Bolivian Authorities Arrest 60 ‘Cryptocurrency Promoters’

Bolivia arrests

The Bolivian Financial System Supervision Authority (ASFI) arrested 60 “cryptocurrency promoters” last week. According to a statement published by the ASFI, in which it refers to bitcoin and several altcoins, the arrestees were carrying out “training activities” relating to  investments that have “characteristics of multilevel schemes.” The agency also indicated it will track down Bolivians promoting Bitcoin online.

“The only thing these people are doing is taking advantage of the population and deceiving the people to appropriate their money,” ASFI director Lenny Valdivia Bautista said in the statement.

Since 2014, the Latin American country and its central bank consider bitcoin as well as all altcoins to be pyramid schemes. As such, it was the first country in the world that completely prohibited use of “any kind of currency that is not issued and controlled by a government or an authorized entity.”

This ban forms the basis for this week’s arrests. While there are currently few specifics available, news reports suggest the Bolivians were distributing brochures promoting bitcoin, and possibly selling bitcoin online. 

“We have confiscated brochures relating to business schemes that go around giving trainings and making business plans in relation to virtual currencies that are operating abroad,” Valdivia Bautista stated. “The Bolivian population should not participate in closed [cryptocurrency] groups through WhatsApp. The only thing they are doing is taking advantage of the population, deceiving the people to appropriate their money.”

Speaking to CoinTelegraph half a year ago, the creator of the Bolivian Bitcoin Facebook group explained that Bolivian Bitcoin users maintain connections through social media. Because cryptocurrencies are banned in the Latin American country, trades are organised through small-scale discussion groups, and the exchange of bitcoins often happens in person.

Apparently, the Bolivian authorities have taken note. According to hoybolivia.com, the ASFI said that it will continue to track down and arrest anyone that promotes or sells cryptocurrency on social media or other websites. Bolivians are also asked to “take care of their savings by reporting [cryptocurrency related] activities” by calling a special hotline or contacting the country’s “Special Forces Against Felony.”

“It is important to urge the population to report these cases in which people aim to take advantage of people and their families’ savings,” said Valdivia Bautista.

Bolivia is not the first Latin American country that is cracking down on Bitcoin users. In February of this year, Venezuelan authorities arrested eight Bitcoin miners. In addition to that, Venezuela’s main exchange — Surbitcoin — had to halt operations as the company’s bank closed their account.

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Qtum’s Block Size Limit Will Be Governed by Smart Contracts: Here’s How

Qtum’s Block Size Limit Will Be Governed by Smart Contracts: Here’s How

Qtum is an up-and-coming smart contract platform set to launch in September of this year. Sometimes ambitiously referring to itself as “China’s Ethereum,” the project recently raised $15 million in three days through a successful crowdsale or “Initial Coin Offering” (ICO).

On a technical level, the Qtum blockchain will resemble Bitcoin, but will integrate an Ethereum-like Virtual Machine on top for smart contracting purposes. Additionally, Qtum is in the process of implementing a “Decentralized Governance Protocol” (DGP). This DGP will have smart contracts determine the blockchain’s parameter selection, like its block size limit.

Jordan Earls, also known as “earlz” online, is the co-founder and lead developer of Qtum.

“We believe this will allow for Qtum to be the first self-modifiable, self-regulating and ultimately self-aware blockchain,” he told Bitcoin Magazine.

 The Concept

Any blockchain has a number of parameters. In Bitcoin, this of course includes the 1 megabyte block size limit. But it also includes the block reward (currently 12.5), the block interval time (ten minutes) and more. These and three other parameters apply to Qtum as well.

But there are two basic problems with needing to have these parameters. First, they are very hard to get “right,” in so far as that’s even possible, since different parameters benefit different use cases. And second, in a decentralized system, these parameters can be very hard to change.

“The core rationale and problem we had when designing this is that we will release Qtum with some initial parameters that we try to make perfect,” Earls told Bitcoin Magazine. “But we don’t know what the ecosystem will look like one month after release, much less one year. So, we designed DGP. That way, we can tune the blockchain to be as usable and secure as possible without needing to fork, just to change a simple number from 1 to 2.”

Qtum plans to realize this way of “tuning the blockchain” by doing what it does best: The DGP will consist of relatively straightforward smart contracts made up of blockchain-readable pieces of executable code.

