BPs struggled to coordinate their action, and that many decisions on EOS blockchain were handled by centralized entities.

On Nov. 1, more criticism of EOS’ governance model arrived, as blockchain testing company Whiteblock published results of “the first independent benchmark testing of the EOS software.” Essentially, the investigation came to several conclusions about EOS, the most bold of which was that “EOS is not a blockchain,” but “rather a distributed, homogeneous database management system” because its transactions were reportedly “not cryptographically validated.”

Additionally, the research results showed inaccuracies in performance claims. In July, EOS CTO Daniel Larimer tweeted that EOS was performing 2,351 transactions per second (TPS) — Ethereum, for comparison, can process around 15. The Whiteblock report, however, showed that with “real-world conditions” of round-trip latency and 0.01 percent packet loss, EOS performance was below 50 TPS, “putting the system in close proximity to the performance that exists in Ethereum.” The investigation concluded that “the foundation of the EOS system is built on a flawed model that is not truly decentralized.”

Similarly, a report published by Hong Kong-based peer-to-peer cryptocurrency exchange BitMex in late November suggested that EOS resembled a “distributed database system” rather than a blockchain-powered network. The document is no longer available for unknown reasons, but has been covered by various media outlets before going offline.

Still, EOS’ Daniel Larimer has previously confirmed that his company does not aim to be decentralized. In an interview with YouTube blog “Colin Talks Crypto,” which aired on Oct. 3, Larimer clarified his vision:

“Decentralization isn’t what we’re after. What we’re after is anti-censorship and robustness against being shut down.”

Cointelegraph has reached out to various Block.one representatives as well as Starteos for further comment, but none of them have replied to date.

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Losing the Lambos: It's Time to Get Serious About Crypto's Big Questions

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


“Crypto in crisis.”

Mainstream press outlets covering battered crypto markets have frequently invoked that phrase in recent weeks. For those of us who’ve followed the cryptocurrency scene for five years or more, the natural retort is: “When hasn’t it been in crisis?”

I would suggest that crisis – or at least relentless, chaotic drama – is the natural state for an open-source technology that engages a diverse, global, leaderless community in exploring an idea that promises to reorganize the fabric of our economy.

The outcome of this grand experiment is unknowable. But if we accept that the prospect of replacing 5,000 years of centralized record-keeping with a decentralized model of computerized consensus is rife with transformative potential, then we must also accept that it will generate wild, impossible-to-measure predictions, along with rampant speculation and hype.

By extension, these will frequently also generate fear and disappointment, and, unavoidably, price volatility.

The other thing you’ll hear from crypto “veterans” – yes, just five years in bitcoinland qualifies you for that title – is that crisis, and bitcoin’s capacity to survive it, is precisely what proves its worth.

The meme most frequently used to describe this resilient quality is that of bitcoin as the honey badger. But I prefer Andreas Antonopoulos’s “sewer rat” analogy: bitcoin as a tough-as-nails subterranean rodent that has proven it can take what the world throws at it.

Our increasingly distributed, fragmented economy needs open, self-healing systems that can withstand threats. The fastest way to build such resiliency is to expose the system to those threats so that it generates self-correcting counter-responses. Bitcoin, unprotected by a corporate IT team’s firewalls, rises to that challenge.

About here you might assume I’m going to smugly argue that the latest round of crypto critics are doomed to the same fate as past naysayers, who were proven wrong by the price recoveries that occurred after prior moments of “crisis.” (These newcomers would include former Paypal CEO Bill Harris, who told CNBC this month that he saw bitcoin going to zero.)

But that’s not what this column is about.

History is not prologue. The fact that bitcoin eventually recovered from the low of $210 it hit one year after its late-2013 peak of $1,150 is no guarantee that it will rebound from its current price near $6,500 and revisit its late-2017 peak of $19,783. And, yes, it could definitely go lower.

Fewer Lambos, more education

Rather, what I’d like to talk about is how the crypto community should use this moment to forget about price fluctuations and instead engage the world in a proper discussion about blockchain technology’s potential.

Let’s have less “to the moon” and “Lambo” talk and more discussions about the promise of peer-to-peer exchange, smart contracts and decentralized applications.

It’s time to ask questions about what we want this movement to be when it grows up. What do we want cryptocurrency and blockchain technology to achieve? And embedded in that is a question about who we are. As it stands in 2018, what does the crypto and blockchain community represent?

Some serious crypto developers might submit that bothering oneself with such flimsy questions of identity is no better than obsessing with price levels, when the most important thing they need to do is write code and develop real, battle-tested functionality.

