Category Archives: ERC-20

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MakerDAO to Accept Select ERC-20 Tokens as Loan Collateral

MakerDAO has announced that they will begin accepting select ERC-20 tokens as collateral when taking out Dai loans, unlike the current setup where Ethereum is the only accepted collateral. The first six ERC-20 tokens that could possibly be used as collateral are Augur (REP), Basic Attention Token (BAT), DigixDAO (DGD), Golem (GNT), OmiseGo (OMG), and 0x (ZRX). BAT is likely the first ERC-20 token to be approved.

MakerDAO is a decentralized borrowing and stable coin system, where borrowers deposit cryptocurrency as collateral and receive the Dai stable coin which is pegged 1:1 with the USD. MakerDAO adjusts interest rates, much like a central bank, in order to keep Dai’s value balanced. Dai and MakerDAO have seen growing popularity, with Dai having a circulating supply in excess of USD 100 million, and Maker (MKR) having a market cap near USD 670 million.

In the old system, MKR was used to pay stability fees, which is essentially the same as an interest rate, but now Dai will be used to pay the stability fee.

Users who hold the old single collateral version of Dai, now called Sai, will be able to upgrade to the multi-collateral version, which is called Dai, via the migration app. Users who hold Sai on Coinbase will have their coins automatically upgraded to the new multi-collateral Dai.

Finally, one of the most anticipated changes in the MakerDAO system is that users who hold Dai will be able to earn interest simply by holding their coins. The interest payments will be funded with the stability fee. is committed to unbiased news and upholding journalistic codes of ethics. For more information please read our Editorial Policy here.

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Decentralized Blockchain-Based VPNs Have the Potential to Increase Anonymity and Establish VPN-Based Virtual Economies

Decentralized Blockchain-Based VPNs Have The Potential To Increase Anonymity And Establish VPN-Based Virtual Economies

Internet censorship has become a severe problem in China, where a Great Firewall has been built which spies on and censors the internet usage of 340 million Chinese citizens, as explained in a previous article. Commonly used websites like Google, Facebook, Twitter, Wikipedia, and the New York Times are banned in China. Beyond limiting the free flow of information, China also arrests people who post dissenting thoughts against the government, while simultaneously not allowing people to use the internet unless their identity is verified. 

Essentially, the internet is crippled in China due to government censorship. China is not the only country with internet censorship issues, indeed there are censorship issues in practically every nation on Earth to varying degrees. 

How a VPN Works

One of the most common tools used to circumvent internet censorship is a Virtual Private Network (VPN). When using the internet without a VPN, the origin and destination of data are known, and it is possible to see the data travel from point A to point B. The Mozilla Developers describe the internet with this analogyLet’s imagine that the web is a road. On one end of the road is the client, which is like your house. On the other end of the road is the server, which is a shop you want to buy something from… When you type a web address into your browser (for our analogy that’s like walking to the shop).”

A VPN encrypts data at the origin, making it so no one can read the data. Additionally, the VPN hides the origin internet protocol (IP) address, so that no one can know where the data came from. The encrypted data is sent to the VPN server, which decrypts the data and sends it across the public internet to the destination. Outside observers would think the data came from the IP address of the VPN server, and would not be able to know the real origin IP address. 

Schematic of a VPN, showing how the VPN secures users against entities and organizations that spy on internet traffic. Courtesy of

Expanding the Mozilla Developer’s analogy, a VPN is basically like hiring a masked person to go to and from the store for you, and that person travels to another country in between to throw off anyone following them.

VPNs Are Fundamentally Flawed Due to Centralization

Although in an ideal world, VPNs would offer rock-solid anonymity, there are several caveats in real-life which can compromise the anonymity of VPNs. These problems generally stem from the centralized nature of VPNs, meaning a centralized entity like a corporation or an individual is in charge of each specific VPN service. 

Logging of connection and usage data is an unavoidable problem for some VPNs, especially when using a free service. If a VPN indicates that it has bandwidth limits, then it is likely logging usage data, and this usage data could end up exposing a user’s identity as well as what they are doing on the internet. 