“We have open-source smart contracts which implement the rules for changing the parameters, which will then be accepted by all nodes. It implements a fairly simple governance system of ‘user keys’ and ‘admin keys.’ There is a modifiable parameter in the contract which determines how many keys of each type must vote in order to approve a change to, say, the block size limit.”

Importantly, through the use of smart contracts, these keys can actually represent more than just a regular user per key: Each key can represent a defined group.

“Perhaps one key represents a majority of hash power; or a key represents coin votes by coin holders; or a key acts according to a dynamic limit based on how full blocks are. Or even oracles: a key can effectively be controlled by people or servers that act based on input not directly readable by the blockchain itself, like USD market price for transaction fees. It’s extremely flexible.”

Qtum will almost certainly include smart contracts for the block size limit, the gas schedule to determine the price of different smart contract operations (for which Ethereum hard forked several times) and the minimum gas price. Additionally, it might deploy smart contracts for block interval times, block rewards, maximum gas per block and maximum script size or signature operations per transaction or block.

Changing the Rules

Embedding the parameter selection in smart contracts is clever and having all node software adjust accordingly even more so. However, an arguably even harder problem is not so much what parameter is decided on, but who gets to decide in the first place and how.

In Qtum, the initial parameters will be set by the developers based on their testing and measurements.

“For instance, we’ve already determined that a block size of 2 megabytes should be reasonable,” Earls said.

After that, the initial set of rules to define the parameters can be changed themselves within the rules of the system, too.

A smart contract could, for example, start out relatively simple: It requires a majority of core developers to change the rules of the contract. Then, if a majority of core developers decides that instead of just developers, it should also include a majority of coin holders, the contract can be changed to a two-of-two multisig contract. From that moment on, one key would represent the developers, while the other key would represent the majority of coin holders. Next, if both developers and coin holders agree, hash power can have a seat at the table, too, and so forth.

As such, Qtum smart contracts can change not only the parameters of the system, but also how the parameters themselves can be changed.

That said, as Earls acknowledged, the Decentralized Governance Protocol can’t actually solve all governance problems. It’s specifically designed to make certain predefined parameters more easily adjustable, and it can indeed even change how these parameters can be adjusted to some extent.

But the Decentralized Governance Protocol does not and cannot apply to network rules that aren’t among these predefined parameters. Protocol changes outside of these specific parameters would still require a typical upgrade mechanism, like a hard fork or a soft fork.

“I believe if Bitcoin had DGP technology, then we would still see all this fighting about SegWit vs Bitcoin Unlimited, etcetera,” Earls acknowledged. “But, DGP would have been used in the meantime to increase the block size to something conservative but reasonable like 2 megabytes or 4 megabytes, to avoid all the transaction speed problems. Meanwhile, the developers and community could figure out a more permanent solution.”

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DCG’s Bitcoin Scaling Proposal and What it Needs to Succeed

DCG’s Scaling Proposal and What it Needs to Succeed

Spearheaded by Barry Silbert’s Digital Currency Group (DCG), over 50 companies signed and published on Medium a “Bitcoin Scaling Agreement” this week. The agreement intends to put an end to Bitcoin’s long-lasting scaling debate. But whether it actually will is a different question.

Here’s what the agreement entails, how it compares to existing scaling proposals and what it requires to succeed …

What the Agreement Entails

The DCG agreement is based on the “SegWit2MB” proposal, originally floated by RSK Founder and Chief Scientist Sergio Demian Lerner. This proposal couples activation of Segregated Witness (SegWit), the centrepiece of Bitcoin Core’s scaling roadmap, with an added block-size-increase hard fork down the road. While SegWit itself offers an increase to two to four megabytes, the added hard fork should double this to a maximum of eight megabytes.

According to the Medium post, the soft fork will be activated “at an 80% threshold,” (presumably) referring to hash power. And the hard fork will be activated “within six months.”

However, it seems that different signatories have different interpretations of what this actually means. Some claim that SegWit will be activated as a soft fork first, followed by a separate block-size-increase hard fork later. Others suggest that the soft fork will come first, but in such a way that it would trigger hard fork code, which still activates later. Yet others suggest that both the soft fork and the hard fork will be activated at the same time. And some even think the hard fork will come first, followed by SegWit activation later.

While these kinds of details may still need to be worked out, over 50 companies signed the agreement. Combined, they currently represent more than 80 percent of hash power on the network and, according to these companies, $5.1 billion USD in transaction volume as well as 20.5 million Bitcoin wallets.

