Australian computer scientist and tech entrepreneur Craig Wright has continued with his claims that he is the inventor of Bitcoin.
Australian computer scientist and tech entrepreneur Craig Wright has asserted that Satoshi Nakamoto, the author of the Bitcoin (BTC) white paper, plagiarized him.
Speaking at the CC London Investment in Blockchain and AI Forum 2019, which took place from Oct. 14 to Oct. 16, Wright claimed that he was about to reveal the ultimate proof of his authorship of the original Bitcoin code. This will come out, according to Wright, in the form of a thesis he wrote back in 2008.
Wright said that Nakamoto lifted entire sections of the thesis into the Bitcoin white paper. After realizing that he referred to Satoshi in the third-person, Wright said:
“Either I am Satoshi or Satoshi plagiarized me. You can make the choice, I don’t really care because he actually took whole paragraphs from my LOM. So it’s either me or… I don’t really care if you like it.”
Worth noting, Wright has continuously claimed that Satoshi Nakamoto is the alias for the partnership between him and his late business partner Dave Kleiman, the entity entirely responsible for inventing Bitcoin. After Kleiman’s death, Wright began arguing that he is actually Satoshi Nakamoto.
Wright’s academic background
As previously reported, Wright has become one of the most controversial figures in the crypto community, primarily due to his self-proclamation that he is Bitcoin’s original creator. Wright has filed 114 blockchain patents since 2017 and listed two PhDs on his LinkedIn page, including one from Charles Sturt University.
Eventually, Forbes contacted the university and found out that it had not granted Wright any PhDs, although it gave him three master’s degrees in networking and systems administration, management (IT), and information systems security. Wright was, however, awarded with a doctorate degree by Charles Sturt University later in 2017.
Wright and the case of 1 million BTC
Since early 2018, Wright has been a defendant in a lawsuit filed on behalf of the estate of Kleiman, alleging that following Kleiman’s death in 2013, Wright unlawfully appropriated more than a million BTC that the business partners had mined jointly in the early years of the cryptocurrency, as well as some related intellectual property.
In late August, Judge Bruce Reinhart rejected Wright’s testimony, stating that he had perjured himself by providing the court with falsified documents and recommended that he hand over 50% of the over 1 million BTC Kleiman mined with Wright, as well as intellectual property rights associated with Bitcoin’s software.
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In a string of recent Tweets, 2020 Libertarian presidential candidate and fugitive from the law John McAfee has been talking about slavery. Urging people to “wake up” and assuring them that neither compliance with the status quo, nor stacks of riches, can set them free. Indeed, when the current state of the world is examined closely under an economic lens, there is no other rational conclusion save that humanity currently inhabits a gigantic, fiat money plantation, and that the slaveholders are violent and irrevocably unreasonable.
Yes, you are a slave. No, that’s not hyperbole. Before launching into this, though, it’s important to define terms. A generally agreeable definition runs like this one, put forth by UNESCO:
As slavery seems to take new forms, it is still, nevertheless, identified by an element of ownership or control over another’s life, coercion and the restriction of movement and by the fact that someone is not free to leave or to change an employer.
In essence, to be a slave is to have no autonomy or freedom concerning one’s body with regard to other human beings. That’s just to say, if you’re not a slave, you can do what you want within the bounds of property, and nobody has a right to force you to be somewhere, or to work for them.
The historic plantation slavery of the southern United States is well-known for its visible, horrific evils wrought on innocent human beings treated as property. Blatant examples of slavery also continue in many places today, in the form of direct “ownership,” human trafficking, sex slavery, and suchlike. But there’s still a form that is so blatant as to be ubiquitous, yet which most do not even protest, let alone recognize: fiat slavery.
In a recent live video uploaded to his Twitter account, maverick anti-politician John McAfee laments: “You think you’re not slaves but you are. The nine-to-five existence of your current lives is structured by the American industrial corporate complex, complicit with our government. You need to free yourselves from this.”
He goes on to state: “This is not what life is. Life is a great mystery. A glorious, unbelievably mysterious, beautiful existence if you are free from those who control you.”
An actual abolitionist from the plantation slavery era in the United States, political philosopher, essayist, and individualist anarchist Lysander Spooner eloquently elaborated:
While some balk at the idea of taxation and fiat money being a form of slavery, there really is no other rational conclusion. According to former IRS agent Sherry Peel Jackson in one of her many compelling speeches, it’s true, and knowledge of economics bears it out:
And let me tell you, that as a black woman I am keenly aware of the history of slavery. But do you understand that we are all slaves to this system? Do you understand that the media and Hollywood play a part keeping the American people so fixated [onmovies and TV]…that we don’t take time to read the Creature from Jekyll Island, study the Internal Revenue Code and learn the Constitution?
What Makes You A Slave?
In civilized market transactions, the buyer chooses the products or services they’d like to purchase, and the quantity, freely. Common sense. Nobody would frequent a pizza shop, for example, where the workers and owner forced people to buy pizzas under threat of violence. This would not only be absurd – it would be completely immoral.
With government and its fiat (lit. “by decree”) money, though, you don’t have a choice. The services and products—and their quantities—are chosen for you in advance, and you must buy, and work to pay via taxes, or go to jail. If you don’t like the quality of police protection offered to your community, that’s too bad. You must pay for it. If you don’t like any of the politicians running for office to rule your life, that’s too bad. You still have to work and pay for the winner’s policies to be implemented. If you don’t pay, you’ll go to jail. If you try to run away, you’ll almost always be caught. Maybe killed. If you wish to leave the plantation, there’s a fee for that, and your request may be denied. Just to be 100%, crystal clear: your request to move your own body geographically elsewhere may be denied. So, in the end, who owns you? It certainly isn’t you, by the looks of things.
Free Range Tax Cattle
Before 1861, there was no such thing as an “income tax” in America. In fact, the IRS was formed around the same time to collect the nation’s very first income taxes as a “temporary” measure to pay for the Civil War. Of course, “temporary” would turn into perpetual, and the many-tentacled monster of centralized state banking would grow in grotesque, rapid fashion, leading to the current situation. In 1895, the U.S. Supreme Court struck down the income tax as unconstitutional, but it would be later revived as a permanent fixture in 1913, the same year the Federal Reserve was created.
