All posts by CoinAffairs

Suspended Not Abandoned? Jeff Garzik Is Reworking the Segwit2x Code


The controversial scaling proposal Segwit2x may have been officially called off this August, but that doesn’t mean its former lead developer is giving up on plans to keep its codebase alive.

In fact, Jeff Garzik, better known as the CEO of blockchain startup Bloq, now believes his prior work could be revived in a way that promotes interoperability between the increasingly fragmented set of protocols bearing the bitcoin name (see: bitcoin, bitcoin cash and bitcoin gold). And in a new interview, he revealed that he is working on forthcoming updates to the software, called BTC1, with this goal in mind.

While he admits he’s not sure how successful the effort will be, Garzik nonetheless framed it as one aimed at unifying a bitcoin developer community that saw no shortage of infighting in 2017.

Garzik told CoinDesk:

“I hope that bringing multiple chains together in one software will, in some small way, bring multiple developers from multiple communities back together.”

Still, the development is notable given the software’s history in achieving the opposite.

After all, the BTC1 code is most associated with Segwit2x, a failed attempt by business and miners to change the rules of the bitcoin protocol. Forged at a meeting in New York in May, the agreement called for the block size parameter to be raised to 2MB, while also pushing for an upgrade called Segregated Witness, designed to both improve and expand bitcoin’s block size.

However, while SegWit was enacted, the block size increase, formally coded in BTC1, was officially called off not weeks before it was supposed to go live amid significant pushback and criticism from developers.

‘Bitcoin cousins’

But while a handful of new cryptocurrencies have been created out of new bitcoin software versions over the past few months, Garzik stressed that the goal of the new BTC1 iteration is not to create a new currency.

“It’s not a new chain. That’s the key innovation of BTC1,” he told CoinDesk.

Instead, Garzik’s concept relies on developing a new version of the Bitcoin Core software – the most popular implementation of bitcoin – though one in which the code can support multiple different cryptocurrencies. In this way, BTC1 will follow whatever changes are added to Bitcoin Core.

Garzik went on to compare the software to ethereum, which allows new cryptocurrencies to be issued on its blockchain, something that’s possible on top of bitcoin, though perhaps not as easy as it is on competing protocols.

“The focus will be on multi-coin support of ‘bitcoin cousins,’” he said, defining “cousins” as coins with software that shares 97 percent or more of the code with the original bitcoin software the Core developers manage.

With BTC1, as Garzik envisions it it, users won’t have to download one litecoin node, one bitcoin node and one bitcoin cash node. Rather they just download one BTC1 full node and it supports all of the chains simultaneously.

As far as what coins (of the more than 1,300 total coins that have sprung up over the years, many with code nearly identical to bitcoin’s) will be supported by BTC1, Garzik plans to be choosy, at least at first, adding only “successful” networks that have attracted significant attention from users. In his eyes, at least so far, litecoin, zcash, and maybe bitcoin cash meet these criteria.

He added:

“Since six bitcoin forks were created in December alone, it’s not realistic to support all of them.”

And he’s being strict with this stance, arguing for neutrality, saying that it even applies to United Bitcoin, a recent bitcoin fork for which Garzik serves as chief scientist.

“I would like to see United Bitcoin adopted, but by my own metric, it’s not there yet,” he said.

Beyond the coin

Garzik also plans to take the idea beyond cryptocurrencies.

Taking inspiration from Red Hat, a Linux company that Garzik worked at for more than a decade, he sees Bloq using the new BTC1 software to bridge the corporate and open-source worlds. Just as the open-source software Fedora feeds into the Red Hat product, Garzik believes an open-source BTC1 software can feed into Bloq.

In this way, Garzik claims Bloq developers won’t be the only developers working on BTC1. Garzik plans to open development up to anyone that wants to participate, including a “handful” of developers that worked on Segwit2x.

Although this idea sounds very different from the code’s original intent, Garzik argues this was always his plan – to move the BTC1 software forward whether Segwit2x succeeded or not.

He said:

“BTC1 was always supposed to be longterm. Segwit2x was always supposed to be a one and done. And BTC1 was always supposed to be the entity that continued even after Segwit2x’s success or failure.”

Yet, the new iteration of the codebase also has benefits for Bloq – which recently announced it’d be launching a cross-blockchain cryptocurrency called metronome – as well.

According to Garzik, many of the software implementations that forked off bitcoin, especially older coins, have vulnerabilities within them because they aren’t as heavily developed as bitcoin, for instance. These bugs can cause serious issues for Bloq’s current enterprise customers, and so the company would benefit from having open-source code that supports the development of different cryptocurrencies simultaneously.

To that end, Bloq and some of its customers (which will be announced in the next 60 days) are funding at least 50 percent of BTC1’s future development, Garzik said. Interoperability between coins is something many crypto enthusiasts are interested in, envisioning a future which Garzik calls a “multi-coin universe.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Bloq and helped organize the Segwit2x agreement. 

Jeff Garzik image via TEDx video

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at

Canadian Police Issue Warning Over Bitcoin Tax Scam


Police in Canada have issued a warning over a bitcoin tax scam after more than 40 York region residents fell victim to fraudsters.

According to a report by CBC News, York Regional Police said that victims lost as much as 340,000 Canadian dollars (US$267,000) through the scam.

The fraudsters, who identified themselves as employees of the Canada Revenue Agency, threatened the victims with arrest for unpaid taxes if they did not send funds using bitcoin ATMs.

York police’s Det. Const. Rob Vingerhoets said the bitcoin ATMs are “legitimate” and that tracking down the fraudsters or recovering lost money may be possible.

According to police force, there has been an increase in reports of such scammers in recent months. Public awareness is the only way to combat such scams in the future, Vingerhoets said, adding, “Our main strategy, … [is] to stop people from becoming victims in the first place.”

York police have placed flyers near bitcoin ATMs to alert the public about potential scams, the report adds.

The news comes soon after Durham Regional Police Service in Ontario issued a warning to the public about fraudulent investment schemes involving bitcoin.

Bitcoin and ATM receipt image via Shutterstock

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Money Manager VanEck Launches Cryptocurrency Price Indices


The company behind a recent effort to launch a cryptocurrency-tied exchange-traded fund (ETF) has unveiled a suite of new price indices related to bitcoin and other digital assets.

New York-based VanEck announced today that it is partnering with UK data firm CryptoCompare to launch the indices, which include several that focus on specific cryptocurrencies like bitcoin and ether, as well as others that trace the movements of multiple assets. The indices are being managed through MV Index Solutions, a company owned by VanEck.

“Digital assets are a dynamic area that merits attention, especially by professional investor. Although not without risks, digital assets have the potential to integrate into the broad economy and become an investable asset class in their own right,” Thomas Kettner, managing director for MVIS, said in a statement.

VanEck made headlines in August when filings with the U.S. Securities and Exchange Commission revealed a plan to list an ETF centered around bitcoin derivatives products. The filings – which came months after the SEC’s rejection of an ETF effort launched by investors Cameron and Tyler Winklevoss – ultimately came to form part of a wider effort to create similar products for U.S. investors.

In late September, however, VanEck filed to withdraw its application, revealing at the time that the SEC was all but refusing to review ETF proposals built around cryptocurrency derivatives, owing to the nascent state of that market.

Market data image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Canada Court Holds ICO Organizer in Contempt


The organizer of an initial coin offering (ICO) in Canada has been found in contempt of court following a new ruling from the Quebec Supreme Court.

The Autorité des marchés financiers (AMF), Quebec’s financial regulator, published a statement on October 20 announcing that Dominic Lacroix and a related company, DL Innov inc., had allegedly ignored previous court orders aimed at preventing them from soliciting investors for “PlexCoin”. PlexCoin, according to its official website, is a cryptocurrency based on ethereum.

The dispute between AMF and PlexCoin’s backers dates back to earlier this year, when Canadian regulators issued prohibition orders to Lacroix, DLT Innov and several related businesses, restricting them from promoting a planned token sale for PlexCoin. The AMF said at the time that the parties were ordered to close any related websites and pull back any advertisements related to the cryptocurrency release.

Within days, however, the AMF would go on to issue a warning to investors about PlexCoin, stating that “the persons involved have apparently not complied with these orders” and that a planned ICO was still being organized.

In September, Canadian regulators issued further restrictions, including an order to the cryptocurrency’s backers to not “dispose of any funds, securities or other property in their possession or entrusted to them.”

According to the latest release, Quebec Supreme Court Justice Marc Lesage sided with the government in ruling that Lacroix and DL Innov continue to violate the past orders.

“In his decision, Lesage…emphasized that the evidence filed by the AMF demonstrates beyond any doubt that Dominic Lacroix and DL Innov Inc., representatives and alter ego of PlexCorps and PlexCoin, continued to solicit and propose to investors, directly and indirectly, to invest in the purchase of PlexCoin, a virtual currency, after orders issued by the Administrative Court of Financial Markets preventing them from July 20, 2017,” the AMF wrote.

A hearing is reportedly set to take place next month regarding a penalty for the court contempt finding, according to the agency.