But there are telling omissions, too. Perhaps most notably, no Bitcoin Core developer is party to the agreement, nor were any of them even present at the meeting. Similarly, none of the entities that fund Bitcoin Core developers — Chaincode Labs, Blockstream or MIT’s Digital Currency Initiative — signed on. And of course, some 50 companies are only a segment of the Bitcoin industry in the first place; several big players are still missing.

Last but not least, Bitcoin’s broader user base is not involved with the agreement either, nor is the agreement in any way tied to community support.

How the Agreement Compares to Existing Scaling Solutions

Like the DCG agreement, Bitcoin Core’s scaling roadmap includes Segregated Witness as well. It also suggests that a hard fork to further increase the block size limit could be needed in the future, though it does not specify a specific point in time. Most Bitcoin Core developers also believe that a hard fork requires at least a year to prepare, perhaps more. As such, both Bitcoin Core and the DCG agreement share activation of SegWit as a first step in their scaling plans — but not the hard fork part.

However, the SegWit activation mechanism that is part of the DCG agreement slightly differs from the current activation mechanism implemented in Bitcoin Core. Most important, the DCG agreement lowers the required hash power threshold from 95 to 80 percent. And because of how SegWit is designed, activation through the DCG agreement is incompatible with all SegWit-ready Bitcoin nodes on the network.

It may be possible to work around this issue, however. As proposed by Bitmain Warranty engineer James Hilliard, SegWit activation can be made compatible between the DCG agreement and Bitcoin Core, though it’s a bit “hacky.” In short, if miners signal support for SegWit along the DCG agreement with at least 80 percent of hash power, this 80 percent can also start to completely reject any block that does not signal support for SegWit. This activates the current SegWit proposal by Bitcoin Core, as that would reach its 95 percent threshold as well.

Down the road, the DCG agreement’s hard fork is very unlikely to be implemented in Bitcoin Core for a number of reasons, but most importantly because it is contentious.

Other scaling proposals, like Bitcoin Unlimited’s Emergent Consensus or Bcoin’s Extension Blocks, are not necessarily incompatible with the DCG agreement, or at least they don’t need to be.

What the Agreement Requires to Succeed

What the agreement requires to succeed depends on your concept of “success.” But it will be a challenge by any definition.

First off, it should be noted that the proposal — which allows for blocks of up to 8 megabytes — may not be safe. While the full extent of the block size issue is outside the scope of this article, suffice it to say that some think that 8 megabyte blocks are, in fact, a significant risk.

Perhaps even more important, code needs to be written, and it is not yet clear who will actually do this. Moreover, this code should really be reviewed and tested extensively: the plan is to have it carry billions of dollars’ worth of value. This will not be easy to do within six months; impossible, according to some.

Then, this code must be brought into production. For the hard fork in particular, this means that everyone effectively needs to switch to a new protocol. If all signatories of the agreement follow through, it would probably be sufficient to at least keep this protocol running.

It seems obvious that the signatories of the DCG agreement hope that the rest of the Bitcoin ecosystem will also switch to the new protocol once the fork takes place. In that case, the new protocol would (probably) be considered the “new Bitcoin” by everyone.

But given the contention of the proposed hard fork, this currently seems very unlikely.

While it’s impossible to predict the future, it seems almost certain that at least some segment of Bitcoin developers, miners, companies and — most important — users will reject the fork. They will stay put on the existing protocol even if that means it takes much longer for blocks to confirm, or they will roll out a user activated soft fork, or perhaps they will even deploy a counter–hard fork. Under any of these scenarios, the Bitcoin blockchain would “split” into two chains, or more.

The real challenge, therefore, is to get people to use the new chain. And, if that is desired, to get them to consider it the “real” Bitcoin. This will probably be a much harder challenge than forking itself, even for all the companies involved in the DCG agreement.

And most important, for the agreement to succeed in any way at all (perhaps even under a different name than “Bitcoin”), it will require the signatories to follow through. The Bitcoin protocol is difficult to change, and promises or Medium posts alone don’t have any impact on it whatsoever, as several similar commitments have proven in the past.

The post DCG’s Bitcoin Scaling Proposal and What it Needs to Succeed appeared first on Bitcoin Magazine.

