Wednesday, September 28, 2016

London Police Investigate OneCoin Cryptocurrency Scheme

 

The London police are investigating a digital currency scheme widely believed to be fraudulent.

OneCoin, promoted as a digital currency investment opportunity, was cited as a risk to consumers this week by the UK Financial Conduct Authority, one of several finance regulators in the country and the agency that has participated in the licensing of legitimate bitcoin and blockchain service providers.

Marketed as a digital currency similar to bitcoin, OneCoin has key differences such as an promotion-heavy pitch focused on selling investment packages and a centralized hub for exchange, storage and transaction logging. Critics have gone so far as to argue that OneCoin, as a currency, doesn't actually exist.

In statements, the FCA urged consumers who believe they have been scammed to contact the London police's fraud division.

The agency said:

"This firm is not authorized by us and we do not believe it is undertaking any activities that require our authorization. However, we are concerned about the potential risks this firm poses to UK consumers."

Notably, this is not the first time that OneCoin has drawn the ire of regulators.

In July, Belgian authorities warned consumers about investing in OneCoin, warning that "false and misleading" information was being disseminated by supporters.

Though unconfirmed, financial watchdogs in Germany and Bangladesh, among other likely countries, are believed to be investigating the issue further.

Tuesday, September 27, 2016

Blockchain Post-Trade Startup Juzhen Raises $23 Million Series A

 



Juzhen Financials, a startup led by China UnionPay veteran Lilin Sun, has raised $23m (¥153m) to develop clearing and settlement solutions based on distributed ledger technology.

The Series A funding was led by Wanxiang Holdings and included support from its blockchain-focused investment subsidiary Fenbushi Capital. The funding marks the largest investment round raised yet by an Asia-based blockchain startup, CoinDesk data reveals.

As a result, the Shanghai-based startup becomes one of the best positioned blockchain firms to seek to collaborate with banking incumbents on solutions for post-trade, with its potential market including broker-dealers, custodian banks, clearinghouses and exchanges.

But while Juzhen's goals are similar in intent to other international firms including New York's Digital Asset Holdings and London's Clearmatics, Lilin noted that he believes China is in need of its own solutions provider.

Lilin told CoinDesk:

"If you want to change the infrastructure, it takes a long time. It's a lot of engineering work, and you have to understand the culture. We understand the Chinese market."

Founded in 2014, Juzhen has long been working to determine how distributed technologies could offer solutions to problems in China's financial markets, even before Lilin said it shifted its focus to blockchain technology.

Lilin said he has long been interested in applying peer-to-peer technologies to finance, beginning with his use of eDonkey Network, a file sharing service created by Ripple and Stellar founder Jed McCaleb. (If that sounds too-early-to-be-true, at one point in the conversation, Lilin even delightedly showed a selfie of himself with McCaleb).

"Lot of mistakes still happen in post-trade every day, but with blockchain, it's easier to balance, faster and more accurate," he said.

Lilin also asserted that Juzhen is seeing traction with its ideas, amid a broader uptick in interest in the technology among China-based financial firms.

So far, Lilin said Juzhen is already working with partners including online banking giant Webank and the regional blockchain consortium ChinaLedger, both of which spoke at last week's Global Blockchain Summit in Shanghai.

China's advantage

But while Juzhen's goals may seem ambitious, Lilin is optimistic about its prospects given that he believes China offers an accommodating regulatory climate for startups.

Whereas in the US regulation "comes first", Lilin said that China encourages innovation before deciding on the best rules to implement. Echoing comments made by executives from blockchain startup Circle, Lilin noted that this is why he believes mobile payments have so far taken off in China, but struggled elsewhere.

Overall, Lilin described his strategy with Chinese regulators as one that will keep the government "close but not too close" as it works to scale its offerings.

"We are talking to an number of Chinese government departments and we are involved in several workshops and discussions," he said, adding:

"We're trying to be friends, but keep them at arm's length."

The comments follow new public statements from China-based financial institutions in which they called for collaboration with regulators to help advance applications of the technology.

Pace of change

But while the new funding means Lilin can allocate more resources to personnel, it also means that it must work to address the technological limitations of blockchain that are still pressing today.

Lilin acknowledged, for example, noted that most China-based financial institutions (like their international peers) are worried about privacy and confidentiality, and that today, technological solutions to these concerns are still being sought.