The dispute was ongoing when regulators in Canada published guidance on the blockchain funding use case in late August. At the time,  the Canada Securities Administrators – an umbrella group for the country’s regional markets watchdogs – said that it had found “many” ICO-derived tokens constitute securities.

Editor’s Note: Some of the statements in this report have been translated from French.

Image via Shutterstock

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Money at Risk? Mobile Wallets Become New Battleground in Bitcoin Fork Debate


Mobile bitcoin wallets users might not realize it, but their money might be at a heightened risk this November.

While advertised as a tool bitcoin users can tap to achieve an experience more akin to a conventional financial product, mobile bitcoin wallets today send transactions to the bitcoin blockchain, though in a way that differs from the default wallet options. But come November this construction could cause turbulence, because that’s when the bitcoin protocol is aiming to undergo yet another major change to its software.

Following this summer’s activation of the code upgrade SegWit, a group of businesses are now seeking to trigger a hard fork to increase bitcoin’s block size and further expand its transaction capacity. The code, part of a larger upgrade called Segwit2x, could lead bitcoin to split into two (again), that is, if not everyone decides to support the upgrade.

Still, the difference is that, unlike bitcoin cash, Segwit2x’s developers are doing everything they can to keep all bitcoin users on the same blockchain.

Segwit2x lead developer Jeff Garzik told CoinDesk:

“The design goal of Segwit2x – just like [the latest] ethereum fork – is to upgrade bitcoin, not create a new currency.”

To do so, developers backing the project also have made a couple of key (if controversial) design decisions that have to do with maintaining compatibility with “simplified payment verification” wallets, the technical term for smartphone-based bitcoin wallet applications.

But developers argue that there are pros and cons of how they are trying to accomplish this.

For one, it might not exactly be safe for mobile wallet users to make transactions immediately after the hard fork is enacted.

Attack resistance or convenience?

The first design decision is omitting so-called “replay protection.”

A bit of a political term, it’s meant to describe what happens when a blockchain splits in two, as users suddenly have equal value on both blockchains. This means that when users move tokens on one blockchain, the tokens also move (or “replay”) on the other.

But this isn’t visible to people who might not know that they have money on two networks during a network split. Worse case: users might lose some of their money and not even notice.

“It becomes unpredictable what money you’re moving and when,” Bread Wallet CMO Aaron Lasher explained in conversation with CoinDesk.

Since not everyone agrees with the Segwit2x hard fork – some are even going as far as to write up manifestos in opposition – it’s likely to split into two competing networks, and this could be confusing for general users.

However, Segwit2x developers have a reason for leaving replay protection out: to keep Segwit2x compatible with SPV mobile wallets.

“‘Replay protection’, as you call it, splits the chain. It simply doesn’t make sense. You’d suddenly be breaking [more than 10 million] SPV clients that otherwise work just fine. It is a goal of Segwit2x to help avoid this,” BitGo CEO Mike Belshe wrote in an email debate between developers of the project.

In other words, replay protection would cause inconvenience for mobile wallet users who want to shift over to the Segwit2x blockchain, so Segwit2x developers don’t plan on adding it.

Hard fork decisions

Mobile wallets are the subject of debate in another area as well.

Many providers of this wallet option, such as Electrum and Bread Wallet, rely on SPV. This does away with need to hold a full copy of the blockchain, making the data far easier to store on storage-strapped cellphones.

But, they have some drawbacks. (Coinkite co-founder CEO Rodolfo Novak went as far as to quip that “the ‘V’ in SPV stands for Victim.”)

As implemented today, SPV wallets will automatically follow whatever version of bitcoin has the most miners backing it. So, if bitcoin splits into two, and Segwit2x attracts more computing power than the legacy bitcoin chain, then all of the SPV wallets will follow along. That’s by design.

But some mobile wallet providers aren’t so happy about this, as it’s hard to explain to users what’s happening.

“It’s really tough for us because we are so direly affected,” said Lasher.

This also has the potential to lead to some technical problems. If there are two bitcoins, mobile wallet software might get confused about which chain to follow, especially if miners switch between blockchains over time (as happened in the aftermath of the bitcoin cash fork).

“It could confuse SPV clients and result in clients switching back and forth between chains, making them lose money depending on which chain has more work at what point,” Chaincode engineer Matt Corallo said.

Novak painted another scenario.

“With SVP you don’t know if the node you are connected to is lying to you. For example, a Segwit2x node can spoof as a [bitcoin] node [on the other chain], this means that without replay protection your wallet may spend the funds in the wrong chain and lose them on the correct chain,” Novak told CoinDesk.

Overall, developers paint an assortment of “if-then” scenarios. Lasher admitted as much, noting that it’s unclear which ones will actually play out.

“It’s really this decision tree of many, many things that can happen. And all of them are on the scale of somewhat annoying to downright dangerous,” he said, adding that Bread Wallet plans to encourage users to stop making transactions during the hard fork, “if they can manage.”

A solution?

But with disarray at the application layer, protocol developers have been arguing about how best to handle what might come.

Bitcoin contributor James Hilliard, well-known for helping to prevent a bitcoin split earlier this year, suggested a change to the Segwit2x codebase that he argues would give mobile wallets more control over the which bitcoin they ultimately land on.

Again, though, Segwit2x developers argue that this change would make it more difficult for users to transition to a blockchain with a block size increase – something they believe many users want to do, so that they can make cheaper transactions. (Garzik argued that is the most “neutral” metric for determining which chain SPV wallets should follow.)

But, again, others believe that this will confuse users and perhaps even lead those that are unaware of the situation to lose money.

Some developers even agree that there needs to be a block-size parameter increase, but simply disagree with some of Segwit2x’s design decisions.

As such, the statements highlight that, while often portrayed as black and white, the scaling argument still has its shades of gray.

Lasher concluded:

“There might be some merits to a block-size increase. But we don’t agree with the current way it’s being pushed through.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the Segwit2x proposal and has an ownership stake in BitGo.

Fishing net image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at

Chinese Search Giant Baidu Joins Hyperledger Blockchain Consortium


Chinese search engine giant Baidu has become the latest member of the Linux Foundation-led Hyperledger blockchain consortium.

In joining the group – which focuses on developing blockchain technologies for enterprises – Baidu will assist the project’s efforts alongside other member companies including Accenture, IBM, JP Morgan, R3, Cisco and SAP, among others.

Explaining the firm’s reasons for joining Hyperledger in a statement, Baidu vice president Zhang Xuyang cited the belief that blockchain could help “better tailor” its search preferences according to users’ needs.

“Over the past 17 years, we have striven to fulfill our mission by listening carefully to our users,” he added. “We’re thrilled to be part of Hyperledger and look forward to collaborating with other members to drive open blockchain solutions forward.”

Brian Behlendorf, executive director of Hyperledger, said of the new member:

“[Baidu’s] deep understanding in connecting users to information and services will be tremendous experience for us to leverage as we look to expand our reach further in Asia and drive more global production deployments of Hyperledger technology.”

The announcement comes just a week after business network company Tradeshift also joined Hyperledger as a member. Over 160 companies, startups and organizations have now joined the consortium since it launched in 2015.

Baidu flags image via Shutterstock

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Bank Consortium to Launch Joint Venture for Blockchain Trade Platform


A consortium of banks is planning to launch a joint business venture for its in-development blockchain commerce platform.

Aiming to ease European domestic and cross-border trade, the Digital Trade Chain group is building a distributed ledger framework that connects a buyer, sellers, banks and intermediaries to simplify transaction management and tracking.

To that end, the consortium will create a new business entity in the Republic of Ireland, jointly owned by the eight founding banks, that will manage and distribute the offering, now rebranded as “” The new entity is expected to be formed sometime by the end of the year.

“The commercialization of the platform is expected in Q2 2018. From February 2018, test clients of the founding banks will be able to use the platform,” the consortium said in a statement.

First unveiled in January, Digital Trade Chain now counts Banco Santander among its membership, alongside Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and UniCredit – as well as IBM.

The coming months will also see efforts to attract additional parties to the consortium in addition to financial services. One area of focus will be companies involved in the trade process, including in shipping – an industry that has seen rapidly growing interest in blockchain tech in recent months.

Cargo port image via Shutterstock

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Gibraltar Publishes Draft Regulations for Blockchain Startups


Gibraltar’s Financial Services Commission has published a draft of its upcoming regulatory framework for firms offering blockchain services.

Planned to come into effect from January 2018, the new rules will cover any commercial use of distributed ledger technology (DLT) as a means to store and transmit value. While this would include cryptocurrency exchanges, the word “value” is also defined as including “assets, holdings, or other forms of ownership, rights or interests.” Investment services (and other controlled financial offerings) connected to the tech would be covered as well.

Under the framework, DLT service providers will be granted a working license, providing they conform to some regulatory principles.

As defined by the paper, these principles include honesty, integrity, the protection of customer assets and maintaining a high degree of cybersecurity. And once the rulings are accepted by Gibraltar’s legislature, the British Overseas Territory will be among the few jurisdictions worldwide to offer a fully regulated framework for firms working with blockchain.