Currency competition was also historically permitted more or less, prior to this time. Until the National Bank Act of 1863, communities, churches, railroads, and virtually anyone could issue their own paper money backed by whatever they saw fit. These days, unless one’s currency is approved by the government, forget about it. This is why the whole issue of Bitcoin and currencies like Facebook’s proposed Libra are causing so much commotion. Never mind that the Fed has just slashed interest rates once again, on July 31. This for the first time since the financial crisis of 2008. The money forced on everyone continues to be systematically devalued and debased. No matter. Use it, or else.
That’s the situation. Forced to work to pay for things for someone else. No safe alternative. Cannot leave. If you leave, you’ll have to pay for your freedom. If you try to run away, you’ll be caged, killed, or fined and returned to the plantation. This is, by definition, slavery.
Bitcoin Breaks the Mold
At the beginning of July the Dementia Society of America announced it would begin accepting Bitcoin and crypto donations:
Why crypto donations? For donors in the United States, the IRS has classified Bitcoin as property for tax purposes. When you donate Bitcoin…you don’t pay capital gains tax and can write off the donation. You can change lives, and honor the memory and legacy of a loved one, in a convenient and tax efficient way.
Even if these tax laws were changed, bitcoin would still have the ability to travel thousands of miles in an instant, for practically zero fees, which means its utility cannot be determined by a state or central bank. From Venezuelan aid to clothes in Canada, crypto’s ability to sustain secure, reliable, and fraud-resistant charity is remarkable.
What really frightens the slaveholder paradigm is the fact that when individual users—and not central banks or governments—hold the private keys to their money, the only way to control it is to attempt a desperate application of force. This has two effects:
Proving that the money is indeed secure and valuable.
Showing the state for what it is: a violent, inhumane, controlling force.
The Keys Must Be Used or the Lock Won’t Open
Bitcoin and crypto are tools that can help trapped humans enjoy a better quality of life and begin to break free from the slave cycle McAfee speaks of. They’ve already begun to do so, giving normal, everyday individuals who couldn’t compete in the status quo of fiat power, an unexpected chance to innovate and be judged by their own merits and the market, instead of an arbitrary set of illogical, violent rules. Perhaps that is why governments are supportive of blockchain in general, but stand against private currencies. That said, in and of themselves, these are not enough.
As McAfee details in his latest video, even if one has all the money (or bitcoin) in the world, without an understanding of the value of freedom, no one can break free.
What do you think about McAfee’s statements? Let us know in the comments section below.
OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.
Images courtesy of Shutterstock, Twitter, fair use.
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Since the Indian government unveiled a draft bill to ban cryptocurrency, the crypto community has ramped up its efforts to influence the government’s final decision. The community has plans to reach out to parliament members to show them how flawed the crypto recommendations the government is examining are.
Ever since India’s Ministry of Finance released the long-awaited crypto report including the draft bill to ban cryptocurrencies, the Indian crypto community has ramped up its efforts to influence the government’s final decision.
“Different parts of the crypto community has been trying to make the government officials aware of the benefits of crypto from the last 24 months or more,” Nischal Shetty, CEO of local crypto exchange Wazirx, told news.Bitcoin.com. However, he said “the flawed crypto report suggests that the inputs from the community were never taken into account while preparing the report,” emphasizing that “Now, the entire crypto community of India is coming together and going in harder than before.” The CEO detailed:
We’re going to reach out to our elected members of parliament in India as they will be the final authorities to decide whether this report should be adopted.
“We want to ensure our ministers hear us out and understand that the report is flawed in multiple ways including the simple fact that it does not even classify crypto into assets, utilities and securities,” he continued.
There are many areas in the report that suggest that the committee either did not understand the fundamental concept of cryptocurrency or did not do enough research before producing the report and the draft bill. Shetty opined:
The flawed crypto report punishes people of India & startups for participating in public blockchains while it encourages corporates to create private blockchains
The committee claims to have studied how some countries (Russia, China, Switzerland, Thailand, Japan, the U.S., and Canada) treat crypto assets. With regard to banning, the report says cryptocurrency is “completely banned” in China. However, Shetty reiterated that holding crypto is not banned there and a Chinese court recently recognized bitcoin as virtual property. In addition, Bank of China, one of the country’s biggest state-owned commercial banks, published an infographic on July 26 about bitcoin, how it works, and why the price is going up; the cryptosphere views this move as bullish.
Further, the crypto report being examined by the Indian government is dated Feb. 28, even though it was released to the public on July 22. Many believe that the committee should have taken into consideration some recent developments such as the G20 summit and the crypto standards released by the Financial Action Task Force (FATF). India and other G20 nations have declared their commitments to applying the FATF standards.
Shetty additionally shared with news.Bitcoin.com details of a number of initiatives brewing within the Indian community to help the government understand crypto. The community hopes to convince the government to introduce positive regulations instead of adopting the bill to ban cryptocurrencies.
He explained that the community is planning a campaign for Indians to write physical letters to their prime minister and finance minister, adding:
We’re trying to get in-person meetings with our elected representatives in parliament.
He is also appealing to local and international media to help give voice to this issue. “India is the largest democracy in the world and banning crypto would undermine all the innovation that crypto has done for this world,” the CEO opined. “We’re also open to suggestions and feedback from people of India as well as internationally on how to ensure India positively regulates crypto.”
Shetty has been actively running a Twitter campaign calling for positive crypto regulation in India. It has been 270 days since the start of his campaign.
In addition, the community is fighting the banking restriction imposed by the Reserve Bank of India (RBI). The central bank issued a circular in April last year banning regulated financial institutions from providing services to crypto businesses. In response, a number of industry participants filed writ petitions challenging the ban, which the supreme court is scheduled to hear during the case this week after repeatedly postponing it.
Crypto Not Banned, but There Is a Ban Proposal
While the Indian government has not made its final decision on what to do with cryptocurrency, it has confirmed that crypto is currently not banned. The aforementioned draft bill is, however, a proposal to do so, which the Ministry of Finance revealed on July 22 as being examined “in consultation with all the concerned departments and regulatory authorities before the government takes a final decision.”
