Category Archives: Cryptocurrency

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Crypto on the Rock: Gibraltar Gets Its First Regulated Exchange

The tiny British Overseas Territory of Gibraltar located at the southern tip of the Iberian Peninsula is to get its first fully licensed exchange, Coinfloor.

Coinfloor, the UK’s oldest crypto exchange is the first to be fully accredited as a “distributed ledger technology (DLT) provider” under the legislation which requires the government to satisfy itself that 9 operating principles of good practice are being adhered to.

Obi Nwosu, the CEO of Coinfloor, commented that these were all met by his company, including those which guarantee adequate AML and KYC safeguards and security against the risk of cyber attack. He said:

“What impressed us was that this [legislation] was in the works for a long time… It’s been well thought out, well considered. They are focusing in on quality over quantity.”

Gibraltar, known affectionately as “The Rock” among residents and visitors, and home to the only Barbary macaques living in Europe, has begun attracting new and existing fintech companies to its shores. It is attempting to follow in the footsteps of other European countries such as Malta and Switzerland, both of which have seen the arrival of major cryptocurrency players like Binance and Bitmain in 2018. It now holds regular events such as the Gibraltar International Fintech Forum, demonstrating the country’s serious intent when it comes to encouraging fintech companies to do business there.

Coinfloor’s CEO said that he was glad to be able to fulfil the requirements of the new legislation, thereby securing a position in Gibraltar’s blockchain and cryptocurrency ecosystem, particularly as the UK exchange had recently been forced to lay off employees due to weakening demand in the UK through Bitcoin’s fall from its 2017 highs. He argued:

“It’s never desirable to make these changes, but it’s a natural part of the market cycle… The market has contracted and you should make appropriate changes to your team . . . It’s happening across this space.”

Despite some companies looking to Gibraltar as a possible home, it is more likely that Malta, with its vibrant crypto community and favourable blockchain legislation, will be become a favourite with established exchanges and startups, particularly given the ongoing concerns regarding a no deal Brexit.

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BitcoinNews.com Daily Podcast 14th October 2018

Listen to the 14 October 2018 BitcoinNews.com Daily Podcast below.

On this edition of the BitcoinNews.com Daily Podcast, we discuss how Tether has drastically crashed below parity with the USD and how Bitcoin prices on Bitfinex have surged well above global market price, both indicating serious problems on Bitfinex. Learn about the failure of the Constantinople hard fork on the Ethereum testnet, and about an easter egg found in Bitcoin’s original code from 10 years ago.

Follow the Bitcoin News Daily Podcast 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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Siberian Church Turns to the Power of Crypto In Mining Gaff

A church in Irkutsk, Siberia’s largest state, has been taken to court for draining too much power from the local grid through crypto mining.

Crypto mining in itself is not illegal and Russian law permits reduced power rates for non-government organizations. But, it seems that the church decided to go beyond covering essential heating and lighting and raised extra funds in their own way through crypto mining.

Most churches fundraise for essential repairs, but it seems as though someone in this parish had their own particular use for the extra generation of cash raised by their mining activities. It is not clear if members of the clergy or someone in the parish had locked into the church’s power supply, but the court found for the power company that no case of power theft was suggested, which does indicate that the irregular use of power may have been authorised by the church.

The result means that the church has a tab of $16,000 to pick up and faces their tariffs being raised by the electricity company. More importantly, the case may set a precedent in the courts for future such incidents when excess power is drawn without consultation with local electricity providers. Although not currently legislated for, extreme overuse of power through crypto mining may invite closer government scrutiny if it became a common occurrence.

The cold climate, particularly in locations such as Siberia with its sub-zero temperatures, has made the likes of Russia and Iceland the go-to destinations for industrial level crypto mining. The Russian Association of Crypto Industry and Blockchain (RACIB) claims that there are now over 400,000 people employed in the sector. 70,000 enterprises operate hundreds of thousands of mining rigs, with an increase in one-man operators working from their homes.

