Friday, June 17, 2016

Will The DAO Become Ethereum's Mt Gox?

 

As stakeholders in the world's largest decentralized autonomous organization (DAO) descend into forums to debate its future, concerns are emerging about what the success or failure of The DAO could mean for Ethereum, the blockchain platform that enabled its creation.

 

Front and center for those invested is the idea that the fate of one of the technology's most visible projects could create a lasting impression among potential users and the public, and the fears are not without precedent.

 

While bitcoin continues to face difficulty with regulators and banks, Ethereum has so far been able to build public bridges with the mainstream financial world. Tests were run by 11 banks on a private version of the network in January, and invitations for its creator to help inform the work ongoing at Hyperledger and R3CEV have so far followed suit.

 

In contrast, bitcoin's network has secured billions of dollars in funds for years, but its reputation was shaped early on by events like the shutdown of online black market Silk Road, the rapid price fluctuations of its token and the collapse of its once-largest exchange, Mt Gox.

 

Against this backdrop, those close to the project are beginning to see The DAO as Ethereum’s "flagship application", one that they believe could hold the key to ensuring a lasting, favorable impression for Ethereum's technology, or scar its reputation.

 

Stephan Tual founder of Ethereum startup Slock.it which created the code on which The DAO is built told CoinDesk:

 

"You don’t want a bad story about Ethereum. If [The DAO] were to crash, people would compare it to Mt Gox."

 

Reality check

But why is so much riding on The DAO?

A decentralized autonomous organization that lets its members vote on how to fund projects and direct operations, The DAO has so far amassed $160m in consumer funds in exchange for voting rights in the way it spends money, prompting mainstream media attention.

Currently, those funds amount to about 14.4% of all the ether in circulation and with a mandate to invest in Ethereum startups The DAO has the potential to exercise considerable influence on the ecosystem.

But shortly after the organization successfully raised the funds its design was challenged with the publication of a critical report authored by three computer scientists who specialize in blockchain. The report advocated for further development of The DAO to be halted until certain issues they claimed to have found in the governance model were fixed.

 

One possible mechanism to help solve those issues is built into the The DAO's voting mechanism. While the organization’s mission is to fund other Ethereum projects the method of selecting those projects can also be used to vote on internal changes, including to its own code.

At the moment, each of the top three proposals for funding from the DAO would redefine how it operates. The moratorium proposal is the most popular to date, followed by a proposal to change the deposit required to make a proposal and a method for returning DAO tokens accidentally sent to the project. Several others are specifically aimed at the governance model.

 

But, it's not just entrepreneurs who are concerned either. Six of the top 10 most discussed threads on The DAO forum pertain to changing The DAO itself, ranging from giving it a new name, to changing the requirements for submitting a proposal, and concerns about the way decisions are made.

 

Learning from the Mt Gox implosion

At its peak, Mt Gox accounted for an estimated 80% of all bitcoin trading volume in the world.

 

When the exchange collapsed in February 2014 losing an estimated $350m worth of bitcoin, many heralded it as one of the many so-called deaths of bitcoin. With a current market cap of over $9bn and a 20% price increase last month, bitcoin clearly hasn’t gone anywhere, but its reputation has visibly suffered.

At the time of the Mt Gox collapse, Tony Sakich was just getting started in the industry at his first job with a bitcoin company, BitPay. Now an Ethereum consultant with blockchain services firm Vanbex Group, Sakich told CoinDesk the reason bitcoin is thriving in spite of the collapse of its largest exchange is that so much activity existed in other areas of the bitcoin economy, a point he says the Ethereum community could learn from.

 

To help lead the development of the Ethereum ecosystem, investment firms which have traditionally focused on bitcoin startups — such as Blockchain Capital and Digital Currency Group — have recently begun evaluating Ethereum startups as potential portfolio members.

In April some of that research culminated in a $775,000 investment in Ethereum co-founder Gavin Wood’s operation Ethcore, led by Blockchain Capital and Fenbushi Capital. Other firms such as Trust Stamp have also begun to receive VC investment.

While The DAO is naturally attractive to Ethereum entrepreneurs looking for funding, Sakich said investments from outside the organization also need to increase.

 

"I’m hoping that developers don’t hear all this about The DAO and stop there and think that’s their only way to get an Ethereum project done," Sakich said, adding:

"To have a strong ecosystem in Ethereum you need projects outside of The DAO and there needs to be as many projects as possible."

Friday, June 10, 2016

Bitcoin Exchange Owner Extradited Following Cybercrime Indictment

 

Two individuals tied to the now-defunct US bitcoin exchange Coin.mx have been extradited to the US from Israel, prosecutors announced today.

The US Attorney's Office for the Southern District of New York announced today that Gery Shalon and Ziv Orenstein have been extradited after being arrested last year. Both appeared in Manhattan court today and have been indicted on securities fraud and computer hacking charges. The two plead not guilty, according to The Wall Street Journal.