Paying for a premium VPN service is another point where anonymity can be compromised if a credit/debit card or any other fiat payment method is used to buy a VPN, then the VPN account can be linked to an identity. Fortunately, cryptocurrency solves this problem. Paying with Bitcoin is usually enough to hide one’s identity when paying for a VPN, and even better is paying with the stealth cryptocurrency Monero. 

VPN services usually also come with a terms of service (ToS) document, which may include a privacy policy. It is critical to read this privacy policy to ensure that the VPN will not divulge information for any corporate or law enforcement reasons, or even store data in the first place.

Due to the centralized nature of a VPN, an administrator can install malware such as trojans, adware, riskware, and spyware, which can be used to collect personal data including text messages, calls, and even banking information. This obviously completely defeats the purpose of using a VPN in the first place. 

Collection of personal data, which is then sold to 3rd parties or used to display customized ads, is apparently a common practice for VPN services in desperate need of income. Once again, this defeats the purpose of using a VPN.

Apparently, VPNs sometimes leak, instantly revealing a user’s true IP address and internet usage. It is important to use a VPN kill switch, which instantly cuts off the internet if a VPN connection fails. VPN connections can fail due to slow servers, poor local connectivity, and local firewalls. This is also related to centralization, since the fewer servers a VPN uses, the more likely it is that a leak will occur.

One of the most catastrophic problems that can occur with a VPN is if the network chooses your computer to be an exit node. This can happen with free VPN services that try to build a network with user’s computers rather than having their own dedicated servers. If your computer becomes an exit node, then activity from other VPN users on the network will be traced back to your IP address. 

Can Decentralized VPNs (dVPNs) Solve the Problems of Centralized VPNs?

Considering the problems that arise from using centralized VPN services, it is no surprise that decentralized VPN (dVPN) services are being developed. The theoretical goal of a dVPN is that the network is so decentralized, while simultaneously being completely secure, that no one can compromise a user’s anonymity in any way. There would be no administrators on the network that have the power to log, upload malware, spy, etc. 

Privatix Establishes a VPN-Based Virtual Economy with Blockchain Technology

A real-life example of a company that is trying to build a dVPN is Privatix. The idea behind Privatix is that 3.5 billion people have internet in the world, and 90% of the bandwidth is already paid for but goes unused. People can sell their spare bandwidth in exchange for Privatix Tokens (PRIX), instead of just letting their bandwidth go to waste. On the flip side of the coin, VPN users pay a low fee via cryptocurrency directly to the people they are obtaining bandwidth from. 

Privatix utilizes the Ethereum blockchain and the Privatix Token is a simple ERC-20 token. A direct peer to peer marketplace for bandwidth is integrated into the Privatix platform, allowing bandwidth providers to post offers, as well as facilitating completely anonymous communication between buyers and sellers. This is perhaps the beginning of a VPN-Based virtual economy powered by blockchain technology. 

Although Privatix and Mysterium Are Branded as dVPNs, They Are Centralized and Have Severe Exit Node Issues

The reality is that Privatix is a centralized VPN at this point, albeit a popular centralized VPN with 1.5 million users. Although there is a peer to peer marketplace which utilizes blockchain technology, the actual VPN service is still administered by Privatix. 

That being said, Privatix outlines their plan for becoming a true dVPN in the future. Instead of using dedicated servers, which is a centralized point of failure, Privatix plans on having millions of users act as exit nodes. Apparently, users will rapidly switch between exit nodes, which will obfuscate the user’s identity even further. Also, users can choose to be a ‘peer’ in the network, meaning they act as an exit node, and they can then earn dVPN bandwidth instead of paying for it. 

A glaring problem with the current centralized version of Privatix, which will probably remain a problem even when the dVPN launches, is that exit nodes may have illicit activity tracked to their IP address if a Privatix VPN user does something illegal while using the exit node. Privatix says they provide exit node operators with a document that transfers responsibility to Privatix. However, this argument may not hold up in a court of law, since the exit node operator personally facilitated an illegal activity for monetary gain. 