As part of this push, Lilin said that he will fund academic research on financial cryptography, and that his firm has asked 10 university groups to submit ideas as part of a bid to collect new ideas on the subject.

"We will continue to spend resources on the research of cryptography," he said.

Lilin indicated that he believes solutions could be found through the creative use of hardware as part of a distributed ledger system, and that he intends to explore this intersection as his firm moves ahead with its roadmap.

Swiss Central Banker: Blockchain Turning Finance 'On Its Head'

 


The president and and chairman of the board of Switzerland's central bank described a financial system "turned on its head" by blockchain and distributed ledgers to kick off the Sibos conference yesterday in Switzerland.

Addressing a crowd of some 8,000 financial industry professionals, Thomas Jordan lectured on the history of centralization as a means to provide security and efficiency in the banking industry, from the birth of centralized clearing houses in the 1940s to the advent of the Six Interbank Clearing system (SIC) in 1987.

But with blockchain and distributed ledgers "promising first and foremost to reduce cost", Jordan said the Swiss National Bank is now in discussions with market participants, regulators and other central banks about what to do next.

Jordan said of blockchain technology and distributed ledgers:

"Such systems could render the reconciliation of transactions and balance data between banks and the third-party system obsolete. The paradigm seems to have been turned on its head. Decentralization, not centralization, now appears to promise the greatest efficiency gains."

In addition to being president of the central bank, Jordan is on the board of directors of the Bank for International Settlements (BIS) in Basel and the governor of the International Monetary Fund (IMF) for Switzerland.

"The Swiss Central Bank is neutral vis-Ă -vis the technologies underpinning financial market infrastructure," said Jordan. "It assesses innovation in terms of their implications in terms of their fulfillment of its mandate."

A blockchain hybrid

But Jordan continued his keynote address by adding that he doesn't think all centralization will go away.

For example, he described existing financial market research structures as "already highly competitive," and an example of a "conventional centralized model" that "meets high safety standards and improvements are being made all the time."

Instead of a financial industry that is replaced by distributed ledgers, Jordan described a "hybrid scenario" where security information is settled on a distributed ledger and even opened up to the possibility of central banks issuing currency on a blockchain.

He added the latter "raises a host of settlement specific questions."

Thursday, September 22, 2016

Brothers Face Jail Time for Stealing Power to Mine Bitcoins

 

Two brothers in the Netherlands face months in prison after allegedly siphoning power to fuel a small bitcoin mining operation, Dutch authorities say.

The case dates back to 2014, when the brothers, whose names were not disclosed, are said to have been caught stealing electricity from a local utility provider in order to power bitcoin mining devices at a location in Rotterdam. Prosecutors said this week that, in total, the brothers mined roughly €200k ($223,000) worth of bitcoin prior to being caught.

According to the Openbaar Ministerie, the public prosecutorial service in the Netherlands, the brothers have both been charged with money laundering. One brother, who owned the property in which the devices were kept, has also been charged with stealing power to grow marijuana plants at the same location.

Local reports suggest that the younger brother, aged 39, faces up to fifteen months in prison if convicted. The older brother, aged 42, could be sentenced to as many as five months in prison.

Fines as high as €250,000 may also be levied if the two are convicted.

A decision is expected in the next two weeks, local news source De Gelderlander reported.

Winklevoss Bitcoin Exchange Gemini to Launch Daily Auctions

 

Gemini Trading, the bitcoin and ethereum exchange founded by Tyler and Cameron Winklevoss, is set to begin hosting daily bitcoin auctions.

While such auctions are commonplace as a way to determine more accurate closing prices for the New York Stock Exchange or Nasdaq, Gemini is positioning the auction as more than a first for its exchange.

Tyler Winklevoss told CoinDesk:

"It's the first ever end-of-day auction on a bitcoin exchange. It's a pretty standard feature on traditional exchanges that didn't exist on a bitcoin exchange until now."

The launch represents the latest effort by the Winklevoss brothers to create investment mechanisms for mainstream investors.

Since 2014, the Winklevoss Bitcoin Trust has been working to open the first bitcoin exchange traded fund (ETF) on a major stock exchange. In June, after almost three years, the Trust filed to move their application from Nasdaq to Bats, a move that accelerated progress even if the final decision could still be months away.

How it works

Beginning at 5pm ET, Gemini will begin accepting two-sided bids in BTC/USD for the next day's auction, ending at 4pm. Gemini expects to add additional trading pairs at a later date.