To be sure, a post-bubble period, when the speculators’ distracting hype has dissipated, is a great time for developers to get work done. It’s no coincidence that Segregated Witness (Segwit) and the Lightning Network were developed during the prior bitcoin price lull. The ERC-20 ethereum token standard was also forged in that period, paving the way for ICO boom of 2016-2017.

But the involvement of others in the advance of this technology must also be acknowledged – even those from the enterprise world, the corporate community that hardcore crypto folks tend to dismiss. The blockchain community’s identity is complex and multi-faceted.

Learning from private blockchains

During the previous bitcoin market hiatus, while bitcoin developers worked on scaling solutions amid a different kind of “crisis” – the block size debate – a wave of non-developer newcomers started getting interested in blockchain technology: lawyers, bankers, supply-chain managers and regulators.

Rising to serve their interests were a variety of permissioned blockchain platforms, including IBM’s Fabric, introduced within the Hyperledger project, and the R3 consortium’s Corda.

Fast-forward to 2018 and, while cryptocurrency investors lick their wounds and wonder what the future holds, permissioned enterprise solutions are marching ahead, moving from proofs-of-concept to real-world implementations.

In just two recent examples, the World Bank teamed up with Microsoft and the Commonwealth Bank of Australia to issue its first blockchain-based bond and Maersk and IBM announced that 94 firms have signed up for TradeLens, their supply chain, shipping and logistics platform.

Many crypto developers dismiss these enterprise-driven private blockchain solutions, which typically employ pre-bitcoin consensus solutions such as practical byzantine fault tolerance and a trusted entity to administer the network, as a retrograde solution that’s not censorship-resistant. Like them, I believe permissioned blockchains will ultimately be proven inferior to permissionless systems, much as the open internet’s greater access to innovation and bigger network defeated private companies’ walled-garden “intranets” in the 1990s.

But I also think the work being done on these permissioned blockchain solutions is immensely valuable.

Until scaling solutions such as Lightning and sharding are working at full capability, permissionless blockchains can’t introduce decentralized applications at scale with anywhere near the ease of permissioned systems, which have fewer governance and computational limitations. In the meantime, there’s a great deal of learning that we can – indeed, need – to take from how these real-world private blockchain implementations play out.

Consider what the TradeLens project might tell us. What standards and practices will shippers, manufacturing companies and customs agents adopt as they integrate smart contracts to coordinate the movement of goods across multiple jurisdictions?

Finding common ground

This cross-community learning is precisely why the “who are we?” question matters.

Believe it or not, across a diverse and even divisive community – public versus private blockchains, BTC versus BCH, maximalists versus everyone else – a common vision does exist. We just need to define that shared identity more constructively than the one that many outside of the community assign to it: that of a nerdy, fanatic cult.

(An aside: one response to Bill Harris’s derisive comment about the “cult of bitcoin’s” false claims – “that it’s instant, free, scalable, efficient, secure, globally accepted and useful” – is to point out that in post-AD Rome, Christianity was a cult. Also, why do people who made their living from the constant improvement of the internet assume that crypto technology is doomed to a static existence? Dismissing bitcoin because of its limited scalability and adoption in 2018 is like attacking the Internet in 1995 because 28 bps modems were too slow to enable meaningful connectivity – as if no engineers see the problem or are working on it. Sheesh.)

How do we get society to go beyond these simplistic representations of the blockchain community? What is the core commonality that matters within this wide tent?

To me it the common recognition that decentralized consensus mechanisms that enable groups of people to collectively assess the veracity of shared information can help society more efficiently overcome the cost of trust, an age-old human problem. They all see in this new model big opportunities to disintermediate value exchanges of all kinds and, in doing so, to open markets and unlock innovations that produce better outcomes for everyone.

Blockchains are a complex, multifaceted social technology. As such, achieving its full potential requires different types of expertise. Of course, we need a great deal of protocol development, but also UX and application design. And beyond the engineering realm, we need legal reforms, governance solutions, standards agreements, and marketing and education.

Here the 2014-2015 price lull is also instructive. At that time, bankers and lawyers, their interest piqued by the market mania they’d witnessed in 2013, took early moves toward comprehending blockchain technology. In doing so, they spurred a valuable societal debate on the challenges and opportunities it presents.

Even as a few ham-fisted regulatory solutions, such as the BitLicense, emerged and as banks undertook a clumsy, misguided attempt to co-opt “blockchain without bitcoin,” the opening of a mainstream conversation enabled sensible advocates for the technology such as Coin Center and the Chamber of Digital Commerce to establish an invaluable dialogue with policymakers and society at large.

