R3 has scored another win in the insurance sector, giving the startup a wide lead over other distributed ledger technology (DLT) providers in the sector.

Revealed exclusively to CoinDesk, the RiskBlock Alliance, whose members include such insurance heavyweights as Chubb, Marsh and Liberty Mutual, has decided to build its first set of use cases using R3's Corda platform.

The news comes soon after B3i, the European reinsurance consortium, decided to switch from Hyperledger Fabric to Corda. With the addition of RiskBlock, R3 now counts all the major insurance blockchain consortia as Corda users, including the Insurwave marine insurance platform created by EY and Maersk as well as regional initiatives in India and Italy. 

RiskBlock was officially launched in mid-2017 by The Institutes, an insurance research and education network, but the team behind the DLT consortium has spent at least two years testing enterprise blockchain solutions. Earlier this year, RiskBlock narrowed down its choices to a short list: Quorum (developed by JPMorgan Chase), Hyperledger Fabric, Corda, and Digital Asset.

"We went through an intense and laborious process and finally narrowed it down to two, which were Corda and Digital Asset," Patrick Schmid, a vice president at RiskBlock, told CoinDesk, adding:

"It was a close race – and we haven't worked out all the details yet – but we have decided on Corda and we are moving in that direction."

RiskBlock was a founding member of the Ethereum Enterprise Alliance and much of the early work, including several proofs-of-concept, was done on a private version of ethereum, the world's second-largest blockchain. However, the insurance consortium started to change course this year as it received input from member firms and also some of its potential partners.

Privacy – or, rather, the lack thereof in a system forked from a public network – was the dealbreaker for these companies, according to Schmid.

"What we learned from testing ethereum was that our members found huge value in the smart contracts, and found huge value in blockchain-enabled technology. But they were a little bit concerned about data segregation," he said.

"Even with a private variant of ethereum, their concern really was around data being stored, even if it's encrypted and hashed, on every node in the system."

The new RiskBlock applications are proofs of insurance (with the goal of weeding out uninsured motorists); more efficient forms of data sharing when a policyholder first notifies an insurer it will be filing a claim; subrogation (think of when your auto insurance carrier pays you after an accident and then pursues the other driver's carrier for reimbursement), with a focus on blockchain-based net settlement; and parametric insurance, which is paid out automatically when a triggering event such as a natural catastrophe occurs.

In terms of a timeline, Schmid said, "Everything is in progress now. We anticipate that we'll have POI and First Notice of Loss fully complete and ready for member testing before the end of summer."

See more: https://www.coindesk.com/all-big-insurers-are-uniting-behind-r3s-blockchain-tech/

"Every crypto exchange in Iran [has been] filtered since May."

That's how one Iranian bitcoin advocate, speaking on condition of anonymity, described a new wave of government censorship that has cut Iranians off from vital links to the crypto economy ahead of a scheduled renewal of U.S. sanctions in August and November.

Several Iranians exclusively told CoinDesk they are having trouble accessing crypto exchanges like Binance, Blockchain and LocalBitcoins, even with virtual private networks (VPNs) and other workarounds that were already commonplace because of international sanctions.

It's a scenario that highlights the complexities of censorship resistance – a country whose people are most in need of an economic lifeline are now ostracized from empowering services.

"Many people are using it [bitcoin] as a hedge instrument because buying BTC is easier than going into the black market to buy yourself US dollars," said the Iranian source, a cryptocurrency veteran with deep ties across Tehran's startup scene.

No speculative investment, the source is referencing how Iranian's currency reached an annual inflation rate of 127 percent on July 2. (For some Iranians, bitcoin's volatility appears trivial in the face of rampant inflation and political uncertainty.)

"[President Rohani] doesn't want Iranians to transfer foreign currency, especially dollars, outside the country," said Ahmad Khalid Majidyar, director of IranObserved Project at the Middle East Institute, a think tank in Washington D.C. that offers non-partisan political analysis.

Majidyar told CoinDesk:

"If [diplomacy] falters, it would mean there are more restrictions, and definitely cryptocurrency would be impacted as well."

Most experts agree that the current economic crisis, one tied to international relations, has spurred Iranian authorities to seek strict controls on cryptocurrency. (A CoinDesk survey of 200 domestic crypto users revealed a majority used the tech for cross-border payments.)

In light of the political situation, the censorship has been a long time coming.

In December 2017, Iran's anti-money laundering body forbid financial institutions from working with cryptocurrencies like bitcoin. This policy stipulated the Central Bank of Iran cannot take "any action to promote" decentralized currencies.

Then in May, the Iranian Financial Tribune reported Mohammad Reza Pourebrahimi, head of the parliament's economic committee, warned crypto traders could harm the Iranian economy if they continued to spend billions through international marketplaces.

See more: https://www.coindesk.com/iran-crypto-exchanges/

A debate between an infamous bitcoin detractor and one of the cryptocurrency's most well-known entrepreneurs made sparks fly in New York City Monday.

Hosted by the Soho Forum, a monthly Manhattan debate series, the event saw Erik Voorhees, the CEO of exchange service ShapeShift, argue that government-backed monies will eventually be replaced by bitcoin and blockchain innovations. The world's largest cryptocurrency, he said, just needs gradual adoption to eventually triumph.

However, the debate was far from a one-sided showcase. There to represent the opposition, Peter Schiff provided more than a healthy dose of skepticism. Perhaps most damningly, he argued people are not currently buying into bitcoin or other cryptocurrencies to use them; they're here to get rich, he said.

The economist said that bitcoin is primarily seen as a speculative asset. Moreover, even people who do plan to use bitcoin cannot do so easily.

Bitcoin is not, at present, a reliable store of value, he continued. Schiff pointed out that the price of a bitcoin can change hour-to-hour, which makes it difficult for people to price goods or negotiate contracts using the cryptocurrency.

