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Several major Japanese banks, in partnership with bitcoin exchange bitFlyer and Deloitte Japan, have published the first results of a blockchain interbank payments trial.

The Blockchain Study Group, which includes Mizuho Financial Group, Inc., Sumitomo Mitsui Banking Corporation and Mitsubishi UFJ Financial Group, Inc., have spent the last year collaboratively testing the technology for uses in bank-to-bank payments. The results of the specific trial disclosed today relate to the issuance of payments. According to the institutions involved, future testing will be widened to include the clearing and settlement of those transactions.

The contents of the report, a full copy of which can be found below, represent perhaps some of the more granular details of blockchain experimentation in Japan to date. Since the start of 2016, a range of proofs-of-concept have been developed and tested by financial institutions in Japan, primarily in the areas of payments, document management and digital currency.

The trial involving bitFlyer and Deloitte fits squarely in this context. But it’s in the report’s conclusion, however, that the authors dig into the bigger-picture outcome from the trial.

The authors note:

Quote:“Through practical experiment of domestic interbank payment operation, possibility in benefitting from cost reduction effect in system development by leveraging blockchain technology was confirmed. However, various issues exist in the application of blockchain technology to the domestic interbank payment operation, such as in methods to interface to existing bank systems and to areas outside payment, and in methods to fulfill non-functional requirements of high levels.”

In other words, while the proposed system can make it potentially cheaper to transact from one bank to another, the existing infrastructure isn’t quite ready to integrate with the technology. Further study, the report goes on to explain, will focus on how to alleviate some of these problems.

Nuts and bolts
The report itself contains intriguing details about how bank-driven blockchain systems might look in production.
Included in the report is a diagram detailing the structure of how participants interact with the proposed network. Transaction validation, for example, would be a process reserved for select banks – known as “core nodes” in this instance. “Application nodes”, on the other hand, would constitute the banks that are sending or receiving transactions that are including in the blocks created by the core nodes.

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According to the report, the prototype system was capable of processing over a thousand transactions per second.

“In the assessment to the experiment environment constructed this time, it was proven that the performance throughput in particular achieved 1,500 transactions per second and that the level sufficient for actual operation is expected,” the authors wrote.

As for the specifics behind those cost-cutting measures, the report highlights that reduced expenditures for software licenses, hardware, and maintenance would all be lower when compared to technologies utilized today. Costs related to middleware and applications were noted to be lower as well.

Read More Read More, Posted by: mikado
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Digital currency advocates in Australia have launched a new code of conduct initiative aimed at promoting self-regulation in the nascent technology space.

The Australian Digital Currency & Commerce Association (ADCCA) announced today the launch of the Digital Currency Industry Code of Conduct, which the group said was a result of recommendations in 2015 Senate report. The initiative was first announcedin February.

One of the key suggestions in that report was that, as the government formulates a more concrete strategy for regulating digital currencies like bitcoin, self-regulation among companies working with the tech can help fill the gap. Since then, Australia has moved to extend anti-money laundering rules to bitcoin exchanges – a position reflected in the new conduct code. Meanwhile, officials have been looking at ways to eliminate a much-maligned “double tax” on the purchase of bitcoin.

Nicholas Giurietto, CEO of the ADCCA, said in a statement:

Quote:“The self-regulatory model that we have developed gives Australian consumers confidence that they are dealing with a business with standards that they can trust, while implementing AML/CTF safeguards.

Those backing the initiative, including Deloitte’s Australian branch, positioned the launch from the perspective of consumer safety and outreach.
“It is all about making digital money safe. Our collective aim is to develop standards of consumer protection that hold participants to account and to a very high standard of conduct,” said Richard Miller, Deloitte advisory partner.

The launch comes as Australia continues to implement its fintech policy goals. Yet more changes are on the horizon, as the country’s chief financial reporting standards agency has pushed for international work on digital currency standards. Business regulators in Australia have also hinted that they may scrutinize acquisition deals involving blockchain startups or the technologies they’ve developed.

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Finland’s central bank co-organized a seminar on blockchain last week.
The Bank of Finland held the event in partnership with the country’s Ministry of Finance. The seminar took place on 24th November, according to the central bank.

Attendees included government regulators, local academics and companies based in Finland, drawn from institutions like Aalto University, Lappeenranta University of Technology and the VTT Technical Research Centre of Finland. Representatives from firms like Microsoft and Finnish energy firm Fortum were also in attendance.

In statements, central bank representatives said the event supports ongoing research into new technologies like blockchain.
Governor Erkki Liikanen was quoted as saying during remarks at the event:

Quote:“Our task is to ensure the reliability and efficiency of the payment system and the overall financial system and to participate in their development. Research into, and support of, new innovations shaping the financial sector constitute part of this work.”

The hope, according to the central bank, was to spur discussion on “a common view and strategy” for the technology in the Finnish public and private sectors. Ten blockchain projects were presented during the one-day seminar, focused on applications in both government and finance, among other areas.

