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Bitcoin Regulation: Is Bitcoin Legal in the US? Cryptalker
[FULL ANALYSIS] Bitcoin exchanges and payment processors in Canada are now regulated as Money Service Businesses
Hello Bitcoiners! Many of you saw my tweet yesterday about the Bitcoin regulations in Canada. As usual, some journalists decided to write articles about my tweets without asking me for the full context :P Which means there has been a lot of misunderstanding. Particuarly, these regulations mean that we can lower the KYC requirements and no longer require ID documents or bank account connections! We can also increase the daily transaction limit from $3,000 per day to $10,000 per day for unverified accounts. The main difference is that we now have a $1,000 per-transaction limit (instead of per day) and we must report suspicious transactions. It's important to read about our reporting requirements, as it is the main difference since pretty much every exchange was doing KYC anyway. Hopefully you appreciate the transparency, and I'm available for questions! Cheers, Francis ********************************************* Text below is copied from: https://medium.com/bull-bitcoin/bitcoin-exchanges-and-payment-processors-in-canada-are-now-regulated-as-money-service-businesses-1ca820575511
Bitcoin is money, regulated like money
Notice to Canadian Bitcoin users
If you are the user of a Canadian Bitcoin company, be assured that:
These regulations only target virtual currency exchanges and virtual currency transmitters (e.g. payment processors, custodial wallets).
No action on your part is currently required. It is businesses that have to comply, not users.
You may notice that the exchange service you are using has change its transactions limits or is now requiring more information from you. You can stop reading this email now without any consequence! Otherwise, keep regarding if you are interested in my unique insights into this important topic!
Background on regulation
Today marks an important chapter for Bitcoin’s history in Canada: Bitcoin is officially regulated as money (virtual currency) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act of Canada (PCMLTFA), under the jurisdiction of the Financial Transaction and Reports Analysis Centre of Canada (FINTRAC). This is the culmination of 5 years of effort by numerous Bitcoin Canadian advocates collaborating with the Ministry of Finance, Fintrac and other Canadian government agencies. It is important to note that there is no new Bitcoin law in Canada. In June of 2014, the Governor General of Canada (representing Her Majesty Queen Elizabeth II) gave royal asset to Bill C-31, voted by parliament under Stephen Harper’s Conservative government, which included amendments to the PCMLTFA to included Bitcoin companies (named “dealers in virtual currency”) as a category of Money Service Businesses. Thereafter, FINTRAC engaged in the process of defining what exactly is meant by “dealing in virtual currency” and what particular rules would apply to the businesses in this category. Much of our work was centred around excluding things like non-custodial wallets, nodes, mining and other activities that were not related exchange or payments processing. To give an idea, the other categories that apply to traditional fiat currency businesses are:
Foreign exchange dealing
Remitting or transmitting funds
Issuing or deeming money order or similar negotiable instruments
When we say that Bitcoin is now regulated, what we mean is that these questions have been settled, officially published, and that they are now legally binding. Businesses that are deemed to be “dealing in virtual currency” must register with FINTRAC as a money service business, just like they would if they were doing traditional currency exchange or payment processing. There is no “license” required, which means that you do not need the government’s approval before you can operate a Bitcoin exchange business. However, when you operate a Money Service Business, you must register and comply with the laws… otherwise you risk jail time and large fines.
What activities are regulated as Money Service Business activity?
A virtual currency exchange transaction is defined as: “an exchange, at the request of another person or entity, of virtual currency for funds, funds for virtual currency or one virtual currency for another.” This includes, but is not limited to:
Bitcoin trading platforms (orderbooks)
Bitcoin exchange platforms (fixed-rate)
Selling or buying Bitcoin OTC professionally
Crypto-to-crypto trading (orderbook, fixed-rate or OTC)
Notice to foreign Bitcoin companies with clients in Canada
Regardless of whether or not your business is based in Canada, you must register with FINTRAC as a Foreign Money Service Business, if:
You direct your MSB services at persons or entities in Canada
The regulation of Bitcoin exchange and payment services has always been inevitable. If we want Bitcoin to be considered as money, we must accept that it will be regulated like other monies. Our stance on the regulation issue has always been that Bitcoin exchanges and payment processors should be regulated like fiat currency exchanges and payment processors, no more, no less. This is the outcome we obtained. To comply with these regulations, we are implementing a few changes to our Know-Your-Customer requirement and transaction limits which may paradoxically make your experience using Bull Bitcoin and Bylls even more private and convenient!
The bad news
We are adding per-transaction limits in addition to daily volume limits.
The per-transaction limit for accounts with limited verification is $1,000 (previously $3000). To conduct transactions over $1,000 you must get your account verified.
We require users to provide their Date of Birth as a requirement to change their verification status to “Verified”.
We require users to provide their Occupation as a requirement to change their verification status to “Verified”.
The good news
We are increasing the daily volume limit from $3,000 to $10,000 for users that have the “limited” account verification status. Users with limited account verification can do multiple transactions as long as they are each below the $1,000 threshold and as long as they don’t exhibit suspicious behavior (see details below).
Identity documents will no longer be required for users that can be identified using their credit files. They will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer.
Connecting bank accounts to Bull Bitcoin using the flinks bank verification software will no longer be required for users that can be identified using their credit files. This will only be required where identification using credit file lookup was inconclusive. This change will take effect later this summer
The user’s KYC info (name, address, date of birth and occupation)
Suspicious transaction reporting
Satoshi Portal is required to make suspicious transactions report to FINTRAC after we have detected a fact that amounts to reasonable grounds to suspect that one of your transactions is related to the commission or attempted commission of a money laundering offence or a terrorist activity financing offence. Failure by Satoshi Portal Inc. to report a suspicious transaction could lead to up to five years imprisonment, a fine of up to $2,000,000, or both, for its executives. We are not allowed to share with anyone other than FINTRAC, including our clients, the contents of a suspicious transaction report as well as the fact that a suspicious transaction report has been filed.
What is suspicious activity?
Note forbitcoinca: this section applies ONLY to Bull Bitcoin. Most exchanges have much stricter interpretation of what is suspicious. You should operate under the assumption that using Coinjoin or TOR will get you flagged at some other exchanges even though it's okay for Bull Bitcoin. That is simply because we have a more sophisticated understanding of privacy best practices. Identifying suspicious behavior is heavily dependent on the context of each transaction. We understand and take into account that for many of our customers, privacy and libertarian beliefs are of the utmost importance, and that some users may not know that the behavior they are engaging in is suspicious. When we are concerned or confused about the behaviors of our users, we endeavour to discuss it with them before jumping to conclusions. In general, here are a few tips:
Don’t provide false of misleading information. We will know right away if your date of birth, address and name don’t match.
Don’t try to exploit loopholes in the KYC process.
Don’t transact on behalf of someone else without telling us.
Be cooperative with customer support.
Here are some examples of behavior that we do not consider suspicious:
Coinjoin or other Bitcoin privacy techniques.
Using VPNs, TOR or VOIP phones.
Asking questions about, or criticizing, our privacy policies.
Talking negatively about banks or government.
Here are some example indicators of behavior that would lead us to investigate whether or not a transaction is suspicious:
Making statements about being involved with criminal activity.
Saying you don’t want the government to know about your transactions.
Asking advice about concealing source of funds or tax avoidance.
Funding your account from a bank account that is not in your name.
Conducting transactions on behalf of someone else without telling us.
Trying to falsify your identity or impersonating someone else.
Making multiple bill payments to the same recipient, or multiple Bitcoin purchases, in a way which seems structured specifically to avoid the $1,000 transaction amount KYC threshold.
Continuing to perform transactions that are unnecessarily complex, inefficient and not cost-effective after having been advised otherwise by our staff.
What does this mean for Bitcoin?
It was always standard practice for Bitcoin companies to operate under the assumption they would eventually be regulated and adopt policies and procedures as if they were already regulated. The same practices used for legal KYC were already commonplace to mitigate fraud (chargebacks). In addition, law enforcement and other government agencies in Canada were already issuing subpoenas and information requests to Bitcoin companies to obtain the information of users that were under investigation. We suspect that cash-based Bitcoin exchanges, whether Bitcoin ATMs, physical Bitcoin exchanges or Peer-to-Peer trading, will be the most affected since they will no longer be able to operate without KYC and the absence of KYC was the primary feature that allowed them to justify charging such high fees and exchange rate premiums. One thing is certain, as of today, there is no ambiguity whatsoever that Bitcoin is 100% legal and regulated in Canada!