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These Two UASFs Could Activate SegWit

BIP 148 and BIP 149: the Two UASFs to Activate SegWit

Segregated Witness (SegWit), the Bitcoin protocol upgrade proposed by the Bitcoin Core development team, was originally designed to activate via the Bitcoin Improvement Protocol 9 (BIP 9) standard, a hash-power signalling mechanism. This would allow the Bitcoin ecosystem to coordinate the upgrade relatively safely through miner readiness.

But with the SegWit proposal in particular, BIP 9 no longer serves just to signal readiness. Miners as well as users increasingly see BIP 9 as a sort of miner vote on the desirability of the protocol upgrade. And some miners even seem to utilize it as a negotiation chip for protocol development.

The pseudonymous developer who goes by the name “Shaolinfry” considers this an abuse of the coordination mechanism. He therefore recently proposed an alternative activation scheme: a user-activated soft fork, better known as a “UASF.”

Shaolinfry also drafted two specific UASF proposals: BIP 148 and BIP 149. Both of these are currently “in the running” for user adoption. And speaking with Bitcoin Magazine, Shaolinfry, at least, seems sure that one of them will be accepted by the network.

“There is no universe in which SegWit will not get activated.”

SegWit and the UASF

A soft fork is a change to the Bitcoin protocol that introduces new rules or tightens existing ones. This makes soft forks backward compatible: nodes that did not upgrade should remain part of the same Bitcoin network.

Segregated Witness is a soft fork that would increase Bitcoin’s block size limit and solve some longstanding protocol issues. While it’s always hard to say with conclusive certainty, the proposal seems to have broad support within the Bitcoin ecosystem. Many wallets, exchanges and other companies in the space have indicated they are ready for it, while an overwhelming share of reachable nodes on the network have implemented the solution, too.

As per BIP 9, the current implementation of SegWit activates if about 95 percent of hash power signals support within a two-week difficulty period before November. However, hash power support has so far stagnated at around 30 percent.

This apparent mismatch between the ecosystem and hash power support is why some — like BIP 9 co-author Rusty Russell — are increasingly thinking the activation method was a mistake.

And Shaolinfry does, too.

“The main issue with BIP 9 is that it has a veto of only about 5 percent of hash power,” Shaolinfry explained. “That veto could be intentionally or unintentionally triggered. Intentionally, like how miners are currently blocking SegWit activation. Or unintentionally due to upgrade apathy.

“Miner activation also draws attention to mining pool operators politically. The whole world is paying attention to who is and isn’t signaling. That is undesirable. And what if the soft fork is for something that could make governments angry? We know this is the case in China for anonymity features, and increasingly in the United States as well.”

As such, Shaolinfry proposed activating SegWit through a UASF.

The idea behind any UASF, in short, is that users simply activate the soft fork at an agreed-upon point in time. If these users represent a majority of the Bitcoin economy — exchanges, merchants, users — miners are financially incentivized to follow the new soft fork rules. If they don’t, they could mine invalid blocks (according to the majority of the Bitcoin economy), and the “bitcoins” they earn would be worth less — or worth nothing at all.

Once a majority of hash power does follow these financial incentives and enforces the new rules, the rest of the Bitcoin ecosystem should automatically follow, just like with any other soft fork.

BIP 148

The first UASF proposal drafted by Shaolinfry is BIP 148.

BIP 148 is an interesting take on a UASF because it is actually designed to trigger the existing BIP 9 SegWit-activation threshold.

“If you want to redeploy SegWit, you must wait for the current deployment to expire by November of this year because many Bitcoin nodes won’t accept it otherwise,” Shaolinfry explained. “BIP 148 is a way to make the current BIP 141 deployment activate before November. That’s faster, and has the advantage that more than 70 percent of nodes has already upgraded.”

Specifically, starting on August 1, BIP 148 nodes will reject any Bitcoin blocks that do not signal support for Segregated Witness via BIP 9. So, if the majority of the Bitcoin economy enforces BIP 148, miners will have to signal support for SegWit in order not to have their blocks rejected.

Once these miners do signal support for SegWit, this signaling would also trigger all the “normal” SegWit nodes on the network. All these nodes would then enforce SegWit, even if they didn’t participate in the BIP 148 activation themselves.

And, from a game theory perspective, it may even be viable for a relatively small minority of the Bitcoin economy to get BIP 148 activated. Miners should have little to lose by signaling support for SegWit, but something to lose from not signaling: a smaller total number of users to sell their bitcoins to. As such, even a modest but committed BIP 148 user base could potentially be enough.