Speaking to the Gibraltar Chronicle, minister of commerce Albert Isola said that this was typical of the countries determination to facilitate innovation while maintain a strong regulatory presence. He said: “We have done this before and will do so again.”

Samantha Barrass, chief executive of the Gibraltar Financial Services Commission, said:

“This regulatory framework demonstrates that regulators can keep up to date with technology without stifling innovation, protect consumers and create a well-regulated safe environment in which financial technology can flourish.”

Earlier this year, the country’s primary securities exchange, the Gibraltar Stock Exchange (GSE), revealed a plan to integrate blockchain into its trading and settlement systems.

And, last month, the Gibraltar Financial Services Commission issued an investor warning on initial coin offerings (ICOs). The risks contained in ICO investments led authorities to consider a complimentary framework for token sales on a DLT, according to the statement.

Today’s draft made no direct mention of the blockchain use case.

Gibraltar image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at

US State Department Seeks Blockchain Boost Amid $10 Billion Reboot


The U.S. agency that oversees foreign affairs is looking seriously at blockchain.

That’s according to John Sullivan, U.S. Deputy Secretary of State, who encouraged the State Department and its private sector partners to embrace the technology as a way to “advance diplomacy and development objectives” at the Blockchain@State forum held Tuesday in Washington, D.C. 

Speaking to an audience comprised of other government agencies, members of the private sector and non-profits, Sullivan went so far as to suggest blockchain could be a key part of the massive restructuring of the department proposed by Secretary of State Rex Tillerson, who leads the agency.

Sullivan told attendees:

“This forum has implications for our ongoing redesign efforts. We’re interested to learn whether blockchain technology can have direct applications to many of the key features of our proposed redesign.”

Tillerson first proposed the redesign, which seeks to save as much as $10 billion over five years, in September. And while Sullivan acknowledged blockchain isn’t a “panacea” to the agency’s problems, he emphasized that he’s keen to see the technology used to improve internal processes and capture efficiency gains.

The forum explored numerous ways in which blockchains might improve core agency mandates such as administering foreign aid, promoting democracy and improving governance and political institutions in U.S.-allied countries.

With that, Sullivan (who was appointed by President Donald Trump and sworn in this May) urged the agency and its stakeholders to think hard about how the technology could be deployed in a diplomatic context to strengthen national security and promote greater economic prosperity.

Identity is in

And at least some industry participants are taking Sullivan’s encouragement to heart.

For instance, Joseph Lubin, founder and CEO of ConsenSys, the New York-based blockchain development firm that co-sponsored the event, argued that a blockchain-based self-sovereign identity scheme could have an immediate and far-reaching impact toward the agency’s goals, especially those that have to do with humanitarian aid. 

Lubin told CoinDesk:

“Once people own their own identity, then they’re less enthralled to their governments and less subject to adverse situations like natural disasters and wars. So, if someone is ejected from their country, if they’ve already established self-sovereign identity they can reconstitute their life.”

Other speakers at the event agreed, with Ashish Gadnis, CEO of BanQu, a provider of identity and financial services in developing countries, highlighting the importance of end users owning, controlling and possibly monetizing their personal data.

“All the aid we give to refugees is one-sided. This means that they are recipients of transactions from people like us, yet … they don’t exist because they don’t own or control their own data,” Gadnis said.

Sullivan also gave credence to the idea that blockchain could combat pervasive challenges in the area of foreign aid distribution such as corruption, fraud and the misappropriation of funds. He continued, saying these same challenges might not only be solved in aid distribution, but also in other areas, such as eliminating the corruption in government’s control over land title registries in the developing world.

While the concept of a blockchain-based self-sovereign identity has been a favorite of the industry, it’s a particularly hard problem to fix – one that some believe depends on how advanced smart contract technology becomes, another area Lubin called attention to.

In his mind, constructing international frameworks and treaties using smart contracts could serve as a means to combat the “free rider” problems associated with agreements like the United Nations or NATO, both of which deal with member countries frequently failing to fulfill their financial commitments with little consequence.

U.S. wakes up

Yet, the State Department’s forum comes amid increasing interest by government agencies throughout the world to understand and harness the technology. While some governments have moved to ban cryptocurrency and the tools that have come from it, most are taking a more open-minded approach.

“Blockchain technology is on the move around the world, so it is, therefore, essential that we better understand this cutting-edge technology as it becomes more ubiquitous in our economy,” Sullivan said, highlighting ongoing distributed ledger projects in Estonia, Georgia, Dubai and Singapore.

Sullivan’s bullish remarks, coupled with growing interest from the State Department and other agencies within the U.S. government, are being well-received by the blockchain community.

Not only was ConsenSys a presence at the forum, but distributed ledger consortium R3, enterprise blockchain firm BitFury and a handful of industry startups were in attendance.

“We’re particularly excited that the U.S. is waking up, big time, and realizing that this is a transformative technology,” said Lubin, adding that he hopes the country will emerge as a critical agent in advancing the technology worldwide.

Lubin said:

“There are other smaller players who are embracing this technology strongly, but we do want to see America get out in front of this and transform society with it.”

US flag image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at

Welcome to Bitcoin Country: Silk Road and the Lost Threads of Agorism


Dr Paul Ennis is a research assistant at the Centre for Innovation, Technology & Organisation at University College Dublin, specializing in bitcoin and blockchain studies.

In this opinion piece, Ennis takes a dive into the kinds of sub-cultures bitcoin and cryptocurrencies enable, tracing their origins in libertarianism – and beyond.

Not everything is tameable – that’s a truism that might apply to bitcoin above all.

Recently, researchers from City University and Stockholm University introduced the concept of the “bandit organization,” calling it “a form of association or ‘band’ (frequently led by a charismatic individual) that occupies a space outside national and/or international credibility but inside the everyday practical and moral organization of specific audiences.”

Bitcoin, as we all intuitively seem to sense, is not quite a community in any usual sense.

For this reason, I’ve started to describe it as a land of bandits, “Bitcoin Country,” a term that denotes a semi-autonomous lawless region full of bandits, some noble, some not, and most certainly not cohesive.

Too formless to be a country, too amorphous to be a company, you can think of Bitcoin Country as a kind of digitally decentralized frontier.

The outlaws

Historian Eric Hobsbawm provided an early model of outlaws as social bandits that, although often violent, were celebrated by the local community as heroic or defiant.

In this way, the origin story of bitcoin is deliciously outlaw, essentially one of the individual who, through an amazing feat, harangues the evil king. It’s all the better if the king has devolved into vice and avarice to the point of financial ruin.

The other, slightly more contentious hero, operated on the edge of the edge, is the black market within the black market, the bayous of Bitcoin Country.

“The fascists always use the narrative of ‘We are the white knights in shining armor protecting against the threats. We come here and we move out the dark with pure whiteness.’ That’s a false narrative because there is corruption in those castles. The real base of power lies with us. We are the darkness.”

In the above quote, anarchist bitcoin developer Amir Taaki sets out, in the context of a documentary about the original darknet marketplace, Silk Road, a common theme within digital libertarian culture: the establishment, broadly construed, is corrupt.

Not just corrupt, its corruptness is clouded in “whiteness,” traditional forms of organizational legitimacy, and it uses narratives of fear to ensure we place our trust in them.

We need police to stop crime, we need armies to stop invaders and intelligence services to stop terrorists. Taaki’s rhetoric is hyperbolic, but it contains, implicitly, two important insights. The first is that the organizational legitimacy of central authorities is connected to our placing our trust in them in exchange for protection from threats (Taaki calls this “babysitting” a little later in the speech).

The second, a cypherpunk view, is that a powerful response to this situation, in the context of the digital world, is the creation of technological systems that subvert this power relation, “the real base of power lies with us.”

Radical dimension

These systems Taaki discusses would strive to be trustless, having no central authority and, strikingly, they would not require legitimacy. It is crucial to remember that digital libertarians do not propose a counter-legitimacy belonging to them.

They do not claim to be the truly legitimate position. Rather they revel in being “the darkness.”

Their ideal systems necessitate no “babysitters,” no trusted third party, no “legitimacy” in any traditional sense. Given such an anarchic spirit, it is no surprise that digital libertarians are drawn toward those areas deemed off-limits by authority, such as the shadow economy.

Silk Road was never just an exercise in deviant entrepreneurship, but was “presented as a means to dismantle the state.” University professor David Golumbia notes that in the wider bitcoin discourse “the idea that government itself is inherently evil” appears with “particular force.”

It was a form of activism involving a political “prefiguration” that sustained the community.

Prefiguration is a concept found in the left anarchist and autonomist Marxist traditions and developed in relation to cryptomarkets. Like most forms of political radicalism, libertarianism relies on envisioning a world that does not yet exist. Aware that this is the case, radical activists often must discover methods that justify their faith in the project.

For the anarchist and autonomist traditions, this tension has emerged quite visibly in movements such as Occupy Wall Street.

As Mathijs van de Sande explains, prefigurative politics need to be seen in terms of the ever-evolving act of bringing into being the world its adherents wish to see, but without any mainstream engagement. Crucial to prefiguration is a subtle inversion within leftist thinking.