By concentrating liquidity at a single moment each day, Winklevoss says the auction will increase liquidity while minimizing "slippage" thats results from large investors who affect the price with their purchases.

After 22 hours and 50 minutes of bidding, Gemini will begin publishing "indicative auction prices" every minute, giving bidders a chance to pull out their bids until 3:59pm ET, after which the final bid closes.

The closing auction price is determined by finding the price, at which the greatest aggregate buy demand and sell demand can be fulfilled.

In addition to giving investors an official closing price to report to their banks and accounts, the auction is intended to make it easier for buyers and sellers to find each other, according to Benjamin Small, head of Gemini's market structure.

"A benefit for institutional traders is that an auction attracts counterparties during a particular time," Small told CoinDesk. "By focusing on a specific moment of time, the opportunities to interact are increased significantly."

Pricing bitcoin

The auction set-up builds on the Winkdex, a bitcoin index that draws its data from the top three bitcoin exchanges by trade volume.

In interview, Small pointed to the index as a complimentary tool for bitcoin investors, whereas the auction helps serve to provide insight into how investors are buying and selling bitcoin during specific periods.

Small concluded:

"The Winkdex and other indexes are based on trades that have occurred, a blended rate of history. The auction price is based on the orders at a set time. It optimizes the amount of trading."

Tuesday, September 20, 2016

Ethereum's Creator Proves Blockchain Scaling Vision is No Joke

 

"Okay, ethereum's done, let's go back to ethereum classic."

The jokes were frequent during ethereum creator Vitalik Buterin's keynote at the project's Shanghai developer conference, Devcon2, on Monday. There, despite the complexity of the technical changes the project will face in the years ahead (and the controversies in recent past), Buterin conveyed a confidence and personality onstage that was unique among the day's presenters, even as he outlined some of the more nuanced proposals.

That scaling was the subject of his talk, entitled "The Mauve Revolution", is not a surprise given the increased relevancy of the issue across all blockchain networks. As more banks and enterprise firms seek to use blockchain systems, the scaling question calls to light the inefficiency of the nascent technology.

But the idea that ethereum may be performing below the expectations of this new audience was the frequent butt of Buterin's barbs, with slides featuring titles like "What sucks about ethereum?" and an analogy comparing the network to a "smartphone from 1999".

To begin, Buterin rifled through a number of issues he sees with the blockchain-based decentralized application platform today, including how few transactions it can process.

Still, he told the audience:

"We have solutions for most of these problems."

In the remainder of his presentation, Buterin discussed ways ethereum will be seeking to solve for scalability in the coming months and years. While he did not discuss any specification timeline or plan of execution, the talk felt charged with an overall sense of direction that seemed to resonate.

"[Buterin] has a very special ability in that he's able to come up with the theoretical solution to a situation that is very much pressing today. He can play devil's advocate to himself," Kesem Frank, COO of Toronto-based enterprise blockchain firm Nuco, told CoinDesk.

Lower on the agenda for the talk was discussion of ethereum's proposed effort to implement sharding, a concept that would find it splitting in such a way where multiple blockchains would, almost like miners, form their own consensus on a larger state.

Here, Buterin deferred attendees to the latest version of his "mauve paper" outlining his current thesis on the state of the network, the third edition of which was announced prior to the conference.

'Virtual mining'

Key to ethereum's vision for expanding its network of users is transitioning from the transaction validation algorithm popularized by bitcoin (proof-of-work) to an alternative (proof-of-stake) that does not require the purchasing of hardware.

Buterin explained the transition as one that will seek to replicate bitcoin's mining process virtually without "wasting electricity".

Essentially, Buterin sees his fix as one that will find consumers purchasing ethers (the unit of account on the protocol) in exchange for virtual miners, which would then be governed in such a way as to replicate a competitive verification process.

"Virtual miners are kept track of in the state of the protocol itself," Buterin explained.

However, Buterin's version of the idea offers a number of fixes to what he called the "supposed fundamental flaws" of this long-attempted validation mechanism.

First, he outlined that it is possible to make such a system more difficult to game if those who buy virtual miners have to wait to join the validation pool, thus gaining eligibility to the rewards produced by the protocol.

Buterin also envisions restrictions on both withdrawals and the transactions that these addresses can as execute as other ways to ensure that those who are validating are doing so in ways that will not be harmful to the computing network.