Finally, echoing his Medium post on Litecoin’s SegWit activation, Shaolinfry noted that even the possibility of such a UASF could be enough to make miners signal support — without even needing nodes to actually enforce it.

BIP 148: Risks and Incentives

There are, however, some risks. These are why some prominent Bitcoin Core developers — like Blockstream CTO Gregory Maxwell and Chaincode Labs Co-Founder Suhas Daftuar — consider BIP 148 too disruptive.

Per BIP 148, otherwise valid blocks would be rejected merely because they don’t include a signal. The rejection of these blocks would waste miners’ resources and detrimentally affect Bitcoin’s security.

Moreover, if only a minority of hash power enforces the new rules — either because they ignore financial incentives or because only a small minority of the economy enforces the new rules in the first place — the Bitcoin blockchain could split in two. There would be a “SegWit chain” and a “non-SegWit chain.” That would open up a new can of worms, where the risks for users on both ends of the chain are not the same.

“The incentives are clearly there for miners to follow the economy,” said Shaolinfry in response to this criticism. “But indeed, there is a chain split risk if less than 51 percent [of] miners comply and run BIP 148. However, even in this circumstance, the non-BIP 148 chain is asymmetrically disadvantaged, and will almost certainly be completely wiped out. The SegWit chain will always be more valuable, and once a majority of miners switches to that chain, the non-SegWit chain will disappear altogether.”

Furthermore, from a certain threshold on, the risk of a chain split become smaller as it gathers more support. This is why another prominent Bitcoin Core developer, Luke Dashjr, is throwing his weight behind the proposal.

And to avoid these kinds of risks, there could be another twist to BIP 148 as well, Shaolinfry pointed out:

“The interesting thing about BIP 148 is that any majority of miners can trigger it — it doesn’t have to be 95 percent. If 75 or even just 51 percent of hash power starts rejecting non-signaling blocks per August 1, they will always claim the longest chain. So really, all miners will from then on have to signal support and activate SegWit — or have all their blocks orphaned by the network.”

Finally, Shaolinfry may also release code — “Segsignal” — to allow miners to signal whether they will deploy BIP 148 and under what condition. Using this, miners could, for example, agree to activate SegWit through BIP 148 if, and only if, 51 percent indicates that they are willing to.

“This should remove any risk of a chain-split, even a short-lived one,” Shaolinfry said.

BIP 149 (and BIP 8)

Shaolinfry’s alternative UASF proposal is BIP 149.

BIP 149 utilizes an entirely new soft fork activation mechanism: BIP 8. BIP 8 resembles BIP 9 in that it initially allows miners to activate the soft fork through hash power. However, as opposed to BIP 9, the soft fork proposal doesn’t just time out by the end of the activation period. Instead, it sets an activation deadline. If that deadline is reached, nodes activate the soft fork regardless of hash power support.

There is a particular technical advantage of BIP 149 over BIP 148: it is less intrusive for miners. While BIP 148 effectively forces miners to signal, with BIP 149 miners don’t actually have to do all that much. They can support SegWit if they want to. If not, they may want to run a so-called “border node” to filter invalid transactions and blocks post-activation, but that’s about it.

Shaolinfry plans to implement BIP 149 in dedicated Bitcoin software if BIP 148 doesn’t succeed, and when the current BIP 9 SegWit proposal has expired by mid-November. The activation deadline for BIP 149 is then scheduled for early July 2018.  

Some developers, like Maxwell, are in no rush to activate SegWit and consider BIP 149 preferable. But others, like Dashjr, believe it will take too long.

Shaolinfry himself noted:

“BIP 149 is not too slow from a technical point of view. But, I do think the longer SegWit isn’t activated, the more gremlins and obstacles are going to besiege Bitcoin. So if the ecosystem rallies around BIP 148, that would bring this nightmare to a close.”

The post These Two UASFs Could Activate SegWit appeared first on Bitcoin Magazine.

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Bitmain May Be Infringing on the AsicBoost Patent After All

Bitmain may be infringing copyright

The AsicBoost controversy has added another chapter to its book.

Yesterday, law firm Getech Law published an open letter, which was subsequently confirmed to be legitimate by Timo Hanke, the initial submitter of the AsicBoost patent application. In the open letter, the law firm states that several chip producers and sellers are infringing on the intellectual property derived from the pending AsicBoost patent. As such, these companies should “cease production and sales activities of any products in connection to the pending patent application.”