In traditional Marxism, the relation to the state is directly antagonistic; one is against the state.

In the anarchist and autonomist view, this becomes inverted. There, to borrow from the Spanish Indignados, “We are not against the system. The system is against us.”

This redefines the nature of defiance as a focus on how best one can build new worlds despite state “interference.” It manifests as a process of instantiation of abstract ideals to come through practices occurring in the here and now.

The overriding aim is to act “as if one is already free.”

Exit over voice

The state is to be escaped rather than replaced. In other words, “exit over voice.”

According to economist Albert Hirschman, the two options open to all dissatisfied members of an organization are exit or voice. One can either exit the organization or voice dissatisfaction.

Libertarians are infamous for their preference for exit or, at least, the option of exit and, as journalist Brian Doherty charts, there have been many attempts to escape what they perceive as the ultimate closure of options, the state.

The concept of exit has even led to attempts to establish entirely new countries, known as micro-nations, their failures documented in an obscure libertarian classic “How to Start Your Country.” Arguably the most successful forms of exit have occurred by simply moving out to sea, as encapsulated in our romantic vision of anarchistic pirates, but also in the most successful micro-nation of all time, the Principality of Sealand, an offshore oil platform located not far from the coast of Suffolk, England.

The Dread Pirate Roberts name evokes this pirate outlaw status quite explicitly (Ross Ulbrich, who ran Silk Road under that name, even notes this in discussion with Variety Jones). He had not just prefigured the world his community wanted to see, but had generated a space, a micro-nation located off the coast of the clearnet, where the law (seemingly) no longer applied.

In effect, what Ulbricht achieved was a quite unique marriage of high-minded digital libertarian ideals with the routine process of buying and selling narcotics.

For most participants, their engagement with Silk Road operationalized a sense of freedom to consume their drug of choice in the context of doing no harm to others, aligning participants with the cyber-libertarian philosophy of DPR.

Konkin’s influence

In more formal terms, organizational legitimacy on the Silk Road was ensured by reimagining the “mundane” act of buying and selling narcotics as an act of liberty.

For Ulbricht, the success of Silk Road was precisely in line with the teachings of his most important intellectual influence, Samuel Edward Konkin III. A relatively obscure figure, Konkin developed a strand of libertarianism known as agorism in the early 1970s. In his exceptionally detailed and thorough-going history of American libertarianism, Doherty references Konkin a mere five times and not once in any especially important manner.

Indeed, Konkin seems to have “fallen” out of the tradition, but this is consistent with his rejection of the Libertarian Party as inherently paradoxical, preferring instead to promote black market activism where one might “commit civil disobedience profitably.” It is not clear how Ulbricht first came across Konkin, but perhaps there was something of the kindred spirit to them, both had studied chemistry to an advanced degree.

Konkin proposed a dual course to bringing agorism into being: (1) a theoretical position known as “counter-establishment economics,” or “counter-economics” for short, and (2) the practical dimension of “counter-economic activity.” For Konkin only a small handful understand agorism, in the theoretical sense, but this does not mean that counter-economic activity does not occur.

Konkin was keen to celebrate the unconscious agorists that populate our world: tax-dodgers, black market operators, prostitutes and so on. This is where Konkin can be considered explicitly radical.

The creation of black markets was for Konkin an agorist act where small “pockets” of outlaw culture create markets more efficient than the state can provide. The more efficient these pockets the more people in the white economy will turn to agorism.

Konkin died in 2004, but he had foreseen, as early as the middle of the 1980s, that the internet opened up agorist possibilities. His remarks are worth quoting in full, given his influence upon Ulbricht:

“The internet explosion has led the American State – for now, at any rate – to throw up its tentacles at regulation of the information industry. Every legislative session, however, brings up new attempts to tax and control the World Wide Web. But consider this well: should the counter-economy lick the information problem, it would virtually eliminate the risk it incurs under the State’s threat. That is, if you can advertise your products, reach your consumers and accept payment (a form of information), all outside the detection capabilities of the State, what enforcement of control would be left?’”

This is, to be direct, quite simply what Silk Road was.

Even more prescient is that Konkin recognized the importance of encryption around the same time.

Noting that encryption meant the state “cannot reach the invoices, inventory lists, accounts and so on of the Counter-Economist,” Konkin’s proto-conception of the cryptomarket means he arrived at the idea before even the cypherpunks.

Rusted train image via Shutterstock

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Better in Byzantium? Ethereum Takes Baby Steps Toward a Privacy Boost


Ethereum users may soon be getting a much-needed privacy boost.

Long a shortcoming for all public blockchain networks, the world’s second-largest blockchain is nonetheless aiming for big improvements in its upcoming Byzantium release. For most buy-and-hold users, these limitations might not be apparent, but that’s not to say there aren’t potential implications that could affect the wide variety of users the network is trying to attract.

As an example, the software upgrade comes at a time when regulation is putting a strain on the network – at least one government has already taken aim against what has emerged in 2017 as its biggest use case. In the past month, China issued not only an all-out ban on ICOs, but ordered exchanges (including those that buy and sell ether) to hand customer data to the authorities.

This added attention is just one of the things that has shone a light on the limitations of the network. Currently, every transaction is permanently visible on the ethereum blockchain, meaning that investments made by individuals – including those that might be illegal – can be widely observed. Not quite a bug and not quite a feature, this availability of user information is still something that many developers have set about to correct.

Complicating matters, however, is that ethereum hasn’t been known for its privacy features to date.

While zcash helped pioneer the use of zk-snarks and monero popularized ring signatures and stealth addresses, ethereum has perhaps struggled to find a similar value-add when it comes to anonymity.

But the upcoming Byzantium hard fork, currently expected to occur in October, will introduce two new cryptographic procedures which should eventually pave the way for increased privacy.

Ethereum’s first major upgrade since 2016, Byzantium is actually one-half of a much larger upgrade designed to enhance the usability of the platform, named Metropolis. It will also be the first major technical upgrade since the network has been valued in the billions, a development that could add drama to the proceedings.

Looking ahead, the second part of Metropolis, Constantipole, has been postponed indefinitely, meaning users will have to wait before they can enjoy maximum privacy on the platform.

Still, that’s not to say there aren’t substantial efforts toward that goal.

Where are we now?

Privacy on ethereum is a notoriously complex endeavor, as it contradicts some basic methods of how a blockchain functions.

Transparency on a blockchain is vital such that it protects its users from the risk of double spending, which is when a malicious user sends the same coin to two different places at once. This risk is resolved by rendering the details of each transaction visible and storing them in a widely distributed ledger.

As this procedure is fundamental to the technology, rewriting it requires high-level mathematics which have never before been attempted.

As such, ethereum’s developers are taking that attempt seriously and are reaching out to peers in other blockchain platforms for new ideas and features. For example, ethereum’s team has been working together with the privacy-centric currency zcash on zk-snarks, which could make it possible for ethereum users to make their transactions more private.

By using that technology, a statement can be verified without requiring any information to be revealed beyond its validity. As an encryption method, zk-snarks work by translating what you want to prove into an equivalent form – without anyone knowing the solution to the algebraic equations that produced it.

Notably, the upcoming Byzantium hard fork introduces new elliptic curve primitives and a pairing function for a specific curve which will make the cryptography possible and toughen the security of a zk-snark computation. The larger the curve, the more secure it is, but it does bring higher costs for each operation.

As a result, these heavy mathematical procedures are now far too expensive to run on the ethereum platform.

In principle, prior to Byzantium, a zk-snark could be completed by the ethereum virtual machine, but it would be too expensive to fit inside a single block. However, the Byzantium hard fork will introduce a gas-subsidized pairing check that makes a zk-snark less costly to compute. If you’re unsure, “gas” is a unit used to measure the computational effort that goes into a transaction and is used to calculate fees.

What needs to be done?

Due to this new feature, the first zk-snark transaction was verified on the Byzantium testnet earlier this week. The transaction, which is viewable on the test network here, cost a total of 1,933,895 gas. To put this in some context – a non-private transaction currently costs far less, around 21,000 gas.

Still, aside from this costliness, and beyond the verification itself, there’s nothing in ethereum that today can support the tech.

As explained by ethereum’s lead zk-snark researcher, Christian Reitwiessner, the “missing piece” is the part of the system that would communicate with the ethereum virtual machine, which translates instructions and relays them to network nodes.

“We need practical implementations of all the other components of a zk-snark system (apart from the verification),” he told CoinDesk.

Some of these features might be figured out soon. For example, work needs to be done to translate a computational task from source code into the form required by a zk-snark. Reitwiessner said this is currently in heavy development, and will likely be released by the ethereum developer conference in November.

However, other milestones still need extensive research before they can be reached.

At present, regardless of whether an ether transaction is private, it will always be visible to the person who pays for the gas.

Eventually, new features released in the second ethereum upgrade, Constantinople, will aim to provide a newly flexible ether wallet, allowing users the option to pay for gas in tokens instead of ether. According to Reitwiessner: “This could include paying for gas with tokens which might be zk-SNARK tokens.”