The proposal was submitted by the interministerial committee constituted on Nov. 2, 2017, under the chairmanship of former Secretary of Department of Economic Affairs (DEA) Subhash Chandra Garg, to study all aspects of cryptocurrency and provide recommendations. According to the proposal:
The committee recommends that all private cryptocurrencies, except any cryptocurrency issued by the state, be banned in India.
Two days after the report was released, Indian Prime Minister Narendra Modi, on July 24, reshuffled top-level bureaucrats. Garg was replaced by Public Asset Management Secretary Atanu Chakraborty as the new DEA Secretary and reappointed as the Secretary of the Power Ministry. On July 25, Garg tweeted that he had applied for voluntary retirement, effective Oct. 31. Comments flooded his announcement tweet, as many crypto enthusiasts in India expressed their joy at his departure.
Prior to the publication of the committee’s report and draft bill, various industry participants had made efforts to help the Indian government better understand cryptocurrency.
The Ministry of Finance invited lawyers from Nishith Desai Associates earlier this year to present their suggestions for India’s crypto regulation. The lawyers proposed a balanced approach, emphasized “Regulation not prohibition,” and suggested a number of ways to license crypto businesses. They believe that “An outright ban on crypto-asset activity should not be considered for several reasons,” noting:
History has taught us that such technologies [blockchain] should be regulated and not banned, since banning is likely to be counter-productive and may also suffer from legal infirmities.
Sandeep Goenka, co-founder of Zebpay, formerly one of the largest crypto exchanges in India, recently shared a list of efforts he participated in between March 2017 and April 2018 “to educate the government why bitcoin would greatly benefit India.” He met with officials from various ministries including the Ministry of Finance, the Ministry of Electronics and Information Technology, Niti Aayog, the Institute of Chartered Accountants of India, the Institute for Development and Research in Banking Technology, the Ministry of Home Affairs, the Financial Intelligence Unit, the RBI, and the Securities and Exchange Board of India.
Suggestions From Open Town Halls
Regulatory suggestions gathered at open town hall roadshows, in which over 400 people participated, were also provided to the government. The roadshows, organized by Blockchained India, took place in eight major cities in March and April. The group subsequently released a report highlighting key recommendations. Co-founder Akshay Aggarwal wrote:
We have provided our recommendations to be considered by the concerned authorities in designing a regulatory framework that helps cater to the innovation in the industry and helps it grow towards adding value to the economy of India.
Among the suggestions is for the term cryptocurrency to be “defined authoritatively,” as event participants believe that it is essential to distinguish cryptocurrencies from “virtual currencies” since the latter includes a larger array of products and digital assets.
Another recommendation is for the government to mandate crypto exchange compliance with a number of measures including consumer protection, transparency, anti-money laundering and countering financial terrorism. There is also a self-regulatory suggestion. Crypto exchanges in India could formulate an industry-wide self-regulatory framework of best practices for all exchanges to follow, the report conveys. Moreover, crypto trading could be “limited only to whitelisted addresses held by consumers,” while measures to reduce risks to uses of exchange hacks could also be implemented.
What do you think of the Indian community’s efforts? Do you think the government will listen to them? Let us know in the comments section below.
Images courtesy of Shutterstock and India Today.
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Decentralization over time is an ethos that many crypto projects espouse. To date, however, few have completed this journey. Talking the talk is easy, but when it comes down to it, only a handful of projects are bold enough to walk the walk and willingly entrust their fate to the community.
The Road to Decentralization Is Littered With Good Intentions
Decentralization today evokes the “blockchain, not bitcoin” mantra of 2016: a popular concept, but with few real-world success stories to cite. Even Facebook, in its 26-page technical paper for Libra, has gotten on the decentralization bandwagon, outlining a “roadmap for the shift toward a permissionless system.” “I’m pretty sure this would be the first time a distributed network transitioned from permissioned to permissionless,” noted Jameson Lopp. Long before Facebook took an interest in the lingua franca of cryptocurrency, numerous projects within the ecosystem expressed the desire to distribute control over time. Today, projects as diverse as Icon, Iota, Digitex and Digibyte are intent on pursuing various implementations of this goal.
To understand the extent to which it’s possible to decentralize a project, it’s first necessary to understand why. What is it about decentralization that’s so sexy in the eyes of so many within the cryptosphere? Ultimately, it all comes back to Bitcoin. There are many things that Bitcoin got right from day one, from its fair launch to its absence of a formal team that could be subpoenaed or cowed into submission. As Anthony Pompliano put it, the day Congress ordered Facebook to halt development of Libra, “Wait till Congress finds out they can’t send letters to Bitcoin.” Decentralization was and still is one of Bitcoin’s killer features.
Icon Treads the Path to Greater Decentralization
Blockchain network Icon is currently on a mission to achieve optimum decentralization, a quest that’s described as a “core principle” of its governance model. To achieve this, Icon is assigning responsibility for overseeing node environments to a series of candidates who are elected by the community. Each node operator is tasked with maintaining consensus on the network, verifying transactions and participating in governance, including voting on policy proposals. Through assigning control to a distributed community, Icon aims to connect independent blockchains without the need for intermediaries. In September, 100 Public Representatives (P-Reps) will be elected by the community to facilitate the transition to a decentralized model.
Forthcoming crypto futures exchange Digitex, meanwhile, has pledged to transfer ownership and governance rights to a decentralized autonomous organization on October 1, with token-holders given a say on treasury management and key operational decisions. Other projects that have committed to becoming more decentralized over time include art provenance protocol Codex, and Iota, which in May committed to ditching the most controversial part of its architecture – a centralized coordinator. It will be 2020 before this is implemented, however, at which point network stability and security should be maintainable without the coordinator.
Although reaching this milestone will not make Iota decentralized, by any reasonable definition, there is a case for stating that it makes sense for crypto projects to start out highly centralized. In “Centralize, then Decentralize,” Arjun Balaji of crypto investment firm Paradigm writes:
The common criticism with 2nd or 3rd-wave crypto projects … that they’re inferior to natively cypherpunk projects (e.g. Bitcoin, Monero) due to their “centralization” is ignorant of reality. It’s next to impossible to simultaneously build new types of distributed networks while optimizing for decentralization from early on.
