Day: June 23, 2018

Mining industry overview: Who will prevail in the cryptocurrency mining market in 2018? Top five biggest farms which mine Bitcoin on an industrial scale

At press time, bitcoin is retaining its $6,100 price from yesterday. The currency fell to this position from $6,700 after Japan’s Financial Services Agency (FSA) sent notifications to more than five digital currency exchanges saying that they must heighten their security measures against money laundering after noticing weaknesses in their infrastructures.

Bitcoin has continued to suffer drops over the past week. Its initial slump to $6,700 occurred after hovering at the $7,600 mark for some time, and now the price is just $100 away from its February low. While bitcoin did drop below $6,000 during yesterday’s evening hours, things didn’t last, and the coin quickly pushed itself back up to $6,100, where it has been ever since.

Bitcoin has allegedly lost over 70 percent of its value since December, when it managed to strike near the $20,000 range. However, many analysts are unconcerned about the currency’s recent behavior, saying it’s all part of a downward trend that was predicted long ago.

Digital currency investor Marius Rupsys, for example, has consistently mentioned this idea, stating that while bitcoin pushes steadily lower, the question remains regarding when “big investors will come back.”

“Retail traders might be actively buying and selling, but their volumes aren’t sufficient to move the market significantly to either side,” he comments. “’Wait and see’ is for larger investors, who try to get into crypto assets using OTC.”

He added:

“The volume is going down consistently on all major exchanges (i.e. Bitfinex), so this sell pressure is reducing as less and less people are willing to sell. I am waiting for volume to pick up, which is likely to push the price upwards given sellers sold and new investors want to get in, though it is very difficult to know when that will happen. Therefore, my position is to wait for price action with volume.”

Other analysts, however, aren’t so sure, and predict a case of the old gloom-and-doom for bitcoin should the currency fall any lower. Publisher of the newsletter Crypto Patterns Jon Pearlstone, for example, states:

“If bitcoin breaks the 2018 lows, watch for a spike in volume and a possible fast drop in price towards the $5,000 level.”

Bitcoin is not alone in its demise. The currency is joined by entities like Litecoin – which has struck its lowest point in roughly seven months – and ether, which is currently trading at $479 – about 60 percent lower than its all-time high last December. Overall, the cryptocurrency market has crashed, falling to about $259 billion at press time from $813 billion (almost $1 trillion) last year.

Figures like Phillip Nunn – CEO of the Manchester-based financial firm Blackmore Group – are sticking to their guns that bitcoin will reach new heights by the end of the year. Nunn is certain that bitcoin will strike $60,000 by the time 2018 closes, and despite the massive drops, we can’t help but consider bitcoin’s behavior last year, when it rose from $5,000 to nearly $20,000 in just one month between November and December.

Could the currency do something extraordinary like that again before things tumble further? Nothing’s impossible, we suppose….

Bitcoin Charts by TradingView

Exchange hacks are becoming the new normal. Just two weeks after Conrail’s $37.2 million hack, it was time for Bithumb’s $31 million hack, with the difference being that Bithumb is the world’s sixth largest cryptocurrency exchange based on CoinMarketCap data, far larger than Coinrail. Last December, another South Korean exchange called Youbit filed for bankruptcy after suffering hacks. Of course, these hacks are still much smaller than the infamous Mt. Gox hack. With such a terrible track record, why would anyone still work with crypto exchanges?

Bitcoin, the world’s first cryptocurrency, was a direct response to the Great Recession of 2008; as central bodies collapsed, it offered a peer-to-peer, independent alternative with which to transfer funds. Blockchain is all about decentralization and removing the intermediaries which profit off one’s earnings and impose their biased will. But by removing them, we are also removing the protection they offer.

What Are Crypto Exchanges Used For?

The first notable Bitcoin “transaction” was the famous pizza purchase, when 10,000 Bitcoins were used to buy two pizzas. There has to be demand before money has any value. In 2010, it took 10,000 Bitcoins to convince someone to hand over two pizza boxes.

This brings us to another fundamental aspect of transactions: they always have two sides. Whether you want to jump on the crypto wagon or cash out, there has to be someone who wants to do the opposite. Bitcoin lets you transact peer-to-peer, but how do you find that other person? That is where crypto exchanges come in, and they are especially valuable to day traders.