Postponing this feature until Constantinople also gives ethereum developers some time to tease out other complex challenges.

For one, ethereum must counter a security problem within zk-snark tech itself, known as the trusted setup. When zcash launched its zk-snark-powered currency back in October 2016, it corresponded with an elaborate performance, whereby each member of the z-cash development team set fire to the computers they had used to bring z-cash to life.

This was to prove that there was no backdoor into the technology that could potentially allow developers the ability to manipulate the network. The catch now is that ethereum must develop something equivalent to this, but one that can scale to thousands of participants.

Alongside this, solutions need to be developed so that mathematical proofs are generated alongside a zk-snark. And, more programming is needed to establish the possibility of zk-snarks occurring off the blockchain.

In light of this, it could be that a smoother alternative to zk-snarks is developed in the meantime.

Reitwiessner hinted at this, adding:

“Furthermore, we are not tied to a specific zk-snark or even zk-snarks themselves.”

As such, his statements hint that, for ethereum, the privacy conversation is only just beginning.

Baby steps image via Shutterstock

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Australia Cites Blockchain In ‘Digital Economy’ Strategy Launch


Australia’s government is plotting an ambitious new “Digital Economy” initiative, citing the country’s previous work with blockchain and its future potential in a new public consultation call.

The scope of the project is outlined in a new paper published this week by the The Department of Industry, Innovation and Science, which also includes a series of questions aimed to spur public debate around digitized businesses and services.

Though none of the questions explicitly mention blockchain, the document highlights the technology in several areas, and signals that the government in Australia sees a prominent role for blockchain in the future.

As the paper explains in one passage:

“The next phase of the internet, where we are always on and always connected, has the potential to transform our economy even further. Horizontal platform technologies like distributed ledger technology (for example, blockchain) and machine learning will support innovation and productivity right across the economy.”

Indeed, the government in Australia has gone to some lengths to encourage development around the technology, both for cryptocurrencies as well as broader blockchain applications. Agencies within the government have also produced research studies investigating blockchain, with two in particular being released earlier this summer.

Just this week, officials introduced long-awaited legislation to end Australia’s “double tax” on cryptocurrencies, an application of the country’s goods-and-services (GST) levies that had long earned the ire of cryptocurrency enthusiasts domestically and abroad.

Parliament building image via Shutterstock

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US Federal Reserve Hints at DLT Integration in New Report


The US Federal Reserve indicated on Tuesday that it is open to using distributed ledger technology (DLT) and cryptocurrencies for financial transactions in place of the decades-old wire transfers and other tools currently used.

A response to a January 2015 call for public input on how national banks can become more efficient with a 21st century infrastructure, the document outlines how the U.S. central bank is specifically looking for a secure, fast, and efficient system that can more easily work with the different banks and financial organizations which do business with the government both domestically and internationally.

While the report primarily focused on what tools could be used to update the US payment system, it made two mentions of DLT, stating it would also be reviewed for use by the government.

According to the report:

“[T]he Federal Reserve will consider other enhancements to its existing services and will continue to monitor, study and solicit input from stakeholders to understand the implications of new payment technologies and models, including distributed ledger technologies and digital currencies, that can facilitate a safe and efficient US payment system.”

This is not the first time the Federal Reserve has discussed DLT or cryptocurrency. In December 2016, the central bank published a document explaining the potential use of blockchain systems for both banks and consumers.

While last year’spublication listed the potential benefits of DLT, it also acknowledged potential issues, including its relatively recent invention and possible security problems.

The December report notes that current laws and regulations do not clearly define ownership rights over digital tokens which represent physical assets or purely digital assets.

Before approving distributed ledger technologies or other upgraded payment systems for use, the organization wants to check how much these systems would cost and how well they would work. This work includes analyzing the security, cost, efficiency, and viability of the various options discussed in the report. There is no firm timeline listed for the next stage of the work.

The September report concludes:

“[S]ubstantial work lies ahead to implement and adopt safe, ubiquitous real-time retail payments and to foster a safe, resilient and efficient US payment system.”

Image via Shutterstock

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Is Blockchain Ready for Fiat? Why Banks See Big Promise in Crypto Cash


Central banks could soon see a wave of technological breakthroughs – that is, if the newest members of the Utility Settlement Coin (USC) project have anything to say about it.

Initially designed as a way to minimize the role of clearinghouses by letting financial institutions pay each other directly using collateral-backed crypto tokens, the implications of the work could have a broad impact. Since the collateral associated with those tokens is to be held by central banks, the project is increasingly being seen as a step toward reimagining how fiat currency could be issued.

But the potential improvements go far beyond faster transactions with less risk to counterparties, according to several members of the consortium.

If both an asset and the currency used to pay for it are issued on a blockchain, entirely new financial products could result, they argue.

Lee Braine of the Barclays investment bank told CoinDesk:

“By focusing on new collateralized digital currencies linked to major fiat currencies, the Utility Settlement Coin project could potentially create new asset-backed regulated digital cash instruments on distributed ledger technology.”

Echoing Braine’s enthusiasm was the head of blockchain research and development at Banco Santander, Julio Faura.

In interview with CoinDesk, Faura framed the benefits another way, emphasizing the power of using distributed ledgers to run encrypted, self-executing agreements:

“The idea of having a fiat-backed proxy of central bank money issued on smart contacts for financial institutions to exchange liquidity globally seems a very powerful concept,” he said.

Eliminating risk 

The idea of central banks issuing fiat currency on a blockchain also has the attention of Emmanuel Aidoo, the head of Credit Suisse’s distributed ledger and blockchain program, who says the change could do more than streamline post-trade processing.

Aidoo said he’d been monitoring the USC for 18 months before concluding that the time was right for his bank to get involved. Indeed, it was his belief that the project could impact financial stability on the largest economic scale, that eventually led him to “help drive momentum” for its support.

He told CoinDesk:

“The applications of USC extend beyond payments, and could ultimately optimize efficiencies in margin and collateral obligations and reduce systemic risk.”

Already, central banks around the world are exploring how blockchain technology could assist in a wide range of applications.

Central to such large-scale, diverse promise, is the ability to minimize risk between each of the individual counterparties involved in an agreement.

For example, currently, there’s substantial risk in an exchange process called “delivery versus payment,” which is designed to ensure securities are only moved down the value chain at as close to the moment of payment as possible, minimizing possible exposure to loss due to sudden changes in price.

Another new USC member, digital product manager of cash solutions at State Street bank, Swen Werner, said that “ensuring the settlement of financial instruments follows a strict delivery-versus-payment process is of critical importance to the industry and the success of new distributed ledger solutions.”

Similarly, the head of fintech partnerships and strategy at HSBC, Kaushalya Somasundaram, explained how the solution developed with the help of blockchain startup Clearmatics, could help reduce the number of times such risky exchanges occur.

“It would be a lot more efficient to actually link up the digital currency to the central bank collateral and to be able to transfer the digital currency across,” she said. “Ensuring the cash fungibility happens at once across all the legs of the transaction, and not multiple times, across each leg in a sequential manner.”

Pushing interoperability

Currently, the USC platform is being designed so that the value of the token is derived from collateral stored by Utility Settlement Coin members in central banks – but use of the platform itself is not contingent on central bank adoption.

However, as with any distributed ledger technology, the solution can only be only as powerful as the number of parties who adopt it. At every point of exchange between a blockchain-based asset and a centralized asset the element of risk increases, minimizing the potential benefits of a partial implementation, according to Hyder Jaffrey, the head of strategic investment and fintech innovation at UBS.

In order to minimize those vulnerabilities, Jaffrey joins many of his fellow USC members in his belief that fiat currency issued on a blockchain is essential. To help increase the chances that adoption occurs, several members said they aim to leverage their membership as a way to engage directly with central banks.

“In order to see the benefits on-ledger, you really need the breadth of [central bank currencies] available in similar time frames,” he said.

Still, he concluded with a cautious afterthought:

“That’s probably going to be some time before we see that.”

Digital cash image via Shutterstock

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$5,000: Bitcoin Price Hits Historic New Milestone


Bitcoin’s price rose above $5,000 for the first time today.

The CoinDesk Bitcoin Price Index (BPI) hit a high of $5,013.91 at 02:25 UTC, market data shows, staying above that level over the next 10 minutes of trading. The price then dipped below the $5,000 mark, falling over the next hour to a low of $4,867.18 at 03:28 UTC.

Market data points to Chinese bitcoin exchange OKCoin leading the spike, with that market hitting a high of $5,149.

Markets then climbed back above $4,900, reaching $4,916.39, BPI data shows, before sliding again. As of press time, bitcoin’s price is trading at $4,877.36, according to the BPI.

A week ago, markets were at ranging between $4,340 and $4,370, and on Tuesday the weekly low was recorded at $4,221.44. Yet in the past few days, markets saw significant surges, shooting past the $4,700 and $4,800 levels to hit new all-time highs.

Image via Shutterstock

This piece has been updated.

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Bitcoin Exchange BTC-e Promises ‘Daily’ Updates During Relaunch Attempt


Bitcoin exchange BTC-e is planning to release more updates about its recovery efforts weeks after a stunning crackdown by US authorities.