From Central Control to Community Stewardship
Most projects today don’t have the luxury of operating under pseudonyms or issuing coins over time through mining. With the notable exception of Grin, every major project in the post-ICO era has been subject to rules pertaining to money transmission, KYC/AML, taxation and a glut of others. While these projects will always be dependent upon a centralized team to lead business development and technical improvements, there is scope for the underlying protocol to decentralize over time. This prevents the project from being monopolized by a handful of powerful actors. It may also ensure that the protocol’s token is deemed a utility rather than a security, under certain circumstances, paving the way for wider listing on crypto exchanges, including those that fall under the purview of the SEC.
The ongoing decentralization of crypto projects can be measured across three main criteria:
Incentives: A truly decentralized protocol must have incentives aligned between network participants to support collaboration for mutual benefit. This requires trust, and the only way this can be maintained is by eliminating a central authority that presents a single point of failure. As Placeholder VC’s investment thesis explains, “Cryptonetworks alleviate [lack of trust] by decentralizing power structures and distributing most of the value to the users in a way that better aligns incentives.”
Community: There should be no entry barriers to participating in the network, with users, miners, developers, stakers and other entities granted permissionless access.
Consensus: There must be agreement on the current status of the network, and any changes made to it, including transactions and account balances, as well as technical changes to the protocol itself.
It’s a Scale, Not a Switch
There is no such thing as 100% decentralization. Even “full decentralized” projects such as Bitcoin have points of failure and potential attack vectors that a determined and well-funded actor could seek to exploit. The ability for projects to execute “continue[s] to be important, but so is selecting teams led by founders whose commitment to the promise of decentralization is far greater than their desire to make money,” assert Placeholder VC.
The current crop of projects assigning more control to the community aren’t trying to become the next Bitcoin. Rather, they recognize that the benefits of a distributed and leaderless network outweigh the advantages to be had from entrusting key decisions to a centralized cartel. So far, in the short history of cryptocurrency, the market has judged decentralized projects with strong fundamentals kindly. Today’s projects, pursuing a similar course, are hoping to be judged equally favorably.
Do you think it’s possible for a cryptocurrency project to effectively decentralize over time? Let us know in the comments section below.
Images courtesy of Shutterstock.
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EOS developer Block.one is attempting a 10% buyback of its stock.
Earlier this week, it was revealed that EOS developer Block.one is attempting a 10% buyback of its stock, reportedly the second one in less than a year.
It seems that some of the company’s investors are up for a big payday: The earliest backers could expect a hefty 6,567% return on their initial investments, while Michael Novogratz has already managed to secure a much more modest, though still profitable, 123% return.
But why would Block.one buy its shares back in the first place? It appears that the startup’s executives are confident about the future of their network — and a marketed announcement scheduled for June 1 could be one of the reasons.
What is Block.one?
Block.one is a private company known for developing and publishing the EOS.io protocol. It is registered in the Cayman Islands, lead by CEO Daniel Larimer and chief technology officer Brendan Blumer.
EOS.io, in turn, is a blockchain-powered smart contracts protocol for the development, hosting and execution of decentralized applications (DApps). In other words, it’s a decentralized alternative to cloud hosting services.
EOS.io is supported by its native cryptocurrency, EOS, currently the fifth-largest by total market cap. The tokens can be staked for using network resources: As per the project’s white paper, DApp developers can build their product on the top of the EOS.io protocol and make use of the servers, bandwidth and computational power of EOS itself, as those resources are distributed equally among EOS cryptocurrency holders.
The platform was launched in June 2018 as open-source software, with its first testnets and original white paper emerging earlier in 2017.
Notably, Block.one holds the absolute record in terms of funds raised during an initial coin offering (ICO): It has managed to gather around $4.1 billion — or about 7.12 million ether (ETH) — worth of investments for EOS.io after fundraising for nearly a year. The second-biggest campaign of the sort, the messenger Telegram, has raised less than half the amount — i.e., $1.7 billion.
What is the purpose of the new buyback?
Having raised a record-breaking amount of money last year, the EOS.io publisher is now performing a 10% buyback of its shares.
A Block.one spokesperson has confirmed to Cointelegraph that the stock repurchase is “closing,” and hence at the final stage. The company’s representative also said they are unable to reveal the participants.
“Buybacks are a normal activity for many companies,” the spokesperson told Cointelegraph. “Block.one is confident of its growth prospects and industry opportunities. We are pleased with the support from investors, and that they have been able to benefit from, and participate in, the success of our company.”
Notably, this isn’t the first buyback for Block.one. As per Bloomberg, this stock repurchase offer comes “less than a year” after the initial buyback, in which Block.one reportedly aimed to acquire 15% of its outstanding shares at $1,200 each, but gathered a total of 13.8% in the end, which equaled around $300 million.
The new buyback, in turn, values the company at around $2.3 billion, up from about a $40 million valuation in 2017. The repurchase price being offered is reportedly even higher this time, at $1,500 per share — up 6,567% from the original price of $22.50.
Later backers — including PayPal co-founder Peter Thiel, crypto mining hardware billionaire Jihan Wu of Bitmain, as well as hedge fund managers Louis Bacon and Alan Howard, who all bought into Block.one in July 2018 — could also be in for a massive payoff, if they agree to sell.
According to Bloomberg, Bacon and Howard have declined to specify whether they are going to sell their shares, while Thiel is not responding to messages. Cointelegraph has reached out to Bitmain to clarify whether Wu is planning to participate in the buyback but has not heard back as of press time.
Nevertheless, there is at least one confirmed investor who has agreed to participate in the stock repurchase. Novogratz’s crypto merchant bank, Galaxy Digital, accepted the offer and sold shares in Block.one for $71.2 million — securing a 123% return on the initial investment.
In an accompanying press release, Novogratz stressed that “substantial outperformance” from Block.one had contributed to the decision and that his bank will continue to work with the startup. “We continue to work closely with Block.one as a key partner across a number of our business lines, including the Galaxy EOS VC Fund, which invests in companies building on the EOS.IO protocol, and remain excited about the EOS.IO protocol,” the Galaxy Digital CEO said.
Later, Novogratz took to Twitter to reiterate that Galaxy Digital is still a shareholder in Block.one as well as a “large holder of $EOS tokens.” To explain why his crypto merchant bank sold the shares, he stated the following: “Took profit to rebalance our portfolio.” The investment bank had a net loss of $272.7 million in 2018 — evidently due to the bear market — and the recent deal might be an attempt to mitigate those losses.
