Daily Archives: September 9, 2018

Submarine Swaps Make It Possible for All Cryptocurrencies to Use Lightning Network

Lightning Labs developer Alex Bosworth was investigating atomic swaps, a way to transfer cryptocurrencies between different blockchains without middlemen, and then came up with the groundbreaking idea of submarine swaps.

The Lightning Network was originally developed to be a scalability solution for Bitcoin. This would require an on-chain Bitcoin transaction to lock up coins in a lightning channel, and then another transaction to close the channel and disburse the Bitcoin to its proper owners. In-between the opening and closing transactions there can be thousands or millions of transactions on the Lightning Network. Lightning Network is still a work in progress but definitely has the potential to allow Bitcoin to scale to the size of financial networks like Visa.

Submarine swaps, on the other hand, have the ability to allow any cryptocurrency to be used on the Lightning Network, which could lead to the formation of the ultimate decentralized exchange. This could, in turn, lead to the Lightning Network becoming a scalability solution for all cryptocurrencies, and not just Bitcoin alone.

What Alex Bosworth figured out is that with Submarine Swaps a user can send Bitcoin from the Bitcoin blockchain into an already active Lightning Network channel. One major advantage of this right off the bat is that it allows Lightning channels to be refilled, instead of going through the tedious procedure of opening a new channel when bitcoins in a channel run out, saving on transaction fees.

Even more importantly, any cryptocurrency can be sent as a payment into the Lightning Network by using Submarine Swaps. Jason Wong has already created the software to send Litecoin and Ethereum into the Lightning Network and has successfully tested it.

It is clear that any cryptocurrency can be used on the Lightning Network if the proper software is developed for each crypto. This means that instead of a Lightning Network for each type of crypto, there can just be one Lightning Network with all the cryptos.

Simultaneously, this can easily be developed into an ultimate decentralized exchange where every cryptocurrency can be traded with one another, without regulations or middlemen. It changes the entire paradigm of crypto exchanging, which is an aspect of the industry that is currently being suffocated by government regulations. A decentralized exchange built with submarine swaps would make government regulations obsolete and ineffective, freeing the entire crypto world from centralized tyranny. Long term, this would increase the proliferation and profitability of crypto.

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Goldman Sachs Not Abandoning Crypto Trading Desk, Plans to Launch Bitcoin Derivative

A story circulated through the mainstream crypto media that Goldman Sachs was abandoning its crypto trading desk ended up being a fake news. Not only is Goldman Sachs not abandoning its crypto trading desk, according to its Chief Financial Officer (CFO) Martin Chavez, Goldman Sachs is looking to expand its operation by launching a Bitcoin derivative.

Martin Chavez says “I never thought I would hear myself use this term but I really have to describe that news as fake news”. The fake news made the rounds on 5 September 2018, the same day Bitcoin crashed from USD 7,400 to USD 6,400. Many people at the time speculated that the Goldman Sachs news helped drive this crash. Yet, the market hasn’t gone up since this fake news was reversed, suggesting it might just be a coincidental crash event.

Martin Chavez indicates that clients want a Bitcoin derivative, specifically saying “The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges”. Goldman Sachs is already settling Bitcoin futures contracts from the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) since May 2018. This new derivatives product Martin Chavez is talking about is like an in-house version of cash-settled Bitcoin futures.

It would be much better for Bitcoin, and much more groundbreaking, if the product Goldman Sachs plans to launch uses physical Bitcoins. However, Martin Chavez says “Physical bitcoin is something tremendously interesting, and tremendously challenging. From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.

His argument isn’t entirely true, since Xapo, BitGo, and Coinbase offer institutional grade crypto custodianship that would be effective and sufficient for Goldman Sachs’ operations. However, it is unfortunate that Goldman Sachs is choosing to go with cash-settled derivatives – paper bitcoins, instead of actual bitcoins. Paper bitcoins are actually bad for the Bitcoin market, since they divert investment away from the spot market, causing Bitcoin’s price to be lower in the long-term than it would be if paper bitcoins didn’t exist. Unfortunately, paper bitcoins are proliferating on the Bitcoin futures markets in Chicago, on derivatives exchanges like BitMEX, and now Goldman Sachs.

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Bitcoin News Radio Show, 9th September 2018

Listen to the 9 September 2018 Bitcoin News Radio Show below.