The Mysterium Network is another project that is quite similar to Privatix. Idle bandwidth is rented out to VPN users in exchange for Mysterium Tokens (MYST), which is an ERC-20 token on the Ethereum blockchain. Like Privatix, the Mysterium Network utilizes blockchain technology to establish one of the first VPN-based virtual economies. 

At this point the Mysterium network is not fully decentralized, nor has it solved the exit node problem. According to the White Paper, Mysterium will truly become decentralized in Phase 3 when it removes its central server. As for the exit node problem, the goal of Mysterium is to dissolve user data and send it deep into the network of Mysterium Nodes to achieve an end to end encryption. 

Is the Exit Node Problem Truly Solvable?

Mysterium is essentially saying that the data will be ripped apart and encrypted into unintelligible gibberish within the network, and somehow this will solve the exit node identity problem. The reality is that an IP address is required in order to use the internet, whether it be your actual IP address, the IP address of a VPN server, or the IP address of a peer on a dVPN network. Essentially, when a VPN is used for illegal activity, someone’s IP address will be associated with the illegal activity, and this is especially true when using a dVPN network where all the exit nodes represent actual people. 

It remains to be seen how the exit node problem will be solved, and indeed this is the biggest problem preventing the maturation of dVPNs. At this point, users can sell their unused bandwidth to VPN users, but is the money earned from selling that bandwidth worth the risk of being identified as an IP address that conducts illegal activity?

In summary, dVPNs would be the ideal evolution of VPN technology via providing truly anonymous and trustless services, as opposed to current VPN providers which are centralized, opening up multiple ways for a user’s identity to be compromised. Two early attempts at dVPNs are Privatix and the Mysterium Network, which are in reality centralized VPNs, but have succeeded in creating VPN-based virtual markets that are powered by blockchain technology, turning unused bandwidth into a profitable commodity. The holy grail for Privatix and Mysterium would be a resolution of the exit node problem, where users who sell bandwidth have their IP address attached to the possibly illegal activity that occurs over VPNs. At this time it is unknown how exactly the exit node problem will be resolved, but in a future where this problem is resolved, dVPNs would provide the ultimate level of internet anonymity, enhancing the flow of information and freedom across the world. is committed to unbiased news and upholding journalistic codes of ethics. For more information please read our Editorial Policy here.

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Tokens on Bitcoin Soon Possible via Lightning

Tokens on Bitcoin Soon Possible via Lightning

The search for a secure alternative to the very popular ERC-20 tokens on Ethereum has turned up an unexpected solution: issuing tokens via Bitcoin’s Lightning Network second layer protocol.

A CoinDesk article reports that BHB Network co-founder and staunch critic of Ethereum Giacomo Zucco has hit upon the solution that he claims could change the game for entrepreneurs via a better token-minting protocol:

“If ethereum is going to die eventually, then we have very high hopes that this will be sustainable long term.”

He has named the open-source token project as Spectrum and it already benefits from several powerful names in the industry such as investors Fulgur Ventures and Poseidon Group, and startups such as Bitrefill and Chainside. Even crypto exchange Bitfinex has thrown its weight behind it, all of them keen to change the prevailing mindset about Bitcoin’s slowness for experimental tech.

Bitfinex CTO Paolo Ardoino already commits to issuing a Tether version compatible with Spectrum before the end of 2019, adding that “Bitfinex will continue supporting Lightning projects and features in our platforms”.

Spectrum will use RGB colored coin standards that will be tied to actual Bitcoin so that tokens can be issued several layers above it. In effect, instead of competing with sidechains like Liquid, it complements them and enables cross-currency swaps within Lightning channels.

This is very different from tokens on Ethereum, which are all operated via smart contracts and has built-in support for complex functions. This, according to ConsenSys employee Gregory Rocco, is why colored coins never got popular, since they required external coordination.

Zucco says:

“If you want to do something with tokens, we think Layer 3 is the right place to put it. With lightning now you can be competitive, fast, creative, reckless.”


