Bitcoin Gold Is About to Trial an ASIC-Resistant Bitcoin Fork

Bitcoin Gold Is About to Trial an ASIC-Resistant Bitcoin Fork

It’s forking season.

After Bitcoin Cash (Bcash) forked from the Bitcoin blockchain to create a new cryptocurrency (BCH), and ahead of the SegWit2X fork that may do the same thing, a third Bitcoin fork is in the making: Bitcoin Gold (Bgold; BTG). But where Bcash and SegWit2X are scaling-related forks — both mainly increase Bitcoin’s block size limit — Bgold wants to re-decentralize mining by implementing a new proof-of-work algorithm.

“What was born as decentralized is now centralized,” Bitcoin Gold contributor J. Alejandro Regojo told Bitcoin Magazine, referring to the current state of Bitcoin mining. “With this fork, we want to show how Bitcoin can be as ‘Satoshi’ as possible, as social as possible, and as decentralized as possible.”

Mining Centralization

Bitcoin Gold was initiated by Jack Liao, CEO of Hong Kong–based mining hardware producer LightningASIC, and was first announced in late August. The open project has been gaining traction and support in the wider cryptocurrency space since, with a dedicated Slack as a main hub for discussion and organization. Bgold is currently being developed by the pseudonymous developer “h4x3rotab” along with a small group of volunteers contributing to the project in other ways.

The attention Bgold has attracted is probably in part because anyone who owns bitcoin (BTC) on October 25th will receive the equivalent amount of BTG. While this model has been criticized, particularly because it presents a burden on service providers and users, it has also proven successful. With the launch of Bitcoin Cash in particular, users eagerly accepted their batch of “free money,” while exchanges, wallets and other service providers proved relatively willing to integrate the new coin.

Further, the Bgold team believes that this distribution method should also benefit Bitcoin over altcoins as it provides an extra incentive to hold BTC on particular dates.

“But the key goal that we are trying to achieve with this fork is to build a perpetually ASIC-resistant version of Bitcoin,” said Robert Kuhne, another Bitcoin Gold contributor, in explaining the purpose of the project to Bitcoin Magazine.

Bgold contributors like Regojo and Kuhne think that Bitcoin’s proof-of-work hashing algorithm was essentially broken by the introduction of specialized ASIC (application-specific integrated circuit) mining hardware. In the early years of Bitcoin’s existence, individual users were often also miners; this has since become concentrated into relatively centralized data centers operated by professionals.

“And we’re now in a situation where 65 percent of hash power comes from a country that doesn’t like Bitcoin,” Regojo noted, referring to China’s recent clamp down on cryptocurrencies.

An Uneven Playing Field

And while mining is centralized, ASIC production is even more centralized, the Bgold contributors pointed out. Only a handful of companies currently produce such specialized chips.

This means that anyone who wants to be a miner in any meaningful way is beholden to these companies, Kuhne argued.

“The way the monopoly manufacturer currently operates is abusive to its customers — individual miners — and the industry at large,” he said, referring to major Chinese ASIC producer Bitmain. “Manufacturers can produce ASICs at a tiny cost, but miners have to buy at a high price. This violates the one-CPU-one-vote ethos as described in the Bitcoin white paper, because while everyone can buy CPU at the same price, the same is not true for ASIC hardware.”

Regojo and Kuhne see this as a fundamental problem — not something that free market dynamics can realistically resolve. They suggest that the barrier of entry to the ASIC market to compete with existing manufacturers is fundamentally too high to allow for open competition.

“You can’t build a factory without approval from the government and banking system. So there are really only a handful of entities in the world that have total authority over who can and can’t manufacture ASIC machines. And all this could potentially get much worse if and when those institution really start feeling the disruption from Bitcoin, which hasn’t begun in earnest yet,” Kuhne said.

Bitcoin Gold

As opposed to the Bitcoin Cash and (especially) the upcoming SegWit2X forks, Bitcoin Gold very specifically does not make a claim to be the “real” Bitcoin. Instead, the Bgold project hopes it can prove a valuable exercise for Bitcoin; a sort of test case for a hard fork that Bitcoin itself may one day require.

Concretely, Bitcoin Gold is now implementing the Equihash proof-of-work algorithm. This is already used by Zcash and is relatively ASIC-resistant.