Crypto exchanges also take care of storing your money, much like a bank would. We’ve all heard stories of people who lost the passwords to their fortunes, or lost or erased their hard drives, and were never able to recover the lost funds. That never happens with crypto exchanges where you can recover your password or use identity verification.

How Much Money Do Exchanges Make?

The short answer: tons. According to Bloomberg, the top 10 are generating as much as $3 million in fees a day, which translates to more than $1 billion per year. They earn money from transaction fees, which average 0.2%. In the case of the infamous Mt. Gox hack in which 650,000 BTC were stolen, some people even suspected an inside job by the employees of Mt. Gox. As for the Bithumb hack, the exchange is so big that they promised to cover the losses.

Hacking Bitcoin

To be clear, Bitcoin has never been hacked. Hacking Bitcoin would require a 51% attack, which is nearly impossible due to Bitcoin’s large network and processing power. A much easier alternative is to steal one’s private keys.

In Bitcoin, every account holder has a private key. It works like a password and is extremely hard to guess or crack. The person in charge of one’s private key has full control over that account. And because of the way Bitcoin works, once the money is out of your wallet, it is out for good (no centralized bodies, remember?) Thus, safekeeping private keys is very important. For this reason, we have the concept of cold wallets and hot wallets.

You typically store your cryptos in a ‘wallet’. When you want to use your wallet, you typically need to connect it to the internet to conduct an online transaction. Hot wallets are constantly connected to the internet, making them ideal for daily transactions. But your private keys also reside in this wallet, and thus they are under constant threat of being hacked.

Cold wallets, on the other hand, are totally disconnected from the internet. They are a safe way to store your investments for the long term. To withdraw money from your cold wallet, you might use a USB stick to sign the transaction in the cold wallet, and then transfer that signed transaction to the internet. This is also how Bithumb responded; after becoming aware of the hack, they moved funds to their cold wallets, preventing further breaches but also freezing active transactions.

Why are crypto exchanges such a lucrative target? They hold a lot of money and thousands of private keys. Most of them, unfortunately, have inadequate security measures. Breaking into one is much more profitable than breaking into an individual’s computer. Also, what the hackers steal has immediate value.

The End of Crypto Exchanges?

Despite Bitcoin’s (and blockchain’s) promise of decentralization, it seems we have ended up with another form of centralization – one that brings back everything blockchains promised to avoid, just in other ways. The government of South Korea is going to impose harder regulations on the crypto exchanges and regulate them like banks. What we can hope for are decentralized exchanges.

Unlike centralized exchanges, decentralized exchanges aren’t coordinated by one entity. Decentralized exchanges do not hold customers’ funds – they only serve as a matching platform for trade orders. Traditionally, they have also been harder to use and less popular than their centralized counterparts. How this competition will work out remains to be seen. But if you want centralized, just go with fiat.

According to a statement issued by the trustee in Mt. Gox’s bankruptcy case, criminal bankruptcy proceedings have temporarily been paused and civil rehabilitation will commence. Customers will eventually be repaid some of the bitcoins they lost, and bitcoins that are still being held by Mt. Gox won’t be liquidated any further.

The collapse of Mt. Gox in 2014 is perhaps the most infamous cryptocurrency exchange hacking incident in history, since it was the first major Bitcoin exchange to collapse and involved the disappearance of 850,000 bitcoins worth USD 473 million at the time. In the present day, this amount of bitcoins is worth over USD 5 billion. 200,000 bitcoins were later ‘found’ in an early Mt. Gox wallet that was used before 2011, providing some funds for compensating customers. These funds have been controlled by a trustee appointed by the court, and none of it has been given to customers yet.

Mt. Gox’ customers have until 22 October 2018 to submit their claims; the old claims submitted during bankruptcy court are not valid for the civil rehabilitation process. Repayments won’t begin until after February 2019 when the proposed rehabilitation plan is submitted, and there is no set date for repayments as of yet. The Mt. Gox nightmare has been dragging on for over 4 years now, most customers probably have accepted that their bitcoins are gone. There might be some good news after all though; since this is a civil rehabilitation the remaining 137,891 bitcoins held by the trustee will eventually be refunded to customers instead of being converted to cash. These bitcoins are worth USD 848 million currently.