Link to our website:https://block.co/blockchain-in-the-public-sector-webcast-qa/ Block.co fourth webcast titled "Digital Transformation of the Public Sector & The Upcoming Legislation of Blockchain Technology in Cyprus” was an immense success. We gathered some of the best experts in the field, Deputy Minister Kyriacos Kokkinos, Jeff Bandman, Steve Tendon, and Christiana Aristidou to share their experience and discuss with us the latest updates regarding Blockchain in the Public Sector. In its fourth series of webcasts, Block.co gathered 281 people watching the event from 41 different countries, for a two-hour webcast where guests answered participants’ questions. Following the impressive outcome and response we received from the audience, Block.co’s team has done its best to address all the questions for which public information is available. Below is a list of the questions that were made and were not answered due to time constraints during the webcast. For the remaining questions from our audience, the team will reach out to our distinguished guests to receive their comments and feedback. Please note, that the below information is only for informational purposes! Question 1: How can asset tracing be accomplished with bitcoins and cryptocurrency? And how can this be regulated? Block.co Team Answer: Digital Asset tracing may be accomplished with cryptocurrency intelligence solutions such as Cipher Trace and the ICE cryptocurrency intelligence program. FATF (Financial Action Task Force) embarked on a program of work from summer 2018 to June 2019 to strengthen and update the provisions dealing with virtual assets and virtual asset service providers. FATF updated Recommendations in October 2018 and Guidance in June 2019 include several new obligations that apply to VASPs. The so-called “Travel Rule” FATF announced in October 2019 agreed on the assessment criteria for how it will assess countries’ compliance with the new global standards. Under the Travel Rule, the transmitter’s financial institutions must include and send information in the transmittal order such as Information about the identity, name, address, and account number of the sender and its financial institution Information about the identity, name, address and account number of the recipient. The ”Travel Rule” is effectively being applied to cryptoasset transfers when there is a virtual asset service provider (VASP) involved. The scope of focus has broadened from “convertible” virtual assets to any virtual asset. Countries should make sure businesses can freeze crypto wallet or exchange accounts for sanctioned individuals. Question 2: Which kind of software or technical knowledge is required to develop cryptocurrency? Block.co Team Answer: It depends on the type of cryptocurrency you wish to create, as well as the preferred functionality and features, and characteristics of the token or coin (i.e. will it be pre-mined, what type of hashing or cryptographic algorithm will be used (i.e. proof of work (POW) or proof of stake (POS) or a hybrid of both), etc. Likewise, it is useful to utilize a programming language that is broadly used and supported by a vast and active development community; more data could be found here: more information could be found here: top programming languages in 2015/2016, published by IEEE here, and TIOBE. Hypothetically, you can utilize any programming language to make cryptocurrency digital money, however, the most widely recognized are C, C++, Java, Python, Perl. The beauty of cryptocurrencies is that you can literally have access to the entire Bitcoin and Ethereum open-source programming scripts, and create your alternate coin (altcoin). Question 3: Hello all, I want to know about the current status of the European Union Blockchain initiative in currency or public identity. Block.co Team Answer: Please refer to the European Services Blockchain Infrastructure (EBSI) website. Question 4: Mining is also the process of confirmation of transactions in the Bitcoin Blockchain. What is the process of confirmation of transactions in the Blockchain of an Organization? How do we call it? Block.co Team Answer: That would depend on the specific consensus algorithm used for the confirmation of transactions. The consensus algorithm is part of the blockchain protocol that defines the rules on how consensus is reached on that blockchain. In order to participate, entities on the blockchain must obey and follow the same consensus algorithm. Make sure to check our glossary for more information. Question 5: How does a small business implement blockchain into its current non-blockchain software systems? Who do they hire to install it? Block.co Team Answer: It is easy when there are APIs to connect the various software. For more information, you can check Block.co API. Question 6: What is your opinion on digitizing developing economies like India by using AI and blockchain? Block.co Team Answer: Watch a very interesting webinar on the matter by Mr. Prasanna: Question 7: Blockchain technologies have been around since 2008. What would you say has been the biggest obstacle in widespread adoption? Block.co Team Answer: In our opinion, the biggest obstacles are volatile cryptoasset prices, complicated UIs, undefined blockchain technology standards. Moreover, the legislation around the technologies is still now being developed and does not offer legal certainty for broader adoption. Question 8: Limitations to Blockchain Usability in the Public Sector? Block.co Team Answer: Blockchain in the Public Sector, like any other innovative concept with big potential, cannot be a solution to every problem. Users and developers are still figuring out technological and managerial challenges. From a technological perspective, some aspects such as platform scalability, validation methods, data standardization, and systems integration must still be addressed. From a managerial point of view, the questions include business model transformation, incentive structure, and transaction scale, and maturity. Read more here. Question 9: How can these blockchain initiatives be practical for the African context Block.co Team Answer: As long as the internet infrastructure is in place, these blockchain initiatives may have the same benefits for the African region. Question 10: What are some compelling use cases you’ve seen lately, and how do they serve to further legitimize blockchain as a solution? Block.co Team Answer: You can see the global trends from all around the world when it comes to further legitimization as a solution, with China leading the way. Read more here. Question 11: How does digital currency manage the issue of money laundering? Block.co Team Answer: Depends under which context you are looking at the term digital currency. A digital currency usually refers to a balance or a record stored in a distributed database, in an electronic computer database, within digital files or a stored-value card. Some examples of digital currencies are cryptocurrencies, virtual currencies, central bank digital currencies (CBDCs), and e-Cash. The Financial Action Task Force (FATF) is an intergovernmental body established in 1989 on the initiative of the G7 to develop policies to fight money laundering. Since 2001 FATF is also looking into terrorism financing. The objectives of FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its Recommendations through “peer reviews” (“mutual evaluations”) of member countries. It is the global watchdog for anti-money laundering & counter-terrorist finance. In June 2019, it updated its guidance paper for Virtual Assets Service Providers (VASPs) regarding the transfer of digital assets. There was an insertion of a new interpretive note that sets out the application of the FATF Standards to virtual asset activities and service providers. To apply FATF Recommendations, countries should consider virtual assets as “property,” “proceeds,” “funds,” “funds or other assets,” or other “corresponding value.” Countries should apply the relevant measures under the FATF Recommendations to virtual assets and virtual asset service providers (VASPs). Read more about the FATF recommendations here). https://preview.redd.it/58tt7mt1pld51.png?width=1920&format=png&auto=webp&s=d24811c4864ebf02cb9aacc8d6b877a1fbc3756b Question 12: To what extent can blockchain be used to improve the privacy of healthcare? Block.co team Answer: Please refer to our previous webcast, blog, and articles for more information. Question 13: What is Blockchain technology in Shipping? Block.co team Answer: The shipping sector has been in the hold of phony maritime institutes charging exorbitant fees via agents, issuing certificates to candidates who do not have the imperative attendance, or those candidates who just pay the fees for the course and ask for the certificate. In view of these fake accreditations, the possibility exists that someone could be harmed or killed, and we could face any number of potential ecological disasters. Having the option to easily verify the genuine origin of a certificate by an approved maritime center is foremost for shipping companies to fast-track their operation and streamline their labor. Question 14: Different uses of blockchain other than cryptocurrency? Block.co team Answer: Please refer to our blog and glossary. Question 15: Upcoming trends in Blockchain concerning Advertising, Marketing, and Public Relations in the Public and Private sectors. Block.co Team Answer: Regarding the application of blockchain technology to media copyrights, please see Block.co use case proposal during the Bloomen Ideathon. https://preview.redd.it/48zc8j38pld51.png?width=3622&format=png&auto=webp&s=79987d1dc7eb8d0c8e32dbce8680b17801d0d244 Question 16: How to create a decentralized blockchain? Block.co Team Answer: An excessive number of individuals feel that blockchain is some supernatural innovation that makes up a decentralized system. In truth, this innovation only enables decentralization. Which means, it permits cryptocurrency to work in a decentralized way. Yet, it doesn’t give any guarantees that it will work that way. Along these lines, it’s really, some outer variables that decide genuine decentralization. Technology, itself never really guarantees it. That is the reason it’s a mistake to expect that if it’s a blockchain — it’s decentralized. From a technical perspective, both blockchains, centralized, and decentralized are comparative, as they take work on distributed peer to peer to network. This implies every node is individually responsible to verify and store the shared ledger. Both Blockchains utilize either a proof-of-work or proof-of-stake mechanisms to make a solitary record and they have to give upper and lower limits on the security and productivity of the system. For more information please refer to our infographic. Question 17: Dubai government Blockchain implementation progress? Block.co Team Answer: You can see more information here. Question 18: How Blockchain and IoT can be integrated to secure data being transmitted through IoT devices. Block.co Team Answer: You can read more about it here. Question 19: How can the Nigerian government use Blockchain to effectively implement its existing launched eGovernment master plan? Block.co Team Answer: Perhaps it can draw its attention to the initiatives of Dubai, Estonia, and Malta to prepare an implementation framework. Question 20: What impact is blockchain going to have in today world of business especially in the financial sector Block.co Team Answer: Please refer to our recent article titled Benefits of Blockchain Technology in the Banking Industry. Question 21: Is Blockchain Technology affect individuals? Block.co Team Answer: The social effect of blockchain innovation has just started to be acknowledged and this may simply be a hint of something larger. Cryptocurrencies have raised questions over financial services through digital wallets, and while considering that there are in excess of 3,5 billion individuals on the planet today without access to banking, such a move is surely impactful. Maybe the move for cryptocurrencies will be simpler for developing nations than the process of fiat cash and credit cards. It is like the transformation that developing nations had with mobile phones. It was simpler to acquire mass amounts of mobile phones than to supply another infrastructure for landlines telephones. In addition to giving the underprivileged access to banking services, greater transparency could also raise the profile and effectiveness of charities working in developing countries that fall under corrupt or manipulative governments. An expanded degree of trust in where the cash goes and whose advantages would without a doubt lead to expanded commitments and backing for the poor in parts of the world that are in urgent need of help. Blockchain technology is well placed to remove the possibility of vote-apparatus and the entirety of different negatives related to the current democratic procedure. Obviously, with new innovation, there are new obstacles and issues that will arise, yet the cycle goes on and those new issues will be comprehended with progressively modern arrangements. A decentralized record would give the entirety of the fundamental information to precisely record votes on an anonymous basis, and check the exactness and whether there had been any manipulation of the voting procedure. Question 22: As Andreas Antonopoulos often says in his MOOC: ”is a blockchain even needed?” Ie. Are there better methods? Block.co Team Answer: In combination with nascent technologies, IoT, distributed computing, and distributed ledger technologies, governments can provide inventive services and answers for the citizens and local municipalities. Blockchain can provide the component to create a safe framework to deal with these functions. In particular, it can provide a safe interoperable infrastructure that permits all smart city services and capacities to work past presently imagined levels. On the off chance that there were better techniques, they would be researched. Question 23: Would any of this be also applicable to the educational sector (as part of the general public sector), and if so in which way? Block.co Team Answer: Yes, please refer to our Webcast on Education and our blog post. Question 24: Will we be able to get a hold of this recording upon completion of the meeting? Block.co Team Answer: Yes, here is a link to the recording of our webcast Blockchain in the Public Sector. Question 25: Was wondering if there are any existing universal framework in governing the blockchain technology? Block.co Team Answer: The short answer is NO, as this framework is currently being prepared in collaboration with the various Member States. We would like to thank everyone for attending our webcast and hoping to interact with you in future webinars. If you would like to watch the webinar again, then click here! For more info, contactBlock.codirectly or email at [[email protected]](mailto:[email protected]). Tel +357 70007828 Get the latest from Block.co, like and follow us on social media: ✔️Facebook ✔️LinkedIn ✔️Twitter ✔️YouTube ✔️Medium ✔️Instagram ✔️Telegram ✔️Reddit ✔️GitHub
As I was strolling around the forums I spit my coffee today. Some people in crazytown forums actuall wants Blizzard to make a cash shop where you can buy an item and basically customize its mods. Wich is basically equivalent to Satoshi Nakamoto the bitcoin founder printing bitcoins as he sees fit and then selling them to you. If satoshi wants bitcoins he needs to mine them like everybody else. Satoshi wrote the arbiting paper that makes this sytem work and be legitimate by the principe of "proof of work". All this in the hopes of "stopping the chinese farmer", or any other seller here in America. Well if the item is found, and it took years of farming and associated energy cost, it is his item. You need to accept that. What Blizzard can do, is that it if wants to be an intermediate and facilitate the transaction, and thereby comply with all rules and regulations associated with being a money transmitter. Wich Jay Wilson was amateurishly unrepared for. Had he really been up to the task, and smart about virtual currencies, he would have seen things ahead of the curve and prepare for this, as it was easy to predict back then for somebody that was following the news. He could have coupled his product to the fever of virtual currencies and increase revenues tenfold, if the game would have been up to par with the currency itself, and the system robust and dupe-free. Alot of crappy shitcoins backed by nobodies and air made billions since that time, Blizzard could have even subverted and owned that whole cryptocurrency idea of a virtual currency/rarity if it had the right people at the helm, and even compete with Bitcoin. So what happened was :pump fake to the people who like trading in D2, pump fake to the people who like PvPing in D2, make it bad, have them leave, create a vacuum, have the D3 fans aggregate themselves so they can subvert the Diablo games and call themselves Diablo fans. Never settle yourself in any camp in particular, find youself no man's land. Get your legs stuck in crybaby cement. Congrats Jay Wilson, well done. Your lack of foresight and lack of follow through cost the company 10's of billions.