According to a Blockforce Capital analyst Charlie Smith, the most likely scenario is that Block.one believes it is worth more than the price it is buying back at. In an email to Cointelegraph, Smith wrote:
“By buying back shares from investors, Block.one can clear some names off the cap table and establish more centralized decision making. Even if the investors that sold shares had no say in the direction of Block.one, by clearing them off the cap table, Block.one can focus more on its own interests.”
What is Block.one planning to do with all that money?
Block.one’s total assets, including cash and investments, amounted to $3 billion at the end of February, according to Bloomberg, who reportedly obtained that number from a March 2019 email to the company’s shareholders.
$2.2 billion of this was held as what the company called in its email “liquid fiat assets,” with most of it invested in U.S. government bonds. The letter also reportedly revealed that the company’s crypto portfolio had halved to around $500 million during the crypto winter. However, in a more recent email sent out in May, the company ostensibly said those losses were “more than fully recovered,” given that bitcoin has been on a rally over the previous months.
The new buyback as well as the “few outward signs of progress since the sale of EOS tokens,” as Bloomberg puts it, raise the question: What is Block.one’s plan, and why does the startup need all that money?
“Basically, Block.one raised a massive fortune with the EOS ICO, and most of it just sat there,” Mark D’Aria, founder and CEO of Bitpro Cryptocurrency Consulting, told Cointelegraph. “They used some to fund development of the ecosystem but as the Bloomberg report points out, there was never any need for billions of dollars to create something like EOS.”
“Last year’s buyback was to make room for new investors without unnecessarily inflating our balance sheet. This round included highly strategic shareholders such as Peter Thiel, Alan Howard, and Louis Bacon, and was a very positive thing for the company. This year’s buyback positions us for the same, and we also expect it will be another milestone for us.”
According to Blumer, this information, “along with a lot of other material,” was presented to Bloomberg’s Marsh, but “facts were chosen and arranged deceitfully and with poor journalism standards.”
When asked by a Telegram group member to specify why Block.one needs to make room instead of doing equity dilution, Blumer replied:
“Block.one was a VC funded startup and after so much growth it’s prudent to allow liquidity to earlier investors to make room for larger more strategic ones.”
According to Larimer, who also joined the Telegram chat to address investors’ questions regarding the stock repurchase, Block.one couldn’t have chosen to buy EOS tokens instead, because the company cannot own more than 10% of the total supply, which it has already maxed out. “We […] want eos to remain decentralized,” the CEO added. “We keep our non-EOS treasury in a blended portfolio of Crypto and Fiat.”
Is centralization a problem for EOS?
Notably, decentralization might be one of EOS’ weakest spots. In November 2018, its governance model was exposed, as evidence suggesting that some confirmed transactions were reversed surfaced on social media, which puzzled some pundits as well as ordinary crypto enthusiasts.
Around the same time, blockchain-testing company Whiteblock published the results of “the first independent benchmark testing of the EOS software.” The investigation came to several conclusions about EOS, the most bold of which was that “EOS is not a blockchain, rather a distributed homogeneous database management system, a clear distinction in that their transactions are not cryptographically validated.”
Further, in October 2018, allegations arose accusing the platform’s major Block Producers (BPs) — entities that essentially get to “mine” the EOS blockchain after being elected — of “mutual voting” and “collusion,” suggesting that the entire model of governance might be corrupt.
However, full decentralization is not necessarily paramount to the project’s success at this point, D’Aria of Bitpro acknowledged to Cointelegpraph:
“Yes, EOS is unequivocally more centralized than Bitcoin or Ethereum. Decentralization has a tremendous cost in terms of performance and efficiency, and EOS gets around those limitations by simply being less decentralized. It’s not fully centralized, it’s just further down the spectrum than ETH. So then the question becomes, ‘is EOS decentralized enough’? For a lot of use cases, I do believe it is.”
In D’Aria’s view, EOS has a high chance of effectively competing with Ethereum as the main platform for DApps, which seems to be Block.one’s current primary aim. D’Aria opined, “If you asked me whether ETH or EOS would ultimately be more successful 10 years from now, I’d have a really hard time answering that question because they’re both legitimate competitors for that space.”
EOS’ future is looking bright — at least in the eyes of its creators
Notably, Block.one’s leaders appear to be confident about the future of their product. “We sold a product, a place on a snapshot list that could be used by the community to create the highest performance and most used blockchain,” Larimer wrote in the Telegram group chat. “We sold the community tools that enabled them to create $6b in value.”
“If we had not sold our funds on an ongoing basis we would have inflated Ethereum to the moon and then crashed it when exiting,” Blumer also wrote in the chat. “One day btc will probably run on eosio chains.”
More on CoinMarketCap’s plan to fight fake volume reporting.
Recently, CoinMarketCap (CMC), arguably the industry’s best-known cryptocurrency market data service, announced an initiative to provide “greater transparency, accountability, and disclosure from projects in the crypto space.” The move followed recent reports on fake volume data and wash trading among cryptocurrency exchanges that were published last month.
Now, all exchanges are required to provide mandatory application programming interface (API) data to CMC by June 2019. Those who fail to do so risk getting delisted from the platform. So, can this brand new scheme cleanse the market from untrustworthy data?
Fake volume is one of crypto market’s chief problems: two reports
Recently, a number of researches highlighted the problem of fake volume among crypto exchanges, suggesting that the majority of platforms claim to handle unrealistic amounts of transactions. As explained by Changpeng Zhao, the CEO of Binance, some exchanges alter their volume to get ranked higher on popular trackers like CMC, and hence get exposure and attract new clients.
The Tie: 90% of the volume is fake, 75% of crypto exchanges look suspicious
While the problem of fake volume isn’t particularly new to the crypto market, at least two recent reports have stirred up a new wave of discussion. First, on March 18, trading analytics platform the Tie reported that almost 90% of cryptocurrency exchanges’ reported trade volumes may be fake, and that as much as three-quarters of those platforms have suspicious volumes.
To conduct the research, the Tie took the reported trading volume for the last 30 days of the top 100 exchanges. They subsequently divided that data by the exchange’s website visits over 30 days estimated by SimilarWeb to determine the volume per visit.