"The biggest problem with bitcoin and why it can never be used as money is because [currency] has to be a reliable store of value, not just a medium of exchange," he said.

Voorhees did not see market fluctuations as an issue.

He told the crowd:

"I remember when it was a big deal when bitcoin moved 50 percent. Today, it's a big deal when it moves 10 percent. I think in a few years it'll be a big deal when it moves 2-3 percent. While bitcoin is volatile today, I think this problem is self-correcting."

Still, the event did see both provocateurs find common ground. Schiff, for example, doesn't believe in fiat currency.

"The fiat system that we have now is not going to work," but "replacing fiat currency with digital currency is not an improvement," he said.

See More: https://www.coindesk.com/voorhees-vs-schiff-bull-tackles-bear-at-bitcoin-debate/

Bitcoin may be global, but it's still a small community

This is why a recent Fast Company South Africa story attracted international commentary – and not in a good way. After all, it isn't every day that relative unknowns get touted as "Bitcoin Kings" on a magazine cover. Still, that's how the crypto world has been introduced to JT Foxx and Mao Lal.

In a tweet posted Wednesday, announcing its June issue, the two supposed experts were featured in a story titled, "Masters of Cryptocurrency."

See more:https://www.coindesk.com/bitcoins-unknown-kings-magazine-mystery-thats-got-crypto-guessing/

Yet another top-20 cryptocurrency has officially released live software.

As of 0:00 UTC Saturday, the first block on the VeChain blockchain, whose token supply is valued at $1.46 billion at writing, has been mined, marking a milestone for a project that aims to be among the first to convince enterprise businesses to adopt code tied to a crypto asset traded on a public market.

Seeking to address obstacles with public blockchains like ethereum and bitcoin (namely alleged governance inefficiencies, economic model issues and application design difficulties), the project also hopes to eclipse solutions like Hyperledger that have so far been the go-to platforms for business.

In short, founded by former CIO of Louis Vuitton China, Sunny Lu, VeChain hopes to be the first to put "real business" applications on a public blockchain.

"Right now, if we look at all the existing public blockchains, there is a common economic model which is from bitcoin that tries to motivate more people to join the network," Lu explained."The cost to use public blockchains is linked to the token valuation on the blockchain directly.

For the execution of more exotic blockchain features like smart contracts and decentralized applications, Lu argues this is a problem.

He told CoinDesk:

"It kind of generates a typical paradox which is, the more utility, the more use cases, the higher valuation of the token. It also means a higher cost to use the blockchain, and that means no one will use it anymore if the cost is too high."

To solve this, VeChain uses a twin token system in which its VET asset functions as a store of value, and the VeThor token represents the underlying cost of using the blockchain. (The project is not alone in using such a system. Both Neo and Ontology also support twin tokens that seek to break up user behaviors.)

Still, another means by which VeChain has sought to differentiate is by emphasizing what Lu calls "ready to wear" software that reduces development time and costs.

"All of the public blockchains running in total decentralization mode are like naked blockchains to most enterprises," Lu said. "Because it's just open source for the core codes, if you want to build up an application, you've got to do everything by yourself starting from scratch."

Early backing
But perhaps what distinguishes VeChain from its competitors is the extent to which enterprises are already said to be involved in that process. VeChain boasts partnerships with automobile manufacturers BMW and Groupe Renault, and global quality assurance and risk management company DNV GL.

Some partners, like DNV GL, have even taken on a more technical role in the project's execution – specifically within its governance system, a key part of VeChain's pitch to businesses.

Notably, the project uses a system called "proof-of-authority" (PoA) to govern how its blockchain rules can be altered, which Lu says offers enterprises "a balance between decentralization and centralization."

VeChain is not the first project to attempt to walk this line.

EOS and Tron have also experimented with new governance models in which software users are positioned as "community members" that can use their tokens to elect delegates (nodes) to validate blocks.

In this way, VeChain's consensus system has two components. The first, what Lu refers to as the "decentralized part,' is that token holders have the ability to vote, and that the weight of their vote corresponds to the number of VET tokens they hold and whether or not they complete a KYC process.

Some token holders, like DNV GL, also run nodes, and to do so, must meet certain requirements.

"Every node will have specifications, not only about hardware, but about the security level and process, how to manage your nodes and your contribution to the VeChain community," Lu told CoinDesk.

All voters use their "voting authority" to have a voice in decisions about technical modifications to the blockchain and to elect VeChain's "Steering Committee." This is what Lu calls "the centralized part," which is the seven seat governing body of the VeChain foundation and its blockchain.

"Those seven seats of the committee, we will execute any decisions coming from the voting process, even including who should be next in the Steering Committee," Lu said. "By doing that, you maintain the publicity or transparency of a decentralized part and also maintain the efficiency of a centralized part."

See more: https://www.coindesk.com/vechain-arrives-know-1-5-billion-blockchain-business/

If all goes well, $700 million worth of cryptocurrency is about to find a new home.

That's because Shanghai-based Ontology, a project closely tied to the "smart economy" blockchain Neo, is expected to launch its live blockchain on June 30, a step that will find one of the top 20 crypto assets finally releasing its proprietary technology.

Described as an enterprise-focused platform, Ontology is seeking to provide a high volume of fast and cheap transactions, all while helping businesses grapple with the thorny problems of interoperability and digital identity. As such, Neo is one of several public blockchains catering to enterprise that have recently or will soon go live, Tron and Vechain being other notable contenders.

However, what might distinguish Ontology's claims is the experience of the team.

The protocol emerged from Neo, an ethereum challenger whose founder, Da Hongfei, is Ontology's CEO. Both Neo and Ontology are subsidiaries of Onchain, which developed a private enterprise blockchain platform called DNA. Da is also Onchain's CEO.

Meanwhile, Ontology's founder Li Jun told CoinDesk that his company and Neo are co-funding work on API standardization, shared smart contract standards, and "cross-chain technology innovation."