As previously reported by CoinDesk, BTC-e was the target of a law enforcement operation in late July, during which one of its alleged operators was arrested in Greece. US authorities later seized BTC-e’s Web domain and unsealed a 21-count indictment, accusing Russian national Alexander Vinnik and BTC-e of facilitating the laundering of billions of dollars via bitcoin, along with a $110 million fine.

Yet days after the arrest, a forum account long associated with BTC-e posted a pledge to relaunch the exchange, promising to return funds to those who were held accounts at the time of the shutdown. BTC-e has since announced it plans to issue a debt token as part of that repayment effort.

Now, according to new update posted on Bitcoin Talk, BTC-e is in the process of “transferring digital resources to an investment company” that will support the planned exchange relaunch.

In a translated statement, BTC-e reiterated its promise that users “will be able to withdraw 55% of the funds” when the exchange is brought online. BTC-e indicated that it would move to publish more frequent updates after August 31, with the next update expected on August 30.

The account also answered a number of queries, perhaps most notably to one about the legal effort launched by US prosecutors.

“At the moment, we have not received official documents from the United States. All that is at the moment is an order,” it stated.

Radio tower image via Shutterstock

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Vietnam Is Preparing to Legally Recognize Bitcoin in 2018


Vietnam’s prime minister has approved a plan that could see the country formally recognize bitcoin as a form of payment by 2018.

According to regional news services VNA, Prime Minister Nguyen Xuan Phuc has tasked Vietnam’s central bank as well as the Ministry of Finance and the Ministry of Public Safety, to draw up a legal framework around cryptocurrencies.

An assessment for how the government should approach this process is due to be completed by August of next year. Once that is concluded, it’s expected that drawing up the legal documents required to recognize cryptocurrencies under a regulatory framework will be completed by the end of 2018.

In tandem, officials will also begin work on a tax treatment for cryptocurrencies. According to VNA, a system governing how cryptocurrency users will be taxed in Vietnam is slated to be in place by June 2019.

If approved, the move would signal that leaders in Vietnam are moving away from the more cautious viewpoint expressed in 2014, when central bank officials warned consumers about the risk of cryptocurrencies.

Ho Chi Minh City, Vietnam image via Shutterstock

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Bitcoin Prices Bounce Back Above $4,400


Bitcoin prices have once more climbed past $4,400 following days of generally sideways movement within the $4,100–$4,200 range.

Starting to pick up from around 22:00 UTC yesterday, prices across global exchanges opened the session at $4,362, and had reached a high of $4,420. Prices were again at that level at press time, a rise of 1.33 percent, according to the CoinDesk Bitcoin Price Index.

Those figures put prices around $85 short of the all-time high achieved on August 17, when bitcoin topped $4,500 for the first time ever.

Elsewhere in the markets, ethereum is up 3.49 percent for the day at $332.65, according to CoinMarketCap. New cryptocurrency bitcoin cash is down 2 percent, however, with prices at $642.95 at press time.

A notable strong showing for privacy-oriented cryptocurrency monero today sees its price up over 14 percent, with one token now worth $98.

Reflecting continued positivity in the digital asset markets, the market capitalization across all cryptocurrencies is once again at a record high, at just over $155 billion.

Trader and chart image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

Bank of America Files 9 More Blockchain Patent Applications


The U.S. Patent and Trademark Office has released nine more blockchain-related patent applications filed by Bank of America.

Data collected by CoinDesk shows that the applications – which relate to conducting and settling transactions within a payment network – were all filed February 22. To date, Bank of America has filed more than 30 known patent applications related to the technology, including as many as 18 during 2016 alone.

Combined, the breadth of the applications suggests that work is being done on blockchain-based payment systems within Bank of America. At the same time, the bank has issued no definitive statements on the subject to date, and it’s not clear whether any of the proposed inventions will see the light of day.

Yet past announcements from the bank hint at where some of the intellectual property may come into play.

Last September, Bank of America and Microsoft announced a joint initiative aimed at applying blockchain tech to the area of trade finance. Working with Microsoft Treasury, which handles the tech giant’s corporate payments and strategic investments, the project is aimed at building a new blockchain-based system to facilitate transactions between the two companies.

Still, it remains to be seen whether the project turns into something at commercial scale. And given the pace of patent applications seen thus far during 2016, Bank of America could be pursuing other intellectual property avenues as well.

Bank of America image via Roman Tiraspolsky/Shutterstock

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Brazil’s Ministry of Planning Is Testing Blockchain Identity Tech


Working alongside global tech giant Microsoft and ethereum-focused startup ConsenSys, Brazil’s Ministry of Planning, Budget and Management is piloting a blockchain identity application.

Leveraging technology provided by ConsenSys affiliate project uPort – a “self-sovereign”‘ identity system built on ethereum that allows users access and control over their own data – the agency is testing how the technology could be used to verify the legitimacy of personal documents.

In statements, Adriane Medeiros Melo, head of information technology at the ministry, framed the trial as one that would help the organization test the potential of blockchain technologies, as well as to “establish a new trust model between government and society.”

Formed in 1962, the Ministry of Planning’s mission is to coordinate the management of federal government policies and budgets. As such, its investigation falls in line with the wider investigation of blockchain for record-keeping ongoing at institutions globally.

In recent weeks, government agencies as diverse as the U.S. Department of Homeland Security and Britain’s Innovate UK have announced similar projects aimed at boosting local blockchain development.

Brazil map via Shutterstock

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Credit Suisse Eyes 2018 Launch for Blockchain Loans Platform


A group of banks led by Credit Suisse is eyeing the launch of a commercial platform for blockchain-based syndicated loans, according to reports.

Speaking to finance magazine EuroMoney, Emmanuel Aidoo, who leads Credit Suisse’s blockchain efforts, said that syndicated loan trial – which began last fall – is moving ahead.

Aidoo told the publication:

“We are working to put a few dozen smaller loan transactions, where we or other participating banks are the agent, onto a distributed ledger platform using smart contracts in production next year.”

The group involved finished the second phase of their testing in March. Conceptually, the test envisions a syndicated loan market – in which multiple lenders pool their capital for individual borrowers – built on blockchain. The group hopes the technology can reduce barriers between counterparts, reducing both time and cost in making the necessary capital available.

Using smart contracts to reduce those turnaround times could increase the market’s appeal to potential lenders and investors, according to Aidoo.

“Many investors, including mutual funds and institutional asset managers, might be attracted to loans that are senior to bonds in the capital structure, but they are put off by how long loan trades take to settle,” he said.

Credit Suisse image via Sonia Alves-Polidori/Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

Bitcoin Trading Sideways as Bitcoin Cash Drops to $800


Following the all-time highs set over the last week, bitcoin has been trading sideways for the last 48 hours, and prices are fluctuating in the $4,050 to $4,200 range.

Prices for the asset across global exchanges averaged $4,109 at press time, having opened the session at $4,206 and achieved a high of $4,208 at roughly 8 a.m. UTC, according to CoinDesk’s Bitcoin Price Index.

The question everyone will be wondering now is, will the price go up or down when the next big movement kicks off? For that we’ll just have to wait and see, but a Goldman Sachs analyst said, on August 14, that bitcoin could rise as high as $4,800 in the current bull market.

Elsewhere, the new bitcoin alternative, bitcoin cash, shocked observers briefly yesterday by setting its own all-time high of around $1,091, according to data from CoinMarketCap.

Via CoinMarketCap

Since being created in a fork of the bitcoin blockchain on August 1, prices had been for the greater part steady around $300. However, a breakout on August 17 saw enthusiastic trading – at South Korea exchanges, in particular – that took the digital asset to its previously unseen heights.

In the hours since, bitcoin cash prices have dropped somewhat and now hover close to the $800 mark.

Overall, the market is still trending up, with the market capitalization across all cryptocurrencies currently at $146 billion – down slightly from a record high of $147.2 billion set at around 8 a.m. this morning.

Trading chart image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

$7 Million: Bitcoin Wallet Startup Breadwallet Raises New Funding


Bitcoin wallet provider Breadwallet has announced $7 million in new funding.

The startup – which debuted in 2014 – raised funds from a group of investors that includes DAS Capital, East Ventures, Globe Advisors, Liberty City Ventures, Maffin Inc, OKWAVE and Saison Ventures. An unnamed group of angel investors and family offices also took part in the round, according to the firm.

Breadwallet indicated it plans to use the funding to expand its business development and marketing teams, as well as invest in new functionality for the bitcoin wallet itself.

Perhaps more notably, the startup has also announced that it is setting up new headquarters in Switzerland.

With the move, Breadwallet joins an increasing number of cryptocurrency and blockchain startups that have made their home in the so-called “Crypto Valley.”

Adam Traidman, Breadwallet’s founder and CEO, said of the move:

“Switzerland has emerged as a hotbed of digital currency startup activity, and we were attracted by its leadership in conservative financial legislation. Its strong reputation for financial privacy for consumers is the ideal fit for our charter to empower individuals with the benefits of bitcoin.”