I see potential to do even more at this time, as securities regulators grapple with how to define and manage token markets and as wide-membership industry initiatives such as the Token Alliance come with up useful frameworks for self regulation.

A time like now, with the bubble burst and the market mania subsiding, is the ideal one in which to undertake this kind of multi-stakeholder engagement.

Lamborghini engine image via Shutterstock

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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Ripple’s XRP the least Loser in the Last 7 Days & Daily Life Uses

The San Francisco based crypto-startup Ripple, since its debut, is close connected with deviation of traditional cryptocurrency philosophy. The delivering of traditional banking infrastructure solutions for efficiency, the centralized nature of XRP and the team’s comments in favor of the fiat standard has made the community engage a hate sentiment towards the coin.

XRP

As commented by the CEO of Arrington XRP Capital – Michael Arrington, saying that indeed the only thing in common and that everybody agrees on in the cryptoverse is that they all hate the token.

But, this does not impact the company at all to grasp success as they are offering financial solutions to traditional banking systems and ordinary users also.

After partnering with Wirex, the company was able to add XRP token support to its Visa card. Subsequently, the number of sign-ups and transactions on the platform had a considerable boost.

Another user mentioned that XRP is an excellent tipping option. This case of microtransactions is essential because many cryptos have been attacked because of the high costs of uploading a transaction to the blockchain. The use of XRP allows for fast and cost-free transactions, providing an excellent opportunity for adoption in real-life scenarios.

The Crypto-Market

The last week has been a constant violent sell-off for the digital crypto-assets as even the leading coins by market capitalization are over 20% in the red. The only that is in a single digit loss is Ripple’s famous XRP against the US Dollar as it has been able to stand in mid of the two major mark $0.40 and $0.50 [per time of writing $0.4400]. Other leading coins like BTC or ETH are dangerously surfing just above the important holding levels of $7,010 and $406.50.

Source: coinmarketcap

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NO to Bitcoin SegWit2x – Litecoin Creator Charlie Lee is Against

The founder and creator of Litecoin [LTC], very respected cryptocurrency-community figure Charlie Lee – supporter of Bitcoin for a long time, via twitter has showcased his concerns related to SegWit2x for the pursuit of solution by a group of companies which are in change of BTC protocol with no user consensus:

“Miners and business cannot change Bitcoin without user consensus. So today, to show my disapproval, I’m adding [NO2X] to my name.”

First, the upgrade was suggested to increase the block size of Bitcoin by 2MB, followed up by the activation of the Bitcoin Core development Team’s scaling and transaction malleability solution SegWit2x (Segregated Witness) – by Barry Silbert-led Digital Currency group which followed as a solution to the Hong Kong agreement.

However, the majority of the Bitcoin community opposed the activation of SegWit2x, due to the lack of support from Bitcoin Core developers and users. Acknowledging the decline in the probability of the Bitcoin community agreeing to the SegWit2x proposal, the companies behind the movement proposed a hard fork execution in November, to create a separate Bitcoin-based Blockchain network, like Bitcoin Cash.

By many this event taking place is quite odd as the timing of the suggestions is the issue while a centralized group of businesses are trying to change the Bitcoin protocol without the agreement of BTC core developers, the open-source development community, the industry and users. Adding on that, the SegWit activation is still on its early phases of adopting while it has showed quite impact on the network. While only five percent are Segregated Witness enabled of the network, the block size decreased from 1MB to 0.86MB and the mempool from 150 mln bytes to lower than 10 mln bytes.

The substantial decline in the size of the Bitcoin mempool is especially important to consider, because the mempool is the holding area for unconfirmed Bitcoin transactions. For the past month, the size of the Bitcoin mempool has remained below 15 mln bytes, less than 10 percent of where it was a month ago.

Worthy to mention, Bitcoin pioneer and Blockstream CEO Adam Back in 2015, showed his support towards increasing the BTC block size. This represents that not all Core developers could be against increasing the Bitcoin block size.

But, it is vital to increase the Bitcoin block size when necessary. SegWit has already scaled the Bitcoin network at a similar rate, as a 2MB block size increase and still at five percent capacity. If it reaches 50 percent and 100 percent in the upcoming months, the Bitcoin Blockchain will scale even further.

From that it is easily concluded that there is need to let SegWit expand out and play out, and then when it is absolutely necessary, follow the idea of increasing the BTC block size. That is why it feels odd to implement an important update on the protocol when Segregated Witness was just implemented and is still in the progress of adoption.

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