Ontology's corporate and technological genealogy might be difficult to keep track of, but the result is a pragmatic approach that appears to combine ambition with a lack of the ideological fussiness.

As Li said at a meetup in March:

"When you want blockchain to become a mainstream industry like the internet today, you have to link to the real business scenario."

For a while, Li added, it seemed that appealing to businesses meant building a permissioned framework like DNA, but it soon became clear that "public blockchain is the future."

If you already trust each other, he explained, "blockchain is not necessary."

Having adopted that stance, Onchain – which has since received backing from the Chinese conglomerate Fosun Group and been accepted to Microsoft's Shanghai accelerator – began work on a public platform that would meet some of businesses' most pressing needs: anchoring digital identities in the real world, allowing for flexibility in terms of technical design, and preventing the creation of restrictive silos.

See more: https://www.coindesk.com/800-million-ontology-blockchain-live/

It's no secret that building large-scale, fully decentralized applications is a challenge, but it turns out the hurdles have to do with more than just scaling.

Decentralized application or "dapp" developers frequently hit roadblocks, since ethereum – the go-to platform so far in dapps' short history – can process only around 25 transactions per second, and the more transactions the network is asked to handle, the more each one costs the user. These limitations on transaction throughput are commonly referred to as "scaling" limitations, and everyone from the casual dapp user to ethereum founder Vitalik Buterin is keenly aware of them.

So when a particular dapp turns out to be less-than-totally decentralized, with parts of the software running on centralized servers, say, the solution seems obvious.

Speed up transaction throughput and reduce costs, and pure, blissful decentralization will naturally follow.

Turns out, though, things aren't that simple.

Some of the most popular dapps that currently live on ethereum – which right now fall into two categories, games and exchanges – often retain centralized features, but the reasons have little to do with throughput and instead, revolve around user experience.

Take games – for developers to be able to make updates to a blockchain-based game, they typically put backdoors into the smart contracts.

Otherwise, said James Duffy, a co-founder of Loom Network, which develops ethereum-based dapps including a Q&A site called DelegateCall, developers would only be able to deploy their dapp once and never be able to modify it.

"Obviously if you're a player in the game you want the developers to be able to update it. You want them to be able to fix bugs, add new levels, add new features," Duffy said.

On the other hand, decentralized exchanges (DEX) keep some centralization in their processes as it relates to their order books. The reasons for this approach have to do partly with security and partly with the difficulty of assembling a single, reliable order book across a large, distributed network of computers.

And while most of these dapp projects aim to decentralize further in the future, for now, they're happy to work slowly through that process so that users have the best experience and don't lose money.

Duffy told CoinDesk:

"No one's ever built a complicated app and then launched it and it just worked perfectly on day one."

See more: https://www.coindesk.com/decentralizing-popular-dapps-isnt-just-scaling-problem/

The Digital Currency Research Lab at the People’s Bank of China (PBoC) has filed a new patent this week for a digital wallet that would allow users to track their transaction histories. The patent application was submitted with China's State Intellectual Property Office (SIPO) Friday, June 22.

The new patent outlines how the proposed digital wallet could be used to track transaction data in coordination with a centralized digital currency issuance registration agency. The wallet would enable multi-signature security and manage digital assets that are encrypted - as existing cryptocurrencies - with private keys.

Transaction queries would yield results including the digital currency type, amount, source currency, as well as identification of the source and destination wallets.

This week’s new patent is a part of a longer-term vision for blockchain integration pursued by China’s central bank. While the government maintains a hardline stance on decentralized cryptocurrencies such as Bitcoin (BTC), the PBoC has been extensively investigating the benefits of harnessing their underlying technology for the existing financial system.

The Governor of the PBoC, Zhou Xiaochuan, has suggested that digital currencies will ultimately diminish cash circulation and are “technologically inevitable,” while stressing the PBoC’s role in controlling the “unpredictable effects” of certain applications of blockchain.

In April, the director of PBoC’s Digital Currency Research Lab, Yao Qian, wrote a likewise cautiously affirmative opinion piece for Chinese media advocating for many of blockchain’s potential benefits, while arguing for the need to temper its decentralization in certain scenarios.

Just this month, the PBoC has revealed a new blockchain-powered system with smart contract functionality designed to tokenize paper checks.

Beyond PBoC, in 2017 China as a whole was reported to have filed more blockchain tech patents than any other country with the World Intellectual Property Organization (WIPO).

Link: https://cointelegraph.com/news/people-s-bank-of-china-files-patent-for-digital-currency-wallet

A long-held bitcoin secret is about to be revealed.

No, it's not the identity of Satoshi Nakamoto, it's a private key the cryptocurrency's creator entrusted to several bitcoin developers that activates the protocol's so-called "alert system," once used to flash a text warning to those running the software in case something happened that could impact the security of their funds.

If you didn't know bitcoin had a warning system like this, that's because it was retired in 2016 due to security concerns and frequent confusion about its use.

"The alert system was a frequent source of misunderstanding about the security model and 'effective governance,'" well-known Bitcoin Core contributor Greg Maxwell wrote in a public email from September 2016.

In short, some in the bitcoin community thought it could be used to change that network rules that unite users, which isn't really the case. For example, a BitcoinJ developer once wanted to use the key to control fees, while a Bloq staffer pressed for Bitcoin Core developers to use the key to change the network's mining difficulty.

Plus, developers were worried that if the wrong person got ahold of the key, they could broadcast false messages or potentially cause panic.

As such, to some, the reveal – being undertaken by Bitcoin Core contributor Bryan Bishop – is a long time coming.

"Folks, it's going to be an interesting show," Bishop tweeted, followed by a string of tweets cryptographically proving he's in possession of the secret key, without fully revealing it quite yet.

The reveal is the final step to destroying the system. After Bitcoin Core developers released new code in 2016 without the alert system, in January 2017, a "final alert message" was broadcast, which – by law of the code – made that message unable to be overridden by any other messages in the future.