While the letter does not state it explicitly, and Getech Law preferred not to name specific companies when asked by Bitcoin Magazine, the open letter seems to refer to recent revelations of Bitmain’s implementation of AsicBoost in their specialized Bitcoin mining (ASIC) chips. Indeed, if the letter’s claims hold up, Bitcoin’s biggest mining hardware producer may be unable to sell most of their hardware for the time being.

Otherwise, as Getech Law attorney Jun Ye told Bitcoin Magazine:

If the potential infringements cannot be stopped by the announcement and subsequent cease-and-desist letters, we will have no choice but to seek damages in court once our pending application is issued by the USPTO and other patent offices.

AsicBoost

AsicBoost has had a controversial history within the Bitcoin industry so far.

Initially patented by mathematician and former CoinTerra CTO Timo Hanke, AsicBoost is perhaps best described as a sort of “shortcut” that exploits a weakness in Bitcoin’s proof-of-work algorithm. By reusing some of their work, miners can save between 10 and 30 percent of the energy costs associated with mining. This can add up to a significant increase in profits over time — perhaps in excess of over $100 million per year if no other miners use it.

And it could be the case that no other miners would use it precisely because of AsicBoost’s pending patent. The patent application is therefore controversial, as some believe that such a state-enforced monopoly on using technology could further centralize and skew Bitcoin’s mining ecosystem. About a year ago several Bitcoin developers even proposed changing Bitcoin’s mining algorithm slightly in order to make AsicBoost’s technology obsolete.

But the AsicBoost controversy really exploded onto the scene several weeks ago, as it was discovered that covert use of AsicBoost is incompatible with Segregated Witness, the protocol upgrade proposed by the Bitcoin Core development team. Moreover, it was revealed that Bitmain had implemented the technology in its chips. This might explain why the Chinese mining giant has been opposing the upgrade so far — though the company denies this is the case.

Patent Infringement

Now, it seems Bitmain may not even be legally allowed to have AsicBoost implemented in its chips.

While Hanke was known to have submitted a patent for AsicBoost along with RSK CEO Sergio Demian Lerner, Bitmain initially claimed to hold the patent in China. As such, the company said it shouldn’t be a problem — from a legal perspective — to apply the technology at least within the Chinese jurisdiction.

But it now seems that Hanke claimed his worldwide priority date at the end of 2013, while Bitmain’s patent application stems from 2015. And because of the International Patent System (PCT), Hanke’s application should apply to China as well.

“Although Bitmain has also filed a patent application in China with similar features, we are confident that our patent application has an earlier priority date,” Ye told Bitcoin Magazine.

The patent application is not Hanke’s anymore. Two weeks ago, he sold the patent to Little Dragon Technology, a company based in California. According to Ye, Little Dragon Technology plans to operate in the Bitcoin industry, though it was not yet revealed how, exactly.

Either way, neither Hanke nor Little Dragon Technology gave anyone permission to use AsicBoost. This suggests, at least according to Getech Law, that anyone using AsicBoost is infringing on Little Dragon Technology’s intellectual property. And while Ye did not want to name any specific companies that may be infringing on the intellectual property — Bitmain or otherwise — he did reveal it may be more than one company.

As the open letter states:

“To date, no individual or business entity has been authorized to use or sell products based on the ASICBOOST patent application, yet some bitcoin miner manufacturers have implemented various features of the pending ASICBOOST patent in their mining hardware and firmware, potentially infringing the pending ASICBOOST patent.”

Consequences

In the open letter published yesterday, Getech Law wrote that ASIC producers should immediately cease production and sales of AsicBoost-related products. Additionally, the letter said infringers should contact Getech Law and disclose their relevant production and sales records since 2015. And it called on people who know more about potential patent infringement to contact the law firm.

If ASIC producers do continue to produce or sell AsicBoost-related products, Getech Law warned that there would be subsequent legal action.

“The open letter (announcement) is the first step to enforce my client’s IP rights. We hope that the community can become aware of the potential infringement,” Ye told Bitcoin Magazine.

The future for AsicBoost itself seems unclear, too. While debate over whether or not to disable it on a protocol level is ongoing within Bitcoin’s technical community, the open letter spoke of an “unfair advantage” it could give to miners.