Though no new initiatives were announced or pledged, the central bank said that discussions during the event were, in part, aimed at promoting the development of “guiding principles” for future work among stakeholders in Finland.

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An unintentional split of the network was the latest event to shake ethereum.
By now, you might have heard the back-and-forth about so-called hard forks, a particularly contentious way to update a public blockchain. Some view it as a sometimes necessary means to update the network, while others see it as less than desirable path because it breaks consensus and everyone on the network needs to update to a new blockchain in order to participate.

Ethereum has hard forked three times over the past few months to fix technical issues. But the latest fork was different, because it wasn’t executed on purpose.

At issue is that ethereum has different implementations of the protocol to process transactions on the network in sync. The two most popular, Geth and Parity, implemented the code for the last technical hard fork slightly differently, leading to a Thanksgiving fork.

One consequence is that the ether price dipped to the lowest point it’s been at since April, or before The DAO crisis, according to ethereum’s event timeline. Petar Zivkovski, director of operations for leveraged bitcoin trading platform Whaleclub, went as far as to call these recent challenges a "crisis of identity."

From the mid-summer unravelling of The DAO to an unknown hacker spamming the network to the point where users couldn’t complete smart contracts, it’s been a rough few months for the smart contract platform.

Yet ethereum developers have struck an optimistic tone, seemingly viewing the Thanksgiving fork as another learning experience and a chance to make the network better.

Developer response
Those involved with the project say that the team is looking to take steps in order to prevent future occurrences.
"This time, the fork was detected within 6 minutes, which was a bit lucky," Ethereum Foundation security lead Martin Holst Swende told CoinDesk.
Because developers might not always accidentally spot the problem in such a short time frame, they want to make sure that they're able to react quickly in a similar situation.

"We're working on improving our capabilities for detection, analysis, communication/coordination between teams,” Swende said.
He added that they’re working on a "Post Mortem" report, outlining lessons learned from various ethereum bugs, which they aim to open up to the public soon.

One step being taken will involve making time for added testing of "non-critical" forks, or those that don’t need to be executed immediately.
Ethereum Foundation media relations lead Hudson Jameson noted that developers also plan to overhaul the Ethereum Improvement Proposal (EIP), a process by which developers propose new ecosystem standards or changes to the ethereum protocol.

"There is also plans to eventually create an alternative web interface for listing EIPs so it will be easier for the average user to view EIPs without having to navigate a GitHub repo, which can be confusing at times," he explained.

Fixing the fork and beyond
There have been three other forks recently.
The last technical fork, Spurious Dragon, fixed a few different ethereum issues, including the deletion of the empty accounts that the attacker used to spam the blockchain.

Over the past week, developers have been using this newly granted power to delete all of these empty accounts, thus "debloating" the blockchain (a process that was officially completed on Wednesday). In the middle of this process, at block 2686351, a developer tried to delete an empty account, but didn’t use enough gas.

That’s where Geth and Parity had a minor disagreement— with big consequences. Geth went forward with deleting the accounts, whereas Parity didn’t. So, the network temporarily split into two.

The latest version of Geth, released the day of the fork, fixed the problem.

"If you do not update, please be aware you will be on an invalid chain that is not supported," ethereum creator Vitalik Buterin wrote in response. (This comment got some flak, since Buterin was declaring which chain was correct.)
Further, Buterin described it as an issue with Geth, but other developers have argued otherwise.

Geth developer Péter Szilágyi remarked at the time that, "We're trying to introduce the Parity bug into Geth so that we don't have to rewind the chain..."

Still, despite the minor infighting, the ethereum community views it as an opportunity to do better next time.

Blockchain 'menace'
Yet there are some who think it's a problem that will continue to impact the ambitious smart contract blockchain. To some, the problems described above vindicate a position offered by bitcoin's pseudonymous creator during a debate from six years ago.

"I don't believe a second, compatible implementation of Bitcoin will ever be a good idea. So much of the design depends on all nodes getting exactly identical results in lockstep that a second implementation would be a menace to the network,”
Satoshi Nakamoto said in a discussion with Gavin Andresen, former lead maintainer of Bitcoin Core.

One potential "menace" is that every client on the network needs to function nearly the same, even while written in different programming languages. If there’s a slip up (in ethereum’s case, small disagreements of how to delete the empty accounts), the network could split.

ChromaWay co-founder and CTO Alex Mizrahi argued recently that while multiple implementations might be considered a good thing in other instances, the risk of monetary loss showcases why it might not be appropriate for cryptocurrencies.

So, some argue that a fork was an inevitable result, but since bitcoin and ethereum networks are perceived as competitors, it’s hard to determine the honesty behind this analysis.

