US investor Tim Draper presented his vision for blockchain-based digital governments in an opening keynote speech at the GovTech Pioneers conference in Vienna, Austria Cointelegraph auf Deutsch reported May 23. Draper outlined a future in which blockchain technology utilizing smart contracts in conjunction with artificial intelligence will massively change the role and responsibilities of states.
Japan's Bitcoin Exchanges Under Regulator Surveillance From October
By 2014, Bitcoin was just about ready to hit the mainstream in Japan. Mt. Gox was a Tokyo based bitcoin exchange which boasted 70% of the global turnover of Bitcoin trading. However, in February of 2014 Mt. Gox suddenly closed its website and shut down its exchange when it was discovered that it had been hacked. Approximately 850,000 bitcoins worth about $450 million at the time was missing and presumed to be stolen. The CEO Mark Karpeles was eventually arrestedin Japan and charged with fraud and embezzlement, and the saga was widely broadcast throughout Japan. The true nature of the incident is still a mystery and due to the widely publicized saga, the word “Bitcoin” in Japan continued to have a strong association with fraud, theft, and ponzi schemes for many years to come. Right around the same time, however, there were some new developments in Japan. Bitflyer was a bitcoin exchange that was started by a group led by an ex-Goldman Sachs trader. QUOINE was another Singapore based company that opened an exchange in Japan. As these exchanges slowly gained a quiet following, some homegrown Japanese cryptocurrencies also emerged.
Barclays Joins CLS Blockchain Consortium in Search of Swift Alternative
Barclays has become the latest major financial institution to join the foreign exchange-focused blockchain consortium founded by cash settlement system provider CLS Group. Revealed today, the London-based bank will now work alongside the group's other members, including JPMorgan Chase, Goldman Sachs and Bank of China, in a bid to bring new levels of efficiency and security to the forex settlements industry. First revealed last year, the CLS consortium specifically aims to use the open-source Hyperledger Fabric blockchain to create new channels for foreign exchange. Demoed at Swift's annual Sibos conference last autumn, the group's blockchain platform is designed to be a new way for buy-side and sell-side institutions to exchange 140 global currencies that are now settled outside of the existing CLS settlement service. According to Lee Braine, from the Barclays Investment Bank's CTO office, his institution became interested in the project partly because the CLS platform will operate side-by-side with the existing Swift solution – at least for now – rather than being forced on customers. Braine told CoinDesk: "People can connect via Swift or via a new [distributed ledger technology] connection mechanism. So, you have a choice." In its initial incarnation, the platform, called CLS Net, is expected to let participants trade global currencies using six different kinds of blockchain-based products. The netting services amount to a new line of business for CLS, which traditionally uses its own payment-versus-payment settlement service linked to the real-time gross settlement systems of 18 currencies. A representative of CLS confirmed that progress on the expanded blockchain functionality is "proceeding well." Blockchain evolution Providing more detail about what attracted Barclays to the CLS consortium, Braine pointed to the desire for "harmonious" functionality with Swift's foreign exchange service. Instead of what he called a "Big Bang" implementation of blockchain (wherein entire consortia of institutions convert to blockchain-based systems), Braine described a tiered system of integration he imagines might be useful to the group. He breaks down this "incremental roadmap" into 10 layers, with the lowest level of blockchain adoption requiring only existing technology plugged into a third-party blockchain provider. The highest level, by contrast, would see transactions being fully reliant on distributed ledgers without a centralized backup system. Braine hopes the lessons Barclays learns about how this work might play out in the real world will inform other blockchain projects. He told CoinDesk: "We envisage banks could be at different levels of integration for particular use cases, and yet still being able to participate."
Europe's Largest Port Launches Blockchain Research Lab
The Dutch port of Rotterdam, the biggest shipping hub in Europe, is opening a research lab devoted to blockchain technology. Conceived as a "knowledge centre for the regional private sector" and geared towards applied research, the so-called "BlockLab" is being set up in a joint effort between the Municipality of Rotterdam and the port authority to investigate blockchain's potential in organising port logistics and cargo flows more efficiently. According to a press release, initial steps include the launch of a blockchain app – developed in partnership with cloud software company Exact and ABN AMRO bank – to assist stock financing in the port logistics sector. Maarten Struijvenberg, Rotterdam's deputy mayor for economic affairs, commented: "There's this huge buzz about 'blockchain', but actually, there aren't that many fully functional applications. We'll be changing this with BlockLab. This is important, because we need real innovations to launch the next economy. And blockchain can help us realise them." Not all of the research at BlockLab will be entirely port related, however. The release also reveals an interest in exploring blockchain to give a boost to what it calls "energy transition" – for example, allowing firms to trade residual heat and the city's occupants to trade electricity. This is not the first effort that the port has made within the blockchain space. Last year, the the authority announced it would be taking part in a blockchain consortium alongside 14 major banks and universities to explore blockchain opportunities within logistics.