The 1MB simply can't survive, and signalling for Segwit2X is a trap for other miners
In this post, I set out a simple sequence of logic which shows that firm believers in 1MB blocks are almost certainly going to lose their investment in Bitcoin. I’ll also show that choosing to mine Segwit2X is a higher risk strategy than mining Bitcoin Cash, and that BCH is almost certain to be the dominant chain. I will only use simple sentences, with links to evidence to support my statements.
At this point, it’s worth taking a breath, and seeing where we are... We have a cryptocurrency with incredible brand loyalty and value, but which is also relying on technology that is starting to weaken in comparison to competitors. Cryptocurrency investors have already proven that they’re willing to invest in coins which are not Bitcoin. The company who wrote the scaling roadmap for Bitcoin naturally have an incentive to scale Bitcoin with one of their own products. They haven’t managed to deliver this product. Even if they do, it’s been proven to not work as originally advertised, and will actually increase centralisation and exposure to regulation. There currently isn’t a visible or viable scaling solution for the Segwit Bitcoin 1MB chain. This brings us to what is happening over the next ten days.
In about 10 days, Bitcoin will fork into the Segwit1X and Segwit2X chains), with Segwit2X offering a small capacity upgrade (2MB blocks)
So we now have three cryptocurrencies, which are competing for the same hashrate. What do miners do? We know that miners are selfish - they only want to make billions, and protect the millions they’ve already invested. Miners will make the choice that makes them the most money. This is not an attack, it is how Bitcoin was designed. Blockstream are behaving in the same way; they’re trying to shape Bitcoin into using the technology which will make them the most money. With the upcoming fork, miners (providers of hashrate) have four choices. They can:
Dedicate their hash rate to the 1MB Segwit Bitcoin chain (Segwit1X)
Dedicate their hash rate to the 2MB Segwit Bitcoin chain (Segwit2X)
Dedicate their hash rate to Bitcoin Cash (BCH)
Split their hash rate across two or three of the chains
At this point, you have to put yourself in a miner’s shoes, and ask yourself what you’d do. You’ve sunk millions into this, and could potentially make billions. Which choice do you make?
If some miners mine Segwit1X, and some miners mine Segwit2X, both of these chains suffer a significant reduction in hashrate, and lose capacity.
If miners split their hashrate across several chains, both Segwit1X and Segwit2X suffer a reduction in hashrate, and lose capacity.
The only chain which can survive a significant reduction in hashrate is Bitcoin Cash.
For either Segwit1X or Segwit2X to survive, they require a majority of hashrate in order to ensure that the chain has enough capacity to meet demand. If it doesn’t have enough capacity, investors will (as they have in the past) invest in other cryptocurrencies instead. As a miner, you cannot directly control whether a majority happens or not, because the other miners are your competitors. You can’t directly control them. Signalling intent is one way of trying to work out what everyone else is doing, to try and ensure alignment and consensus before the date at which it becomes crucial.
If signalling intent cannot be believed, neither Segwit1X or Segwit2X will survive, because hashrate will be divided across the chains.
In both of those scenarios,the 1MB chain does not survive. There’s no other way to say it simply, and if you’re still a 1MBer at this point, I’m afraid there’s simply nothing else to convince you. I sincerely hope you haven’t over-invested. That said, there’s still a question about whether Segwit2X will survive. It needs a majority of hashrate to transfer over, and current signalling suggests that this will happen. However, the people signalling are your competitors. It is in their interest for you to be mining something that they are not. Segwit2X is only safe to mine as a majority, and the people telling you it’s safe to mine are your competitors. Do you trust them? Do they trust you? Of the three chains, the only one that is guaranteed to survive, no matter what, is Bitcoin Cash.
If you signal to mine Segwit2X, and swap over to Bitcoin Cash, you leave some suckers mining a chain that cannot deal with a reduction in hashrate very well.
If you signal to mine Segwit2X, and other miners swap over to Bitcoin Cash, you're mining a chain that cannot deal with a reduction in hashrate very well.
Mining Bitcoin Cash is the only way to guarantee that you, as a miner, will continue to make money. For us, as Bitcoin investors, I think the choice is pretty obvious. ... inb4emergencyBlockstreamPOWfork
US Congressman Tom Emmer announced late Friday that he will introduce a trio of cryptocurrency and blockchain related bills as cryptocurrencies fell lower this weekend after posting significant gains last week
A research report authored by Weiss Ratings, a provider of market research on stocks, ETFs, mutual funds, and cryptocurrencies, makes a bold prediction saying Bitcoin will lose half of its market share to Ethereum within five years. The research report cites that Bitcoin is a, “one trick pony” while Ethereum’s superior blockchain does not limit the cryptocurrency in any sense. After receiving some negative feedback from investors, Weiss Ratings clarified via tweet that they see an, “Ethereum-like platform dominating the market – not necessarily Ethereum itself.”
According to a report by Bloomberg, Brazil’s largest independent broker, Grupo XP, is launching a cryptocurrency exchange in the coming months. Grupo XP announced this move as Brazil may be on the brink of eased cryptocurrency regulations after Brazil’s regulatory agency announced last week it is investigating the country’s largest banks for allegedly halted the service to cryptocurrency related firms. Approximately 3 million Brazilians own cryptocurrencies while just 600,000 have holdings in stocks.
After Bitcoin developers reported of a patch in Bitcoin Core to fix a bug that could bring down a large chunk of the network, an official Common Vulnerabilities and Exposures (CVE) report revealed that the bug was more serious than initially let on. According to the CVE report, an attacker could have exploited the bug to create new Bitcoin, thereby inflating the 21-million coin supply and devaluing current Bitcoins. Over half of Bitcoin miners have updated to the new software patch meaning users can no longer exploit this bug.
Cryptocurrencies and their blockchains have observed more “down-time” in 2018 than ever before. After Steemit, a blockchain-based blogging platform that pays content creator in cryptocurrencies, went down for multiple hours on September 17th, Coindesk released an article discussing the increased down-time cryptocurrencies and their blockchains have observed in 2018. Coindesk’s article details that new and innovative consensus protocols, such as varied versions of Proof of Stake, have contributed to causing increased blockchain downtimes due to experimental protocols and unforeseen issues with these experimental protocols.
Dubai’s Department of Finance (DoF) announced yesterday that it has partnered with the Smart Dubai Office (SDO) to launch a blockchain-powered government payment system. Reported by local news outlet, Zawya, the platform, dubbed, Payment Reconciliation and Settlement, launched yesterday and enables government entities to conduct real-time payments between each other and within government structures while providing more transparency.
Erik Voorhees, CEO of cryptocurrency exchange ShapeShift, said that the exchange’s decision to begin collecting IDs from users was proactive and a necessary step to reduce legal risks. The decision came as Shapeshift was facing warnings from regulators to begin adhering to Know-Your-Customer regulations.
Ethereum developers and miners have come together to stop specialized mining hardware from operating on its network. After a new application-specific integrated circuit (ASIC) was announced last Thursday, developers and mines have become vocal about ASICs effectively pushing out smaller miners from being able to operate. Members of the Ethereum community have called on developers to implement measures against ASIC mining in the Ethereum blockchain, as many believe ASICs can dominate a mining community and force decisions upon a coin.
Iceland’s cryptocurrency industry may be moving away from a mining focus and moving towards a pure blockchain focus. Halldor Jorgenson, chairman of Borealis Data Center in Reykjavik, told news outlet Red Herring that demand from local cryptocurrency firms is shifting more towards pure blockchain. Iceland has become a popular area for mining due to its cold climate and cheap electricity, however, Icelandic industry experts have cited that a blockchain focus is better for the long-term future.
In relation to the probe against Amit Bhardwaj and his alleged Bitcoin Ponzi fraud, Indian police authorities have seized USD$60 million of assets associated with the scheme. The Ponzi scheme was responsible for stealing roughly USD$5.26 billion from over 8,000 people.
Opera is launching a special edition of its Labs desktop browser today that will feature a functional built-in crypto wallet. Announced in early August, the special edition of Labs opened today for private beta testers. According to a blog-post shared with Cointelegraph, Labs will enable users to authenticate Web 3.0 and dApp transactions made on their computer using their Android phone.
Tom Emmer, a member of US Congress, is sponsoring a trio of blockchain-focused bills that aims to support the development and use of blockchain technology and cryptocurrencies. The first of the three bills addresses regulatory frameworks around cryptocurrencies and blockchain. The second bill ensures cryptocurrency miners would not be required to register as money transmitters. The third bill would protect tax payers in reporting revenue from tokens that resulted from a hardfork. Emmer’s announcement of these three bills came Friday, the same day he was named a co-chair of the Congressional Blockchain Caucus.