Thus, to calculate the expected volume, the researchers used a weighted average of the trading volumes per website visit across Binance, Coinbase Pro, Poloniex, Gemini and Kraken — resulting in $591 — and multiplied this number by the web views. The Tie explained that it picked these exchanges “because of large usage among institutions, reputation within the market, and because their web viewership appeared consistent with their reported trading volumes.”
“In total we estimated that 87% of exchanges reported trading volume was potentially suspicious and that 75% of exchanges had some form of suspicious activity occurring on them,” the organization tweeted at the time, adding that it affects the larger picture:
If each exchange averaged the volume per visit of CoinbasePro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1B per day. Currently that number is being reported as $15.9B. pic.twitter.com/jZzezJMmKk
Notably, on March 21, two exchanges featured in the research as having questionable figures — LBank and Bit-Z — dethroned Binance in terms of the adjusted trade volume on CMC. According to research presented by the Tie, LBank’s estimated reported volume per website visit amounts to $65,850.
However, the Tie admitted that its research had certain limitations: Specifically, the website views didn’t take into account API, mobile application trades and desktop client trades.
Because of that, the data could, in theory, just mean that either a much more significant than average portion of LBank users use the API, desktop or mobile clients, or that an LBank user trades over $65,000 per session on average. The Tie notes:
“There were limitations to this report including some of the aforementioned, but the point of the exercise was to show those exchanges that appear most suspicious and to start a greater conversation around wash trading, transaction mining, and liquidity.”
Bitwise: 95% of bitcoin trading volume on unregulated exchanges appears to be fake
On March 20, another substantial report on fake volume surfaced. Issued by cryptocurrency index fund provider Bitwise Asset Management, it argued that 95% of bitcoin trading volume on unregulated exchanges appears to be fake or noneconomic in nature.
Notably, Bitwise sourced its data from CMC, which it claims includes a large amount of this suspect data, “thereby giving a fundamentally mistaken impression” of the actual size of the bitcoin market.
Bitwise ultimately wrote that the real market for BTC is “significantly smaller, more orderly, and more regulated than commonly understood” — amounting in reality to $273 million instead of the $6 billion reported on CMC.
To prove its point, Bitwise first analyzed Coinbase Pro as an example of a regulated exchange to outline trustworthy trading patterns, including an “unequal and streaky” mix of red (sell orders) and green (buy orders) trades, whose distribution fluctuates considerably at any given time.
Further, Bitwise studied spread as a parameter, noting:
“It’s [the spread is] $0.01. At the time this screenshot was taken, bitcoin was trading at $3,419. That means bitcoin was trading at a 0.0003% spread, making it amongst the tightest quoted spread of any financial instrument in the world.”
Coinbase Pro reported around $27 million in daily traded volume of BTC at the time of Bitwise’s analysis — as compared with $480 million reported by Coinbene. The latter was used by the index fund provider to demonstrate the patterns typical of what it characterizes as “suspicious exchanges.”
Suspect signs included an unlikely perfect alternating pattern of green and red trades, as well as a lack of trades with round numbers or small values. On Coinbene, buy and sell orders also appear in timestamped pairs, with one compensating the other. Moreover, the spread on Coinbene at the time of Bitwise’s analysis was $34.74: “that compares to $0.01 on Coinbase Pro. It is surprising that an exchange claiming 18x more volume than Coinbase Pro would have a spread that is 3400x larger.”
Additionally, as per the Bitwise paper, suspect exchanges showed consistent volume throughout the day, while on regulated exchanges, volume corresponded to waking and sleeping hours.
CMC’s response: the DATA alliance
On March 25, Carylyne Chan, global head of marketing at CMC, told Bloomberg that concerns over fake volume “are valid,” which is why more information will be added to the website to help users make better decisions.
“For instance, if an exchange with low traffic has $300M volume and just 5 BTC in its wallet, users will be able to draw their own conclusions without the need for us to make arbitrary judgment calls on what is ’good’ or ’bad.’ We want to state that our philosophy is to provide as much information as possible to our users, so that they can form their own conclusions and interpretations — and not introduce our own bias into that mix.”
On May 1, CMC announced that it will require all crypto exchanges to provide mandatory API data, which includes their live trading data and live order book data, as part of a new transparency initiative titled “the Data Accountability & Transparency Alliance” (DATA).
The alliance was originally announced in CMC’s sixth anniversary blog post. The company explained that it has to deal with regular requests to delist crypto exchanges based on unverifiable information — such as screenshots of chat logs and emails — which is why CMC chose to empower its users to make more informed decisions and “provide a means for projects to differentiate themselves through enhanced disclosures” instead of applying harsh censorship:
“We are paying close attention to the growing discourse surrounding ‘fake volumes’ of exchanges. This is not a trivial problem to solve, as seemingly innocuous decisions can carry unintended consequences. To add to the complexity, we need to be mindful of the numerous use cases for our data – what some deem to be ‘fake data’ is information in and of itself that can yield interesting analyses, and it is important not to throw the baby out with the bathwater.”
Indeed, CMC seems to aim for a softer approach after removing a number of South Korean exchanges from its platform “due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity” back in January 2018, when it caused a major drop in the market.
Stressing that the new condition will be compulsory, the tracker stressed that any exchange that does not provide the data will be not be included in the price and adjusted volume calculations on the site. The changes will come into effect on June 14, 2019, CoinMarketCap noted.
Specifically, the required data includes exchange hot/cold wallet addresses (“indicative numbers to enable users to determine solvency of selected exchange”), live market-pair trading status (“more granular trading data at the market-pair level for further analysis”), live wallet status (“summary status of all possible deposits and withdrawals across currencies”), and historical trade data (“all time-stamped historical trades for tracking, and in some cases, compliance”).
“Our stance is that we do not censor any information, but rather will present all the information to users so that they can make their own judgments and decisions on the data presented,” Chan told Cointelegraph. “This philosophy of providing all the information rather than making our own judgment calls or censorship/curation is the same for data submitted by DATA members.” The global head of marketing at CMC added:
“As with all API endpoints submitted to us from exchanges (of which we now have 257 on CoinMarketCap) we work closely to ensure that the endpoints are up and running effectively. This constitutes the reported volume information that is presented on the site. The adjusted volume metric excludes those exchanges with fee rebates or transaction mining, and with the new mandatory data requirements, those that do not provide their live trade and orderbook data.”