Gibraltar Issues ICO Advisory Amid Drive Toward Blockchain Regulation
The Gibraltar Financial Services Commission, the financial watchdog for the British Overseas Territory, has announced it will put in place new regulations aimed at bringing oversight to the cryptocurrency exchange sector. In a September 22 statement, the commission said that, from January 2018, a new framework will regulate companies using blockchain to "store or transmit value belonging to others." Further, it said initial coin offerings (ICOs) might also come under regulatory oversight in the near future, with the commission explaining it is "considering a complementary regulatory framework covering the promotion and sale of tokens, aligned with the DLT framework." Currently, ICO investment schemes are unregulated, the watchdog said, meaning investors have no recourse to any financial compensation scheme or ombudsman. The statement cautioned the public to ensure they are aware of the "highly-speculative and risky" nature of the token sale funding method. It reads: "ICOs are an unregulated means of raising finance in a venture or project, usually at an early-stage and often one whose products and services have not yet been significantly designed, built or tested, yet alone made operational or generating revenue." Over the past month, several authorities from across the world have made similar statements warning of the risks of ICO schemes. Going a step further, China issued a full ban on the funding method earlier this month, and a number of local cryptocurrency exchanges have seen fit to shutter their services as a result. However, interest in DLT in other areas by elected authorities seems to be growing unswayed. For example, in August, the Gibraltar Stock Exchange announced plans to become the first regulated exchange to implement a blockchain for its trading and settlement systems.
Miner Argument Continues Over Ethereum's Byzantium Economics
A dispute between some ethereum developers and miners is continuing to simmer over the specifics of a coming upgrade designed to improve the network's functionality. The discussion, which has been underway since at least July, currently concerns an ethereum improvement protocol, EIP 649, intended to reduce the time it takes to "mine" a transaction block, a process for which miners are rewarded with the creation of new ether, the platform's native cryptocurrency. Key to the dispute is that, after the migration, nicknamed "Byzantium," blocks would be mined in about 10 seconds faster than they are today. But, to ensure that this does not deflate the value of ether, currently valued at around $300, the code patch also lowers the reward miners receive per block from 5 ETH ($1,200) to 3 ETH ($840). Stepping back, the change can be seen as a response to long-controversial code in the ethereum protocol called the difficulty bomb. An incremental increase of difficulty, pre-configured into the protocol, the difficulty bomb is designed to make blocks steadily less time-efficient to mine. But while the code is intended to incentivize miners to switch to a different chain in the case of a fork, critics fear that, combined with the decline in block reward, it could have the opposite effect. As the change will impact different stakeholders in different ways, it's hard to get everybody on board with the idea. Some commentators have gone so far as portraying the EIP as an attack on miners with the resources to mine harder blocks with greater rewards. At press time, the argument continues, though it remains unclear whether the posts represent a material number of stakeholders, and if they do, how their acknowledgment might shift the conversation around Byzantium, currently planned for late October. The dispute can also be seen as a continuation of the conflict surrounding an older protocol update, named EIP 186. Detailed by CoinDesk earlier this year, the EIP suggested reducing the block award to combat inflation of the currency – a code patch which was widely accepted by the community, and as a result, informed the current EIP. Still, such semantics could emerge as a topic of interest ahead given the mechanics of the Byzantium upgrade. At the time the new code is introduced as a hard fork, miners will be able to choose to switch to the new blockchain with the new rule set, or continue mining the older version of the blockchain. Of note is that a similar split happened in 2016, when following a disagreement, certain miners refused to leave the old blockchain, continuing to mine a currency now called ethereum classic (ETC).