Since ethereum doesn’t a wide user base, it might not have impacted that many people. In this case, those miners that accidentally continued to mine on the "wrong" chain probably lost money. Anyone who made a transaction on the wrong chain might be surprised to see that it didn't go through.

In the end, a similar event would perhaps be more worrying on a more widely used platform.

Read More Read More, Posted by: mikado

The price of bitcoin keeps bumping up over the $750 mark.
The digital currency’s price broke through this key psychological level today, representing the sixth time that bitcoin has surpassed $750 since mid-November, CoinDesk USD Bitcoin Price Index (BPI) figures reveal.

Bitcoin experienced these price fluctuations amid modest trading volume, as CoinMarketCap data shows that at no point during the session did 24-hour trading volume surpass $90 million. This lukewarm trading activity compares to last month, when 24-hour volume reached as much as $174 million on 3rd November and $173 million on 17th November.

The digital currency managed to breach $750 several times in November, climbing past this level before quickly falling back, according to BPI data. The digital currency first surpassed $750 on 17th November, briefly lingering above this level before surrendering its gains and then climbing once again.

Notably, the price of bitcoin has frequently exceeded $750 but has not breach $755 over the last few weeks.

Read More Read More, Posted by: mikado
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Peer-to-peer bitcoin lending platform BitLendingClub has announced that it is shutting down next year.
First detailed in an email to users and later a blog post on its website, BitLendingClub said that "regulatory pressure" in Bulgaria, where the site is based, had driven the site to close.

While the platform's operators weren't clear on exactly when the site would begin to shut down, the team behind the service said that it would disable registrations and loan requests "sometime next week". Full closure is expected sometime in August of next year, before which time the ability to repay loans and withdrawal funds will remain active.

In an email, CEO Kiril Gantchev said that the site had been contacted by regulators in Bulgaria, but declined to comment further on the exact nature of those discussions.

Gantchev told CoinDesk:

Quote:"We've been contacted by regulators in Bulgaria and the regulatory requirements posed to us make it unfeasible to operate the platform, we can't comment anything beyond that."

Launched in May 2014, BitLendingClub would go on to raise a €200,000 seed investment from European VC fund LAUNCHub in October of that year. The service is one of several aiming to provide peer-to-peer loans denominated in the digital currency.

Read More Read More, Posted by: mikado
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Bitcoin and ether exchange startup Coinbase is seeking a patent for a security system for bitcoin private keys.
According to an application published on 24th November by the US Patent and Trademark Office (USPTO), Coinbase is aiming to patent a “security system forming part of a bitcoin host computer”. Coinbase submitted the application in May of last year, with software engineers Andrew Alness and James Hudon listed as inventors.

The startup, which has raised more than $116m in venture capital to date, has sought other patents in the past. The last few months have seen a flurry of activity on the patent front, as the USPTO has released applications from startups like Blockstream and Digital Asset Holdings, as well as major firms like AT&T and Nasdaq, that are related to the tech.

Coinbase explained in the application:

Quote:“It may be a security concern for users that the private keys of their Bitcoin addresses may be stolen from their wallets. Existing systems do not provide a solution for maintaining security over private keys while still allowing the users to checkout on a merchant page and making payments using their wallets.”

When reached for comment, the company pointed to a blog post from September of last year penned by co-founder and CEO Brian Armstrong detailing its plans to seek patents “to keep them out of the hands of bad people”.

“We support innovation and development in the space and hope to facilitate through sharing of IP,” Coinbase said in an emailed statement.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Read More Read More, Posted by: mikado
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R3 released the code for its Corda distributed ledger platform earlier this week, and market observers were quick to weigh in.
The Corda codebase launched Wednesday to public consumption is an early-stage distributed ledger platform designed to record and automate legal agreements between various business entities, with a particular focus on financial institutions.

R3 has pitched the release as a way to open the code up to outside comment – and thus far, reaction to the effort has been mixed, drawing both praise and criticism from market observers.

A director at PricewaterhouseCoopers' fintech and digital practice, said his company welcomes the release, given the potential educational contribution it could make to blockchain developers. Ajit Tripathi said that PwC plans to work with its clients to help them use the software if they express an interest.

Tripathi acknowledged that the open sourcing of the code is certainly good for publicity. At the same time, he added, other code publications from both established companies and startups have demonstrated that it's exactly this kind of publicity that can spark interest from potential contributors.

Given the importance of developer adoption, Tripathi said they have have little choice "but to open-source their platforms." But that doesn’t mean they aren’t also seeking to protect those ideas even as they share them. In August, the Wall Street Journal reported that R3 had filed a patent application for a distributed ledger financial platform, dubbed Concord, upon which others might build.

Tripathi went on to remark:

Quote:"It's also entirely commercially sound to look to preserve their IP through patents where appropriate, although R3 would need to be careful not to ever use any patents in a way that would make developers or institutions wary about using Corda."

Corda criticism
Following the release, some skeptics on social media and at industry conferences moved to voice doubt over the distributed ledger’s value proposition.