Still, the private key needs to be displayed publicly so there's no possibility of reputation attacks against those developers that hold it.

Bishop told CoinDesk he plans to release it soon, though he's not sure about the exact date, adding:

"It's time. I'm thinking about releasing the private key early July at Building on Bitcoin, though it's not finalized yet."

Danger for altcoins
Still, it isn't as easy as it sounds.

Revealing the key is potentially dangerous for any cryptocurrencies that used an older version of bitcoin's code to create their cryptocurrency and have not disabled the alert key mechanism in their own code.

"If the copycats have not disabled the alert system, nor changed the alert key [public key], and if they have not sent what's known as a final alert message, then once the [bitcoin] keys are released, anyone will be able to send alerts on those [other] networks," Bishop told CoinDesk.

It's happened before actually. Litecoin creator Charlie Lee recounted on Twitter just last week how the lesser-known Feathercoin protocol (which copied litecoin's code) received litecoin's alert about upgrading to the latest litecoin client.

And while that isn't a particularly nefarious example, Bishop said, controlling what alert messages are sent on various networks "sounds dangerous."

As such, in Maxwell's 2016 email, he said he had spent and would continue spending some time searching through other cryptocurrency codebases. If they were found to contain the alert key code from bitcoin, he vowed to notify those projects to remove that code.

Maxwell concluded:

"At some point after that, I would then plan to disclose this private key in public, eliminating any further potential of reputation attacks and diminishing the risk of misunderstanding the key as some special trusted source of authority."

See more: https://www.coindesk.com/long-secret-bitcoin-key-finally-revealed/

The price of ethereum, the world's second largest cryptocurrency by market capitalization, dropped to a 74-day low below $430 - a level not seen since April 12.

Data from CoinDesk's price index shows the cryptocurrency dropped by more than $50 over a short-term period of 12 hours to reach $426.47 around 16:00 UTC on Sunday. Yet the bottom support level sparked an immediate reversal in price, which quickly recovered a loss of $42.

As of press time, ETH is back above $450 but still down 3.36 percent over a 24-hour period. Further, on a year-to-date basis, ETH is reporting a 60 percent decline from this year's high of $1.326 seen on Jan. 14.



However, a swift recovery is in play with the cryptocurrency printing a long consolidation candlestick on the longer-term timeframes, suggesting a reversal from the bottom could be confirmed on the closing day's trade. Long-term indicators state ETH has reached an oversold territory and is currently consolidating in price to cool off the RSI and Bearish MACD.



Other major cryptocurrencies are also flashing red but showing small signs of a recovery. For example, bitcoin is trending slightly up at $6,146 based on CoinDesk's Bitcoin Price Index.

EOS, the world's fifth largest cryptocurrency by market capitalization, tells a similar story which is down 3.6 percent but has recovered from a low of $6.89 back to $8 as of press time, data from CoinMarketCap shows.

Meanwhile, the total market capitalization for all cryptocurrencies is just over $250 billion, the lowest since April 7 of this year.

See more: https://www.coindesk.com/ethereum-price-drops-to-two-month-low-below-430/

Overwinter Ahead: What Should Happen When Zcash's First Hard Fork Hits

Privacy-oriented cryptocurrency zcash is about to undergo its first-ever hard fork.

Called "Overwinter," the update requires all users of the nearly $800 million blockchain to switch to a new software. But while these kinds of system-wide changes can be high-risk – if some users reject the change, it can split the blockchain and create a rival cryptocurrency – zcash developers are saying there might not be anything to worry about with this particular update.

Set to activate at block number 347,500, which according to current block times, will happen early on Tuesday morning, Overwinter is being described as a low-impact intermediary step, one that prepares the network for another upgrade in October that has broad support.

That's because the next hard fork upgrade, called Sapling, is all about eliminating the weight of the protocol's private transaction types so that zcash can scale to more users. Essentially, there isn't expected to be much dissent as Overwinter aims to improve on a core attribute of the code already.

According to the zcash website, a total of 12 exchanges, mining pools and startups have come forward to support Overwinter, while further parties – MinerGate, Bitfly and Huobi – have publicized support on Twitter.

As such, Simon Liu, an engineer at zcash, said he does not anticipate risks in the rollout.

"There is unanimous support from all parties," Liu told CoinDesk.

And the cryptocurrency's creator, Zooko Wilcox, echoed this confidence in interview with CoinDesk.

"We've been working with a whole bunch of industry partners and they are all on board with the rollout program," Wilcox said, adding:

"Basically the entire company almost is dedicated to executing [the upgrade] safely and smoothly in order to increase security for all users."

That said, the run-up to the hard fork hasn't been without its drama.

D. Jane Mercer, the developer of the zcash Windows wallet, WinZEC, threatened to stop contributing to the wallet's code and a chain split on June 20 if he didn't get further funding to support his work. However, the situation was resolved quickly, with anonymous donations pouring into the developer.

At the same time, disenfranchisement within the zcash mining community, still grappling with the introduction of an ASIC for zcash mining has continued to build.

However, developers are confident that this is unlikely to impact Overwinter given the nature of the upgrade.

Simple changes
One of the reasons for zcash developer's optimism about the Overwinter hard fork is that those backing the protocol have taken various steps to make sure everything goes smoothly.

For example, the upgrade is low on features, said zcash engineer Jack Grigg. Primarily, it's designed to prepare the network for its October upgrade, Sapling, by adding features that protect the network during system-wide upgrades.

Aside from that, Grigg said, the only code changes are useful optimizations – such as a new form of transaction expiry, that cancels payments if they aren't processed after a certain period of time, and the removal of a hashing bug that makes certain transactions heavier.

Speaking of the latter, Grigg said, "There is good incentive for the network to support it in order to improve performance for transparent transactions with many inputs," adding that because of that the risk of a contentious chain split is low.

That said, there are still inherent risks involved.