And, speaking to Bitcoin Magazine, Ye said:

“We do not want to monopoly the market based on the pending patent. That is, we hope anyone who wants to use the technology can come to us such that we can negotiate reasonable license agreements for them to use the technology.”

Bitmain stated that they were not available for comment at time of publication.

The post Bitmain May Be Infringing on the AsicBoost Patent After All appeared first on Bitcoin Magazine.

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Four Quick Questions and Answers About Ransomware and Bitcoin

WannaCry

Bitcoin got caught in another media storm this week, though only in a supporting role this time around. The ongoing ransomware attack by the name of “WannaCry,” sometimes also referred to as “WannaCrypt0r,” “Wcry,” “WanaCry,” “WannaCrypt” or “Wana Decrypt0r,” infected over 230,000 computers in over 150 countries over the past couple of days, and demands that victims pay a ransom in the cryptocurrency.

So what is ransomware, and what does Bitcoin have to do with all of this?

What Is Ransomware?

Ransomware is a type of computer virus that encrypts data with a secret key. Only if a payment is made, typically in bitcoin, is the decryption key provided so victims can regain access to their data — or at least that’s the promise. An infected computer is quite literally held ransom, for actual money: bitcoin.

Unfortunately, ransomware is quickly growing in scope, and fast turning into a booming business for cybercriminals. In 2015, some estimated $24 million was paid to unlock computers, according to the FBI; in 2016, it hit a dazzling $1 billion. And that’s only expected to get worse this year.

WannaCry, which started last Friday, is the biggest ransomware attack the world has seen so far. This is mostly because WannaCry is not only ransomware, but also a “worm.” This worm uses an exploit developed by the NSA that abuses a weakness in older Windows PCs, which lets it forward itself to more and more computers: over 230,000 of them at the time of writing.

WannaCry also affected several notable targets over the past week, including Spanish phone provider Telefónica, parts of Britain’s National Health Service (NHS), U.S. delivery service FedEx, German railways Deutsche Bahn, LATAM Airlines and more.

How Successful Is Ransomware?

Ransomware attacks seem to be relatively successful in general. According to research by cybersecurity firm Trustlook, for example, over one in three victims of ransomware pay up. And a survey by IBM even showed that 70 percent of businesses infected with ransomware paid the ransom.

WannaCry, however, has not been nearly as successful — or at least not yet. At the time of writing, some 40 bitcoins have been paid to the three Bitcoin addresses associated with WannaCry. At an exchange rate of $1,700, that adds up to about $68,000 in total gains for the attackers. This is perhaps a significant amount in itself, but still modest when taking into account that well over 200,000 computers have been affected, and the ransom demanded is between $300 and $600.

The damage has probably been contained, to a large extent, because it didn’t take long for a security researcher who blogs as “MalwareTech” to find an effective kill switch. He simply registered a website that was mentioned in the code of WannaCry, which disabled at least the initial version of the ransomware.

Additionally, WannaCry gave its victims a week to pay up — though the price to unlock the encrypted data does double from $300 to $600 after four days. Given that a week hasn’t passed since the first reports of infections, it’s possible there will be another surge of payments over the next week.

Why Does Ransomware Use Bitcoin?

Ransomware does not technically require bitcoin. Indeed, there are known cases of ransomware that existed decades before Bitcoin was even invented.

However, bitcoin (and similar cryptocurrencies) can make ransomware much more effective. This is mostly because Bitcoin transactions are instant, reliable, relatively anonymous, easy to verify, and irreversible. Additionally, Bitcoin payments can potentially be made programmable, so a payment automatically sends a decryption key to a victim once a payment is made — though WannaCry did not utilize this possibility.

At the same time, however, the Bitcoin blockchain is also completely transparent. This is why it’s possible to trace exactly how much has been paid to WannaCry. It also means that it may not be very easy for the attackers to convert their bitcoins into fiat currency, or even spend them. If they ever do try to move the funds without taking appropriate precautions, they could get caught. Instead they’ll have to first mix and scramble their coins, which is possible but not necessarily easy to do.

What Can You Do About Ransomware?

The main source of the ransomware problem is not so much Bitcoin, it’s insecure computers. The fact that any malware can nest itself into computers is a problem in itself. Even without ransomware, it means that files can be stolen, edited or otherwise corrupted.