Nigerian Central Bank Director: Cryptocurrency Wave 'Cannot Be Stopped'
The Central Bank of Nigeria is said to be taking a closer look at blockchains and cryptocurrencies. According to a report in The Guardian this week, Musa Jimoh, a deputy director at the country's central bank, recently spoke at a cryptocurrency-focused conference in Lagos, Nigeria's largest city. There, Jimoh indicated that the Central Bank of Nigeria is preparing a white paper on the subject. Perhaps most notable, however, was how Jimoh framed the reason for the study, noting the central bank "cannot stop the tide of waves generated by the blockchain technology and its derivatives." Such comments carry extra weight coming from the institution that oversees domestic monetary policy as well as banking sector regulation. In his remarks, Jimoh also noted that the nature of the technology, which gives users autonomy over the private keys that access blockchain-linked data, enables the creation of forms of money that are "beyond restriction and confiscation." Elsewhere, attendees surveyed at the conference painted a generally positive picture of how the technology is progressing domestically. Other topics addressed included how blockchains can help move payments across borders, and the investment risks associated with the nascent technology. Dr. David Isiawe, president of the Information Security Society of Nigeria, also spoke to the general consensus, when he was quoted as saying the technology is a reality that must be faced by the country's leaders "whether we like it or not." Such comments also coincide with a growing acknowledgment of the technology in Nigeria, and the issues with a relatively immature market. So far this year, domestic regulators, the Central Bank of Nigeria included, have issued two warnings about the technology.
Ukrainian Central Banker: Bitcoin Is 'Definitely Not a Currency'
Ukraine does not recognize bitcoin as a currency or as a medium of exchange, an official at the country's central bank has said. "We can say that this is definitely not a currency, because there is no central issuer. And we cannot recognize this as a means of payment," said Oleg Churiy, deputy head of the National Bank of Ukraine, according to a report Friday by the Ukrainian website Financial Club, as translated by Google. Echoing recent comments by senior financial services executives in the U.S., the Ukrainian central banker described bitcoin as a risky investment for consumers and a vehicle for fraud. But he downplayed any systemic concerns about bitcoin and its brethren. "World regulators are not concerned with any threat of cryptocurrency because of their small volume," Churiy said at the Ukranian Financial Forum. "They are concerned only with the fact that people can lose money [by investing in them]. And fraud that can be [committed] with them." The Ukrainian central bank has been warning about the risks of bitcoin for several years, and last month it indicated it may soon regulate the use of cryptocurrencies. Yet at the same time, Ukraine’s government has recently been testing the distributed-ledger technology that bitcoin inspired, in a novel use case: auctioning seized assets. Bitcoin has even figured in Ukrainian politics in recent years, with separatists and other political dissidentsusing the permissionless, borderless system to raise and transfer funds.
New SEC Cyber Unit to Police ICOs and Other DLT 'Violations'
The SEC will target violations involving distributed ledger technology and initial coin offerings (ICOs) as part of a new effort to fight cybercrime. Announced late Monday, the unit will go after "misconduct perpetrated using the dark web," where bitcoin and other cryptocurrencies are used to pay for illicit goods, the SEC said. The team, led by Robert A. Cohen, a former co-chief of the regulator’s market abuse unit, will also focus on two forms of crime that are often associated with, though hardly unique to, the crypto space: market manipulation and the theft of sensitive information. The news comes less than a week after the SEC disclosed that its own database of corporate filings had been hacked. However, the agency said Monday that the new cyber unit "has been in the planning stages for months." Perhaps supporting that claim, the announcement was issued exactly two months after the SEC’s shot across the bow of the ICO market – a July 25 investor bulletin that said U.S. securities law may apply to digital token sales. Still, that bulletin has done little to cool the white-hot market for token sales. More than $600 million in ICOs have been completed since, according to CoinDesk's ICO Tracker. Separate from the cyber unit, the SEC said Monday, it has also created a retail strategy task force that will "develop proactive, targeted initiatives to identify misconduct impacting retail investors." While this task force’s mission was not described as being specifically aimed at the crypto space, the SEC said this new team will "apply the lessons learned from [past securities fraud] cases and leverage data analytics and technology to identify large-scale misconduct affecting retail investors." Those words may come as welcome news to ICO skeptics who claim that many of these sales have preyed on unsophisticated consumers.