In statements, investors participating in the funding round struck a bullish tone on the prospects of future cryptocurrency adoption and the potential for the startup.

“We believe that digital currency will become increasingly influential as the industry continues its rapid expansion, and Breadwallet is well-positioned to be a dominant leader in the space,” said Shinji Kimura, founder of DAS Capital.

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Lightning Bank Ledgers? Bitfury and Ripple Demo New Twist on Bitcoin Tech


Bitcoin’s much-anticipated Lightning Network is now compatible with seven different payment networks.

Today, blockchain infrastructure firm Bitfury and payments network provider Ripple are releasing new code that makes it possible to conduct Lightning-style transactions across a range of both blockchain and legacy payment networks. While still in its early stages of deployment, it’s believed the Lightning Network could one day expand bitcoin’s capacity to millions of transactions by moving those transactions off of the main bitcoin blockchain.

However, today’s news arguably goes a step further, adding weight to the idea that the top-layer payments network isn’t just a tool for bitcoin.

The two companies released a demo showcasing how the new technology can be used to make a transaction between bitcoin and litecoin, the two blockchain networks which have arguably made the most progress in developing the Lightning Network.

Since Lightning is increasingly perceived as a necessary layer for blockchain transactions, the companies view this as a big step toward a future where users won’t have to worry about which payment method they’re using.

Ripple CTO Stefan Thomas told CoinDesk:

“I shouldn’t have to care which particular coin you use or like. If you’re on PayPal and I’m on Alipay or if I’m on bitcoin and you’re using a bank account, I’ll still be able to send you money and not worry about it. That’s the long-term goal.”

Interledger addition

Honing in on Ripple and Bitfury’s work more specifically, the companies have released code that integrates the Lightning Network with Interledger, a protocol designed by Ripple for making transactions between different types of blockchains.

This means it’s compatible not only with public blockchains like bitcoin or ethereum, but with permissioned protocols managed by only a few companies, as well as traditional payment methods such as PayPal. Interledger aims to support transactions between all of these services by offering a type of “payment-agnostic” escrow service.

The W3C initiative made its first successful transaction across these various types of payment methods earlier this summer, but the new part here is that the Lightning Network can now sit on top of this infrastructure.

“Lightning natively supports transactions across different blockchains, but it cannot make transactions to any central ledger or to PayPal. That’s why integration of Interledger is very, very useful for Lightning,” said Bitfury researcher Viacheslav Zhygulin.

Because litecoin and bitcoin already support test versions of the Lightning Network, the group successfully tested transactions there. (And, you can try it out using the open-source software, too.)

Right now, it only works on the “testnet,” a sandbox version of the blockchain used to trial new features and applications, but Thomas said that the functionality will work similarly on mainnet (the live bitcoin network) once it’s safe to deploy it there.

In the process of developing the product, the two companies also developed a different testnet – what Thomas called a “permanent testnet for testnets” – that cuts across different blockchains as well.

Missing ingredients

Still, while the technology has now been released, there’s work to be done to make the technology usable. For example, there are currently no Lightning Network implementations deployed on top of permissioned blockchains that could take advantage of this newfound interoperability.

Bitfury representatives argued, though, that the framework sets up the necessary infrastructure for the future.

Additionally, Thomas noted that future success of the protocol depends on how many clients ultimately choose to adopt Interledger and Lightning Network technology.

Still, the two companies described it as a big step towards moving money across different types of payment networks. And, since bitcoin and litecoin have near-completed Lightning Networks to work on the mainnet, it might not be long before users make real transactions between the two.

Longer-term, Thomas indicated that the goal is to move beyond the payment networks that Interledger currently supports to encompass perhaps all of them.

He concluded:

“After being involved in the community for so long, I’ve found that the missing ingredient – the one thing that’s missing – is interoperability. Not just with the blockchain, but with central ledgers and more generally interoperability in the financial system.”

Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple. 

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The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].

LedgerX and CBOE: The CFTC’s Trojan Horse in an SEC Turf War


Benjamin Sauter and David McGill of Kobre & Kim LLP are civil litigators and criminal and regulatory defense attorneys. They are also part of the Digital Currency & Ledger Defense Coalition, a group of over 50 lawyers dedicated to protecting US blockchain innovators.

In this opinion piece, Sauter and McGill examine how a new class of cryptocurrency-based financial products could impact the balance of power between US regulators.

There is more than meets the eye to recent announcements that LedgerX and CBOE will soon be offering digital currency derivatives in the U.S.

In addition to delivering new financial products to the public, these initiatives may also usher the U.S. Commodity Futures Trading Commission (CFTC) into the underlying digital currency markets. If so, this would be a regime change in how cryptocurrency trading is regulated, particularly with respect to manipulative or disruptive trading practices.

In light of recent reports of rampant “spoofing” and “wash trading” in some markets, the CFTC may be called upon to rule with an iron fist.

At the same time, the recent announcement that the U.S. Securities and Exchange Commission (SEC) will consider many (if not all) new currency offerings as “securities” portends a looming game of thrones for regulatory dominance in these markets.

The Westeros of digital currency trading

Currently, the CFTC is “beyond the wall” of the digital currency markets.

This is because, as a general matter, the CFTC regulates the trading of commodity derivatives (for example, wheat futures and options), not the trading of underlying commodities themselves (for example, wheat).

The CFTC has designated bitcoin and other virtual currencies as “commodities,” thereby removing them from the ordinary scope of what the the CFTC regulates. As readers may recall, the CFTC’s lack of oversight in this area, and the possibility of unregulated manipulation in the digital currency markets, was a key reason why the SEC recently denied a bid by investors Cameron and Tyler Winklevoss for approval of an exchange-traded bitcoin ETF.

There are two primary exceptions to the rule that the CFTC does not oversee commodities trading:

First, as brandished in the CFTC’s enforcement action against Bitfinex in June 2016, an obscure provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act gives the CFTC jurisdiction over commodities trading when: (a) the trading is done on a leveraged or margined basis, and (b) the commodity is not actually delivered to the customer within 28 days.

Due to a quirk in how Bitfinex held the private keys for customer bitcoins, the CFTC found that these conditions were met and, therefore, that Bitfinex should have been registered with the CFTC. Bitfinex agreed to settle the matter, so the CFTC’s interpretation remains untested and open to dispute in court.

In any event, the CFTC’s enforcement action was largely hollow because digital currency exchanges now appear to be sidestepping this jurisdictional provision by ensuring “actually delivery” of customer private keys. Thus, this provision is unlikely to sustain meaningful regulation by the CFTC of the digital currency markets.

Second, the CFTC has brought enforcement actions for manipulative trading in underlying commodity markets (such as silver) when that trading also affects derivatives markets subject to CFTC oversight.

Again, this basis for the CFTC’s jurisdiction is open to dispute in court, but it is clear that the CFTC believes it has this authority. By extension, one could expect the CFTC to assert some degree of authority over digital currency trading to the extent that trading impacts digital currency derivatives markets.

The CFTC’s gambit

To date, there have been no digital currency derivatives markets in the U.S. to speak of, and thus no opening for the CFTC to break through the jurisdictional wall separating it from the underlying digital currency markets. (Recall that the CFTC tried to shut down derivatives trading on Derivabit and TerraExchange in 2015.)

This is why the CFTC’s recent approval of LedgerX and anticipated approval of CBOE for digital currency derivatives trading is so significant.

With digital currency derivatives trading set to begin, the CFTC may well have found the jurisdictional allies it needs to breach the wall. At a minimum, one can expect the CFTC to assert authority over trading practices on the underlying digital currency markets that provide reference prices for the newly approved derivatives products.

But because the digital currency markets and related derivatives markets are all linked through arbitrage, there may be no natural stopping point once the CFTC crosses the threshold. That could mean a new regulator sitting on the digital throne.

Wars to come

Not to be outdone, the SEC has also been busy plotting its own run at the throne.

The SEC’s recently published “Report of Investigation” on The DAO and signals that new coin offerings may be deemed “securities” subject to SEC oversight.

A key implication of this finding is that the secondary trading of these securities would fall under the SEC’s Section 10(b) anti-fraud mandate – including its prohibitions on market manipulation and insider trading. In other words, the SEC appears to have just carved for itself a large slice of the underlying digital currency markets, at least with respect to newly issued digital currencies.

Given that the CFTC has already found digital currencies to constitute “commodities” within the meaning of the Commodity Exchange Act, there is tension between these two regulatory campaigns.

Which agency would regulate the secondary trading of a new coin offering that serves as a reference price for a derivatives contract?

This regulatory conflict is not unique to digital currencies, and the SEC and the CFTC may end up sharing power as they do with other single-security futures products. But security futures products are subject to an arcane set of rules and joint-registration requirements that are sure to chill the digital currency trading environment.

Prepare for a long winter

Regardless of whether the SEC, the CFTC or both ultimately assert power over trading in the digital currency markets, recent developments suggest that a new regime is coming. Digital currency traders in the U.S. and abroad should prepare for a long winter of uncertainty and, ultimately, regulatory scrutiny of trading practices.