In a lengthy explanation on Twitter, Bitcoin Core developer Peter Todd expressed confusion over what problem Corda is designed to solve. He also argued that, without a clear explanation of who authorized changes, there would be a lack of accountability to partners.

Quote:Not once do the Corda docs talk about who actually is supposed to have access to keys; whole point of crypto is to know who did what!
— Peter Todd (@petertoddbtc) November 30, 2016

Addressing a panel hosted earlier this week by the Wall Street Blockchain Alliance, blockchain researcher and analyst Tone Vays took aim at the Corda release. In conversation with CoinDesk, he argued that R3 is primarily focused on selling its consulting services, and that there is little distinction between Corda and existing approaches to shared databases.

"But getting all the banks in a room and discussing a shared database is I guess impressive," said Vays.

'Overwhelmingly positive'
For its part, R3 says that the debut has been a success. According to managing director Charley Cooper the response to the open-sourcing of Corda has been "overwhelmingly positive".

If the startup was hoping to get developers involved, early signs suggest that the effort is working. Within two hours of blockchain banking consortium R3CEV’s launch of its open-source platform, its first meaningful contribution was received.

Currently, there are about 350 members on the Corda Forum and 18 contributors to the Github page who collectively have made a total of 17 pull-requests, nine of which have been merged with the codebase. The first substantial pull-request, to factor out the webserver into a separate process, has sparked a lively conversation between R3’s lead platform engineer Mike Hearn and other contributors.

In addition to the changes to the codebase that have already been implemented, Cooper says the consortium has heard from "top-level contacts" around the industry offering "constructive feedback" and expressing a desire to get involved.

In the near future open-source blockchain group Hyperledger is expected to incorporate Corda into its growing suite of tools. In a conversation yesterday Cooper expressed excitement over Corda’s reception so far, and for some perspective, a comparison to Hyperledger itself.

Cooper concluded:

Quote:"We’re still at a fraction of the users and active participants that they have. But they’re a year into this and we’re 24 hours into this."

Read More Read More, Posted by: mikado
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Smart contracts startup Symbiont has hired a cryptographer best known for her work in detailing how to break the SHA-1 hashing algorithm as its new chief security officer.

Dr. Lisa Yin, who will also serve as chief cryptographer, was one of three academics to publish a 2005 paper outlining an attack on SHA-1. In the eleven years since, further research has been published highlighting attacks on the hashing algorithm, and in recent years tech firms have called for its retirement.

Yin also served as chief editor of the IEEE P1363 project, which develops and publishes standards for public-key cryptography.
According to the startup, Yin will focus primarily on privacy and security issues related to its blockchain projects. Symbiont unveiled its flagship blockchain initiative, dubbed Assembly, in October.

Yin said in a statement:

Quote:"I am very excited to join the team, and I look forward to keeping Symbiont ahead of the curve on developments in cryptography, which is a critical building block for distributed ledger technology."

Yin's appointment represents the second high-profile talent grab the startup has made in the past month. In November, Symbiont tapped former SEC commissioner Dan Gallagher for its board of directors. At the time, Symbiont also added former T. Rowe Price Global Investment Services CEO and president Todd Ruppert to the board.

Read More Read More, Posted by: mikado
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One of bitcoin's more forward-looking projects has attracted a group of developers who are using some obscure names from the Harry Potter book series.

Bearing the names of the book series' invisibility cloak inventor (Ignotus Peverell), its leading wand maker (Garrick Ollivander) and the mother of its main antagonist (Merope Ripple), the developers are now working on the first version of Mimblewimble.

First proposed by a cryptographer who uses French version of Tom Riddle (better known as Lord Voldemort), Mimblewimble describes a unique way of solving some of bitcoin’s more pressing problems.

By rearranging bitcoin’s transaction structure in such a way, the proposal helps with two things: scaling the bitcoin network to a greater number of transactions and increasing the privacy of user's transactions. The downside of Mimblewimble is that its alternative transaction structure doesn’t work with the existing bitcoin network, so this code may ultimately come to form the basis for future implementation as a sidechain or an altcoin.
In an effort to bring the theoretical project to life, bitcoin experts such as Blockstream mathematician Andrew Poelstra and Bitcoin Core contributor Bryan Bishop have taken an active interest in the project, with Poelstra putting forth a white paper that refines the idea and offers ideas for further scalability improvements.

While Lord Voldemort disappeared after debuting his paper, pseudonymous developers bearing the names of after Harry Potter characters went on to take the reins and begin working on an implementation based on the original concept.

According to Poelstra, the jury is still out as to the true identities of these developers.

He told CoinDesk:

Quote:"There isn't any publicly available info about who these people are."

New 'wizards'
Shortly after the paper's debut (and its author's departure), Ignotus Peverell took the role of ringleader, putting Lord Voldemort’s theory into practice in a project called grin.