"If you're done mining, you can call this function called start withdrawal. Then after another, something like a few months, you can withdraw and take your ether out," he said.

'Nothing at stake'

Perhaps Buterin's most powerful critique, however, was to the "nothing at stake" problem whereby proof-of-stake algorithms have historically struggled to align virtual miners.

Key to solving this, he predicts, will be constructing proof-of-stake in a way that incentivizes participants to continue backing the "winning" version of the transaction history. A feature he proposed as a solution is the inclusion of so-called "dark uncles" or "dunkles" in the protocol.

"The fact that you made a block on another chain means you get penalized and it hurts you," he explained

A tongue-in-cheek play on the term "uncles" (which refers to blocks that are mined but not added to a winning blockchain), he foresees dunkles incurring steep penalties, to the point where losses would even be 1,000% larger than rewards.

Buterin sees the proof-of-stake protocol aiming to encourage the production of a network where the winning blockchain would be the one with the most "value at stake". In this way, he said, validators could bet on the blockchain they think will be the winner by continuing to back it with value.

"Bets start off being conservative, but then over time expand. As validators see that everyone is betting 10-1 on a particular block, 20-1, 40-1, the value lost on a particular block will expand exponentially," he said.

Despite the heavy emphasis on theory, however, Buterin was keen to state the goals of the effort in simplistic terms.

He concluded:

"The dream is to achieve onchain scaling [while] running on nothing other than consumer laptops."

7 Financial Firms Test Blockchain for Data Management

 

Credit Suisse, Citi and HSBC are among seven financial firms to participate in a data management trial announced today and conducted with support from blockchain firms Axoni and R3CEV.

Featuring buy-side and sell-side firms, the multi-month effort envisioned how a distributed ledger prototype could be built to enhance risk management, cost and efficiency issues when managing financial reference data. Also involved was the Securities Industry and Financial Markets Association (SIFMA), a trade group representing US securities firms.

According to a release, the prototype used Axoni Core, the startup's proprietary distributed ledger software to simulate the collaborative management of reference data used in corporate bond issuance.

The companies said:

"The technology enabled participants to interact with reference data after issuance, with any proposed changes requiring validation by the underwriter to ensure the ledger provided a single, immutable record of all data related to the bond."

According to the companies involved, the project was able to demonstrate how regulators and network participants can use the technology to see which parties on a ledger have created, issued and proposed amendments to a data record.

In statements, David Rutter, CEO of R3, and Emmanuel Aido, Credit Suisse's blockchain and distributed ledger lead, spoke to the benefits that this new approach to data management could bring to the financial industry.

"Quality of data has become a crucial issue for financial institutions in today's markets. Unfortunately, their middle and back offices rely on legacy systems and processes – often manual – to manage and repair unclear, inaccurate reference data," Rutter said.

Monday, September 19, 2016

9 Must-Watch Talks at Ethereum's Big Developer Event

 

The world's second largest blockchain network is set to host its annual developer conference this week.

To be held in Shanghai, Devcon2 is expected to draw upwards of 700 attendees, with a lineup featuring many notable developers of the smart contract blockchain. On hand for talks and panels will be ethereum creator Vitalik Buterin, lead Casper developer Vlad Zamfir and creator of the Solidity programming language, Christian Reitwiessner.

Also speaking are members of enterprise financial firms, including Microsoft and Thomson Reuters, with more rumored to be in attendance.

Given the recent trials and tribulations of the emerging technology, however, the tone of this year's Devcon, seems likely to change. As the project is seeking to bounce back from the events of this summer, which saw a notable project collapse and its community locked in fierce debate, the dialogue is likely to provide color on how its leaders believe it can move forward from past challenges.

A look at the schedule reveals a heavy focus on security and scalability – two issues that are top of mind for developers working on blockchain projects globally. Further, there is likely to be a focus on use cases that highlight how the public ethereum blockchain, as well as private implementations, can be used today.

Heading there yourself or watching the livestream? Here's our round-up of the events on our schedule.

1. Ethereum in 25 Minutes – Vitalik Buterin

To warm up before the more technical presentations, ethereum creator Vitalik Buterin will briefly break down the smart contract blockchain's core components, describing technical terms such as "uncles" and "gas" and what they mean for the network.