A few days ago I posted my doubts and criticism about BTC vs BCH, but now I have made my mind up after a lenghty research yesterday and today, I have chosen BCH. Disclaimer: I have already owned BCH before that. So I was already on board BCH, but I had my doubts about it, and certainly the noise the other side makes, it made me doubt myself whether I made the best choice or not. After all it's about money, and the first thing that comes into a person's mind is that it worries about losing it. So if BCH would have been inferior to BTC then there would have been a strong chance of losing that money, through the price doing down like with the other fake coins Bitcoin Gold, Bitcoin Diamond, etc... Because from an investment standpoint I shouldn't care about sides, I just want the one that has a better future and more potential in it. So if I would have found out that BTC is better I would have sold my BCH for BTC obviously, I would have no sentimental attachment to either of them, I just want to be on the right side. Eventually hedge, but hedging is like the game of uncertain people, and there is no uncertainty here, all the evidence shows one side to be much better than the other. It's not even like 70-30, it's more like 99-1. Now I did a lenghty research, read all the comments on my posts, and compared them to the claim BTC makes on their websites and influential BTC people have stated, asked questions, used logic, and it's now objectively clear to me that BCH is the right side to be on.
I was already doubtful about BTC, that is why I have switched to BCH about a year ago, I saw their shady activities, but the final nail in the coffin was probably the massive FEE problem, that started last November and ended in February. That made me totally dislike BTC. However now that the fees are normal in BTC, I had a doubt in my mind that what if they are right? What if the fee spike was just a coordinated attack on BTC, and now that it's over, BTC is just as good as BCH. I mean if the fees are normal now, and about the same last I looked (maybe BTC is like 20% more expensive but still low like 60 cents), it gives some credibility back to BTC. There are theories that the coordinated attack was a conspiracy against BTC, but then again BTC has it's own conspiracies too, so why not just ignore the conspiracy theories and look at the facts. The fact is that it doesn't matter what it was, the mere fact that it happened, and it crippled the network for 4 months, shows that BTC has serious flaws. And it can happen again. So it doesn't matter who did it, it happened, and the network was crippled. Now if a network can be crippled like that, and if you want this network to host a global payment system, then we will have huge problems. BCH can defend against such attack much more effectively because it costs more to fill up a 32MB block than a 1MB block, 32x harder. Plus a 32MB block is so small that anyone can handle that right now, even if a 4 month period attack would happen against BCH, and it would be 32x more costly, so it would be harder to pull off. However if a bigger budgeted attacker would attack again BTC with a 32x budget, then it would cripple BTC for 10 YEARS!!! That would literally make Bitcoin literally die.
Non Mining Nodes
One aspect that the BTC people say is that non miner "full nodes" are sacrosanct, and that we need them to keep miners in check, but I haven't heard any coherent answers as to why. I have read the whitepaper twice, once today and once yesterday, and it states there clearly what the real truth is. You should definitely download and archive the whitepaper because some people tried to rewrite it, Orwellian style, so grab the original one here: https://blockchair.com/bitcoin/whitepaper [Download it and save it on your own computer SHA256: b1674191a88ec5cdd733e4240a81803105dc412d6c6708d53ab94fc248f4f553, these Orwellian trolls might try to gaslight you eventually and rewrite the past!] The whitepaper mentions 3 times that:
The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.
The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.
This is word for word how the whitepaper says it. So this alone disproves the full node myth, it's complete nonsense. The miners have total control, and the nodes don't matter. Satoshi designed a 1 CPU 1 vote system, where every node is a miner node. He could not forecast large farm ASIC miners, but then again that isn't resolved by just running non miner nodes. Furthermore the full node system doesn't have any collective benefit only individual one, which we will get into next, and it might even be a drag: Instead of going from A->D, you have to go to A->B->C->D with a full node system, adding extra inefficiency and latency. Keep in mind, this is not a medieval pidgeon relay messaging system, the information travels at the speed of light, so there is no need for extra relays, in fact adding extra relays just creates extra latency. You eventually have to communicate with a miner, so what is the point in having extra "bus stops" along the way? It's just a waste of resources. We do need many miners to secure the network, and instead of wasting resources on non-mining nodes, they should just spend that on mining if they really want decentralization.
Another claim that they make is that SPV wallets are insecure. Which is somewhat true, but out of perspective. For general users SPV wallets are totally fine. And I don't think SPV security is lower than what anyone except a billionaire who keeps all his coins in 1 address (very stupid) would need. This explained well in the whitepaper in the page 5/ paragraph 8 "Simplified Payment Verification" section. The SPV is probabilistically secure, because it fetches blocks that are already agreed upon, so unless a big conspiracy is taking place, miners rewriting the chain, this gives people a probabilistic security. Most SPV wallets are well implemented so they use the best tools to keep your coin history reasonably accurate, so they fetch data from multiple random servers and compare against it. Certainly Electrum/Electron Cash does this well. One thing I might add is that it's good to use a VPN too with SPV wallets, in case your are personally targeted by a criminal, so your IP address is randomized too for extra security, so you won't download honeypot blocks that are specifically targeting your IP. But other than that SPV is just reasonably secure, and by that I mean that it's probably below 0.1% that your coin history can be deceitful, and even then if you wait for 10-15 confirmations and shuffle your VPN IP address around enough times, you can be absolutely sure that the history is accurate. So their fear is overblown and they are just fearmongering on this, the same way people fearmonger about asteroid impact or alien invasion, it's just not reasonable.
Now as you can see already that a lot of these claims have been utterly debunked, and they don't have coherent arguments to address the rebuttals, in fact in most cases they resort to ad hominems and insults (which I have experienced, just for asking questions). But the coup de grace happens when you realize how inefficient LN is. And for that here are some references, it's mostly technical:
And perhaps it's explained in more simpler terms in youtube videos but the point is that there is real scientific proof that the LN will have awful consequences for the decentralization of BTC, and it inserts and unnecessary middleman into the mix that is a massive point of failure. It essentially creates a KYC regulated bank network on top of a settlement layer, and the governments around the world will have total control over that. Well the LN nodes are essentially money transmitters because they directly facilitate the transfer of money, so AML/KYC/Tax reporting/Surveillance will happen by default on these nodes. And given that LN can't be a decentralized system but a hub & spoke system, due to the need to keep your wallet online at all times, it will literally become a 3rd party custodian based banking system, literally. So all of the essence of Bitcoin [word for word quote from the whitepaper]:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
Will literally cease to exist, and it reverts BTC back into a government regulated banking system, literally.
There are other arguments too, but these are the main ones, and researching them thoroughly and understanding the issues made me lose all my doubts about Bitcoin Cash and all my faith in Bitcoin. It can't be any more clear to me now that Bitcoin Cash is the true version of Bitcoin, the real vision of Satoshi and the genuine implementation of it, with all the technical genius-ity that Satoshi had laid out in the whitepaper which is still relevant. Satoshi laid out everything in the whitepaper, and all of it is implemented geniusly in Bitcoin Cash except for paragraph 7 on page 4 "Reclaiming Disk Space" which talks about block pruning, I am not sure if this is Xthin Blocks or Compact Blocks or Thin Blocks (please explain in the comment section), otherwise it should be implemented, it would be a much better way for scaling than LN. But other than that BCH is technically superior. Now I don't know whether better things win in politics, but in engineering, if your design is shitty, it will inevitably fall apart. You can't have a skyscraper built on quicksand, it's inevitable disaster. So look, BCH is obviously risky, it has less users, less merchants; but because it has a solid foundation and probably the 3rd biggest community after ethereum, it has maaaaaaaaaaaaassive opportunity in it to become the best cryptocurrency (because ethereum has the same or worse issues than BTC). There is no question now whether BCH is better, the only question now is, how long will it take for people to realize this.
So I choose to stay with BCH, and now I am 101% supportive of it! Long Live Bitcoin Cash!!
Open Financial System Open financial system is defined as being available to everyone and not controlled by a single entity.
✔︎ Pretty easy
Innovation or Efficiency Gains New or improved technology which helps solve a problem, creates a new market, addresses an unmet market need, or creates value for network participants.
✔︎ Again, pretty easy, Nimiq is bringing a huge leap forward in terms of accessibility and integration of cryptocurrencies.
Economic Freedom A measure of how easy it is for members of a society to participate in the economy. The technology enables individuals to have more control over their own wealth and property, or the freedom to consume, produce, invest, or work as they choose.
✔︎ Basic requirement of any real cryptocurrency, easily fulfilled by Nimiq.
Equality of Opportunity This technology is accessible to use by anyone with a smartphone or access to the internet. It contributes to the broader mission of building the on-ramps to Finance 2.0.
✔︎ Nimiq is the most accessible crypto on the market right now, you don't even have to install something to begin using it or mining it.
Decentralization The network is public, decentralized, and enables trustless consensus.
〜 The architecture of Nimiq is decentralized however the hashrate is clearly not right now.
Security & Code Assessment of engineering and product quality.
✔︎ Nimiq team has done everything it could to ensure the quality control of the code.
Source Code Open-source code, well-documented peer-review, and testing by contributors separate from the initial development team on GitHub, etc.
〜 Of course Nimiq is open-source but the documentation is still weak, the good thing is that it's being redone.
Prototype There is a working alpha or beta product on a testnet or mainnet.
✔︎ Well, the Nimiq Network is live.
Security & Code Demonstrable record of responding to and improving the code after a disclosure of vulnerability, and a robust bug bounty program or third party security audit.
Team Assessment of short-term operating expectations and decision making.
✔︎ You can even see them on video hehe.
Founders and Leadership Able to articulate vision, strategy, use cases or drive developmental progress. Has a track record of demonstrable success or experience. If information is available, Coinbase will apply "know your client" standards to publicly visible founders or leaders.
✔︎ The profiles of the team are all known and easily checked.
Engineering Assessment of the engineering team and their track record of setting and achieving deadlines.
✔︎ They released the product which is a damn good track record in a sector full of vaporwares.
Business & Operations History of interacting with the community, setting a reasonable budget and managing funds, and achieving project milestones. Thoughtful cash management is a key driver of the project's long term viability.