The solution, therefore, is as simple as it is boring: make sure your operating system is up to date and secure. WannaCry in particular was able to affect so many computers because they were running older versions of Windows. Upgraded computers are no longer vulnerable.

Additionally, you want to make sure to never click suspicious links in emails you receive. WannaCry initially spread itself through such links.

Furthermore, you should make sure to back up your data regularly. If you have your data backed up, you should be able to simply update your computer and restore your files without having to pay anything.

And last but not least, it is not recommended that you pay the ransom. For one, you never know for sure that paying up will actually solve your problem; the attacker could simply lie or perhaps even encrypt your data again. And two, as more people pay the ransom, this trend is more likely to grow.

Though, of course, this is easier said than done. Choosing to not make a ransom payment may not be a viable option if your most valuable files are inaccessible and you don’t have them safely backed up elsewhere …

The post Four Quick Questions and Answers About Ransomware and Bitcoin appeared first on Bitcoin Magazine.

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Litecoin Has Now Deployed Segregated Witness

Litecoin activates Segwit

It’s official. Litecoin, one of the oldest and biggest altcoins by market cap, deployed Segregated Witness (SegWit) today. The protocol upgrade that was originally developed for Bitcoin and proposed by the Bitcoin Core development team locked in on Litecoin two weeks ago, and was enforced by a majority of hash power on the Litecoin network as of a couple of hours ago.

The Segregated Witness soft fork activated without major issues — though there was an early slip up by the biggest Litecoin mining pool on the network.

“F2Pool had a hiccup where they were not mining Litecoin correctly. For some reason their LTC pool was returning a BTC template to miners. We reached out to them and they fixed it right away,” Litecoin inventor Charlie Lee told Bitcoin Magazine.

SegWit

Launched in 2011, Litecoin was one of the first altcoins to gain significant traction. As opposed to some newer altcoins like Ethereum, Ripple and Monero, Litecoin is a straight fork of Bitcoin’s codebase but with a different mining algorithm and some changed parameters, such as faster confirmation times. This similarity to Bitcoin does mean that Litecoin suffers from similar weaknesses as Bitcoin, like transaction malleability.

And, indeed, that it can adopt similar solutions and improvements, like Segregated Witness.

While Litecoin inventor Charlie Lee has been advocating for activation of the soft fork since late 2016, miner support initially did not follow. This changed following the Global LTC Roundtable Meeting, an online meeting held amongst prominent stakeholders in the Litecoin industry, who are based particularly in China. The participants agreed on “Litecoin Global Roundtable Resolution 001 (2017),” which, among other things, holds that the mining pools would activate SegWit.

With its SegWit activation, the “silver to Bitcoin’s gold” has immediately reclaimed a place in the spotlight, and the markets have been taking notice. Having lingered in Bitcoin’s shadow for years at price levels below $5, Litecoin’s exchange rate surged almost tenfold in anticipation of SegWit. The altcoin reached almost $40 today and is trading around $33 at time of publication.

Bitcoin

Perhaps even more important, some prominent Bitcoin projects — like .NET Bitcoin library NBitcoin and wallet mSIGNA — announced to port their work to Litecoin now that it has enabled SegWit. Even more notable, Lightning Labs will roll out a version of their lightning network implementation on Litecoin, while ACINQ has tested their lightning software on the altcoin, too. Similarly, Bitcoin Core developer Johnson Lau, one of the authors of SegWit, has indicated that he will realize smart-contracting solution MAST on Litecoin.

Further down the road, Segregated Witness enables more innovations that could be deployed on Litecoin first. Confidential Transactions, Schnorr signatures and TumbleBit are all in the works for Bitcoin, and shouldn’t take too much effort to port to Litecoin.

Lee himself, furthermore, hopes that atomic swaps will soon see the light of day, enabling an instant and trustless altcoin exchange and lightning network type of transactions across different digital currencies.

“SegWit opens up the doors to many amazing features that can be added to Litecoin,” Lee said. “These include Lightning Network, MAST, Confidential Transactions, Schnorr Signatures and more. I think Litecoin can show Bitcoin that SegWit is indeed the best way to improve the protocol. So I think it will help get that happening sooner on Bitcoin.”

Segregated Witness is still pending activation on Bitcoin, where it requires 95 percent hash power support. It has stagnated at around 30 percent so far.

The post Litecoin Has Now Deployed Segregated Witness appeared first on Bitcoin Magazine.

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