The talk is likely to be a must-see for those looking to get up to speed with the project and its various complexities by offering a big-picture view of its goals and vision.

Given the long relevancy of some of Buterin's earliest talks, this new presentation could prove to be one for the time capsule.

2. Swap, Swear and Swindle. Swarm Incentivization – Viktor TrĂ³n and Dr Aron Fischer

One of the long-term goals of ethereum is to use the blockchain to build a next-generation World Wide Web (Web 3.0), one that tears out its current underpinnings and replaces it with a new setup that doesn't rely on big intermediaries.

But that vision will require a lot of steps, one of which is a lesser-known protocol called Swarm.

With the relatively high price to transact on the ethereum network currently, it remains prohibitive for users to store data directly on the ethereum blockchain. Swarm, which operates similarly to BitTorrent, could allow contracts to be smaller in size, while delivering large quantities of data off of the blockchain.

In this talk, developers Viktor TrĂ³n and Dr Aron Fischer will explain how the system for storing files functions, how it encourages people to use it, and why it will be key to the future of the network.

3. A Correct-by-Construction Asynchronous Casper Protocol – Vlad Zamfir

Ethereum is slated to change drastically in the years ahead.

Arguably central to this vision is the migration of the network from ethereum's current proof-of-work blockchain to one that uses a transaction validation mechanism known as proof-of-stake (POS). Announced in 2015, 'Casper' is the nickname for the technology, one that promises to resolve historical issues with POS validation and that remains a big question mark on the network's roadmap.

Here, ethereum developer Vlad Zamfir is likely to shed light on a process that has mostly occurred behind closed doors.

4. State Channels: Systemic Security Considerations and Solutions – Joseph Poon

Continuing with the focus on scaling solutions, two presentations will explore 'state channels', networks that live a layer above the blockchain that aim to expand the volume of transactions and smart contracts that ethereum can handle.

The talk is likely to be notable as it is slated to be given by the creator of the Lightning Network, the best-known off-chain payment channel network, but one that is envisioned for use on the bitcoin blockchain.

In interview, Poon said his talk will outline security concerns that ethereum developers should watch out for when building their own similar off-chain micropayment networks, as well as his recommendations for how similar ethereum projects can advance harmoniously.

Poon told CoinDesk:

"My intention is to facilitate cross-chains so that cryptocurrency exchanges can be further decentralized."

As it remains one of the rare slots on the schedule that promotes cross-blockchain developer collaboration, this talk could prove one to watch.

5. Panel: Smart Contract Security in Ethereum

Given the collapse of The DAO, this panel could prove one to watch.

There's been particular emphasis of late on designing smart contracts that are more secure and easier to use, and much of the blame (at least in the public's eye) has fallen on ethereum's new smart contracting language, Solidity.

Following The DAO's collapse, big banks like Barclays and smaller startups have been investing time and energy in alternative smart contracting languages.

As such, while the panel will focus on the "implications and developments" of smart contracts, panelists including Solidity creator Dr Christian Reitweissner and ethereum creator Vitalik Buterin may be best served by making the case for the continued development of their open-source tools.

6. Formal Verification for Solidity – Dr Christian Reitweissner

'Formal verification' – keep your eyes on the term, as it's likely to be a buzzword as we head into the fall and winter months.

Given the problems with smart contracts mentioned above, there's ample interest in developing ways of determining if the technology is secure before it's deployed. With the interest and money of large financial institutions on the line, it's safe to say that ensure formal verification for ethereum's Solidity language is top of mind for the network.

Here, Solidity creator Dr Christian Reitweissner will be presenting on formal verification for the smart contracting language, and any new developments here are likely to impact decision-making in the industry in the months ahead.

7. Imandra Contracts: Formal Verification for Ethereum – Dr Grant Passmore

See, we told you it was a hot topic!

We don't know a lot about "Imandra contracts" (other than they use artificial intelligence), or how they could help mathematically verify ethereum's code , but given the background above, the talk is likely to be focused on shaping the discussion of the security of the network and its tools.

8. Mist Vision and Demo – Alex Van de Sande

The browser of the ethereum network, Mist, has perhaps been overlooked given the emphasis on the inner-workings of ethereum.

However, as decentralized applications seek to hit the market, they'll need a user-friendly interface, and this Mist demo is likely to show how far the ethereum community has come in making progress toward this goal.