Because much of Russia’s mining proceeds go towards foreign investment, locally run mining pools are becoming popular as a way of cutting back on the amount of Russian money going towards overseas enterprises through crypto mining.

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Tether Becomes Untethered to USD While Bitcoin on Bitfinex Surge USD 1,000 Above Global Market Price

Bitfinex, the biggest USD to Bitcoin exchange in the world, has been having serious banking troubles recently. First, it was revealed that they had severed ties with their primary bank, the Noble Bank of Puerto Rico, while simultaneously they were keeping the exchange running via a private account at HSBC. Then Bitfinex halted all fiat deposits, indicating that they had perhaps lost functionality in their bank account. Now prices of Bitcoin on Bitfinex have surged to a premium of USD 1,000 versus the global market, and the Tether (USDT) stablecoin which is intimately tied to Bitfinex has seen prices crash well below parity with USD.

The #1 stablecoin, USDT previously peaked at a market cap of USD 2.8 billion. However, USD 320 million worth USDT has been removed from circulation, which is something that could only occur via the redemption process where USDT is directly exchanged for USD via Tether Limited. On 15 October 2018, the price of USDT crashed to as low as USD 0.925, far below parity with the USD, removing another USD 80 million from USDT’s market cap in the process. The only way this makes sense is if Tether’s redemption process has begun to fail, perhaps due to the USD 320 million of USDT redemption in the past week causing a run on their bank. It is nonsensical that anyone would sell USDT so far below the value of the USD unless it is no longer backed by USD at this time.

Simultaneously, the price of Bitcoin on Bitfinex surged to as high as USD 7,700 on 15 October, while the price on Bitstamp and Coinbase was USD 6,700. This is a USD 1,000 premium or 15%. At this time the disparity has relaxed a bit to USD 6,950 on Bitfinex and USD 6,420 on Bitstamp, a USD 530 premium or 8%.

This would suggest that the mechanism of global arbitrage has failed and that Bitcoin cannot be sold easily for fiat on Bitfinex anymore, which suggests fiat withdrawals are no longer working. Users are choosing to buy Bitcoin at a high premium on Bitfinex to get their money off the platform. Something similar happened when Mt. Gox collapsed, which was the biggest USD to Bitcoin exchange during the early days of Bitcoin. The Bitfinex subreddit is filled with complaints that fiat withdrawals are not working.

Despite all of these market and community indicators which suggest the Bitfinex situation is rapidly worsening, Bitfinex released a statement on 15 October declaring that all fiat withdrawals are working fine and fiat deposits will be working by 16 October.

Fiat deposit update – October 15th, 2018. https://t.co/F8o2ltVCN4 pic.twitter.com/ukE9JsRB0j

— Bitfinex (@bitfinex) October 15, 2018

It is hard not to make a comparison to Baghdad Bob, who declared during the Iraq War that American tanks were not in Baghdad when they were only a few hundred meters from his location, and sounds of approaching American troops could be heard while he said that.

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McAfee Claims: If in 2020 Presidential Race, “I Will Tell the Truth”

British-American computer programmer and businessman John McAfee has begun making pledges in his run up to the 2020 US presidential elections.

The founder of McAfee Anti Virus software and vocal cryptocurrency advocate stated recently that he would seek a nomination to run in the next US presidential election. In doing so, has expressed a clear aim to advance the stature of cryptocurrency and blockchain on the world’s financial stage. McAfee recently suggested that blockchain and crypto have given new freedoms to the working community who he sees as ‘hired slaves,’ arguing:

“If you want to send Bitcoin, Ethereum or Monero, who do I have to ask? Only the peer… We are creating a permissionless society…We are not slaves for our jobs, we are not slaves to the government, we are slaves to the entire system.”

In his latest pledge as a potential POTUS runner, which would be his second attempt to get his name on the ballot, he has vowed to “tell the truth,” despite also explaining that he has no chance or indeed no intention of actually winning anything. He commented in his latest tweet:

“In truth: the crowd doesn’t want the truth. It is why politicians lie. They cannot win by telling the truth. I don’t want to win POTUS. I just want the stage.”