Bitcoin Software Wars: The Case Against Replay Attack Protection (1)
The month of September is wrapping up, and the planned November Segwit2x (BTC1) hard fork is steadily approaching. According to the BTC1 roadmap, a block between 1MB and 2MB in size will be generated by miners raising the block size limit at block height 494,784. Over the past few months, Core developers and supporters have been vehemently against the block size increase but are also upset that the Segwit2x working group will not add replay attack protection. The Question Remains — Who Should Add Replay Attack Protection? The Segwit2x hard fork is drawing near, and we may see another blockchain split in the near future. At press time the intention to upgrade the block size to 2MB is backed by 93.8 percent of the entire Bitcoin network hashrate. However, the 2MB increase is not supported by a particular group of Core supporters, and the Core client’s developers are also outspoken against the fork. One of the biggest controversies about the fork is the lack of replay attack protection, and bitcoin proponents have been quarreling about this issue for quite some time. If Segwit2x and the Core software side splits, all transactions, addresses, and balances will be a direct reflection of the legacy chain. This means Unspent Transaction Outputs (UTXO) can be verified by miners on both chains and an ‘attacker, ’ or unknowing investor can spend the “same” funds on both chains. Those who are against Segwit2x believe if the developers do not implement replay attack protection a malicious actor or group can replay transactions deceptively claiming coins on the other chain. In the case with the August 1st Bitcoin Cash hard fork, developers had implemented replay attack protection to avoid this problem. Now, Segwit2x’s working group are not the only ones who can implement replay protection, as there are many who believe Core should add the safeguard. One of the biggest arguments happening across social media is which software should be ‘obligated’ to adding the protection. Further, the Segwit2x developers have addedGavin Andresen’s Opt-in Replay Attack protocol as a means of protection. Segwit2x developers believe the “OP_RETURN” implementation is good enough and that it essentially would block invalid transactions on that particular chain after a split. Jeff Garzik: ‘A Whole Lot of For Thee, But Not For Me Going On’ Now that Opt-in replay has been added to the Segwit2x fork, many bitcoin proponents now believe if Core developers really want a better safeguard — they should be the team to deploy one. Two weeks ago Segwit2x lead developer Jeff Garzik asked bitcoin proponents why Core hasn’t contemplated adding any replay protections. “Any idea when bitcoin Core will add replay protection? There’s a whole lot of ‘For Thee, But Not For Me’ going on,” Garzik asks his Twitter followers. In another conversation over Twitter with Dmitry “Rassah” Murashchik and Blockstream CEO Adam Back, the former Mycelium employee asks Back, “Are you worried that the other chain would win? That’s really the only reason for replay protection.” This is after Back tells his followers that the lack of Segwit2x’s replay protection is “inexcusable.” Daniel Krawisz: ‘You Can’t Win With That Attitude’ Additionally, Daniel Krawisz provided his opinion about the situation in another episode of his Youtube series, “Bitcoin Stuff: Why I’m Against Replay Attack Protection.” Krawisz doesn’t think a bitcoin fork should implement replay protection because it’s a competition and doing so would be too “submissive.” “The only way that a fork of bitcoin can be a good investment is if it’s trying to win — that has to be the goal,” Krawisz latest video explains. “If you are implementing replay protection that’s too submissive. To me, that’s like saying “Yes, you are the ‘real bitcoin’ and I’m just a fork so I will be nice and change the rules to make things more convenient for you,” No that’s not going to work, you can’t win with that attitude.” Krawisz’s opinion reflects his past statements about hard forks and his thoughts about the Bitcoin Cash network and how investors are “Gods” who choose the best protocol in the end. “To me, the bitcoin developers are like the Dynasty and investors are like the mandate from heaven,” Krawisz details. “Sometimes the Dynasty becomes corrupt, and there needs to be new blood, and a new family takes over the empire — Then they have the mandate from heaven. That’s what the investors do, so if bitcoin forks they choose which one wins.” A Fork of a Different Color With a significant amount of business support and a majority of the hashrate, the Segwit2x developers believe the fork will be the ‘true’ bitcoin. As Jeff Garzik stated in the past on the BTC1 Github repo, “The goal of Segwit2x is to upgrade Bitcoin — to be Bitcoin — not create an altcoin.” Whether this happens or not is a different story, and cryptocurrency enthusiasts will watch another historic moment in bitcoin history as this fork will likely be rather different than the one on August 1. What do you think about the hard fork that’s approaching this November? Do you think we will see another network split? Let us know in the comments below. Images via Pixabay, Emaze, the Texas Bitcoin Conference, and Calvin & Hobbes. At news.Bitcoin.com all comments containing links are automatically held up for moderation in the Disqus system. That means an editor has to take a look at the comment to approve it. This is due to the many, repetitive, spam and scam links people post under our articles. We do not censor any comment content based on politics or personal opinions. So, please be patient. Your comment will be published.
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