He or she described the open source project as "very far from complete" upon publishing it in the bitcoin-wizards IRC channel, a popular place to chat about technical bitcoin details.

On 29th October, Garrick Ollivander joined ranks to "fix a merkle tree malleability", among other updates, sparking a new round of excitement for at least one developer.

"And sure enough here was yet another Harry Potter character showing up doing Mimblewimble stuff which was super exciting. I was super jacked. I went for a long run around Austin to let my excitement out," Poelstra said at a recent bitcoin meetup. The entry of Ollivander was followed by Merope Riddle, who made several contributions in late October.

Despite the attention from more "wizards", Poelstra noted that the project is not yet usable, but that it's "making steady progress".

Read More Read More, Posted by: mikado
Source: Poloniex

Ether (ETH) prices struck a seven-month low on 2nd December, extending the losses suffered earlier in the week. ETH fell to as little as $7.60 at 15:55 UTC, according to Poloniex figures. The last time the price dropped to this level was in late April.

The price of ether – the cryptocurrency of the ethereum network – managed to recover later in the session, reaching $7.88 at 17:10 UTC, additional Poloniex data reveals. In spite of this improvement, ETH followed a steady, downward movement during the day, peaking when it opened the session at $8.40.

Ether prices have been encountering headwinds recently as their platform has dealt with a series of technical challenges. The ethereum network has undergone a series of forks, the latest of which was unintentional and resulted in the network being split between two transaction histories for a brief period of time.

Since the Thanksgiving fork, ethereum developers say they have moved to improve existing practices in order to prevent a similar situation from occurring.

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Bitcoin prices neared $780 during the week through 2nd December, coming within 1% of the 2016 high of $781.31 reached in June.
The digital currency rose to a high of $778.14 amid sustained support. Prices remained above $700 all week and only briefly fell below $725, CoinDesk USD Bitcoin Price Index (BPI) data reveals.

Bitcoin prices have been enjoying sustained support, as they have managed to stay north of $700for more than two weeks, having surpassed that level on 14th November, BPI figures show.

The market is highly bullish, according to sentiment data provided by leveraged bitcoin trading platform Whaleclub. Between 26th November and 1st December, the market fluctuated between 82% and 89% long, maintaining an average of 85% long during the six-day period.
Petar Zivkovski, Whaleclub’s director of operations, told CoinDesk:

Quote:"Most traders are long on bitcoin. We've noticed an uptick in shorts in recent days as some contrarians try to pick the top, but those remain relatively rare."

Zivkovski spoke to continued trader interest, telling CoinDesk that he also believes the price rise is fueled by new bitcoin buyers.
"Price has made a series of higher highs and higher lows, which indicates that there is still enough new money coming in to the system to push price to new levels."

Macroeconomic boost
Analysts indicate that bitcoin prices are further receiving support from a handful of macroeconomic developments that have helped drive market participants to the digital currency.

For example, China recently imposed additional capital controls in an effort to reign in outflows and help reduce the yuan’s continued slide against the US dollar.

As the Asian nation's efforts to control its currency continue to draw headlines, cryptocurrency fund manager Jacob Eliosoff pointed to data supporting the notion that China is playing a key role in bitcoin trading.

He told CoinDesk:

Quote:"One thing the data does show is that the CNY price has led the USD one: currently $791 vs $770, a 3% spread, and over the last day often higher. This strongly suggests that, whatever the reason, buying is once again being driven by China."

Another development that has stuck out as potentially supporting bitcoin’s recent price movements is India Prime Minister Narendra Modi’s efforts to take 500 and 1,000-rupee notes out of circulation. While this move has been justified as an attempt to help reduce corruption and black market activity, it could potentially push India into a liquidity crisis.

Modi has pointed to a survey, conducted through a smartphone app, which shows 90% of participants supporting the move to eliminate these banknotes from circulation. However, the move has drawn the opposition of both opposition parties as well as former Indian Prime Minister Manmohan Singh.

Zivkovski made reference to this situation, telling CoinDesk that he believes this situation has boosted bitcoin's outlook.
"The Indian crackdown on cash/rupees has most probably contributed to the rise [in bitcoin prices] with the injection of fresh money and bitcoin users from India," he said.

Ether’s struggle
Elsewhere, ether, the digital currency powering the ethereum platform, continued to struggle this week, falling to its lowest price since April.
Ethereum has faced several challenges lately, including undergoing three forks in the space of a few months as the platform attempts to overcome technical challenges.

Ethereum underwent a hard fork dubbed ‘Spurious Dragon’ on 22nd November, which was an attempt to rectify some complications that stemmed from continued attacks on the network. An attacker had left a significant number of empty accounts in the blockchain, and Spurious Dragon gave developers a way to remove these accounts.

While this hard fork represented an improvement, two major Ethereum clients – Geth and Parity – implemented the code from this fork in different ways. As a result, there came a point where the two clients did not agree on deleting a certain account.