Running on “Truth” would be a campaign which would certainly get some support in the present political climate in the US. Although, it would be highly unlikely that McAfee, seen by some as a maverick would progress. The comparisons to the potential of Donald Trump to become US President, turning back the clock, are there to be made, however. When questioned back in June about his chances in 2020, McAfee said:

“Don’t think that I have a chance of winning. I do not. But what truly changes America is not the president, but the process of creating one. If my following is sufficient I get to stand the world’s largest stage and talk to everyone, as I did last time, to tell the truth.”

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Brooklyn Nets Basketball Player Regrets Missing Bitcoin Slam Dunk

The National Basketball League’s Spencer Dinwiddie says he regrets not holding on to his bitcoins in 2017, allowing him to benefit from the end of year price hike.

The Brooklyn Nets guard, who narrowly missed out on the Most Improved Player award in the NBA last season to Victor Oladipo, was in quite early on Bitcoin’s bull run last year. Dinwiddie bought in at $1,200 a coin with a Coinbase account, but then sold early at $5000 to $15,000 before Bitcoin went north, finally hitting the wall at just under $20,000 at the end of 2017.

Dinwiddie discovered Bitcoin as an NBA rookie and was pulled towards investment portfolios to take up the slack. Clearly not earning the huge salaries of seasoned well-established players, he saw Bitcoin as a great investment opportunity. He initially took family advice, at first investing in real estate, before cryptocurrency lured him in, first to Bitcoin, then to altcoins such as Tron.

His early sell-off has left him feeling short-changed, although if he sold at $15,000 he was not far behind Bitcoin’s big numbers at the end of last year. However, he still regrets selling early, claiming “If I woulda gone all-in, boy, I’d be loaded right now.”

Cryptocurrency endorsements by sporting celebrities and clubs are not uncommon, and basketball is no exception as many see this as the next step to investment. Next year, Bitmain Technologies-owned bitcoin mining company AntPool enters a sponsorship deal with the Houston Rockets, in time for the 2018-19 season. Add to this the Sacramento Kings sign up to the MiningForGood initiative which will see the team mining Ethereum in an arena-based centre. What is refreshing to see is that the cryptocurrency generated funds will go towards the Build Black Coalition which plans to help the Sacramento community’s black residents profit from education and workforce development.

Businessman and investor Mark Cuban, owner of the Dallas Mavericks has already introduced cryptocurrency ticket purchasing in the NBA. He feels this needs to become the norm and was happy to make the first move, commenting:

“If crypto is going to have a chance of being a currency, then someone has to start accepting it for payment,”

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What Is a Timewarp Attack?

When most people think of possible attacks on Bitcoin or crypto, they think of a 51% attack where a miner amasses a majority of the network hash power and forks the blockchain, in order to double spend crypto or to implement code changes. However, another lesser known hack is the timewarp attack, which is what this article explores.

In a nutshell, a timewarp attack occurs when a miner reports incorrect timestamps on the blocks they mine, in order to bring about a lower difficulty. Many cryptocurrencies like Bitcoin periodically adjust difficulty according to the rate of block generation, so that block generation stays at the set amount in the code, which is 10 minutes per block for Bitcoin. By reporting incorrect timestamps a miner can trick the difficulty algorithm and cause difficulty to be lowered, allowing them to mine blocks faster and make more money. This has negative effects for a crypto’s economy, since a timewarp attack increases the inflation rate of a crypto, causing a surge in supply that can lead to a lower market price.

In Bitcoin’s code, a block can be timestamped up to 2 hours in the future, past which point it is rejected. This leeway was designed to account for errors in computer clocks, so miners would not have blocks rejected if their computer clock is slightly off. There have been numerous instances in Bitcoin’s history where a previous block has a timestamp that is after the timestamp of the next block, and this seems to have been a problem especially when new technology is introduced, like when Bitcoin mining pools first launched in 2012.