✔︎ There has been some "lean" periods in terms of communication but overall the team has never stopped interacting with us. When it comes to cash management the dev team should be a model for everyone else with its last transparency report.
Specialized Knowledge and Key People The project leadership is not highly centralized or dependent on a small number of key persons. Specialized knowledge in this field is not limited to a small group of people.
〜 Let's be honest: it is right now, that said the project protocol isn't even 6 months old.
Governance Assessment of long-term operating expectations and decision making.
White Paper Justifies the use case for a decentralized network and outlines project goals from a business and technology perspective. While a white paper is important for understanding the project, it is not a requirement.
〜 There is the "high level" whitepaper of the ICO however it doesn't really explain in detail how Nimiq works.
Scalability Assessment of a network's potential barriers to scaling and ability to grow and handle user adoption.
✔︎ Like pretty much every project, that's what Robin is currently working on by the way.
Roadmap Clear timeline with stages of development, reasonable project milestones, or built-in development incentives.
✔︎ We should have the roadmap soon™️.
Network Operating Costs The barriers to scaling the network have been identified, or solutions have been proposed or discussed. The resource consumption costs for validators and miners are not the main deterrents to participation.
✔︎ Yes, the team has been considering second layer solutions like Lightning Network or Liquidity Network.
Practical Applications There are examples of real-world implementation or future practical applications.
Type of Blockchain The asset is a separate blockchain with a new architecture system and network, or it leverages an existing blockchain for synergies and network effects
Regulation Can Coinbase legally offer this asset?
✔︎ I'm not a lawyer but I guess it can
US Securities Law The asset is not classified as a security using Coinbase's Securities Law Framework.
〜 Hard to say, they have this checklist and the fact that some NIM were given against NET which were distributed through an ICO makes it kind of blurry
Compliance Obligations The asset would not affect Coinbase or Coinbase's ability to meet compliance obligations, which include Compliance Obligations, Anti-Money Laundering (AML) program and obligations under government licenses in any jurisdiction (e.g. Money Transmitter Licenses).
✔︎ Conversion from NET to NIM went through a KYC specifically for that.
Integrity & Reputational Risk Would listing the asset be inconsistent with Coinbase policy?
✔︎ I don't see why.
User Agreement The asset, network, application or fundamental nature of the project does not constitute a Prohibited Business under Appendix 1 of the user Agreement.
✔︎ I read it and it's doesn't.
Liquidity Standards How liquid is this asset?
〜 Weak liquidity right now.
Global Market Capitalization How does the market capitalization compare to the total market capitalizations of other assets?
〜 Weak capitalization.
Asset Velocity Trade velocity, or turnover, is a significant part of market capitalization. This is a measure of how easily the asset can be converted to another asset.
〜 Again, weak velocity.
Circulation For service or work tokens, new supply is created through consensus protocols. If the supply is capped, then a material amount of the total tokens should be available to the public.
✔︎ It's available.
Global Distribution Where is this asset available to trade?
Total # of Exchanges The number of exchanges that support the asset.
Geographic Distribution The asset is not limited to a single geographic region and is available to trade on decentralized exchanges.
Community Activity Dedicated forums are available where developers, supporters, users, and founders can interact and build a community and offer transparency into the project. The team provides regular updates or is responsive to feedback.
✔︎ Yes it has.
External Stakeholders There are investments from venture firms or hedge funds which have experience working with crypto companies or projects. The project has corporate partnerships, joint ventures, or dedicated consortiums.
〜 It doesn't as far as I know.
Change in Market Capitalization The market capitalization has grown after the network has activated, demonstrating increased demand for the asset after the project's launch.
〜 Sadly not.
Nodes Growing # of nodes on the underlying blockchain. The project has a globally distributed node network, meaning operating nodes are not contained in a single country or geographic region.
Economic Incentives Are the economic structures designed to incentivize all parties to act in the best interest of the network?
✔︎ It's a PoW coin so yes.
Type of Token It is a service, work, or hybrid token. Tokens backed by fiat or other physical assets are categorized as US securities and will not be considered at this time.
✔︎ It's not backed by anything but the work done to generate them.
Token Utility There is utility from obtaining, holding, participating, or spending the token. The team identifies a clear and compelling reason for the native digital asset to exist (i.e. the main purpose is not fundraising).
✔︎ Nimiq is a general payment protocol.
Inflation (Money Supply) There is an algorithmically programmed inflation rate which incentivizes security and network effects. Or, if the total supply is capped, then a majority of the tokens should be available for trade when the network launches.
Rewards and Penalties There are mechanisms (such as transaction fees) which incentivize miners, validators, and other participants to exhibit 'good' behavior. Conversely, there are mechanisms which deter 'bad' behavior.
Security There is a focus on stringent security protocols and best practices to limit scams, hacks, and theft of funds.
✔︎ The smart-contract of the ICO was audited and they didn't lose the fund yet so I guess it's secure haha.
Participation Equality Best efforts by the team to allow a fair distribution of tokens (i.e. setting initial individual purchase caps to limit the risk of small number of investors from taking a majority of the supply).
✔︎ The number of NIM distributed through NET is only 7% in any case.
Team Ownership The ownership stake retained by the team is a minority stake. There should be a lock-up period and reasonable vesting schedule to ensure the team is economically incentivized to improve the network into the future.
Transparency The team should be available and responsive to questions or feedback about the product, token sale, or use of funds across multiple forums.
✔︎ See the transparency report.
Total Supply The team should sell a fixed percentage of the total supply, and participants should know the percentage of total supply that their purchase represents, or have a clear understanding of the inflation rate.
✔︎ All informations are available freely online.
Ethics or Code of Conduct White paper or project website should have an ethical or professional code of conduct.
21 inc. device is NOT a Bitcoin miner - it is a smart contract enabler.
In the last few days there have been many articles criticizing the new 21 inc. device as "an inefficient miner". Lots of comments like that on /bitcoin too. If you think the same, you have completely missed the point of 21 inc. device. It is NOT a bitcoin miner. Imagine it does not generate bitcoins at all. Could you write an article criticizing the device if it did not generate ANY bitcoins? You seem to forget (or not realize) that this device's main function is making smart contracts on the Bitcoin blockchain. To use the Bitcoin blockchain the device has to pay transaction (miner) fees, therefore, it needs to have a tiny amount of bitcoins for that. There are several ways to go about doing that:
The device owner could buy a small amount of bitcoins and send them to the device. This would turn off most of the people, because buying bitcoins is a huge hassle, it takes several days, requires the owner to scan and upload various documents, etc. This would not work, because people are too lazy.
The device could already have some bitcoins on it when shipped to the buyer. This would make 21 inc. a money transmitter and would open up a regulatory nightmare where 21. inc would have to spend all their 120 million on lawyers and application fees. This would not work, because of AML / KYC / other regulations.
The device could mine bitcoins itself. This is exactly what 21 inc. device does. Don't look at the dollar value of those bitcoins mined, because it's irrelevant. 10 cent per day may be minuscule in monetary value, but it is enough to pay transaction (miner) fees for 5 smart contracts per day. This is the only purpose of the mining part of the device - to create bitcoins to use for smart contracts' transaction (miner) fees.
4.5.1. Providers of anonymizing services for CVCs Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider). 4.5.1(a) Anonymizing services provider An anonymizing services provider is a money transmitter under FinCEN regulations. The added feature of concealing the source of the transaction does not change that person’s status under the BSA.
Relevant to Monero because the providers (or users) of the opt-in tumble/mixing services for Bitcoin may run into some legal trouble if this report is anything to go by. Would further solidify Monero's necessary existence. Also
4.5.2. Providers of anonymity-enhanced CVCs [convertible virtual currencies]. A person that creates or sells anonymity-enhanced CVCs designed to prevent their tracing through publicly visible ledgers would be a money transmitter under FinCEN regulations depending on the type of payment system and the person’s activity.62 For example: (a) a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity enhanced CVC against the receipt of another type of value (b) a person that uses anonymity-enhanced CVCs to pay for goods or services on his or her own behalf would not be a money transmitter under the BSA. However, if the person uses the CVC to accept and transmit value from one person to another person or location, the person will fall under the definition of money transmitter, if not otherwise exempted. (c) a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed (even if the CVC value was mined at an earlier date). The person would not be a money transmitter if that person uses the CVC it mined to pay for goods and services on his or her own behalf.
Lightning Network Will Likely Fail Due To Several Possible Reasons
ECONOMIC CASE IS ABSENT FOR MANY TRANSACTIONS The median Bitcoin (BTC) fee is $14.41 currently. This has gone parabolic in the past few days. So, let’s use a number before this parabolic rise, which was $3.80. Using this number, opening and closing a Lightning Network (LN) channel means that you will pay $7.60 in fees. Most likely, the fee will be much higher for two reasons:
BTC fees have been trending higher all year and will be higher by the time LN is ready
When you are in the shoe store or restaurant, you will likely pay a higher fee so that you are not waiting there for one or more hours for confirmation.
Let’s say hypothetically that Visa or Paypal charges $1 per transaction. This means that Alice and Carol would need to do 8 or more LN transactions, otherwise it would be cheaper to use Visa or Paypal. But it gets worse. Visa doesn’t charge the customer. To you, Visa and Cash are free. You would have no economic incentive to use BTC and LN. Also, Visa does not charge $1 per transaction. They charge 3%, which is 60 cents on a $20 widget. Let’s say that merchants discount their widgets by 60 cents for non-Visa purchases, to pass the savings onto the customer. Nevertheless, no one is going to use BTC and LN to buy the widget unless 2 things happen:
they buy more than 13 widgets from the same store ($7.60 divided by 60 cents)
they know ahead of time that they will do this with that same store
This means that if you’re traveling, or want to tip content producers on the internet, you will likely not use BTC and LN. If you and your spouse want to try out a new restaurant, you will not use BTC and LN. If you buy shoes, you will not use BTC and LN. ROAD BLOCKS FROM INSUFFICIENT FUNDS Some argue that you do not need to open a channel to everyone, if there’s a route to that merchant. This article explains that if LN is a like a distributed mesh network, then another problem exists:
"third party needs to possess the necessary capital to process the transaction. If Alice and Bob do not have an open channel, and Alice wants to send Bob .5 BTC, they'll both need to be connected to a third party (or a series of 3rd parties). Say if Charles (the third party) only possesses .4 BTC in his respective payment channels with the other users, the transaction will not be able to go through that route. The longer the route, the more likely that a third party does not possess the requisite amount of BTC, thereby making it a useless connection.”