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$126 Billion: The Cryptocurrency Market Just Set a New All-Time High


The total value of all cryptocurrencies set a new all-time high today, rising above $126 billion for the first time in history, according to data from CoinMarketCap.

The new benchmark was set at 8:00 UTC and comes just four days after the crypto asset class set a previous record above $116 billion.

At press time, the price increase appears to be driven by a new influx of capital into bitcoin, the markets oldest and perhaps best understood asset. Over the last seven days, the value of one bitcoin is up more than 20%, rising to over $3,500 from $2,854 last Friday.

During that time, the total value of its coin supply also rose, climbing in value to $57 billion from $47 billion a week ago.

Strong gains have also been seen in the top-10 cryptocurrencies by market cap.

Neo (formerly Antshares), a well-publicized project out of China saw its market capitalization pass $1 billion for the first time. Over the past seven days, it has seen its market capitalization rise to $1.7 billion, up from $550 million, as its price per coin climbed to $34, up from roughly $10 seven days ago.

Elsewhere, IOTA also rose to $1.7 billion, up from $1.1 billion, while ether, the native cryptocurrency on the ethereum blockchain, increased its total market cap to $28 billion, up from $21 billion a week ago.

But that’s not to say all cryptocurrencies have seen such big movements during the period.

Bitcoin cash, the cryptocurrency created in last week’s bitcoin fork, added little new value to its market, inching up to $5.4 billion, from $5.1 billion a week ago.

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SEC Suspends OTC-Traded Emerging Markets Investor Over ICO Concerns


The U.S. Securities and Exchange Commission (SEC) has suspended the trading of shares in an OTC-traded technology company over questions about the accuracy of a planned initial coin offering (ICO).

Issued August 9, the order was made against a firm called CIAO Group (now rebranded as NuMelo Technology), which trades on markets operated by OTC Markets Group. NuMelo first announced plans for an ICO on July 6, at the time indicating a desire to bring a “digital financial products marketplace” based on blockchain tech to the African market.

The company’s website reveals details about its aspirations, with a blog post from May noting that the firm recently saw a management change, and that it was looking to embrace a new business strategy.

In subsequent press releases, the firm blurs the lines between its ideas, evoking the power of blockchain, promising a “$530 billion target market collaboration” and making bold claims about the ability of the technology to revitalize economic access in developing markets.

A June 15 press release reads:

“African public stocks from multiple African countries traded in a single cryptocurrency on US trading platforms cleared through DTCC accepted blockchain transactions could monumentally increase the liquidity of investments in African public companies, and give the average individual US investor new access to the extraordinary growth opportunities only found within frontier markets.”

Ultimately, however, it may be statements like these that influenced the SEC’s decision, as the agency cited questions about the “accuracy of assertions” made by the company “with respect to business plans” and its plans for an ICO as key reasons for the move.

The suspension began today at 11:59 p.m. EST, and is scheduled to last until August 23.

Notably, the announcement follows an uptick in SEC supervision of the cryptocurrency markets, particularly as it relates to the nascent ICO sector.

In June, the SEC took action against a Florida firm over similar concerns, suspending its trading on over-the-counter (OTC) markets, a move that was followed by its landmark ruling that a cryptographic token issued by a project called The DAO met its definition of a security.

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ICOs Meet IPOs: Blockchain Author Alex Tapscott to Take Token Fund Public


If blockchain author Alex Tapscott gets his way, his newly launched investment firm will be the first publicly traded company to focus on initial coin offerings (ICOs).

Fresh off the news that Tapscott’s NextBlock Global has raised $20 million to invest in projects selling cryptographic tokens, he has revealed exclusively to CoinDesk that he plans to list the company on the Toronto Stock Exchange (TSX).

Whereas ICOs have been popularized as an alternative to traditional funding, Tapscott’s rationale in appealing to accredited investors is that he believes they could unlock even more capital for the sector. To bridge that gap, Tapscott said he’s already held “numerous” meetings with Canadian regulators, and that he will likely file paperwork for an initial public offering (IPO) in the coming weeks.

In conversation with CoinDesk, Tapscott went on to describe the importance of what may be the first ICO investment firm to IPO.

He explained:

“Anybody with a discount brokerage account, whether it’s small retail investors, all the way up to a mutual fund or a pension fund, will have what we view as a safe, regulated and relatively straightforward way of owning a diverse collection of the best opportunities in this asset class.”

After the application is filed with the TSX this fall, it will be reviewed by the Ontario Securities Submission (OSC), and if approved, Tapscott expects to go public in six months, “concurrent with a much larger raise.”

Structure and strategy

Also revealed to CoinDesk were new details about NextBlock Global’s investment strategy, including its plans to focus on protocols with the potential to enable entire ecosystems of decentralized applications.

The majority of those investments, Tapscott said, will be made in projects planning to offer an ICO, but which haven’t yet done so. According to CoinDesk data, blockchain projects have in total raised over $1.5 billion in ICOs through July, including $500 million over the last 30 days alone.

In this way, Tapscott is positioning himself among a growing pool of investors who believe that while token sales funded by the public make venture capital dollars less necessary, the skills provided by his team will incentivize experienced investors to join the market.

For example, Tapscott only opted to pursue a publicly traded digital asset investment firm after considering several potentially competing models.

This research included exploring whether the company should hold its own ICO that would issue fund units to accredited limited partners, or whether it should seek a more traditional fund structure by selling to general partners and limited partners.

Still, he believes an IPO remains the preferred option.

“The market is still relatively small, and the number of investors that are actually deploying capital is still relatively small,” said Tapscott, adding:

“And it’s always been my goal to accelerate mainstream investment in this asset class.”

Global asset migration

Elsewhere, Tapscott discussed the importance of jurisdiction in informing his choice.

Since co-authoring his book, “Blockchain Revolution,” last year with his father, Don Tapscott, he has taken on an advisory position at the World Economic Forum and appeared regularly at blockchain conferences. But while he’s become a fixture around the world, he said he chose to come home to his native Canada to list the company for both personal and professional reasons.

Tapscott cited TMX’s early work with blockchain prototypes and the fact that it is among several countries that have shown willingness to let blockchain startups safely experiment in so-called regulatory “sandboxes” as reasons for the move.

“My priority is not only to accelerate adoption,” said Tapscott. “But to make sure my home country, my hometown, leads in a positive way.”

Still, Tapscott acknowledged his goal in listing his company on the Toronto Stock Exchange has implications beyond Canada.

He concluded:

“If we’re going to be successful in migrating all traditional assets – bonds, interest royalties, deeds, titles, etc – into digital assets that are built on top of blockchain technology, then we’re going to have to interact closely with the people who lead in that field today, lead in the traditional world today.”

Alex Tapscott image via Michael del Castillo for CoinDesk

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].

Ether, Litecoin and More: Overstock Now Accepts Cryptocurrencies as Payment


Online retail giant Overstock has partnered with blockchain startup ShapeShift to accept more than 60 cryptocurrencies as payment at its online stores.

With the move, shoppers can now use ether, litecoin, dash and bitcoin cash at checkout, a move that follows Overstock’s early embrace of bitcoin as a payment method. Overstock first began supporting bitcoin for payment in 2014, and it has remained one of the more active companies in developing the technology more broadly, even launching a dedicated subsidiary to focus on its potential applications.

In statements, Overstock CEO Patrick Byrne sought to portray the decision as one that gives its customers greater freedoms outside of the traditional financial system.

Bryne said in a statement:

“Overstock is pro-freedom, including the freedom of individuals to communicate information about value and scarcity without relying on a medium created through the fiat of unaccountable government mandarins.”

The move further comes at a time of broader diversification in the cryptocurrency market, which has seen bitcoin’s share of the total asset class slip below 50%.

As such, Overstock framed the move as one that keeps it in line with new developments in the blockchain market.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in ShapeShift.

Overstock image via CoinDesk Archives 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].

Bitcoin Cash Eases Mining Difficulty as Blockchain Adjusts


Bitcoin Cash adjusted its mining difficulty over the weekend, a move that comes just under a week after the alternative version of the bitcoin blockchain was created.

As a result of both blocks (478,647 and 478,648) having a Median Time Past (MTP) that was 12 hours greater than the six blocks prior, each block adjusted difficulty down by 20%. A special rule to the network, Bitcoin Cash implemented the measure as part of its hard fork last week.

As a result, Bitcoin Cash is now 16.7% as difficult as bitcoin to mine.

This has lead more blocks to be found, both because it’s easier and because more bitcoin miners are now mining Bitcoin Cash. Since the difficulty adjustment, Bitcoin Cash is averaging about 18-minute blocks, implying a hash rate of around 650 PH/s.

At this rate, we can expect another difficulty adjustment in about 13 days, at which point, the network should have roughly 10-minute blocks, like bitcoin, assuming the hash rate stays constant.

Note that economically, it’s still more rational for a miner to mine bitcoin, as Bitcoin Cash needs to be worth about 1/6 of bitcoin’s price to be as profitable, which sets the target at $566 at the time of writing.

Bitcoin Cash is currently trading at around $328.

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