Because several features have been added that look to protect users from any harm that can come from future chain splits – like so-called "replay protection" – those features don't exist now and so could cause problems should a chain split occur during Overwinter.

Speaking to this, Grigg told CoinDesk:

"The Overwinter network upgrade is specifically intended to make future network upgrades safer, so by definition there is more risk during its rollout than for future network upgrades, since some of the features it introduces can't be leveraged for itself."

See more: https://www.coindesk.com/overwinter-ahead-happen-zcashs-first-hard-fork-hits/

#00000000000000000021e800c1e8df51b22c1588e5a624bea17e9faa34b2dc4a

This is a hashtag, but not just any hashtag. In all likelihood, it's the longest and most confusing one you'll ever come across trending in the crypto community.

Posted on June 19 by Mark Wilcox, the hashtag actually represents a cryptographic code known as a hash that's produced each time new transactions are validated and written onto the bitcoin blockchain. There are several of these written each day, so at first glance, it seems strange that this particular one produced on Tuesday at 19:32:37 (UTC) would be of any groundbreaking importance.

That's where you'd be wrong.

Well, actually, that's where you might be wrong.

Some background: There is a theory in physics that attempts to explain the interactions and dynamics of all forces, including gravity, in the universe with one simple mathematical structure known as the E8. Presented in a paper titled, "An Exceptionally Simple Theory of Everything" by Garrett Lisi in 2007, it still remains unproven.

Couple the unsolved status of the E8 theory with the equally unsolved mystery of the exact identity of the person(s) who brought bitcoin – with its supply cap of 21 million coins – into existence, and you get the hypothesis that "21e800" isn't just some random string of numbers and value. In fact, the theory seems to suggest, it is a "vanity hash" purposefully placed by the creator of bitcoin himself/herself/themselves, Satoshi Nakamoto.

Starting to get goosebumps yet?

If this hash is indeed a "vanity hash" or, in other words, one deliberately created as some kind of sign, the computing power to create it is not only magnitudes greater than is currently capable by the average computer, but the time needed to create it is somewhat jaw-dropping, as shown in a chart posted by developer Andrew DeSantis.

See more: https://www.coindesk.com/21e800-bitcoin-satoshi-mystery-twitter-obsessing/

Nearly six months after parting ways with its auditor, Tether has finally produced a third-party report proclaiming that its cryptocurrency is fully backed by U.S. dollars – with some big caveats.

The state of Tether's reserves has been the subject of controversy for months, with online critics claiming the company has been issuing more tokens than it had dollars in the bank – printing money, essentially. Tether has consistently denied this, but has not produced conclusive evidence that it is reserved 1-for-1.

The matter has broad implications for the crypto markets, well beyond the holders of the so-called stablecoin, known as USDT, whose market cap stood at $2.6 billion on Wednesday. 

For starters, many have alleged that Bitfinex, the cryptocurrency exchange that shares common owners and managers with Tether, uses USDT to artificially drive up the price of bitcoin. An academic paper released last week supported this view, and the Commodity Futures Trading Commission reportedly subpoenaed Bitfinex and Tether in December.

Also, USDT, which despite the lingering doubts generally trades around $1, has functioned as a substitute for U.S. dollars. Traders use it to quickly move money between crypto exchanges rather than using bank wire transfers, which can be slow and hard to come by.

Given USDT's importance to the ecosystem, then, an independent confirmation that the coin is in fact fully collateralized might be welcome news, undermining the manipulation claims and bolstering market confidence.

But the three-page memorandum released Wednesday is probably not going to settle the debate, given its ample disclaimers and limited scope.

First off, the report is not an audit. It was prepared by a law firm – Freeh Sporkin & Sullivan, LLP (FSS) – not an accounting firm.

That's not for lack of trying, according to Stu Hoegner, Tether's general counsel.

"The bottom line is that an audit cannot be obtained," Hoegner told CoinDesk, claiming that this problem is not unique to his company but one faced by the entire cryptocurrency industry.

He went on:

"The barriers to getting audited are simply too big to overcome right now, and not just for us."

Those barriers include a steep learning curve for auditors in an emerging industry; accounting standards that predated the advent of cryptocurrency, creating uncertainty about how the rules apply; and the resulting need for auditors to exercise judgment, which is "anathema to a lot of large accounting firms. As a CPA, I understand that," Hoegner said.

In this situation, he said, "we've gone for next best thing."

Although FSS used different procedures than an auditor would, Hoegner said, he argued that the "key conclusions are similar to what an audit would generate" – a snapshot of bank balances at a point in time.

But that highlights another issue with the FSS report: it covers only one such point in time, June 1.

On that date, the law firm said, it is "confident" Tether had more money in the bank than tokens in circulation (specifically, $2.55 billion of U.S. dollar reserves, held at two separate institutions, to cover $2.54 billion USDT). But the report says nothing about the level of collateralization on any date before or since. 

In other words, it doesn't purport to show that USDT has been consistently secured over time – or that it is fully backed today.

See more: https://www.coindesk.com/tether-review-claims-crypto-asset-fully-backed-theres-catch/

To most banks in the U.S., cryptocurrency businesses are pariahs. To Metropolitan Commercial Bank, they're "pioneers."

At least, that's how the New York financial institution's chief technology officer, Nick Rosenberg, describes them.

"We're certainly very interested in growing this vertical," Rosenberg told CoinDesk of the bank's crypto clientele. "We've learned that it's a serious industry. There are some very smart people involved. There are some very interesting ideas coming out that could really change the way people do business."

While most banks cling to the adage "blockchain not bitcoin," Metropolitan stands out simply by being one of the very few to enthusiastically court deposit business from crypto firms.

These clients include a few exchanges, as well as hedge funds and other crypto investors that bank at Metropolitan because it's easier to quickly move their money to those exchanges. (To be clear: the bank only handles fiat for customers and does not touch crypto itself.)