While Geth did delete the account, Parity failed to do so, which resulted in a brief split in the network or "Thanksgiving fork".
In spite of Ethereum’s continued challenges, several market observers have spoken out about the network’s recent progress, pointing to what they called progress in fundamentals such as mining distribution and unique address growth.

Zcash chills out
Zcash prices have calmed down a bit lately, trading in a range between $60 and $80 for most of the week, Poloniex figures reveal.
The digital currency traded within this range after experiencing far greater fluctuations earlier in the week, falling more than 25% from $89.45 at roughly 12:00 UTC on 26th November to $65.59 at 22:00 UTC on 27th November.

The currency’s available supply is now roughly 133,000 ZEC, a figure that represents less than 1% of the 21 million ZEC tokens that are scheduled to be mined over time.

Both Zivkovski and Eliosoff emphasized that at this point, adoption is crucial to supporting the price at current levels, given that supply will continue to increase.

Thus far, Zcash has showed promise by leveraging zero-knowledge proofs called zk-SNARKS to enable counterparties to conduct transactions without revealing themselves. However, the cryptocurrency has thus far obtained little adoption;

Until the digital currency has a viable use aside from trading, its value is highly speculative.

This article is not intended to provide, and should not be taken as, investment advice. Please consider all blockchain investments with caution.

Read More Read More, Posted by: mikado
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For almost two years, there appears to be little discussion in bitcoin’s two main public forums other than scalability, an ancient topic, in bitcoin terms, that has consumed our community at the expense of all else.

There have been many metaphorical casualties, including high principles, such as the right to an open and free public debate in what used to be bitcoin’s main public space, but can bitcoin ever return to a united community? Should it split in two with the market holding a referendum? Can there be a grand compromise or will the question of scalability forever become part of bitcoin’s background?

How Did We Get Here?
The use and need for internet money, or e-cash as Friedman called it, was apparent decades ago, leading some to focus on potential ways it could be implemented. One of them was Hal Finney, a developer for PGP Corporation, a crypto activist, a regular poster on the cypherpunks listserv and the first to receive a bitcoin transaction from Nakamoto.

Both Peter Todd and Gregory Maxwell have stated they worked, collaborated or discussed with Hal Finney an implementation of a proof of work based digital currency, presumably RPOW, which Finney stated he tried to create in 2004. It may well be the case that Finney was a mentor in a way as we can see that many of the ideas of both Todd and Maxwell originate from the cryptographer. For example, Finney had a particular dislike of secp256k1 which was recently modified by Maxwell and Pieter Wuille. Likewise, Todd’s idea of replace by fee, which was incorporated into bitcoin this year, also probably originates from Finney, as, I would argue, does segwit and the Lightning Network which, although with some differences, on a high level applies Finney’s vision for bitcoin publicly stated in December 2010:

“Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self-regulating.

I believe this will be the ultimate fate of Bitcoin, to be the “high-powered money” that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as… well, as Bitcoin based purchases are today.”

This general idea, with some modifications, was expressed to Nakamoto himself when he first announced bitcoin by James A. Donald, an apparent pseudonym. The suggestion, which segwit and Lightning implements to a large degree, although with some modifications, is that no one should use bitcoin’s blockchain, except for banks or hubs, with on-chain fees being $1,000 or more per transaction because, they argue, bitcoin cannot scale. Instead, everyone should transact through banks/hubs, with bitcoin’s blockchain an expensive SWIFT like clearing house.

Nakamoto’s Vision
Nakamoto had something very different in mind, seemingly taking into account the vast complexities of the free market and the nature of permissionless mining, he stated:

“At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.”

Although on the surface this appears to be speculation or a statement of preference, a consideration of long time frames suggests that it is more a statement of inevitable fact as, even if the blocksize is kept at 1MB forever, at some point, perhaps in a century or so, running a node will require up-front capital as data is constantly added to bitcoin’s blockchain.
Nakamoto continues:

Quote:Visa processed 37 billion transactions in FY2008, or an average of 100 million transactions per day. That many transactions would take 100GB of bandwidth, or the size of 12 DVD or 2 HD quality movies, or about $18 worth of bandwidth at current prices. If the network were to get that big, it would take several years, and by then, sending 2 HD movies over the Internet would probably not seem like a big deal.

The time-frame is important. It has taken bitcoin eight years to reach 1MB blocks. Currently, the network would probably operate finely with 2MB blocks for a couple of years, with scientific studies suggesting that today 4MB is perfectly acceptable, which would probably provide space – if bitcoin continues to attract interest and growth – for another half a decade or more.

To reach Visa levels, considering how widely it is used, we would be thinking in terms of decades and for datacenter type nodes we would be imagining a scenario where all of the world’s transactions are in bitcoin specifically, which is highly improbable as even gold has silver and coper, and, in any event, would be in the next century or later, making it impossible for us to predict with any confidence whether a data center would mean a home server or a mining farm.