9. Ethereum Blockchain Initiatives at Thomson Reuters – Dr Tim Nugent

One of just a few enterprise institutions at the conference with a solo speaking slot, this talk from Dr Tim Nugent will shed light on internal R&D at the mass media firm.

As mentioned in past interviews, executives at Thomson Reuters are bullish on use cases including data delivery and digital identity.

As more institutions open up about their creations on ethereum, this will certainly be one to watch, providing insights into how enterprises believe they could leverage ethereum and its technology in the months and years ahead.

Ethereum's 'Holy Trinity' Takes Shape As Swarm Testnet Arrives

 


A big piece of ethereum's decentralized "world computer" will be launching its first public testnet in the coming weeks.

With the launch of the Swarm testnet, the network will be open for any developer to test the new file storage system and identify and fix potential issues. Developers can also use any ethereum client (whether geth, parity or the python client) for their work.

According to developers involved, the move that takes the project one (small) step closer to making its full vision a reality.

On the Internet today, centralized servers owned by for-profit companies hold most of the world's data. But Swarm wants to shake this up by building on an old idea – file sharing.

You might be familiar with BitTorrent, a similar way of file sharing over a peer-to-peer network. The problem with the network, according to the Swarm team, is that it relies on the generosity of its users, that and it's too slow to use as the base for a new web.

Swarm lead developer Viktor TrĂ³n told CoinDesk:

"[BitTorrent] never really caught on to the point where they can serve real-time interactive web applications."

The updates were part of a talk at the ethereum developer conference Devcon2 today, entitled "Swap, Swear and Swindle. Swarm Incentivization", given by its team leads, TrĂ³n and Aron Fischer.

Decentralized versions of photo albums, file managers, corporate storage platforms and GitHub are a few ambitious examples for how Swarm could come to be used.

"The result would be a much more decentralized Internet, both in terms of service provision and in terms of wealth distribution," TrĂ³n said. "It's just as much a social objective as it is a technical project."

'Holy Trinity'

So, how exactly does this fit into ethereum's "world computer" idea?

The big picture vision is to use ethereum's "holy trinity," as TrĂ³n called ethereum, Swarm and a messaging system called Whisper, to build the low-level groundwork for this new World Wide Web.

Ethereum already puts the computational part into place, but it provides limited space. Swarm adds a storage layer to the system. Essentially, it remains too costly to store everything on a blockchain. In this way, Swarm allows data to be referenced on a blockchain, but stored elsewhere.

Yet, in the talk, the developers indicated that incentivizing a file sharing network remains a work in progress. As noted in the presentation, Swarm enables content to be retrieved, but there is no guarantee it will be available.

TrĂ³n outlined how Swarm is seeking to create a system based on what he called "proof of custody", one whereby users would commit a payment to store data, which could be paid incrementally to the person storing it.

"The proof of custody construct makes it so actually you could have a very good level of security that your content is being stored by the storer," he said.

Swarm then uses a "judge contract", a smart contract that would ensure that the data won't be paid if what they have agreed to watch goes missing.

Swear and swindle

However, Swarm also needs a system to ensure that the users storing its data are penalized if they break a promise.

This is where a "Swear contract" comes in, as the smart contract allows nodes to register by posting a security deposit. Registered nodes, the developers explain, can sell promissory notes guaranteeing long-term data availability, which would be exchanged for receipts.

If the data that is overseen by the contract is lost, a feature called a "Swindle" contract comes in. Should a user with a receipt find that their data is no longer available, they are allowed to start a process Fischer likened to litigation.

Here, Tron used the analogy of a babysitter to set the scene for the stakes involved in the high-tech dispute.

"Once it gets to this stage, the only way a peer can defend themselves against a challenge is to say, 'Your baby is here, it's OK'," Tron explained.

Toward a Web 3.0

But if it all goes according to plan, users will have a similarly easy experience using Swarm.

Of note is that Web 3.0 isn't a term that ethereum owns, rather it's a concept that its developers are rallying around. TrĂ³n argues that the blockchain was the "missing puzzle piece" to making this reality and that there are "no more excuses" for big intermediaries (think Facebook or Google) to be the only companies able to provide Internet services.

The second Swarm code proof-of-concept was released in May, and if all goes well, they say they will migrate the testnet to the official ethereum testnet, Morden.

TrĂ³n said they already have plans for a third and fourth code proof-of-concepts, which will include more comprehensive internode communications, data streaming and decentralized database services.