So far, it's proven a lucrative niche for Metropolitan. In the first quarter, cash management and foreign exchange conversion fees from cryptocurrency clients totaled $3.4 million, the bank disclosed in an investor presentation. This helped drive a more than 300 percent increase from a year earlier in Metropolitan's total non-interest income, to $5.4 million, according to a Securities and Exchange Commission filing.

If that doesn't sound like a lot of money, keep in mind that Metropolitan is a community bank. With just $1.9 billion in total assets, it's less than one-1,000th the size of JPMorgan.

What's more, that triple-digit rate of growth is astronomical for the U.S. banking industry, where non-interest income for all institutions climbed a measly 7.9 percent during the same period, according to data from the Federal Deposit Insurance Corp.

Yet despite the lucrative demand from crypto companies for banks to provide fiat liquidity and other traditional services, bitcoin-friendly banks like Metropolitan are still as rare as they were three years ago.

"It's extremely challenging," said Joe Ciccolo, president of the compliance service provider BitAML Inc. Referring to another sector that banks have famously shunned, he added:

"The legalized cannabis industry are having a much easier time than our cryptocurrency clients."

'High-touch relationship'
One reason Metropolitan Bank is an outlier in embracing the crypto industry is that most banks can't stomach the risks. Chief among them is the regulatory risk.

Anti-money-laundering regulations require banks to identify their customers and even their customers' customers, plus track the flow of funds. While public blockchains can help banks and law enforcement trace the movement of money, the pseudonymous nature of crypto addresses makes it hard to determine who is ultimately sending and receiving funds.

Bitcoin's historical association with underground drug markets certainly doesn't help.

"It's very difficult for a bank to maintain a pro-bitcoin stance," said Ciccolo, citing the high turnover among compliance officers. "If you have a new officer come into a financial institution, they may take the opportunity to put a different stance on high-risk customers such as crypto companies."

As bullish as they may be, Metropolitan's bankers still recognize the risks of working with crypto clients. "It's a high-touch relationship," Rosenberg said, meaning one requiring extra diligence.

With regard to risk management, Rosenberg said there are two crucial keys to serving crypto clients.

The first is being extremely selective about client acquisition, only working with companies that take compliance as seriously as the bank does. The second is maintaining an open dialogue with regulators.

"Law enforcement departments, in general, are understanding that cryptocurrency is not all about illicit payments, it has a value and it has a legitimate purpose," Rosenberg said. "It's just a matter of spending time explaining it, understanding what their concerns are, making them feel comfortable that we are mitigating those concerns, and that we have the right controls in place."

Other risks
Compliance aside, Metropolitan also has to insulate itself from the volatility its cryptocurrency customers live with every day. As noted above, the bank only works with fiat currency like dollars, never touching cryptocurrency directly.

But more subtly, it's minimized the risk to its own balance sheet in the event crypto depositors' balances suddenly shrink. To illustrate why this would be a concern, the settlement accounts it maintains for exchanges totaled $281.2 million on March 31, representing 17.4 percent of the bank's total deposits, according to the SEC filing.

Such a high concentration might normally be worrisome.

However, Metropolitan isn't using these accounts to fund long-term assets like mortgages, just cash and equivalents. So, even if they were drained at once, it's far from a run on the bank.

"They do not utilize a lot of these deposits in their everyday operations, just because they do know there is significant volatility there," said Collyn Gilbert, an analyst and managing director at the investment banking firm Keefe, Bruyette & Woods.

To be sure, Metropolitan held another $100.8 million in corporate accounts for cryptocurrency firms, making up 6.2 percent of total deposits as of March 31. And these accounts do fund assets on the balance sheet.

But corporate accounts, which clients use for normal business activities like payroll, are less volatile than settlement accounts, which hold money only temporarily until a transaction is completed, Gilbert said.

Yet there's one more risk Metropolitan has encountered in the crypto space: what finance types call "headline risk."

In January, the bank sent its customers a reminder of what it said was a longstanding policy of not accepting crypto-related wire transfers from entities outside the U.S. Word leaked out to the press, which reported this was a new policy prompted by fraud. Metropolitan had to issue a public denial of that claim to quell backlash.

Reaping rewards
Setting aside the fee income and interest-free funding on deposits, there's a more intangible benefit Metropolitan gains from banking cryptocurrency firms, one that arguably compensates for all the risks.

Namely, it gets a front-row seat to the revolution and is learning about how cryptocurrencies perform in the wild.

"I think Metropolitan was intrigued by the structure, more than just bitcoin, but the structure of that currency market in general," Gilbert said. "The technology behind it is what has really been intriguing to this management team."

Ciccolo agreed that serving this sector has given Metropolitan a competitive advantage.

"There's a dual benefit for those banks that are willing to step out there," he said. "Not only does it present a new book of business their competitors don't have, so they can grow their customer base and reach, at the same time, it also gives them a sneak peek at some of the technology that might be impacting their world in traditional finance."

Indeed, the bank's director of new products, Kyle Hingher, said Metropolitan hopes to someday be one of the leading banks serving the emerging token economy, once the opaque regulatory landscape clears up.

"We're looking at this market as a new asset class," Hingher said. "We'd like to do more for the new asset class."

For now, of course, even companies with cypherpunk ideals benefit from working with traditional banks to tap into audiences and services that utilize fiat currencies. Liquidity lends any crypto startup greater usability.

"If something is really going to succeed, it's going to require a banking partnership," Hingher said.

Looking ahead, the Metropolitan banker is keeping close tabs on the emergence of security tokens and blockchain-based settlement systems.

"The opportunity is to merge technologies and that potential for something brand new that could be earth-shattering and change everything. The potential for that, I think, outweighs all the crash-and-burn scenarios," Hingher told CoinDesk, concluding:

"We call ourselves the entrepreneurial bank. We want to work with this new space rather than butting heads."

https://www.coindesk.com/metropolitan-bank-crypto-bitcoin-clients-millions/

The developer team behind ethereum is considering possible changes to a planned rollout of new technology upgrades.