When asked whether players have enough time to gather and submit the required information, Chan replied that the data “should not be technically hard for exchanges to provide,” and that the 45-day notice should ensure that there is enough time for everyone to join. According to her, no exchange has explicitly declined to join DATA so far:
“We carefully evaluated the requirements so as to make sure they are reasonable and not unnecessarily onerous for the majority of exchanges to provide. In fact, about 150 exchanges already submit this data, and we are simply waiting for the other exchanges to come up to speed on these data points.”
At this point, DATA is comprised of 12 exchanges: Binance, Bittrex, OKEx, Huobi, Liquid, UpBit, IDEX, OceanEX, Gate.io, KuCoin, HitBTC and Bitfinex.
Michael Gan, CEO of KuCoin, told Cointelegraph that CMC approached them about one month ago:
“After they introduced the whole idea, we soon decided to join DATA, as one of the early members. We are still communicating with CMC in terms of all the data submission and it will be done before the deadline.”
Starry Liu, head of marketing at OceanEX, told Cointelegraph that they were the only Initial Launch Partner of DATA that exists for less than one year. According to Liu, OceanEX approached CMC earlier this year to discuss “the idea of setting up an alliance to improve transparency across the whole industry,” and soon joined the initiative:
“We found out this is also CMC’s goal. They actively asked about our feedback and acted really fast during the preparation of DATA.”
Liu specified to Cointelegraph that OceanEX integrated its data to the DATA project in less than one month. The information is collected, but not monitored by CMC, she confirmed:
“We prepare and stream raw data from OceanEx to them and CMC is taking a role more of collecting and disclosing data to the public, instead of monitoring. We may have different roles in this program, but we share the same vision and the ultimate goal, that is to benefit the community and the users.”
The KuCoin CEO, however, told Cointelegraph that CMC “mentioned that they will have a team to check all the data submitted, ensuring its accuracy as the DATA project expected.”
A representative of Exmo, the United Kingdom-based exchange that has applied to join DATA but has not been added to the official roster yet, told Cointelegraph that, while the new alliance is “a considerable step to the formation of the sustainable market,” the industry needs more solutions for the deep-rooted problems such as fake volume. Maria Stankevich, head of business development and communications at the exchange, wrote in an email:
“The fact that the data from the trading platforms will be collected in real time will expand the possibilities for studying the market and analyzing it and improve the understanding of the characteristics of various exchanges — that’s for sure. But this does not mean that the data provided by the websites will be completely objective.
“The same thing applies to the additional information about the exchanges, that is supposed to be submitted by the projects and exchanges by themselves. We don’t doubt the fact that it will be really useful for users — as it will be gathered in one place. But in general, we see it as an extension of the functionality of the CMC itself, an increase in its competitiveness in comparison with the other similar data aggregators.”
Cointelegraph has reached out to more exchanges currently listed in the top-50 by adjusted volume on CMC that are not part of DATA at this point — including Kraken and Coinbase Pro — but has yet to hear back from them.
Matthew Hougan, the author of the aforementioned Bitwise report, told Cointelegraph that he “admires CoinMarketCap for staring down the barrel of systemic fake volume in the crypto market.”
“We’ve seen a number of really robust responses to the problem of fake data, including from OpenMarketCap, Messari and Nomics, and I love that there is a diversity of smart people looking at this problem and driving towards solutions,” Hougan said. However, the researcher also suggested that the data gathered by CMC might still be unsubstantiated in the end:
“Ultimately, given the limited nature of regulations, the globally distributed nature of crypto trading, and the perverse incentives to exaggerate volume, the best approach is going to be ‘trust but verify.’ But CoinMarketCap has taken a good first step and is putting some teeth into its reporting requirements, and I’ll be interested to see what develops from their efforts.”
Meanwhile, CMC plants to extend its initiative even further in the future. “Collecting the data is just the first step,” the tracker wrote. “With a larger dataset, more analyses can be run, and enable the introduction of new, meaningful metrics.”
The Stellar network went offline for over an hour, raising concerns about decentralization.
Recently, blockchain-powered network Stellar stopped confirming transactions for more than one hour, effectively going offline.
Although no money was reportedly lost as a result, Stellar’s major issue has now been highlighted publicly: The project is not decentralized, at least not to the extent expected at this point. Notably, the offline scenario was predicted by researchers earlier last month.
To reach global consensus with other nodes, Stellar Core runs the Stellar Consensus Protocol (SCP). As per the SCP’s white paper, it has “modest computing and financial requirements” compared to more popular decentralized schemes of proof-of-work (PoW) and proof-of-stake (PoS).
Together, all quorum slices that make up the validator nodes form a global network, where voting is used to ensure consensus on which transactions are recorded to the ledger. According to Stellar, this process “occurs approximately every 2-5 seconds.”
So why did the Stellar network go offline?
The Stellar Development Foundation (SDF) — a nonprofit organization committed to the development and adoption of Stellar — believes that the network collapsed because “new nodes took on too much consensus responsibility too soon.” Alternatively, as Nicolas Barry, chief technology officer of Stellar, put it, “it was caused by being too decentralized too fast.”
More specifically, the outage seems to be directly related to earlier claims that Stellar’s network is too centralized. Last month, three researchers from the Korea Advanced Institute of Science and Technology (KAIST) published a paper titled “Is Stellar As Secure As You Think?” concluding that the analysis of the Stellar network proves that it “is significantly centralized.”
Specifically, the researchers stressed that the entire Stellar network rested upon a limited amount of nodes, primarily the ones controlled by SDF itself:
“We show that all of the nodes in Stellar cannot run Stellar consensus protocol if only two nodes fail,” the research claims. “To make matters worse, these two nodes are run and controlled by a single organization, the Stellar foundation.”
Later that month, David Mazières, the chief scientist at SDF and a professor of computer science at Stanford University, penned a response. In it, he confirmed that the configuration of Stellar’s federated Byzantine agreement (FBA), which is a consensus model based on quorum slices, is highly centralized, and said that Stellar developers were “in the process of improving” it. Mazières continued:
“We […] are glad the authors drew attention to this fact. Things have already improved considerably from the configuration analyzed in the paper — for instance the Stellar Development Foundation (SDF) can no longer halt the network, and no two nodes can affect liveness.”