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EOS21 Protocol Teleports Ethereum Tokens to EOS Blockchain

A new protocol called EOS21 has been developed, with the purpose of teleporting Ethereum ERC-20 tokens to the EOS blockchain. This will give decentralized application (Dapp) developers flexibility to use their native tokens on both the Ethereum and EOS blockchains, instead of launching a different token on each blockchain.

Transferring tokens between the Ethereum and EOS blockchains was possible even before the development of EOS21. Indeed, the EOS token itself was transported from Ethereum. However, this process is not automated and continuous; developers take a snapshot of the tokens on the Ethereum blockchain and open up an airdrop on the EOS blockchain. This is a one-shot deal where the ERC-20 Ethereum token version of the crypto gets burned and becomes non-functional. With EOS21, the token can exist on both EOS and Ethereum, and be moved back and forth as needed.

The EOS 21 protocol has three dimensions. In the first, a blackhole smart contract on the Ethereum blockchain absorbs ERC-20 tokens, while collecting EOS account information from the user. Developers can choose to burn their ERC-20 tokens in the blackhole or hold them in the smart contract. Therefore, developers can decide whether they are moving permanently from Ethereum to EOS or leave the door open to move the tokens from EOS back to Ethereum in the future.

In the second dimension, an off-chain oracle program watches the Ethereum transactions and authorizes the distribution of the EOS tokens. This oracle could potentially run entirely on EOS in the future instead of being off-chain. The third dimension is a smart contract on EOS that distributes the EOS tokens to the user.

Before EOS21, there was no direct link between the Ethereum and EOS blockchains. The linking of the Ethereum and EOS economies can be mutually beneficial. Now developers can launch Dapps on both the EOS and Ethereum blockchains and use the same token, expanding Dapp functionality, increasing user base, and providing upward pressure on a token’s price.

Further, distributing Dapps across Ethereum and EOS, rather than running on just one of those blockchains, can be considered a scalability solution. If the network gets congested on one of the blockchains, then users would use the other blockchain more to save on transaction fees, which would result in a lessening of network congestion on the 1st blockchain.


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Ethereum ERC-20 Creator Proposes Reversible ICOs

The creator of the Ethereum ERC-20 token standard, Fabian Vogelsteller, is proposing new technology which will make initial coin offerings (ICOs) reversible, meaning investors can withdraw their funds from the ICO at any time. This will give investors full protection, which would eliminate fraud. This new form of crowdfunding might be called RICO, which stands for reversible ICO.

The ERC-20 token standard is an easy, efficient, and secure way of launching a cryptocurrency via an ICO. A smart contract can be created with ERC-20, where investors send Ether to the smart contract and receive their tokens. This technology has led to USD 20 billion of investments into ICOs in the past two years and has been a boon for the entire crypto space. Unfortunately, a significant fraction of ICOs end up not delivering on their promises of new blockchain technology or in the worst case scenario, end up being outright scams.

Vogelsteller said he feels “obligated to come up with something better” since, without ERC-20, scam ICOs would probably be much harder to pull off and occur less frequently.

The proposed RICO would allow investors to send back their tokens at any time to the smart contract address and get back the Ether they invested. This would give RICOs strong motivation to deliver on their promises, instead of misspending the invested money, since if the RICO fails then all the money will be taken back.

Vogelsteller said, “You are able to withdraw the funds you committed at any point of time and you do this by simply sending back your tokens… It brings the balance back between the community and the project and I think this is really important.”

If RICOs are implemented, then catastrophic ICO failures due to mismanagement or fraud will become a thing of the past. RICO projects will fail naturally and investors will be safe, rather than ICOs hurting all the investors if they don’t deliver. This is good for companies conducting RICOs too since lawsuits would be less likely if a failure happens as investments would be automatically returned.

One aspect of RICOs that remains unclear is how there will be a balance between the company getting the funds it needs and the investors being safe. For investors to be 100% safe, companies that conduct RICOs would never be able to touch any of the invested Ether, which is probably not the way they would prefer to work.

Vogelsteller will demonstrate an RICO in real-life when he launches his fashion and design blockchain Lusko. At that point, the concept behind RICOs should become more clear.