CENTRALIZATION According to this visualization of LN on testnet, LN will be centralized around major hubs. It might be even more centralized than this visualization if the following are true:
Users will want to connect to large hubs to minimize the number of times they need to open/close channels, which incur fees
LN’s security and usability relies on 100% uptime of relaying parties
Only large hubs with a lot of liquidity will be able to make money
Hubs or intermediary nodes will need to be licensed as money transmitters, centralizing LN to exchanges and banks as large hubs
“…applicability of the regulations … to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.” “…an administrator or exchanger is an MSB under FinCEN's regulations, specifically, a money transmitter…” "An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations…” "FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”” "The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.”
"An “informal value transfer system” refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.” “…IVTS… must comply with all BSA registration, recordkeeping, reporting and AML program requirements. “Money transmitting” occurs when funds are transferred on behalf of the public by any and all means including, but not limited to, transfers within the United States or to locations abroad…regulations require all money transmitting businesses…to register with FinCEN."
Mike Caldwell used to accept and mail bitcoins. Customers sent him bitcoins and he mailed physical bitcoins back or to a designated recipient. There is no exchange from one type of currency to another. FinCEN told him that he needed to be licensed as money transmitter, after which Caldwell stopped mailing out bitcoins. ARGUMENTS AGAINST NEED FOR LICENSING Some have argued that LN does not transfer BTC until the channel is closed on the blockchain. This is not a defence, since channels will close on the blockchain. Some have argued that LN nodes do not take ownership of funds. Is this really true? Is this argument based on a technicality or hoping for a loophole? It seems intuitive that a good prosecutor can easily defeat this argument. Even if this loophole exists, can we count on the government to never close this loophole? So, will LN hubs and intermediary nodes need to be licensed as money transmitters? If so, then Bob, who is the intermediary between Alice and Carol, will need a license. But Bob won’t have the money nor qualifications. Money transmitters need to pay $25,000 to $1 million, maintain capital levels and are subject to KYC/AML regulations1. In which case, LN will have mainly large hubs, run by financial firms, such as banks and exchanges. Will the banks want this? Likely. Will they lobby the government to get it? Likely. Some may be wondering about miners. FinCEN has declared that miners are not money transmitters: https://coincenter.org/entry/aml-kyc-tokens :
"Subsequent administrative rulings clarified several remaining ambiguities: miners are not money transmitters…"
FinCEN Declares Bitcoin Miners, Investors Aren't Money Transmitters Some argue that LN nodes will go through Tor and be anonymous. For this to work, will all of the nodes connecting to it, need to run Tor? If so, then how likely will this happen and will all of these people need to run Tor on every device (laptop, phone and tablet)? Furthermore, everyone of these people will be need to be sufficiently tech savvy to download, install and set up Tor. Will the common person be able to do this? Also, will law-abiding nodes, such as retailers or banks, risk their own livelihood by connecting to an illegal node? What is the likelihood of this? Some argue that unlicensed LN hubs can run in foreign countries. Not true. According to FinCEN: "“Money transmitting” occurs when funds are…transfers within the United States or to locations abroad…” Also, foreign companies are not immune from the laws of other countries which have extradition agreements. The U.S. government has sued European banks over the LIBOR scandal. The U.S. government has charged foreign banks for money laundering and two of those banks pleaded guilty. Furthermore, most countries have similar laws. It is no coincidence that European exchanges comply with KYC/AML. Will licensed, regulated LN hubs connect to LN nodes behind Tor or in foreign countries? Unlikely. Will Amazon or eBay connect to LN nodes behind Tor or in foreign countries? Unlikely. If you want to buy from Amazon, you’ll likely need to register yourself at a licensed, regulated LN hub, which means you’ll need to provide your identification photo. Say goodbye to a censorship-resistant, trust-less and permission-less coin. For a preview of what LN will probably look like, look at Coinbase or other large exchanges. It’s a centralized, regulated and censored hub. Coinbase allows users to send to each other off-chain. Coinbase provides user data to the IRS and disallows users from certain countries to sell BTC. You need to trust that no rogue employee in the exchange will steal your funds, or that a bank will not confiscate your funds as banks did in Cyprus. What if the government provides a list of users, who are late with their tax returns, to Coinbase and tells Coinbase to block those users from making transactions? You need Coinbase’s permission. This would be the antithesis of why Satoshi created Bitcoin. NEED TO REPORT TO IRS The IRS has a definition for “third party settlement organization” and these need to report transactions to the IRS. Though we do not know for sure yet, it can be argued that LN hubs satisfies this definition. If this is the case, who will be willing to be LN hubs, other than banks and exchanges? To read about the discussion, go to: Lightning Hubs Will Need To Report To IRS COMPLEXITY All cryptocurrencies are complicated for the common person. You may be tech savvy enough to find a secure wallet and use cryptocurrencies, but the masses are not as tech savvy as you. LN adds a very complicated and convoluted layer to cryptocurrencies. It is bound to have bugs for years to come and it’s complicated to use. This article provides a good explanation of the complexity. Just from the screenshot of the app, the user now needs to learn additional terms and commands: “On Chain” “In Channels” “In Limbo” “Your Channel” “Create Channel” “CID” “OPENING” “PENDING-OPEN” “Available to Receive” “PENDING-FORCE-CLOSE” There are also other things to learn, such as how funds need to be allocated to channels and time locks. Compare this to using your current wallet. Recently, LN became even more complicated and convoluted. It needs a 3rd layer as well: Scaling Bitcoin Might Require A Whole 'Nother Layer How many additional steps does a user need to learn? ALL COINS PLANNING OFF-CHAIN SCALING ARE AT RISK Bitcoin Segwit, Litecoin, Vertcoin and possibly others (including Bitcoin Cash) are planning to implement LN or layer 2 scaling. Ethereum is planning to use Raiden Network, which is very similar to LN. If the above is true about LN, then the scaling roadmap for these coins is questionable at best, nullified at worst. BLOCKSTREAM'S GAME PLAN IS ON TRACK Blockstream employs several of the lead Bitcoin Core developers. Blockstream has said repeatedly that they want high fees. Quotes and source links can be found here. Why is Blockstream so adamant on small blocks, high fees and off-chain scaling? Small blocks, high fees and slow confirmations create demand for off-chain solutions, such as Liquid. Blockstream sells Liquid to exchanges to move Bitcoin quickly on a side-chain. LN will create liquidity hubs, such as exchanges, which will generate traffic and fees for exchanges. With this, exchanges will have a higher need for Liquid. This will be the main way that Blockstream will generate revenue for its investors, who invested $76 million. Otherwise, they can go bankrupt and die. One of Blockstream’s investors/owners is AXA. AXA’s CEO and Chairman until 2016 was also the Chairman of Bilderberg Group. The Bilderberg Group is run by bankers and politicians (former prime ministers and nation leaders). According to GlobalResearch, Bilderberg Group wants “a One World Government (World Company) with a single, global marketplace…and financially regulated by one ‘World (Central) Bank’ using one global currency.” LN helps Bilderberg Group get one step closer to its goal. Luke-Jr is one of the lead BTC developers in Core/Blockstream. Regulation of BTC is in-line with his beliefs. He is a big believer in the government, as he believes that the government should tax you and the “State has authority from God”. In fact, he has other radical beliefs as well:
it is moral for the government to execute criminals and heretics (non-believers)
According to this video, Luke-Jr was the only person to have ever carried out a 51% attack, to destroy a coin that he did not like.
So, having only large, regulated LN hubs is not a failure for Blockstream/Bilderberg. It’s a success. The title of this article should be changed to: "Lightning Will Fail Or Succeed, Depending On Whether You Are Satoshi Or Blockstream/Bilderberg". SIGNIFICANT ADVANCEMENTS WITH ON-CHAIN SCALING Meanwhile, some coins such as Ethereum and Bitcoin Cash are pushing ahead with on-chain scaling. Both are looking at Sharding. Visa handles 2,000 transactions per second on average. Blockstream said that on-chain scaling will not work. The development teams for Bitcoin Cash have shown significant on-chain scaling: 1 GB block running on testnet demonstrates over 10,000 transactions per second: "we are not going from 1MB to 1GB tomorrow — The purpose of going so high is to prove that it can be done — no second layer is necessary” "Preliminary Findings Demonstrate Over 10,000 Transactions Per Second" "Gigablock testnet initiative will likely be implemented first on Bitcoin Cash” Peter Rizun, Andrew Stone -- 1 GB Block Tests -- Scaling Bitcoin Stanford At 13:55 in this video, Rizun said that he thinks that Visa level can be achieved with a 4-core/16GB machine with better implementations (modifying the code to take advantage of parallelization.) Bitcoin Cash plans to fix malleability and enable layer 2 solutions: The Future of “Bitcoin Cash:” An Interview with Bitcoin ABC lead developer Amaury Séchet:
"fixing malleability and enabling Layer 2 solutions will happen”
However, it is questionable if layer 2 will work or is needed. GOING FORWARD The four year scaling debate and in-fighting is what caused small blockers (Blockstream) to fork Bitcoin by adding Segwit and big blockers to fork Bitcoin into Bitcoin Cash. Read: Bitcoin Divorce - Bitcoin [Legacy] vs Bitcoin Cash Explained It will be interesting to see how they scale going forward. Scaling will be instrumental in getting network effect and to be widely adopted as a currency. Whichever Coin Has The Most Network Effect Will Take All (Or Most) (BTC has little network effect, and it's shrinking.) The ability to scale will be key to the long term success of any coin.
Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019. If you want to avoid headaches with launching process, we can help you with ICO and STO advertising and promotion. See the full list of our services: Platinum.fund I am also happy to be a part of the UBAI, the first educational institution providing the most effective online education on blockchain! We can teach you how to do ICO/STO in 2019. Today I want to tell you how to sell and transfer cryptocurrencies. Major Exchanges In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem. Function and History Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe. The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people. Popular Exchanges Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence. Bitfinex Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT). Binance Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours. Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles. Have you ever thought about what are the types of Crypto exchanges?
Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet. Regulatory Environment and Evolution Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold. The United States of America A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system. The European Union The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology. Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto. Behavior of Cryptocurrency Investors by Demographic Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions. The Cryptocurrency Market Cycle Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins. Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years. The Influence of Age upon Trading Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.” Geographic Influence upon Trading One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside. 2013 Bull run vs 2017 Bull run price Analysis In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely. Fraud & Immoral Activity in the Private Market Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak. What are the Exchange Hacks? The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts. Hardware Wallet Scam Case Study In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified). Hardware Wallet Scam Case Study Social Media Fraud Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed. Market Manipulation It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase. Examples of ICO Fraudulent Company Behavior In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”. Signposts of Fraudulent Actors The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper. Signposts of Fraudulent Actors §2 No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out. Methods to Avoid falling Victim Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.” Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not? If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper. Is this too good to be true? All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH. Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take: If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees. Selling Cryptocurrencies Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time. Methods of Sale Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons. The influence and value of your Trade There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project. Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market. Market Behavior in Different Time Periods The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order. Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens. Follow the link: UBAI.co If you want to know how do security tokens work, and become a professional in crypto world contact me via Facebook to get all the details: Facebook
Q: 1) Hello, what's a better strategy for bitcoin holders if it hard forks at 75%? Is it worth holding of the coins in the minority chain? Or better selling them? Will the value of coins in the majority chain be weakened or reinforced? Thank you A: 1) BIP109 does not hard fork at 75%, it hard forks 28 days after 75% has been reached-- so when the hard fork happens, there should be almost zero hash power on the minority chain. So there will not be a minority chain. If I am wrong and blocks are created on the minority chain, people plan to get enough hash power to replace those blocks with empty blocks, so it is impossible to make any transactions on the minority chain. Q: 2) if Bitcoin split into two chains, will it cause panic in the market, then the overall market capitalization fell? A: 2) Bitcoin split into two chains accidentally in March of 2013, and there was panic selling -- the price dropped from $48 to $37 within a few hours. But the mining pools very quickly agreed on which branch of the chain they would support, the problem was resolved within a day, and a week later the price was over $60. That shows the strength of consensus and incentives-- the mining pools did what was best for Bitcoin because that is what is best for themselves in the long term. Q: 3) Now it requres 60-70G space for a full node wallet, also it takes severals days for synchronization. Technically, Is it possible in the future that a full node wallet only cost a little space and can be quickly synchronized? (Do not use light wallets and other third party wallets) A: 3) You can run a pruned node that does not store the full block chain today (I’m running six right now on inexpensive servers around the world to test some new code). It is technically possible to get fast synchronization without giving up any trust, but it would require miners do more work (they would have to compute and store and validate an “unspent transaction output committment hash” in the block chain). There are also schemes that would give you fast synchronization at a lightweight-wallet level of trust, but worked towards no trust if you were connected to the network for long enough. Some developers say that you are not really using Bitcoin unless you run a full node, but that is wrong. Bitcoin was designed so that you can make the choice of speed and convenience versus trust. You give up very, very little trust if you run a lightweight wallet that supports multisignature transactions, and I think that is what most people should be running. Q: 4) What do you think about Ethereum? Can Bitcoin achieve all the same functions claimed by Ethernet? Thank you A: 4) I think most of the interesting things you can do with Ethereum you can also do with multi-signature Bitcoin transactions. I haven’t seen a really great use of Ethereum yet, and I think there will be a big problem with Ethereum smart contracts that are designed to steal people’s money, because very few people will have the skill necessary to tell if a complicated smart contract is correct. I’m watching the rootstock.io project, which brings Ethereum contracts to Bitcoin. Q: 5) Is it possible that Nakamoto may still participate in the development of Bitcoin by a pseudonym? What is the last time he contact you? Will he be back? A: 5) Yes, it is possible. I tell reporters who ask me about Satoshi: The idea of Bitcoin is important; who invented it is an interesting mystery, but I think it should remain a mystery until whoever invented it decides to step forward. We should respect Satoshi's privacy. Q: 6) Now some government can prevent people from accessing foreign information using technical method(like the Great Firewall), people need to get across the wall first if they want to know information abroad. So technically speaking, is it possible that the government could block and damage the usage of bitcoin? If it is, is there any method to get across the wall? A: 6) If a government controls network access into and out of their country (like the Great Firewall), they could easily block connections to and from today’s Bitcoin peer-to-peer network. Connections are not encrypted in any way, and most connect to port 8333, which would be easy to block. However, blocking connections inside the country would be much harder. And it only takes one encrypted or satellite or microwave or laser connection that bypasses the firewall to get around the blockage and get blocks and transactions flowing across the border again. I think governments that decide they don’t like Bitcoin are more likely to pass laws that make it a crime to use a currency other than the official government currency to pay for things. Q: 7) You insist on hard fork at 75%, while Chinse Mining Pools insist at 90%. So it may be easier to get support from China If Classic changes to 90%. Have you ever considered to communicate with Chinese mine pool( such as convening a meeting) to reduce differences? A: 7) Yes, I was in Beijing a few weeks ago to better understand what some of the Chinese mining pools are thinking. It was a productive meeting, and I look forward to communicating more with them soon. Q: 8) How will halving and block size increasing impact the bitcoin price in your opnion? Thanks. A: 8) The price, today, is a reflection of confidence. If people think Bitcoin will be valuable in the future, they are willing to buy it and hold it. Everybody knows the halving will happen, so, theoretically, that should not affect today’s price. I believe that increasing the block size limit would be very good for the price, because Bitcoin is more valuable the more people who are able to use it. Q: 9) Technically, bitcoin should also have drawbacks. Some disadvantages may be improved in the future , while some may be difficult to improve. What are those shortcomings for bitcoin to hard to improve in your opinon? Are you an optimist thinking that all technical shortcomings are temporary, and they will all likely to be improved in the future? A: 9) Every successful technology is full of shortcomings. It is always easier to look backwards and see your mistakes. Smart engineers are very good at working around those shortcomings, and wise engineering managers know when to work around a shortcoming to remain compatible with the existing technology and when it makes sense to break compatibility because eliminating a shortcoming would have large benefits. Q: 10) If there is a kind of altcoin in the future goes beyond Bitcoin, it must has the advantage Bitcoin can not have, right? Conversely, if Bitcoin itself evolves fast, improves and adds new features, it will be difficult to be surpassed and eliminated, right? What does Bitcoin scalability and evolution capability look like? A: 10) People are funny -- I can imagine an altcoin that has no technology advantages over Bitcoin, but some people prefer it for some reason. I live in a town where a lot of people care a lot about the environment, and I could imagine them deciding to use a “GreenCoin” where all miners must be inspected regularly and must use only solar power. I think many engineers tend to over-estimate the importance of new features, and under-estimate the importance of reliability, convenience and reputation. Satoshi designed Bitcoin to be very scalable, and to be able to evolve. I think the best way for any technology to scale and evolve is competition -- make the technology open, and let companies or teams compete to build the most reliable, convienent and secure products. That looks like (and is!) a very messy, chaotic process, but it produces better results, faster, than a single person or team deciding on on approach to solving every problem. Q: 11) If R3 succeeds, will it challenge bitcoin in transnational remittances? A: 11) Maybe -- if banks involved in R3 could make it very convenient to get money into and out of their blockchain. They might not be able to do that because of regulations, though. But I don’t know much about the international remittance market and what regulations the banks will have to deal with. Q: 12) Can blockchain only be secured by mining? Some private blockchain do not have mining property, are they really blockchain? A: 12) Security is not “yes it is secure” or “no it is not secure.” Proof of work (mining) is the most secure way we know of to secure a blockchain, but there are less secure methods that can work if less security is OK. And less security is OK for some private blockchains because if somebody cheats, they can be taken to court and money can be recovered. Q: 13) Will public chain, private chain and R3 chain coexist for a long time? Or only one chain survive finally? What is the relationship among Bitcoin block chain, private chains and R3 chain , complementary or competitive? Will Bitcoin block chain eventually win? A: 13) My guess is all of the “blockchain for everything” excitement will die down in a year or two and a lot of people will be disappointed. Then a few years later there will be blockchains for everything, running quietly inside stock markets and currency exchanges and lots of other places. Some of them will use the Bitcoin blockchain, some of them won’t, and nobody besides blockchain engineers will care much. Throughout it all, I think it is most likely Bitcoin continues to grow, hopefully with less drama as it gets bigger and more mature. Q: 14) Some people think that it is difficult for the outside world to understand the technical details if lightning network is controlled by blockstream or another company, resulting in technological centralization, what’s your opinion? A: 14) I don’t worry about that, the lightning protocol is being designed in the open as an open standard. It is complicated, but not so complicated only one person or company can understand it. Q: 15) What is the procedure Bitcoin Core modify the rules? Take the 2M hard fork proposal as an example, I saw there are concerns that if one of the five core developers who have write access reject the proposal will be rejected. So If happens, does that mean the launch hard ford in July will be abandoned? What is percentage of agreement in Core developers to write code for such a major bifurcation matter like 2M hard fork? Are there any specific standards? Or the lead developer has the final decision? A: 15) That is a good question for the current active Core developers. When I was the lead developer, I would make a final decision if a decision needed to be made.
Q: What do you think about the future of increasing bitcoin block size limit? A: It will happen sooner or later -- almost everybody agrees it must happen. I am still working to make it happen sooner, because the longer it takes, the worse for Bitcoin.
Q: What decision making process you think should be used for future bitcoin development? A: For example, WuJiHan's proposition of service providers and mining pools collecting individual mineuser opinion. Or, a non-profit making standard making committee like IEEE, consists of people with enough expertise in bitcoin and economy, finance? I think we should look at how development of other very successful technologies works (like email or the http protocol). I am not an expert, but open standards and open processes for participating in creating standards that are either adopted by the market or not (like the IETF process) seem to work the best.