Shalon is alleged to be the owner of Coin.mx, an exchange based in Florida that has been tied to a string of cyberattacks on a number of companies including Wall Street bank JPMorgan, which resulted in the theft of personal data from tens of millions of client accounts. Reports from last year suggest that the alleged operation spanned the globe, targeting a range of major businesses.

The two were arrested in July of last year, prosecutors said, a move that came as charges were filed against alleged co-conspirators Anthony Murgio and Yuri Lebedev, who were accused of running an unlawful money transmission business. Murgio later plead not guilty.

US prosecutors have said that Coin.mx was used as a conduit for funds tied to the alleged cybercrime network.

US attorney Preet Bharara said in a statement:

"For the alleged hacks into numerous U.S. companies, including the largest theft of customer data from a U.S. financial institution in history, in furtherance of their securities fraud, Sharon and Orenstein will now face prosecution in a U.S. court."

US prosecutors have said that Coin.mx skirted money services rules by mis-marking credit card purchases for bitcoin and effectively taking control of a New Jersey credit union to route international transactions. A pastor and former executive of the credit union was later charged for taking bribes in exchange for facilitating that arrangement.

Sunday, June 5, 2016

FBI Claims They Breached Tor Security Without Malware

 

 

The Federal Bureau of Investigation has announced the tools they used to get PlayPen members convicted was not malware. After refusing to disclose the methods use when ordered to by a judge, a lot of the FBI’s evidence was thrown out. Despite all of that, law enforcement officials continue to deny their network investigative technique uses malware.

FBI STILL REFUSES TO PROVIDE PROOF

The issues between the FBI and PlayPen convicts is far from resolved, as judges continue to offer contradicting rulings. One judge in Virginia ruled how the case against PlayPen member Edward Mathis should stand, regardless of how the evidence was gathered. Not too long ago, a different judge ruled against using FBI evidence in a similar case; the law enforcement agency refused to disclose details.

 

But the FBI is still not proving any insights as to how their network investigative technique works. One spokesperson told the media on Wednesday how they are not using malware, yet failed to provide any evidence to back up these claims. While no one is asking them to explain everything from a to z, some insights would be more than welcome.

 

Mathis, who will not have the case against him dismissed, felt he was being coerced into signing a statement detailing his crimes. However, the Virginia judge ruled there was no evidence to support these claims. However, there is the question of how the FBI obtained the evidence against this person, as well as the 134 other PlayPen members.

 

Revealing the true IP address of a Tor user is next to impossible with an exploit or malware. The FBI’s network investigation technique managed to do exactly that, albeit many feel the warrant for taking down PlayPen did not give them the legal right to use the malicious or illegal software.

 

This investigation may come around to bite the law enforcement agency in the rear, though. In a previous case, the FBI revealed the source code of their NIT tool. While this software does not alter security settings of target computers, the lines are blurring as to which part of that explanation suddenly makes it alright to deliberately infect consumer devices.

 

Friday, April 15, 2016

EDCAB will Ensure Fair Bitcoin and Blockchain Regulation in Europe

 
The creation of EDCAB signals industry’s commitment to work with policymakers over the long term to achieve positive outcomes for the sector and the European citizens it serves.
There is no denying European policymakers are keeping a very close eye on the blockchain ecosystem. So much even that a new trade body has been established, which goes by the name of EDCAB. Exciting times are ahead for blockchain innovation in Europe, assuming policymakers can keep up with the trends.


Although digital currency and blockchain technology have gone entirely unregulated for quite some in Europe, things are coming to a change in the not-so-distant future. Now that the European Virtual Currency industry has formed a new trade body, the policy on digital currencies and distributed ledger technology will be in the balance.

It has to be said, though, the creation of the EDCAB will [hopefully] be a positive move for the legitimization of the virtual currency ecosystem. Both Bitcoin and blockchain are often referred to as the “Wild West” since there are no rules, and the creation of the EDCAB will change that. Plus, they seem to be taking the right approach by ensuring the policy platform is public, rather than holding meetings behind closed doors.

Few people are aware of how the European Union Council has put virtual currencies at the top of their priority list. This is one financial area evolving at a rapid pace, and legislation is expected to be tabled by the end of June 2016.

EDCAB, or European Digital Currency & Blockchain Technology Forum as it is officially called, wants to create a sound and fair regulatory and legislative framework for distributed ledger technology and digital currencies in Europe. Industry members can engage with EU policymakers, regulators, law enforcement, and legislators, and open discussion is encouraged.

Comprehending the broad scope of digital currency and blockchain technology is not an easy task. Without the proper knowledge, it will be all but impossible to create a viable regulatory framework. EDCAB Will act as a platform to highlight best practice, respond to policy developments, and provide thought leadership regarding these matters.

To kick things off, a major EDCAB event on virtual currencies and blockchain will be held in Brussels, at the European Parliament building. Several roundtables will be held, and there will be a vast selection of financial experts, blockchain leaders, and other interested parties. Exciting times are ahead for Bitcoin and blockchain enthusiasts in Europe, by the look of things.