Addressing rumors that such plans are now under review, ethereum creator Vitalik Buterin told a meeting of the platform's open-source developers Friday that the idea is that the team might seek to alter the sequence in which Casper and sharding, perhaps its two most-anticipated updates, are activated.

Rather than releasing sharding and Casper separately, Buterin said, new advancements in research might enable both upgrades to activate together. (The idea is Casper might be released on a sidechain, or shard, rather than as a smart contract, as previously proposed).

"This is a substantial reworking of the intermediary steps in the roadmap, but of not the final product," Buterin said.

Casper, ethereum's long-planned consensus algorithm proof-of-stake, promises to be more energy efficient and egalitarian than its current proof-of-work system, while sharding could hold the keys to scaling the system to a massive number of transactions. In this way, Buterin stressed that, if enacted, the technologies would combine to create a version of the protocol that could be orders of magnitudes more efficient.

Buterin said:

"This design can basically scale up to the theoretical maximum."

As detailed by CoinDesk, the current version of Casper (Casper FFG) is being tested in the form of a smart contract, named EIP 1011, on ethereum software clients. However, a result of today's meeting, such development could cease in favor of the new design.

"As someone who has been working on this, it took a second to digest and to be comfortable moving forward with, but I am totally okay with this, and think it gets us where we want to be sooner rather than later," author of EIP 1011 Danny Ryan said in the meeting.

In light of the news, ethereum developers also appeared open to the idea the platform's next hard fork, named Constantinople, might not include any Casper-related changes.

Rather, a hard fork will likely occur within the next five months, that focuses on "improvements that we have smoothed out and ready to go, unrelated to that," ethereum developer Nick Johnson said.

Key advantages
According to Buterin, combining the shift with sharding would come with several advantages.

"The development of the one system will be much more directionally en route to what we expect the final later stage sharding system to look like," Buterin said.

Plus, by bringing the first version of Casper onto a shard, the deposit required to participate in securing the network will be reduced significantly, from 1,500 ETH, Buterin's most recent estimate, to 32 ETH.

Due to this lowered figure, Buterin said, "regular individuals participating in staking directly becomes much more viable." Buterin also said that the new model would allow Casper to go live without disturbing the ethereum blockchain itself.

"The Casper component is somewhat more separate from the main chain. That means it can be developed less intrusively in some ways, it can be developed as a separate chain and can have its own rules," Buterin said. "There's a much clearer wall between those systems."

Sharding developer Justin Drake echoed these points.

"It allows to unlock new functionality which radically changes the performance properties of the design," Drake said.

Drake also mentioned that there are security advantages for the new system. For example, such a system would allow for an "atomicity" between nodes on Casper and sharding, increasing the security of both systems. "You can't be a casper validator without also being a sharding validator," Drake said.

The developer continued to state that there are advantages to bridging the Casper research team and the sharding team together.

He said in the meeting:

"In general, there will be more unity between Casper and sharding, and the teams lobbying these projects. I think that's good, there will be more networks effects there."

See more: https://www.coindesk.com/proposed-ethereum-roadmap-activate-biggest-upgrades-together/

With all eyes on Singapore this week, was it any surprise crypto would make an appearance?

The historic summit between U.S. President Donald Trump and North Korea's Supreme Leader Kim Jong Un got the crypto community's attention – and held it – thanks to Dennis Rodman and the notorious cryptocurrency that funded his travel to Singapore, potcoin.

CoinDesk reported on June 7 that retired basketball star Dennis Rodman was headed to Singapore for the Summit with the help of the marijuana-themed cryptocurrency. As a celebrity who have visited North Korea several times, Rodman's trip was considered as "a celebrity twist" to the historical geopolitical event.

According to The Washington Post, Rodman was "in discussions with" the team behind potcoin last week to get financial support for the trip. He later officially confirmed the news on Twitter highlighting the fact his trip was sponsored by the group:

See more: https://www.coindesk.com/dennis-rodman-and-potcoin-how-crypto-gatecrashed-a-historic-summit/

The price of bitcoin hit a two-month low over the weekend – and social media is alight with speculation about it.

While pundits don't quite agree on the circumstances behind the plunge (with some blaming reports of a widening manipulation crackdown, the hack of South Korean crypto exchange Coinrail or just some pre-week selling), what's clear is that the price move has acted as a kind of social thunderbolt for the community, spurring commentary from all sides.

Investor Alistair Milne ran a Twitter poll on Sunday soliciting input on what people thought sparked the dip – in perhaps a sign of the times, half of the roughly 3,700 respondents blamed "aliens" with 9 percent and 12 percent blaming the Coinrail hack and the CFTC subpoenas, respectively.

See more: https://www.coindesk.com/why-bitcoins-price-7k-social-media-some-arent-happy/

Tanzeel Akhtar is an independent British journalist whose work has been published in the Wall Street Journal, CNBC, FT Alphaville, Investing.com, Forbes, Euromoney and Citywire.

With over 1,560 cryptocurrencies for investors to choose from, the abundance can seem overwhelming.

But it also raises an interesting question: How important is it to have exposure to a range of cryptocurrencies? Is it worth diversifying your holdings in order to mitigate risk? The work of Harry Markowitz might lead you to think so.

The Nobel Prize-winning economist, author of the classic 1952 article "Portfolio Selection," devised modern portfolio theory (MPT), which stresses that diversifying assets is crucial. I you diversify enough, you will make risk go away and get the mean. Time and time again, Markowitz's research has shown that investors can assemble the perfect portfolio.

Indeed, recently published research by the Bocconi Students Investment Club at Bocconi University in Milan, Italy, showed that applying the MPT framework to crypto beat all other portfolios, at the cost of a greater volatility.

The investment club wrote:

"Our findings, consistently with MPT, are that portfolio variance can be significantly lowered by exploiting low covariances between coins."