The news that bitcoins won’t be liquidated any further is also positive news for the Bitcoin market. The trustee Nobuaki Kobayashi sold USD 400 million of Bitcoin and Bitcoin Cash from December 2017 through February 2018, giving him the title ‘Mt. Gox Bitcoin Whale’. Some blame him for the end of the Bitcoin rally and the beginning of a steep decline, but he is adamant that his selling did not affect cryptocurrency market prices. Even though mathematically his dumping of bitcoins shouldn’t have impacted market prices much, the speculation caused by the selling possibly had an impact since people are monitoring Mt. Gox’ balance.

At the current value of Bitcoin, there is roughly USD 1.25 billion available for repayments, which is more than double the USD value of the 850,000 bitcoins Mt. Gox announced were missing in 2014. This is enough money to repay all customers and creditors in terms of USD with interest. Of course in terms of bitcoin repayments will be far short. Regardless, the final outcome of the Mt. Gox bankruptcy looks to be far better than expected thanks to the massive rise in Bitcoin’s price.

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Electricity in Texas is about to get cheaper thanks to Public Utilities Commission of Texas’ (PUCT) approval of a REP license to company Grid+, writes Bitrates.

The Grid + token, once issued will reportedly reduce electricity costs to the customer using the Ethereum blockchain, meaning consumers will now be able to access wholesale energy markets.

As one commentator observed before blockchain became the focus of many energy companies, “Solar technology and battery storage are important. But what has been missing is a technology on which to organize, coordinate and secure a true peer-to-peer power grid.”

It appears that this is now happening with more regularity, with companies employing technology to pass on financial befits to consumers. As most homeowners, businesses, governments, and other organizations get their power from regulated utilities at regulated prices, many are looking for new, cheaper, more efficient, alternatives.

Grid+ promises their customers such an option by tapping into blockchain and increasing efficiency and costs, also claiming that they can provide greener energy using the Ethereum blockchain.

Texas has been announced as the company’s initial target, launching their decentralized system in the second quarter of this year. If successful, they hope that other companies in the energy sector will follow suit and adopt their own blockchain solutions.

The advantage of utilizing the blockchain over existing system means that companies need not go through a central authority, and can bypass intermediaries, saving significant dollars on energy bills. Grid+ is not an isolated company offering energy solutions, as this market has now become quite buoyant, particularly in Europe where a new wave of innovative ideas are originating using new technology in both non-renewable and renewable markets.

Solarplaza research, conducted earlier this year, showed that out of the 90 companies involved, over 50 percent of blockchain projects working in the energy space were European based companies, according to Cointelegraph. However, the US remains at the top in this field with projects such as the LO3 Energy project, developing the Brooklyn Microgrid, thereby enabling customers to buy electricity through their platform.

Also, cryptocurrencies have been developed so that customers can pay for their energy using digital currency, such as in Holland where company Spectral Energy developed the Juliette coin so that local residents in Amsterdam could use it to pay their electricity bills.

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Cardano co-founder Charles Hoskinson: Wall Street’s interest in crypto once regulation is sorted will bring in “tens of trillions of dollars”

American multinational technology company Intel has partnered with Enigma on research and development of privacy in computational technologies. Announcing the partnership in a blog post, Enigma said that it was excited to work with Intel as it seeks to advance its protocol and privacy technologies for public blockchains. The partnership comes a few weeks before Enigma launches its testnet and, later this year, its mainnet. Enigma will have access to Intel’s Software Guard Extensions (SGX) which will become central to its privacy-focused technologies, the company revealed.

Partnering to Address Blockchain’s Biggest Challenges

Enigma addresses two key challenges facing blockchain technology: privacy and scalability. Usually, various projects have focused on one while neglecting the other. Promising to turn ‘smart contracts’ into ‘secret contracts’, Enigma’s protocol withholds the input data in ledger transactions from the nodes that execute the code. This protects the data while allowing the data to be computed over, creating a scalable and secure solution.

The vice president of Intel’s software and services group, Rick Echevarria, committed to working with Enigma. The tech giant will work with Enigma to integrate Enigma’s unique privacy protocol to private smart contracts on the Ethereum public ledger, he stated. Echevarria is expected to highlight Enigma’s solutions during Cyber Week 2018 in Tel Aviv, where he will deliver a keynote speech.