The 2-hour leeway for block timestamps is what opens the door for timewarp attacks. For Bitcoin, it would be very difficult to conduct a significant timewarp attack, since it would be publicly obvious on the blockchain, and a successful attack would need a majority of mining power. However, it is still possible, and if a large majority of miners work together they could theoretically drop the difficulty with continued timewarp attacks until it only takes 1 second to mine a block, which is the minimum possible block time. At this worst-case scenario of a timewarp attack, instead of taking 2 weeks to mine 2,016 blocks, it would take just over half an hour. This would lead to rapid inflation of the Bitcoin supply, which could be quite damaging for the market.

It is very unlikely Bitcoin miners would collude and perform such a timewarp attack, since miners have invested billions of USD into mining infrastructure, and the damage to the Bitcoin ecosystem from such an extreme timewarp attack would wipe out their investment. Not to mention it would be glaringly obvious to the community, and there would be a tremendous public outcry.

However, with some cryptocurrencies, it is much easier to perform a timewarp attack. For example, the Verge cryptocurrency continuously re-adjusts difficulty, unlike Bitcoin which adjusts difficulty once every 2 weeks. Therefore, if someone gains a majority of hash power on the Verge they can rapidly implement an extreme timewarp attack. Further, Verge uses multiple mining algorithms, allowing for multiple points of attack. This is exactly what happened, someone timewarp attacked Verge and brought Scrypt difficulty to minimum levels, and they netted millions of USD of Verge in the process.

There are discussions in the Bitcoin community to change the code to prevent timewarp attacks, and obviously other cryptocurrencies need to follow that ideology to prevent catastrophic timewarp attacks like what happened with Verge. However, there is a new idea called Forward Blocks that would apparently be inhibited if Bitcoin’s timewarp attack exploit is fixed, so there is a stalemate on implementing the fix for timewarp attacks in Bitcoin’s code. That being said, the fix is ready for deployment if a timewarp attack ever becomes an issue for Bitcoin.

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Live Stream of 51% Attack Shows Fragile Nature of Many Altcoins

A hacker that operates under the pseudonym Geocold promised to conduct a live stream of a 51% attack on an altcoin, and on 13 October 2018, he made an attempt to 51% attack Bitcoin Private. He was successful at gaining a majority of hashing power, and the only reason he didn’t complete the attack was the live stream platforms he was using, Twitch and stream.me, both shutdown his stream.

A 51% attack is one of the greatest weaknesses of cryptocurrency, and it arises out of the inherently decentralized nature of proof of work (PoW) cryptocurrencies. If a miner has greater than 50% of the network hash rate they can mine blocks faster than the rest of the network combined, giving them the ability to fork the blockchain. This can be used to perform a double spend attack, where a hacker sends a transaction to someone on the original chain, and then creates a longer chain where the transaction doesn’t exist, making the transaction disappear.

Bitcoin and Ethereum have far too much hashing power for any real possibility of a 51% attack, however, many smaller cryptos have small enough hash rates where 51% attacks are a real threat. Some cryptos, like Bitcoin Private, have such small hash rates that a 51% attack is very easy. A study found that less than USD 1,000 is needed to 51% attack many cryptos, just by renting hash power from a cloud mining service.

Bitcoin Gold and Verge have already experienced 51% attacks, and the results are crippling. Beyond the money stolen during a double spend, a 51% attack decimates any reputation and trustworthiness held by that crypto. If a crypto is 51% attacked it is usually removed from all exchanges and users dump all their coins.

In this case, Geocold originally said he was going to 51% attack Einsteinium, a crypto with a USD 20 million market cap. However, he gave a week of advanced warning and the Einsteinium community increased the network hash rate by 15 fold, making a 51% attack too costly. Geocold then began live streaming the first stages of a 51% attack on Bitcoin Private, a crypto with a USD 51 million market cap.