In this way, it's a validation of the idea that 50 to 60 percent of a crypto portfolio should be core holdings of the two largest coins by market capitalization, bitcoin and ether. Alternatives, the thinking goes, should be added only after.

Jeffrey Van de Leemput, a co-founder of Cryptocampus, a crypto mentoring group, says diversifying your portfolio is very important. Not only will this mitigate risk but it can also substantially increase the reward factor of a portfolio.

"Personally, I like having 80 percent large caps and 20% small caps mixed in for performance," says Leemput.

All go down together
But this risk mitigation strategy may be hard to pull off in crypto. When we saw the price of bitcoin plummet earlier this year, it dragged all the other cryptos' prices down too.

Hence, some disagree with Markowitz's theory, or at least its applicability to the brave new world of cryptocurrency.

Dejun Qian, founder of the FUSION Foundation, a public blockchain project, says diversification could help to increase the possibility of finding a good bet. He warns that in this market, 90 percent of the projects will die in the future. Diversifying will help us to capture that 10 percent.

The fun part is hunting for those golden nuggets -- the initial coin offering (ICO) tokens and small caps that you believe will have the potential to succeed in the long run. But in most cases, diversification doesn't help with limiting risks because cryptocurrencies have repeatedly entered periods where they move in tandem, Qian said.

And it bears repeating that in this market the risk is high and crypto investing is not suitable for every investor. Do your own research.

That includes at least entertaining the arguments of so-called maximalists, who claim that there can only be one winner in cryptocurrencies (whichever one they've invested in, naturally), because money relies on network effect.

Maximalists can be rude and clannish, especially on Twitter, but that doesn't mean they're wrong. And if they're right, diversification is just "spraying and praying."

See more: https://www.coindesk.com/just-diversify-crypto-portfolios-not-simple/

Monacoin, bitcoin gold, zencash, verge and now, litecoin cash.

At least five cryptocurrencies have recently been hit with an attack that used to be more theoretical than actual, all in the last month. In each case, attackers have been able to amass enough computing power to compromise these smaller networks, rearrange their transactions and abscond with millions of dollars in an effort that's perhaps the crypto equivalent of a bank heist.

More surprising, though, may be that so-called 51% attacks are a well-known and dangerous cryptocurrency attack vector.

While there have been some instances of such attacks working successfully in the past, they haven't exactly been all that common. They've been so rare, some technologists have gone as far as to argue miners on certain larger blockchains would never fall victim to one. The age-old (in crypto time) argument? It's too costly and they wouldn't get all that much money out of it.

But that doesn't seem to be the case anymore.

NYU computer science researcher Joseph Bonneau released research last year featuring estimates of how much money it would cost to execute these attacks on top blockchains by simply renting power, rather than buying all the equipment.

One conclusion he drew? These attacks were likely to increase. And, it turns out he was right.

"Generally, the community thought this was a distant threat. I thought it was much less distant and have been trying to warn of the risk," he told CoinDesk, adding:

"Even I didn't think it would start happening this soon."

See more: https://www.coindesk.com/blockchains-feared-51-attack-now-becoming-regular/

Today's transactions are besieged with attacks from cybercriminals, but a distributed digital ledger technology called blockchain is changing the future of the financial services industry. Trillions of dollars circulate through the global financial system every day in transactions that impact billions of people. In January 2018 an average of $1.8 trillion was traded daily in the foreign exchange market alone. These transactions are an attractive target for fraud and theft. Forty-five percent of financial intermediaries, including stock exchanges, money transfer services and payment networks report being the victim of an economic crime. Blockchain addresses these vulnerabilities through a peer-to-peer transaction process driven by distributed networks.

Leveraging networks to power commerce
The technology that enables entities to directly transact value without a trusted third party was originally developed to support bitcoin. A blockchain is a shared, distributed ledger that records transactions through a secure, verifiable process that does not flow through an intermediary. By leveraging the combined computing power of a distributed network, it manages all of the verifying, contracting, settling and record-keeping tasks that are the basis of all forms of commerce. For the first time in modern history, two or more parties can build or exchange value independent of institutions like banks, government bureaucracies and rating agencies. Though initially utilized to trade cryptocurrencies, blockchain can record the transaction of anything that has been assigned value.

Blockchain exists as a shared database distributed across a public or private network of computers. A network uses its combined computing power to continuously reconcile data so that the shared ledger of transactions is updated and audited frequently. Secure, direct exchanges make blockchain ideal for trusted transactions. Individuals or businesses can utilize it to transfer intangible values such as equities, currencies, votes, patents or copyrights, as well as tangible property such as gold, real estate, pharmaceuticals or commodities.


Reshaping business models
Emerging network-based business models are poised to transform the financial services industry. For example, consider the process for trading an equity on blockchain. The buyer initiates an order to purchase shares of stock at a particular price. This transaction is grouped with other transactions and represented digitally as a "block" that is broadcast to every user on the network. The network utilizes known algorithms to validate the data in that block, including verifying the buyer's status and the trade. Then the block transfers the title of the securities from the seller to the buyer. Once the transaction has been validated, it is added to the blockchain, and the updated blockchain is distributed to the network and utilized for future verifications.

These same principles also apply to larger transactions such as how companies access growth capital. When companies seek investment through traditional channels, they initially pursue angel investors, then target venture capital and may ultimately issue an initial public offering (IPO). These stages rely on multiple intermediaries, including exchange operators, investment bankers and lawyers. Blockchain upends this process by enabling companies of any size to raise money through a peer-to-peer global distributed share offering. Many companies have already utilized this new funding mechanism, called an initial coin offering (ICO). In 2017 startups raised $5.6 billion in ICOs and nearly a third of that funding was generated for blockchain infrastructure projects.

See More: https://www.forbes.com/sites/brianmenickella/2018/06/05/bitcoin-owes-its-success-to-blockchain/#6bba80843748