Nevertheless, on May 15, at 1:14 p.m. PST, the Stellar network went offline for 67 minutes — according to SDF, while some other reports mentioned “approximately two hours” — after it failed to reach consensus. In a post-mortem analysis, SDF explained that the network froze because too many new nodes were being added in a bid to make it more decentralized:
“We’ve seen claims that Stellar is ‘over-centralized’ and that somehow a failure with SDF’s nodes dragged down the whole network. Ironically, the opposite is true. Stellar has added many new nodes recently. In retrospect, some new nodes took on too much consensus responsibility too soon.”
Specifically, a node of Keybase — a blockchain startup that SDF has invested in — was taken offline for maintenance. At that time, other nodes were reportedly “shaky or down,” which is allegedly why Stellar came to a halt.
Furthermore, SDF claimed that stopping the network is in fact a preferable scenario for Stellar over operating in a faulty state, since the network accommodates financial institutions who supposedly chose it since they “prefer downtime over inconsistent data.” That is why the Stellar protocol didn’t fail, but actually worked as intended, the nonprofit organization argued.
“As a fundamental design choice, Stellar prefers consistency and partition resilience over liveness,” the statement reads. “This is different from other blockchains, in which ‘the chain must go on’ even at the price of soft forks.”
Additionally, SDF has highlighted that no funds were lost as a result of the incident, and the network is currently “healthy.”
KAIST warns that the fundamental problem has not been solved
According to Yongdae Kim, one of the KAIST researchers who authored the April research on the Stellar network, the collapse happened after some changes were made to its structure.
Specifically, Kim told Cointelegraph that, at the time the paper was submitted, if two out of three SDF validator nodes went offline, the Stellar network would collapse.
After researchers reported on the vulnerability, SDF allegedly tried to decentralize the network by removing SDF validators from quorum sets. As a result, Stellar became robust against two node failure, but was still vulnerable to three node failure, according to Kim.
However, right before the halt on May 15, the network has somehow become unstable in the face of a two node failure once more, Kim said, stressing that none of those node pairs belonged to SDF, given that they had been removed at the time. Eventually, a pair of those nodes went offline, which apparently brought the whole network down.
To deal with the aftermath of network failure and bring it back online, SDF included all three of its validators into quorum sets, according to Kim, and hence have returned “back to step 1,” in which if two out of three SDF validator nodes go down, the Stellar network will collapse.
“After we reported it [the cascade failure problem] to them, they manually adjusted validator sets
for a long time,” Kim explained to Cointelegraph. Nevertheless, he said the fact that network failure did occur at some point later on “shows that the design makes it difficult to maintain robust network structure against cascade failure.”
Outlining the fundamental reasons for why the network is vulnerable to a cascade failure problem, Kim described how node hosts have to manually choose their quorum sets, which is difficult, given the complexity of the network’s design. Moreover, the KAIST researcher stressed that not all nodes are equally robust. “SDF are more robust, but they could be a good target,” he told Cointelegraph.
The community’s general reaction was that Stellar is largely centralized, despite SDF actively pushing the opposite opinion. Emin Gün Sirer, co-director of IC3, tweeted:
If your entire network is going down because a single entity had a problem, exactly how decentralized can your system be? That’s right: not at all.https://t.co/6cEWPTPXYc
In response, Kyle McCollom, product manager at SDF, argued that several nodes were unavailable, while Keybase’s node going down for maintenance pushed the network past the threshold:
Several nodes were unavailable (“In the past few weeks we saw, repeatedly, misconfigured validators hampering consensus.”), and Keybase’s node shutdown pushed the network past the threshold. This happened bc several nodes had a problem, not bc “a single entity had a problem”.
Similarly, a user post on Stellar’s subreddit originally implied that the network couldn’t reach consensus because SDF nodes went down, which was denied by McCalleb in the comment section: Stellar’s co-founder wrote that “the SDF nodes and in fact the majority of validators in the network were still up,” but “couldn’t close ledgers safely because they weren’t hearing from enough nodes in their quorums.”
When asked whether the Stellar network could be called a decentralized one after the incident, Hartej Sawhney, a blockchain expert and co-founder of Hosho, replied negatively, but clarified that no project is decentralized today, as the concept has yet to be properly implemented. “Seems like the issue is less to do with centralization, but more to do with consensus responsibility of new nodes,” he told Cointelegraph.
“At this point we of time, Stellar is definitely a centralized network, especially in terms of the liveness aspects, as it was demonstrated in a research done at KAIST,” Eyal Shani, a blockchain researcher at Aykesubir, agreed. “However, this should be no surprise since even the great Bitcoin network can be considered as centralized by many.”
First, the nonprofit aims to introduce better onboarding for new validators by providing users with published standards and explorers to help them create “good” quorum sets — presumably meaning that SDF will advise hosts on which nodes should be included in their quorum slices to avoid similar incidents.
SDF also hopes to achieve better operational standards. “We will increase operator coordination so that maintenance schedules are publicly communicated,” the organization wrote in the blog post. “We will also help operators keep their nodes and their quorum choices up-to-date.”
Moreover, SDF aims to improve better monitoring and alerting to warn node hosts about which crucial nodes are missing from the network, as well as to arrange bot-created announcements in the public validators channel anytime a node goes offline. Improved communication will also ensure that the network can be brought back online much quicker, the nonprofit suggests.
Kim thinks that none of the SDF’s proposals tackle the cascade failure problem directly, which potentially could lead to further incidents. “Overall, these are good set of mitigations. However, it does not fundamentally solve the problem of Stellar,” he told Cointelegraph. “Without a design change, it would be difficult to improve liveness of Stellar.”
Considering that SDF seems to prioritize consistency and partition resilience over network liveness, Stellar moving from the safety of trusted SDF nodes to a more decentralized scenarios could result in new system collapses, Shani of Aykesubir said. “Until they onboard enough serious validators who promise to behave (i.e be up and run the protocol) we could be seeing more halts in the near future,” he told Cointelegraph.