With only USD 200 of hash power rented from a cloud mining service, Geocold obtained 62.5% of the Bitcoin Private network hash rate and mined a single block. Other hackers found Geocold’s IP address and knocked him off the Bitcoin Private mining pool before he could fork, and by the time he got his hash power back online, his Twitch live streaming account was banned.

In the 2nd phase of the attack Geocold was successful in mining numerous blocks and was about to fork the blockchain which would have been devastating for Bitcoin Private, but his live streaming account on stream.me was banned. He decided to stop the attack, and plans to do a 51% attack in the future on an altcoin and simply post the video on YouTube once it’s already done.

This incident reveals that crypto users need to be very wary when playing around with altcoins since it takes just one bad actor to 51% attack an altcoin, which would collapse its price. Crypto users should stick to major cryptos like Bitcoin and Ethereum, which are secure. There may be over 2,000 cryptos listed on CoinMarketCap, but far less than that are actually secure in the face of a 51% attack.

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Central Bank of Zambia Declares Crypto Is Not Legal Tender Amid Hyperinflation Crisis

The Central Bank of Zambia responsible for the issuing the Kwacha (ZMW) fiat currency, has declared that Bitcoin and crypto, in general, are not legal tender. Other warnings about the risks of crypto are also included in this official declaration. This announcement comes at a time of worsening hyperinflation in Zambia, the ZMW has devalued 18% through August and September 2018, well above the hyperinflation threshold.

The Bank of Zambia specifically says “While cryptocurrencies have some monetary characteristics, such as being used as a means of payment on a person to person basis, cryptocurrencies are not legal tender in Zambia.” The Bank of Zambia goes on to clarify that they have not issued any state-backed cryptocurrency, and therefore no cryptocurrencies are legal tender.

While it is obvious that the Bank of Zambia does not approve of cryptocurrency based on this statement, this proclamation has no implications for crypto users in Zambia. The Bank of Zambia has no regulatory authority over crypto, and they don’t intend to regulate crypto. They say “Bank of Zambia does not oversee, supervise nor regulate the cryptocurrency landscape. Consequently, any and all activities related to the buying, trading or usage of cryptocurrencies are performed at the owner’s risk.”

The Bank of Zambia goes on to describe the possible risks associated with crypto as money laundering, terrorism, fraud, and hacking. To be fair, those are problems that fiat currency has too, and any form of money. However, with crypto, the Bank of Zambia warns that there would be no legal recourse for anyone who gets hurt when dealing with them since it’s unregulated.

Overall, this is actually good news for Zambian crypto users, since the Bank of Zambia is saying there are no regulations. In many other countries, Central Banks and governments have regulated crypto heavily, but Zambia is taking a hands-off approach. Further, the Bank of Zambia says “In line with the Bank of Zambia’s position that regulation should not constrain but enable innovation, Bank of Zambia will continue to actively monitor all developments.”

The reason this statement is coming at this time is probably because of the worsening situation of hyperinflation in Zambia, with the ZMW declining 18% versus the USD in only the past 2 months. Zambia is no stranger to hyperinflation, in 2012 Zambia had to cut 3 zeros off of the ZMW since inflation had made smaller denomination fiat bank notes practically worthless.

As seen in other countries with hyperinflation, like Venezuela and Iran, people will choose to put their money in crypto as a safeguard, and the government does not like this since it generates capital outflows that accelerate the collapse of the local fiat. Zambian economist Chibamba Kanyama confirms the situation “Zambians have been desperate on profitable investment vehicles for lack of a liquid stock market. Others are seeking for high interest or high yield investment vehicles from across the country such as offshore accounts. This is because interest rates on savings from commercial banks are below the inflation rate. The crypto market is the latest one and seems to have attracted a number of investors, some of them civil servants and retirees seeking to reinvest their pensions.”

Overall, compared to other countries experiencing fiat hyperinflation, the Bank of Zambia is being quite gracious and not doing anything to stop crypto besides this cautionary statement which could raise some skepticism about crypto.

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