When asked whether he thinks the file program will work in the end, TrĂ³n responded that he doesn't know, but that "we came up with something that we think is pretty good."

Pete Rizzo contributed reporting.

Sun through clouds image via Shutterstock

Friday, September 16, 2016

Vitalik Buterin to Debut Ethereum Scaling Paper at Devcon

 

Ethereum creator Vitalik Buterin will present a new version of the project's 'mauve paper' at a developer conference in Shanghai next week.

Scheduled for 19th September, a talk called "Mauve Revolution" will focus on scaling features still in development on the decentralized application platform, including sharding and proof-of-stake.

The third version of the paper, it is likely to keep a similar spirit as past editions, which have seen Buterin use a tongue-in-cheek tone to discuss the big-picture developments the project is seeking to enact as it approaches key development milestones.

In interview, Buterin said that the talk will discuss the planned transition of ethereum's current code to a new, upgraded version of the platform dubbed "ethereum 2.0", a transition he estimates is about one-third complete.

Buterin said it is this "second stage" that the paper will discuss, telling CoinDesk:

"The ethereum roadmap now has what I would consider three main stages. The first stage is already finished, the second is [about] getting PoS out the door and adding in economic finality and basic sharding."

However, Buterin indicated that ethereum very much remains a work in progress, and that he sees this stage of its development lasting until 2020 or later. Should the network reach version 3.0, he said he's still considering how it would move forward.

"I think the third stage will be much more challenging," he said, adding:

"[It] will require heavy involvement from people who have been thinking about problems like p2p network design, distributed hash tables, distributed systems concurrency for decades and are smarter than myself."

Big Banks Invest $55 Million in Blockchain Startup Ripple's Series B

 



Distributed ledger settlement startup Ripple has raised $55m in venture capital from a mix of financial industry heavyweights.

Participating in Ripple's Series B round are Standard Chartered, Accenture Ventures, SCB Digital Ventures, the venture arm of Siam Commercial Bank and SBI Holdings. Additional investors include Santander InnoVentures, CME Ventures, Seagate Technology and Venture 51.

With a growth trajectory that will soon force the settlement startup out of its San Francisco headquarters, much of those funds will be spent on expansion projects including sales and marketing. However, the investment is distinct for Ripple in that some of the funds could also fuel new acquisitions.

Ripple president and COO Brad Garlinghouse told CoinDesk:

"This gives us a strong balance sheet to also consider acquisitions. There are a lot of small players doing something interesting. Historically, we wouldn't be interested, but going forward we may be."

In total, Ripple has raised $93m venture capital including earlier investments from Google Ventures, Andreessen Horowitz, IDG Capital Partners and Jerry Yang's AME Cloud Ventures, a figure that makes it one of most-funded blockchain firms.

While Garlinghouse wouldn't give any details about which startups the company might have in its sights, he did reveal new information about how it would seek to evolve its strategy in the months ahead.

Customer acquistion

When Ripple was founded in 2012, the company emerged virtually without competition in its efforts to explore blockchain technology. At the time, most startups were focused solely on the bitcoin protocol, and the use of cryptographic code as currency.

But, Ripple (then called OpenCoin) was already working to distinguish itself to its potential customers, bringing to the table a novel take on the technology as well as experienced financial executives in the form of CEO Chris Larsen, who joined in 2013.

Unlike bitcoin, Ripple's consensus ledger is permissioned, meaning banks don't have to worry anonymous entities are validating transactions. Further, Ripple's distributed ledger products and services can operate without its native currency, XRP.

But, success hasn't been overnight. It took a year for the distinctness of these dual offerings to net Ripple's first customer, German Internet bank, Fidor. Four months later, the company signed its first two US banks, and within six months, the firm had signed a dozen more, according to Garlinghouse.

But Garlinghouse credits last year's Sibos banking conference for a recent burst of new customers formally announced today.

"It was one of our largest expenses," he said. "But it was also our best ROI."

Bank partners grow

In addition to today's funding news, Ripple announced its largest batch of banks will formally join its network: Standard Chartered, Westpac, National Australia Bank (NAB), Mizuho Financial Group (MHFG), BMO Financial Group, Siam Commercial Bank and Shanghai Huarui Bank

Each financial institution has successfully transferred actual money on the Ripple network, according to the company, and all are currently building commercial products, though specific use cases vary.