Echevarria was full of praise for Enigma’s privacy solutions:

Intel is committed to enabling business transformation by shortening the time-to-value from blockchain implementations and working with the industry to address privacy, security and scalability challenges. Enigma’s protocol approach is helping solve the challenges on public blockchain networks and improving data privacy and smart contract security.

Intel has become increasingly involved in the blockchain industry, seeking to leverage its considerable experience in the tech industry to develop solutions to some of the industry’s challenges. It is one of the founding members of the SAP Industry Blockchain Consortium, which is composed of industry leaders who seek to use their experience and capital to solve industry challenges and bring blockchains into being. Other founding members include Hewlett Packard, Singaporean electronics company Flex, American semiconductor manufacturer Amkor Technology, and France’s Airbus.

Intel is also behind the Tel Aviv Stock Exchange’s Blockchain Securities Lending, a central securities lending platform in Israel that’s the first of its kind in the world. Intel partnered with Accenture and Israeli fintech company The Floor to develop the platform, which will serve as a one stop shop for securities lending activities while greatly reducing the time taken.

The partnership is just the latest in Enigma’s consistent efforts to work with innovative companies which aim to solve the world’s challenges through decentralized technology, the startup noted. Having sprung from an MIT student thesis in 2015, the project has grown greatly in the years since. Last year, Enigma sold 75 million ENG tokens, raising $45 million from 5,000 contributors. And its belief in the need for privacy in blockchain technology is as strong now as it was when the project started, stating in a March blog post:

Blockchains without privacy are useless. Smart contracts without privacy are useless. If these technologies cannot work without privacy, then new privacy technologies are the truly useful innovations.

The time to take a stand on cryptos for US House members has come. Those who have bashed cryptos in public but have secretly been investing in them will now be outed, thanks to a new memo issued by the House Ethics Committee. The committee announced that it had decided to consider cryptos as “other forms of securities” for the purpose of financial disclosure. Members of Congress who own cryptos valued at $1,000 or more will be required to include this information on their annual financial disclosure statements. The memo also laid out policies regarding the involvement of members in ICOs as the country awaits the SEC’s assessment on how the prevailing securities laws apply to them.

Mining Included as Well

Cryptocurrencies are still a new industry, and existing oversight bodies have yet to come up with comprehensive policies to govern the industry, the memo stated. The SEC has indicated that some cryptos are securities and hence under its jurisdiction. The CFTC has categorized some as commodities, placing them under its regulatory jurisdiction, while the IRS has categorized them as properties for federal tax purposes.

The committee, however, settled on cryptos being forms of securities and therefore ordered all members who have purchased, sold, exchanged or currently own cryptos valued at $1,000 or more to disclose the ownership on their annual financial disclosure statements. The disclosures extend to purchases made by the members’ spouses as well, which must be reported no later than 45 days after each transaction.

The memo also prohibited members from participating in initial coin offerings “in a manner other than is available to members of the public generally.” The SEC is currently reviewing ICOs to assess how the existing securities laws apply to them, and currently, it’s unclear which ICOs will fall under the regulatory jurisdiction of the SEC. Any House member who is considering engaging in an ICO was advised to consult the committee for guidance before doing so.

Insider trading of cryptocurrencies was also strictly prohibited by the committee. The SEC has yet to issue a definitive guide on how insider trading applies to cryptos, but the committee made it clear that in spite of the ruling, standards of conduct still apply to personal financial transactions. Members may not use any information gained from their congressional roles to benefit from trading or receive compensation for exerting influence using their positions.

The memo also covered crypto mining, stating that any earnings accrued fall under “outside income earned.” This is income that is earned as compensation for personal services rendered. Mining is one such service, and thus the cryptos earned will be subject to the set limit which stands at $28,050. This income will also be subject to financial disclosure. Those contemplating trying their hand at mining were advised to consult the committee first for guidance.

This is the first comprehensive document that has set rules for members’ involvement in the crypto industry. Congress hasn’t been very friendly towards the industry in the past, and the crypto community can’t wait to find out which members were engaging in the trading of digital currencies in private while bashing them in public.

Entrepreneurs and developers behind four different blockchain startups can add their names to the list of Thiel Fellowship awardees.