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Coinbase Lists USDC Stablecoin

Coinbase, the largest crypto exchange headquartered in the United States, announced today that they have listed USD Coin (USDC), a stablecoin originally launched by Circle, but now Coinbase is listed as a Co-Founder. This is the first time a stablecoin has been listed on Coinbase, and only the 7th cryptocurrency to ever be listed on the platform, others being Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic, Litecoin, and 0x.

Notably, USDC is an Ethereum ERC-20 token, making it the 2nd ERC-20 token to be added to Coinbase, with the first one being 0x, which was listed less than 2 weeks ago on 12 October 2018. When 0x was listed on Coinbase it was speculated that it would be easy for Coinbase to list other ERC-20 tokens since they use the same backbone technology, and this has already come to fruition with the listing of USDC. There are numerous other ERC-20 tokens among the top cryptos, and in the coming weeks and months, it is likely that Coinbase will keep listing ERC-20 tokens and other cryptos, as per their announcement about listing all possible major cryptocurrencies.

Generally when a crypto is listed on Coinbase they experience the Coinbase Effect, which is a rally resulting from Coinbase users buying the crypto as soon as it is listed. This is because Coinbase is perhaps the most well-known crypto exchange in the United States, and due to the lack of cryptos listed, there is a strong thirst for any new cryptos that get listed.

Since USDC is a stablecoin and pegged approximately to the value of a single USD, its price will not rally due to being added to Coinbase. The way to measure a stablecoin rally or crash is with its market cap since the market cap indicates how much of the stablecoin has been purchased. USDC launched in late September, so the market cap was technically zero up to that point. The market cap grew to USD 10-15 million, until the middle of October 2018 when Tether (USDT), the #1 stablecoin with a market cap in excess of USD 2 billion, had problems and become unpegged from the USD. By 19 October the USDC market cap was in excess of USD 30 million. Following the listing on Coinbase today, the USDC market cap has already more than doubled to USD 62 million.

Since USDT continues to be volatile and is worth less than USD 1, this will give USDC the opportunity to rapidly increase its market cap and perhaps compete with USDT, especially now that Coinbase has listed USDC.

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BitGo Becomes Most Diverse Crypto Custodian After Adding 57 ERC-20 Tokens

BitGo has added 57 ERC-20 tokens to its cryptocurrency custodian service, making it by far the most diverse cryptocurrency custodian in the world. It plans on adding even more ERC-20 tokens. This rapid expansion of BitGo’s custodian service comes only two months after it launched the service in May 2018, following the acquisition of licensed qualified custodian Kingdom Trust regulated by the South Dakota Division of Banking.

Previously, BitGo only offered services for Bitcoin, Litecoin, Bitcoin Cash, Ripple, Ethereum, Royal Mint Gold, and Bitcoin Gold, and such a small selection of cryptocurrencies is typical for cryptocurrency custodians. Likewise, Coinbase’s custodian service, which caused a reversal in the Bitcoin bear market when it launched in July 2018, only offers support for five cryptocurrencies. Cryptocurrency custodians want to be sure that they only offer services for highly secure cryptocurrencies. Cryptocurrencies with low market caps and less mining power securing them are prone to 51% attacks, which causes theft and market crashes that scare away investors.

ERC-20 tokens are based on the Ethereum blockchain and, therefore, are extremely secure since Ethereum has a tremendous amount of mining power securing its network. This makes ERC-20 tokens an ideal addition for cryptocurrency custodians. Indeed, Coinbase announced in March 2018 that it was planning on adding support for all ERC-20 tokens, but it seems BitGo beat them to the punch.

The 57 ERC-20 tokens that BitGo has added include 0x (ZRX), Augur (REP), Golem (GNT), OmiseGo (OMG), Storj (STORJ) and Zilliqa (ZIL).

Even though these tokens all use the Ethereum blockchain, they are distinct cryptocurrencies, and many of them are top ranking cryptocurrencies. In general, it is expected that Bitcoin will be the first choice for institutional investment since it is considered the gold standard of crypto and has the most liquidity, leading to the least slippage.


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