On this edition of the BitcoinNews.com daily radio show we discuss how Iceland now has its first officially licensed crypto exchange, and how crypto adoption has nearly tripled in Australia despite the bear market. Learn about how the number of active users of many cryptocurrencies is extremely low, even for many coins with market caps over USD 100 million. Hear about how Goldman Sachs isn’t closing their crypto trading desk and are actually expanding their crypto operation

Follow the Bitcoin News Radio Show on AnchoriTunesSpotifyGoogle PodcastsStitcherRadio PublicPocket CastsOvercastCastbox, and Breaker. We broadcast a new episode every day, covering the most important topics in the crypto, Bitcoin, and blockchain world!

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Iceland Comes out of the Cold With First Bitcoin Trading Pair

Iceland’s Financial Supervisory Authority (FME) has announced the first registration of a cryptocurrency exchange in the country, allowing users to trade Bitcoin.

The exchange Skiptimynt, will feature two trading pairs, the Icelandic Krona (ISK)/Aurora Coin(AUR) and Bitcoin (BTC)/ISK. Aurora coin is Iceland’s alternative to Bitcoin created in 2014.

In reality, Skiptimynt isn’t the country’s first exchange as that distinction rests with ISX launched in 2016. However, that exchange is largely inactive and doesn’t offer a Bitcoin trading pair, limited to the ISK/AUR pairing.

When Auroracoin was launched it caught the eye of the country including politicians, the cryptocurrency community and the media. Although, very few Icelandic shops and services accepted payments in AUR and since then it has been largely ignored.

After its failed attempts to  “break the shackles of the fiat currency financial system in Iceland”, the country has primarily become a center for cryptocurrency mining. This is largely due to its combination of abundant renewable energy sources and cold climate – both suited for mining operations as they result in low electricity tariffs and cooling costs. Lower costs generate higher profits for cryptocurrency miners, which has created a situation in Iceland where electricity consumption for mining has overtaken household use.

Prominent politicians in Iceland have suggested that the country’s economy could be at risk given a cryptocurrency market crash. Government finance minister Bjarni Benediktsson said that the crypto threat “cannot be excluded as a risk factor” to an economy still recovering from the global financial crisis.

Styrmir Hafliðason, security and quality manager at Skiptimynt data center, is responsible for dealing with the weekly flood of mining applications. He disagrees, suggesting, for example, a crackdown on crypto by regulators wouldn’t impact the country, as crypto assets are simply held as zeros and ones in private centers, and therefore aren’t part of Iceland’s economy.

A recent report by KPMG claims that about 90 percent of the power consumption of Iceland’s data centers last year was dedicated to crypto mining.

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Stock and Crypto Exchange Robinhood Aiming For IPO

Popular stock and crypto trading app Robinhood is planning on going public on the stock exchange with an initial public offering (IPO). Robinhood has been offering zero fee crypto trading since its crypto services launch, causing it to amass users quickly, and now it has over 5 million crypto traders using the platform. If Robinhood were to succeed at getting publicly listed, it would be the first crypto related exchange in the world to have a publicly tradeable stock, a major milestone.

The caveat with Robinhood is it doesn’t offer spot crypto trading. Users can’t withdraw any crypto to their own wallets from Robinhood. Robinhood seems to suggest that the crypto assets in Robinhood accounts are real, but there is no explicit guarantee that Robinhood actually has crypto reserves for all of their crypto balances, they might be using a mix of cash and crypto to back crypto balances. That’s why it is prudent to say this is the first crypto related exchange to get a public stock if successful since Robinhood cannot be considered an actual crypto exchange at this time. That being said, Robinhood’s support page says they want to add crypto withdraws in the future, which would make them a real spot crypto exchange. There is no sign of this happening yet though.

One very important point about this is if Robinhood isn’t backing all of their balances with actual crypto, then they are generating paper crypto. Paper crypto is extremely bad for crypto prices since it takes demand away from spot crypto markets, and therefore crypto prices end up being lower long-term as demand is being diverted into paper crypto which does not impact spot price.

Robinhood has conducted some extremely successful funding rounds leading up to this IPO. In April 2017 Robinhood raised USD 110 million in a series C funding round, giving the company a valuation of USD 1.3 billion. In February 2018 Robinhood conducted a series D funding round and raised USD 363 million, further raising the valuation to USD 5.6 billion. There will likely be at least one more funding round before the IPO, which will force Robinhood’s valuation even higher.