As an example, Garlinghouse told CoinDesk that one of China's rare privately-owned banks, Shanghai Huarui Bank, is working with Ripple on a new commercial cross-border payment service so its retail customer base can send money internationally in real-time.

Initially, Shanghai Huarui Bank is targeting Chinese families that want to give money to students studying abroad in the US.

In total, Ripple's network now includes 15 global banks, with 10 banks in commercial deal phases. Further, it claims it has now completed 30 pilot projects.

Growth spurt

Along with the new crop of paying clients, Ripple has been experiencing other forms of growth, according to Garlinghouse.

Currently, the firm employs about 150 people and it's hiring 25 more.

Over the past quarter, more than 50% of Ripple's hires have been engineers, he said. And he estimates that his compliance department is larger than most of the startups Ripple competes against. "Banks need that support," said Garlinghouse.

Among the more notable hires this round of investment will facilitate is a lead to manage the joint venture launched earlier this year with Tokyo-based SBI Group to sell Ripple products in Japan.

Within the next six months, Garlinghouse said Ripple will outgrow its San Francisco offices and sign a deal at a new location twice the size.

He concluded:

"We are out of office space."

Thursday, September 15, 2016

One of Bitcoin's Biggest Miners is Launching a Second Pool

 


As if running the third-largest bitcoin mining pool wasn't enough, China-based Bitmain announced the launch of its second mining pool yesterday.

Unlike the other large mining pools, though, the new offering (launched through its subsidiary BTC.com) will be open sourced to its community of users. According to Bitmain, the pool is not meant as a replacement for its popular Antpool platform (which has roughly 13% of the network's market share) but rather to enhance the stability of the bitcoin network.

In interview, Nisthant Sharma, international marketing manager at Bitmain, explained that the goal is to use this software to "promote decentralization of the bitcoin mining network".

Sharma told CoinDesk:

"We hope that this open-source mining pool will set new benchmarks in terms of stability, efficiency, and service for all mining pools."

Sharma explained that, by utilizing the global community, the company believes it can set new technical standards for mining.

Profit, profit

A key focus for the software is on reducing "orphan rates", a metric that has a material impact on miner profitability.

In bitcoin mining, it's not uncommon for two separate miners to find the same block almost at the same time. This results in the creation of two blockchains, but only one can become the longest chain that is accepted as official by the network.

The blockchain that is eliminated is called an orphan, and each time one occurs, some member of the mining network misses out on the revenue that would come from official recognition.

According to analytics provider Blockchain, it's not uncommon for there to be three to five orphan blocks in any given week. Though this is only 0.5% of the total blocks produced every seven days, bitcoin mining has become a low margin business.

To combat this, one of the primary features associated with the pool is a "PoolWatcher" function.

As Bitmain explains it, this looks for signals that another pool has found a block. Rather than continuing to mine on a potential orphan, it will instead, immediately switch to that block.

Sharma explained that Bitmain is spinning up clusters of servers around the world to help with latency of new block discovery. If another miner finds a block, these clusters will transmit that data faster, allowing the pool to switch to the next block.

Though the software is open-source, only users of the BTC.com pool will have access to these server clusters, Sharma said.

Centralization possible

While Bitmain is touting this new software as a way of decentralizing bitcoin mining, it certainly does carry with it the risk that the firm will accumulate an even greater market share with two mining pool services.

Yet, in the short-term, the gain might be neutral. Because it already runs Antpool, it's likely that users might migrate from Antpool over to the new pool, especially in the short-term.

Accoridng to Sharma, this is "not something Bitmain is thinking about". However, the pool's payout mechanism, "pay per share (PPS)", could help it to quickly accumulate market share.

PPS simply means that a miner receives a percentage of the mining reward proportional to the hashrate they contributed to that block. For example, if the miner contributes 1% of the power needed to uncover a mining reward, it would receive 1% of the revenue.

However, a situation could present itself in the future where Antpool keeps its hold and users from other pools, or entirely new miners, join BTC.com'sl.

As mining pools share the reward based on pooled resources, the bigger the pool, the more likely that a reward will be paid out. This results in miners joining larger pools because it maximizes the likelihood that they'll earn something for their efforts.

Because of this, and the 0% fee that Bitmain is charging until the end of the year, BTC.com's pool has the chance to quickly gain market share, a move that could further centralize mining under Bitmain.