Nakamoto, therefore, has so far been right in suggesting that bitcoin can scale and, as 4MB is perfectly acceptable, he will continue to be right for another half a decade, but the supporters of Finney’s vision have decided to not wait until they are proven fully wrong, and instead implement that vision now when technically even they would agree there is no need, at least for another few years.
Nakamoto’s Vision v Finney’s
These two different ways of reaching the same end have divided prominent bitcoin developers, with Gavin Andresen, Mike Hearn, Jeff Garzik and others supporting Nakamoto’s Vision, while the relative newcomers Gregory Maxwell, Peter Todd and others arguing for Finney’s.

There is something to be said about some developers proposing to suddenly completely transforming bitcoin’s payment network, despite it’s clearly laid design, from one which works perfectly fine to a completely unproven new network, but the difficulty in a decentralized system is that there is no judge to make a decision. Although miners, to a large extent, operate as initial arbitrators by the blocks they mine, with the market then approving or over-riding their decision, miners have failed to act for almost two years. Even now that they have to choose between Bitcoin Unlimited and Segwit, some are proposing they may choose neither, a decision that would suggest it is miners who are keeping capacity limited.

According to every poll, including a recent one by CCN, around 80%, consistently over the two years, prefer on-chain scalability. Although these polls are not scientific, the recent experience of ethereum shows that they are strongly indicative with the current price between ETH and ETC largely reflecting polls prior to the fork. The majority of Bitcoin users therefore clearly seem to prefer Nakamoto’s vision, who has proven his abilities by creating a working digital currency, rather than Finney’s, who failed with RPOW, but users are being denied such choice.

A Grand Compromise?
The main reason why users are being denied a choice, besides the simple fact that LN does not exist and is a very new system which needs years of operation to gain any trust that it doesn’t have bugs and can’t easily be hacked, is that followers of Finney’s vision probably know LN is inferior to on-chain transactions because you have to in effect open a metaphorical bank account and deposit bitcoin to an LN address which you can no longer access outside of the LN system at least for a period of time, among other things.
Moreover, as LN hubs take fees from miners, on-chain transactions need to become very expensive to compensate for the fees hubs are taking, all of which is paid by end users. As such, space needs to be kept very limited, from the perspective of the 20%, so that ordinary bitcoiners stop using the blockchain and are very much forced to use LN.

However, although the network has been operating at full capacity for almost all of 2016, from observation one can say that there appears to be a ceiling on transaction fees of around 50 cents, with perhaps exceptional spikes during fast price movements. In general, the network seems to self-regulate whereby an increase of fees reduces demand as users wait or substitute bitcoin with other networks as one would expect, but this empirical proof that fees cannot be forced, which would largely disprove the entire concept of replacing bitcoin’s payment network with LN, seems to be largely ignored by the proponents of Finney’s vision.

The much more sensible solution to next century’s problems is many transactions paying a small fee as Nakamoto suggested. The alternative, as Finney’s proponents suggest, is for these many transactions to pay small fees to hubs, plus the fees to miners, with hubs plus bitcoin nodes in servers or data centers eventually, making the exercise of adding an intermediary with its many problems very much confusing.

If Bitcoin Core wished, they could set a flag day as Nakamoto recommended and Ethereum has implemented a number of times with no technical problems and, where there has been general agreement, with no problem whatever. They could also adopt BU’s method of decentralized decision making regarding on-chain scalability or BU could incorporate segwit without the discount, but neither of those options is likely as that would make LN optional.

A further difficulty in reaching a compromise is the fact that bitcoin’s community has already hardforked with miners, developers and ordinary users divided while businesses largely seem to prefer an on-chain increase. Uniting the community once more would be a difficult if at all possible task as Michael Marquardt continues a North Korean grip on r/bitcoin which indicates Finny’s vision has largely lost the debate and user’s support as otherwise there would be no need for such drastic actions.

The Endless Debate
Considering that this debate began as soon as bitcoin was proposed, it is probable that all parties involved have a genuine difference of opinion, with both sides of the argument having their own merits. As such, it may well be the case that this debate never actually ends as whichever path is chosen there will still be arguments to be made regarding scalability as bitcoin’s adoption continues to grow.

Eventually, we’ll probably reach some sort of understanding, but the continued delay towards a decision has probably set bitcoin back two or three years as the community consumes its energy on endlessly repeating the same arguments, instead of working towards implementing the many opportunities bitcoin offers.

For that reason, it is highly unfortunate that a compromise was not reached and even now does not seem possible, but in the end, bitcoin continues to work and capture the world’s imagination, with far more aspects to this digital currency than the question of scalability which will be addressed whether through hubs or Bitcoin Unlimited, eventually.

Read More Read More, Posted by: mikado
[Image: hardfork5.jpg]
Image credit: Reddit.