Full ASIC-resistance, however, is thought to be impossible: Any mining algorithm could be subject to specialized chips. Like Vertcoin, the Bgold community therefore plans to re-deploy a new proof-of-work algorithm hard fork if it is found out that ASIC-chips for Equihash are being produced. (This plan alone, of course, could be a deterrent for any potential ASIC-producer.)

For security, the project plans to implement strong replay protection to avoid loss of funds for unsuspecting or non-technical users. It will also adopt a new difficulty re-target algorithm to prevent the blockchain from stalling: Difficulty is re-adjusted at every block instead of once every two weeks.

While the coin is set to launch two weeks from now, the Bgold codebase is not yet fully developed and ready to be deployed. Implementation of the new proof-of-work algorithm and replay protection, as well as the new difficulty re-adjustment scheme, are yet to be finished.

Nor are all the details for the project even ironed out.

Early announcements indicated that Bitcoin Gold would have a closed launch and a presale of coins. A new batch of BTG was to be mined in the first week after the fork and subsequently distributed to designated investors, not unlike an ICO. Proceeds of this “ICO” were then to be used for development and other Bgold-related purposes.

However, as interest in the project grew, this idea became more controversial. Not everyone involved with Bitcoin Gold likes the idea of an additional founders reward — something Bcash, for example, did not have.

Kuhne addressed the issue by stating: “We have heard a lot of feedback from the community, so this proposal will be replaced with an updated and improved plan. But we will not completely rule out the possibility of a modest pre-mine to provide a basic level of funding for the project.”

Disclaimer: The author of this article holds BTC and will therefore also own BTG at launch.


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Op Ed: Is There a Future for Banking in a Cryptocurrency-Dominated World?

Op Ed: Is There a Future for Banking in a Cryptocurrency-Dominated World?

What is the future of banking, central banking and financial intermediation in a world in which cryptocurrency is dominant? Let’s speculate a bit, with the proviso that no one can fully anticipate how these markets will evolve.

We can find hints in the speech by IMF head Christine Lagarde at a Bank of England conference in September 2017. She dropped some words that likely sent some chills down a few spines in the audience. She explained that cryptocurrency is not a passing fad but a genuine innovation in money. The only remaining barriers to widespread adoption are technical, fixable and likely to be overcome as the sector develops. This, she argued, has profound implications for the future of financial intermediation and central banks.

“In the future,” she explained, “we might keep minimal balances for payment services on electronic wallets. The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms with an edge in big data and artificial intelligence for automatic credit scoring … Some would argue that this puts a question mark on the fractional banking model we know today, if there are fewer bank deposits and money flows into the economy through new channels.”

She continued to press the point, as it relates directly to the Bank of England and the Federal Reserve.

“How would monetary policy be set in this context? Today’s central banks typically affect asset prices through primary dealers, or big banks, to which they provide liquidity at fixed prices — so-called open-market operations. But if these banks were to become less relevant in the new financial world, and demand for central bank balances were to diminish, could monetary policy transmission remain as effective?”

She put a question mark after that last sentence, but she might as well have made the statement: Monetary policy cannot be effective in this world. In fact, it is worse. It might not matter at all.

It’s an astonishing thing to consider. For more than a century, academics, regulators, captains of finance and high-level government officials have worked to find the perfect monetary policy to stabilize the macroeconomy, provide liquidity for growth without inflation and otherwise become masters of economic planning.

But this entire machinery is premised on two important conditions. First, the government must have the monopoly on money. It has held this for more than a century. Government prints the money, controls its supply, imposes legal tender and regulates against the enforcement of contracts denominated in unofficial currency. And second, most of this money has to be held in some way in the banking system. If you take away both of those, the cause of central banking has a serious problem pursuing any form of monetary planning at all.

That is indeed a very different world. And it is no wonder that the ruling class is concerned.

Today, banks like JPMorgan and Goldman Sachs are experimenting with blockchain technology and cryptoassets. And Lagarde’s own statement might be seen to portend the issuance of a new global cryptocurrency to replace the Special Drawing Right. The core problem of these large-scale attempts to reproduce the power of the distributed ledger is that it might be too little, too late. The model of a new world of banking and credit is already revealing itself.

Would Banks Exist?