Q: From my experience on Reddit, people now start to understand that evil is not Blockstream/Core's intention. They simply have a very different vision on how Bitcoin network should be running and on how future development should be heading. They do whatever they can to protect their vision, even dirty tricks, because they feel they are bringing justice. Similarly, in Chinese community, we do see the same situation. Many Chinese Bitcoiners that showed strong enthusiasm in the past differ with each other. This even happens among my own real-life friends. My question is: How can we separate these two groups of people who have widely divergent visions? Bitcoin cannot proceed when carrying two totally different visions. A: I don’t know! It is always best if everybody is free to work on their own vision, but for some reason some people seem to think that the block size limit will prevent big companies from taking over Bitcoin. I think all they will accomplish is making the technology much more complicated. And big companies are much better able to deal with and control highly complicated technologies.
Q: Please share your comments on ripple, Mr. Guru. A: I haven’t paid very much attention to Ripple- the last time I looked at it was probably two years ago. Back then I thought they would have trouble with governments wanting to regulate their gateway nodes as money transmitters, but I haven’t even taken the time to see if I was right about that.
Q: Hi Gavin, I think you had a disagreement with the Nakamoto roadmap in Bitcoin design. Can you explain why? Thank you. A: I assume you mean the part where Satoshi says he doesn’t think a second implementation will ever be a good idea. I just think Satoshi was wrong about that-- if you look at very successful protocols, they all have multiple compatible implementations. We understand a lot more about what it takes to be completely compatible and have much better tools to ensure compatibility. And the fact that there now are multiple compatible implementations working on the network (btcd being probably the best example) shows both that it is possible and that the other implementations are not a menace to the network.
Q: 1) For the dispute between Core and Classic, can we refer to the theory of “Common-pool resources” (Commons) in the Western cultural tradition to understand and grasp the public and neutral property of bitcoin so at to strive for a solution which can balance interests of all parties? A: 1) Maybe. The blockchain could be considered a Commons today-- a common, limited resource. But if control of the block size limit was given to miners, then I don’t think it fits the definition any more, because miners would have the freedom to restrict its use however they saw fit, on a block-by-block basis. That is just a simple, pure market, with transaction creators on one side and miners on the other. Q: 2) For the application requring "bitcoin multi-signature script", can you recommend any programming language, libraries or tools? A: 2) BitPay has some good tools: https://github.com/bitpay/bitcore I haven’t worked on any multisignature applications since writing the low-level protocol code-- there are probably other great libraries and tools that I just don’t know about.
Q: Hello Gavin, are you now still developing Classic? Will Classic proceed? Would you give up Classic and return to Core? A: Yes, yes, and there is no “return to” -- I plan on contributing to lots of projects.
Q: 1) If there are one million entrepreneurs who require fund and asset securitization via block chain technology, is it possible? A: 1) If there are ten million investors willing to fund those entrepreneurs, sure it is possible. The technology won’t be a problem, one million is not a large number for today’s computers. Q: 2) Why can we trust Bitcoin and what are the advantages of bitcoin in online payment and settlement? Its commission fee now is not as cheap as before, besides, the time for one confirm is not fast enough. Your opinions on pros and cons of Mining and PoW? A: 2) For people in places with good-enough banking systems like the United States or China, purchasing things inside their own country, bitcoin does not have much of an advantage over existing payment systems. But if you are buying something from somebody in another country, or you live in a place where there are no good payment systems, Bitcoin works very well. Proof of work and mining is the most fair, decentralized way to distribute new coins. They are also the best way of securing the network that we know of so far. Perhaps in 30 years when essentially all of the new coins have been mined and computer scientists have thoroughly studied other ways of securing the network it might make sense for Bitcoin to start to switch to something other than mining and proof-of-work to secure the network. Q: 3) How likely the possibility of replacing the existing legal currency with virtual currency? A: 3) Very unlikely in a large country. I can imagine a small country that uses a larger country’s currency deciding to switch to a crypto currency, though.
Q: 1) You have always insist on larger block. Some people share the same view, they just want to increase the block size, regardless of network bandwidth restrictions in China and other developing countries. How do you see this criticism? A: 1) Most people are using Bitcoin over very limited bandwidth connections-- most people use lightweight wallets. If you run a business that needs a fast connection to the Internet, then it is not expensive to rent a server in a data center that has very good bandwidth. Even inexpensive servers have plenty of bandwidth and CPU power to keep up with much higher transaction volume. If you insist on running a full node from your home, average connection speed in China today is 3.7 megabits per second, which is almost 1,000 transactions per second. Latency through the Great Firewall is a bigger issue right now, but there are several software solutions to that problem that people (including myself) are working on right now. Q: 2) In addition, I'm curious what is your opinion on the current Bitcoin Core team? There is no doubt? If so, why not act as a Core developer contributing code in Bitcoin Core to solve these problems? A: 2) I like most of the people on the current Bitcoin Core team, they are great. But there are a couple of people on that team I don’t want to work with, so I have decided to limit the amount of time I spend with that project.
Q: 1) Hello Gavin, I would like to ask you how long since your last contribution in Bitcoin Core or others related? Expect the big influence as one of the earliest contributors, do not you think you ought to talk about the code, mostly for the coutribution of development of Bitcoin? A from pangcong: 1)The last commit in bitcoin core made by Gavin is on September 30, 2015, after that Gavin was busy with bitcoin XT and bicoin classic. His actual development in bitcoin has never stopped, these records are very clear on github, if you want to ask questions which are obvious, please investigate first. A from Gavin: 1) Also: I submitted some patches to Bitcoin Core a few days ago. Q: 2) Also, you were a neutral software engineer before, seriously committed to improving the bitcoin. But now you're playing political means to enhance your impact on the future of Bitcoin, how do you respond with it? A from KuHaiBian: 2) Now the biggest problem in Bitcoin is not block size limit, but that there is only one development team, it is as dangerous as the situation that there is only one mining pool mining bitcoin. This is the biggest problem Gavin is trying to solve. A from Gavin: 2) I just give my honest opinion, and try to do what I can to make Bitcoin more successful.
Q: There is no systematic process for Bitcoin upgrades. Is there any regulation/restriction on the power of Core devs? How do we balance the conflict between the centrilized power of the devs with interest of the community consensus? Do you think Bitcoin need to learn from R3 chains or distributed ledger systems? I.e. setting up regulations to constrain the power of the devs, so that only devs with “restricted access” can contribute, not everyone. A: Competition is the best solution. If the Core team does not make their customers happy, then they will be replaced. It might take a year or more for another team to get the reputation for high-quality code that the Core team has acquired over the years.
Q: In 2016, you propose to increase block size limit to 8M, then doubled every two years. Is it still the most promising expansion plan in your opinion now? If it is, do you think it possible that the block size reach 8GB in 2036, particularly given the network speed and bandwith in developing countries. A: I think it would be best to eliminate the block size limit entirely, and let the miners decide if they should accept or reject blocks. The miners want Bitcoin to succeed, and will not choose a size so large the network cannot handle it. I don’t know if people would agree to eliminate the limit, though. A dynamic limit that grows, but prevents an extremely large ‘attack block’ would also be a good solution. The growing-8MB idea came from the idea that it should be possible for somebody on a home Internet connection to continue to validate every single transaction. However, more research showed that the bottleneck is not the connection from the Internet to our homes (even in China there is plenty of bandwidth there) but connections across international borders. In particular, the Great Firewall can sometimes greatly restrict bandwidth to and from China.
Q: Gavin, hello! What is the reason do you think the community rejected Bitcoin XT? A: It was a mistake to try to make more changes than just simply increasing the block size limit.
Q: Now the problem of block size limit is not so serious as before when Bitoin was attacked, and the Segwit has been deployed, so what is the controversy? Why have to argue to the bitter end, must we argue until bitcoin die? Gavin, we all know your contribution to Bitcoin. But in 2015, when you said in bitcoin software development, we need a "dictator" to resolve the dispute. I think you want to be this dictator. http://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-June/008810.html A: Must we argue until bitcoin die: I think is is in the nature of people to argue, so I think we will be arguing about lots of things until either we die or Bitcoin dies. I think in a few years we will look back and wonder why there was so much arguing, but I also think some good things have come from all of the argument.
Q: 1) What do you think about Ethereum? Can smart contract run based on Bitcoin? A: 1) (This question is repeated. Please see Q18-4) Q: 2) What are the problems Miners may have to face after halving in July? Thanks! A: 2) There is a small risk that the halving will make a good fraction of the miners stop mining, because they will get about half of the bitcoins they got before the halving. And that might mean blocks take longer to create, which means less space for transactions, which might mean people get frustrated and leave Bitcoin. Which could drop the price even more, causing more miners to stop mining, more frustration, and so on. Miners tell me they have already planned ahead for the halving and this will not happen, which is why I think it is a small risk and I don’t think the halving will be a big problem for most miners. Q: 3) Where can we get the whole code and code review of bitcoin? A: 3) Bitcoin Core is at: https://github.com/bitcoin/bitcoin Bitcoin Classic: https://github.com/bitcoinclassic/bitcoinclassic btcd: https://github.com/btcsuite/btcd bitcore: https://github.com/bitpay/bitcore
The BSA regulations define the term “money transmitter” to include a person that provides money transmission services or any other person engaged in the transfer of funds. The guidance makes clear that “a user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB [money transmitter]under FinCEN’s regulations“. This group of ... Colorado’s money transmitter regulations do not define virtual currency and the Colorado Division of Banking has not published any guidelines. An attempt to address this lack of clarity, Colorado House Bill 18-1220, would have described when wallet providers, traders and exchanges fall under the definition of money transmitters as well as clarified when altcoins fall under securities ... Should Regulations Treat Bitcoin Miners as Money Transmitters? By Bailey Reutzel August 16 ... The government could look to close down mining pools, groups of Bitcoin miners that share resources, Siddiqui says. But some pools are based outside the U.S. and others are peer-to-peer pools without central authority. Miners are issuers of the new currency by default, he says. If the government ... Bitcoin paid for services rendered or to independent contractors must be reported on IRS Form 1099, with self-employment tax possibly being applicable. Finally, capital gain on altcoins is taxable, as gains would be in stocks and bonds. The government has taken a cautious position toward bitcoin money transmitters. Bitcoin miners who mine “for themselves” do not have to register as Money Services Businesses (MSBs) with the US Financial Crimes Enforcement Network (FinCEN), according to an official letter ...
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