Ethereum has successfully upgraded its network to address a number of attack vectors that were constantly exploited in September and October of this year.

Just before Devcon2’s opening, an attacker exploited a smart contract gas mispricing bug which threatened to derail Ethereum’s big day. The developers, however, were able to take emergency measures, allowing the network to continue operating, but after Devcon2, for a period of two weeks, the attacker kept exploiting the same bug in different and creative ways, leading Gavin Wood, founder of Parity Technologies, to call for a hardfork.

The developers recommended two hardforks, an emergency upgrade to deal with the most serious issues, which was successfully completed in October, and a second hardfork to further optimize the network and increase Ethereum’s robustness.

The second hardfork just completed today and it includes, among other aspects, relay protection so that the ETH and ETC chains can be fully separated. At block 2,670,000, the network disregarded the old bugged chain for the new more robust blockchain without any apparent technical or social complications.

The identity of the attacker remains unknown. There were speculations that he was testing ethereum to find any holes so that the network can become more robust, but he could have, for all we know, intended to disrupt the network. If the latter was his aim, he has somewhat succeeded. Ethereum’s price has been falling for the past month, but the main reason may be because of a rally in bitcoin due to monetary mismanagement by authorities in China, India, Nigeria, Zimbabwe and other countries.

The community has however appeared to be somewhat on suspense during the past two months due to the necessary upgrades being in the background. Now that it’s all completed, investors, developers and businesses might breathe a sigh of relief or even celebrate as the issues are finally resolved, allowing a return to normal operations.

ETC is to also hardfork, but there appears to be little discussion on their main public forum. The currency has fallen to $0.84, attracting little attention after an initial frenzy.

Discussions about a Bitcoin hardfork continue with Segwit and Bitcoin Unlimited in a duel for the currency’s future. The bitcoin community has for almost two years been discussing an upgrade to its transaction capacity, with the extremely prolonged period of decision making exerting a toll to the point where Vox asked what happened to bitcoin’s aim of changing the world. As miners appear divided, developers too and the community itself which has hardforked into two main public forums, a resolution does not appear in sight.

One of the reason appears to be a fear of hardforks, however, as ethereum has now shown time and again, where there is general agreement, there are no complications whatever. Even when there is no general agreement, the matter is resolved in weeks as opposed to months or years.

The different approaches have allowed Ethereum to quickly resolve its issues and move on to more important matters, while Bitcoin continues to argue over one parameter. Main focus may, therefore, once more return to the fast, agile and innovative new currency, while the public and investors wait for bitcoin to determine its path and find its spirit.

Read More Read More, Posted by: mikado
[Image: 5-bitcoins-1024x682.jpg]
Bitcoin is gaining popularity in South Korea.

As bitcoin and digital currencies grow in popularity in South Korea, financial regulators have launched a digital currency task force to focus on regulatory and licensing parameters for bitcoin exchanges.

In a meeting last week, the first of many over the coming months, the task f
orce agreed that the bitcoin and digital currency sector needs to be regulated, according to regional publication Korea Joongang Daily.

The Financial Services Commission (FSC) convened the meeting, besides launching the task force, and saw other authorities including the Bank of Korea, the country’s central bank, the Ministry of Strategy and Finance and the Financial Supervisory Service. As things stand, the Ministry of Science, ICT and Future Planning is tasked to oversee the registration of bitcoin exchanges without any regulatory guidelines. The current structure is likely to change by Q1 2017.

As for the regulatory approach itself, the taskforce will refer to existing legal frameworks in the United States – New York state’s BitLicense is a notable example – and Japan, where a recent bill was passed by the legislature to regulate bitcoin exchanges in the country.
The templates for bitcoin regulations were first revealed in a speech by FSC chairman Yim Jong-yong last month, who stated:

Quote:The government will push for the systemization of digital currency on a full scale in tandem with a global trend in the U.S., Japan and other countries.

Bitcoin adoption has seen significant strides in the country, with a total of 1.5 trillion won (approx. $1.3 billion) in transactions processed between the top three bitcoin exchanges alone. Other data revealed by the FSC notes a 6% rise in average monthly bitcoin transactions compared to last year.

The need for regulation will also see stringent measures to prevent misuse of digital currencies through exchanges, according to the commission, which said during the meeting:
Quote:Digital currency is often used for money laundering, drug trafficking and tax-related crimes since it is free from regulation.

The increased activity from regulators and officials coincides with developments in the South Korean fintech space in recent months. For instance, the Korea Exchange, South Korea’s sole securities operator launched a blockchain-based market for private companies and startups to trade shares. Shinhan Bank, a major financial institution in the country, announced a new bitcoin-based remittance service that will serve the Korea-China corridor, highlighting a notable instance where a traditional bank is tapping into the innovation of bitcoin.

Read More Read More, Posted by: mikado


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