Robinhood has been undergoing constant audits from the United States Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in preparation for the IPO. Additionally, Robinhood is seeking a Chief Financial Officer (CFO).

If Robinhood’s IPO is successful, and it appears it will be, the billions of USD generated by the IPO will put Robinhood in a position to become a global stock and crypto powerhouse. Robinhood might be considered a small time crypto exchange now, and perhaps not even a real crypto exchange, but that could drastically change after the IPO.

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Bitcoin News Radio Show, 8th September 2018

Listen to the 8 September 2018 Bitcoin News Radio Show below.

On this episode of the BitcoinNews.com daily radio show, we discuss the tragic story of the flight attendant who got a USD 100,000 loan to invest in crypto right before crypto crashed. Learn about Robinhood’s upcoming IPO, and the USD 3 million mansion in Malta being sold for Bitcoin only. Hear about the newly appointed SEC commissioner who is favorable towards crypto.

Follow the Bitcoin News Radio Show on AnchoriTunesSpotifyGoogle PodcastsStitcherRadio PublicPocket CastsOvercastCastbox, and Breaker. We broadcast a new episode every day, covering the most important topics in the crypto, Bitcoin, and blockchain world!

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Australian Securities Watchdog Prepares to Mitigate Potential Harm of Cryptocurrencies and ICOs

The Australian Securities and Investments Commission (ASIC), as the nation’s chief securities regulator, has recently released its corporate plan 2018-2022 to focus on monitoring the potential dangers from emerging technologies and services such as cryptocurrencies and ICOs.

Future Plans

The ASIC will be launching a project to examine and study the usage and popularity of cryptocurrencies across various industries. In addition, regarding cryptocurrency exchanges, the regulator said it was preparing a policy that would bring them under the same level of scrutiny that traditional stock exchanges and financial market operators are also subject to, by “applying the principles for regulating market infrastructure providers to crypto exchanges.”

Presently, domestic cryptocurrency exchanges fall under the regulation of the country’s financial intelligence agency and watchdog, the Australian Transactions and Reporting Analysis Center (AUSTRAC).

These regulations have been in effect since April 2018. However, AUSTRAC has been monitoring domestic cryptocurrency exchanges since December 2017. Exchange operators were obligated to enroll with AUSTRAC’s ‘Digital Currency Exchange Register’ whilst complying with anti-money laundering (AML), counter-terrorism financing (CTF) and know-your-customer (KYC) rules.

At the time, this was considered to be a skeptical move from Australia, but it actually generated a positive force behind cryptocurrency acceptance, knowledge and adoption in Australia by creating ‘sustainable, non-restrictive regulations’.

The ASIC report writes: “We will continue to focus on monitoring threats of harm from emerging products (e.g. ICOs and cryptocurrencies), cyber resilience, the adequate management of technological solutions by firms and markets, and misconduct that is facilitated by or through digital and/or cyber-based mechanisms.”

Despite a May 2018 report from the Australian Competition and Consumer Commission (ACCC) that detailed significant consumer losses to cryptocurrency scams in 2017, Australia managed to bounce back in a very positive way.

Developments Down-Under

Australia has been a significant point of interest for the crypto or blockchain industry and community for quite some time. After the regulations set up in April, Australia has adapted with an open-minded approach to real-world cryptocurrency and blockchain applications.

With regards to infrastructure, an Australian tech firm partnered with an energy provider to create a dedicated power station for blockchain operators, with the hopes of creating a blockchain “Silicon Valley”.

In March, the Australian Tax Office (ATO) began looking to the public for guidance on how to legislate cryptocurrency taxes. As time moved forward, the ATO moved forward with its crypto-tax plans by coming up with a 100 point check system. In July, crypto-classifications and taxation rules were further clarified.

Most recently, the Australian federal agency partnered with IBM to create a national blockchain for the use of smart legal contracts, which allows domestic companies to utilize the network for digital contracts.

Blockchain technologies in Australia have also managed to find their way into sustainable sugar projects, as well as the Commonwealth Bank of Australia’s recent project that successfully tracked the shipment of 17 tons of almonds using blockchain.

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