How is conventional banking affected by cryptocurrency? Lagarde offers that it raises questions about fractional-reserve banking, the practice of keeping fewer deposits on hand than can be immediately paid out to customers at any one time. The practice has been well established for hundreds of years, and yet it can lead to unwarranted expansions of credit and fuel system-wide instability.

Consider the history of banking. What was the purpose of the bank? There have been traditionally three primary functions that banks have provided since the ancient world.

The first has been to provide safe storage for money itself. This is the warehousing function. It is essential and worth paying for. People need a safe place to store their money.

The second is the loan function. The more credible the warehousing function becomes, the more the bank is in the position to leverage its specie holdings for its credit-granting functions. This is the origin of fractional-reserve banking. The bank cannot pay all depositors on demand. Instead, it relies on its financial soundness and a rate of return for depositors who entrust the bank with the responsibility of maintaining its balance sheet.

The third is the clearing system. Because there is always counterparty risk in such transactions — the bank and the depositor must trust each other to tell the truth and make good on promises — the system settles transactions and certifies that all promises to pay have been kept. In the period between the transaction and the clearing, money becomes a credit issued and accepted based on trust.

What happens to these three functions in a crypto-based monetary economy? Let’s go through them.

Warehousing

That money needed a warehouse has always been taken for granted. This was a technological limitation of salt, gold, silver and so on. Specie takes up space. You need a secure space for it. It is also weighty and impractical for moving from space to space by a single individual. Murray Rothbard, in his book “Mystery of Banking,” regrets that these factors even exist and pointedly says that if people had carried coins rather than relying on paper money from banks, we could have avoided a century of financial panic and inflation. That’s a theoretically sound point that runs into practical limitations. The reason for notes to represent specie is to facilitate trade in a way that meets the needs of consumers.

However, thanks to Bitcoin, we can now see that this warehousing service was in demand due to physical factors and not fundamental ones. Bitcoin has all the attributes of traditional money but adds two advantages: it is weightless and takes up no physical space.

The money is “stored” in the cloud on the blockchain. The personal wallet serves the function of providing access via double-key cryptography. If you have your private key — and this can be on physical paper or on a device not even connected to the internet — you have all you need to set up your own private banking empire. Anyone in the world can do it without trust relationships, personal identification or credit history. The institutions that seem like banks — services like Coinbase that hold your key for you — maintain a full-reserve policy or risk losing the trust of their customers.

It is impossible to anticipate what kinds of crypto-derivatives will end up being securitized and traded in the future. Surely, the last nine years of the previously impossible should cause everyone to be humble in their predictive outlook. That said, there is good reason to believe that the diminution of counterparty risk inherent in every non-cash transaction will drive markets toward greater accountability in every sense. And this alone might solve the age-old debate about fractional versus full reserves with the best possible resolution.

The question does not have to be resolved by intellectuals and policies. It is settled by the market, so long as technology permits people to pay for goods and services with a spaceless and weightless money that requires no warehousing.

Clearing

As for clearing, the single most difficult-to-grasp feature of Bitcoin is the manner in which it reduces or eliminates counterparty risk associated with monetary exchange. Transactions are cleared as they are made. This has never before been possible in the history of money and finance on a geographically noncontiguous basis. With traditional money, for clearing to occur instantly, you have to actually be there, trading physical dollars for goods and services.

Cryptocurrency reproduces this exact financial arrangement on a peer-to-peer basis between any two individuals anywhere in the world. You are literally trading your stuff for his or her stuff. Ownership titles are rearranged when the transaction is confirmed in the ledger.

What role is then here for traditional banks to be the guardians of settlement? When it comes to clearing services, so far as I can tell, that role is eliminated for all transactions that are settled in the instant of their confirmation (the time delay involved in moving crypto is nothing more than a delay; it creates no credits).

What About Credit?

We are habituated into thinking that the whole world runs on credit. That’s because it does. This isn’t because we are financially irresponsible, are unable to say no, absolutely adore large financial institutions or are willing to pay high rates of interest. It’s because the sophistication of modern financial technology has been hobbled by old-fashioned payment technology that still operates today the way it did in the time of the Medicis.

In any case, the fundamentals are the same in conventional finance today as compared with the Medicis. It still relies on trust relationships, credit instruments that represent property but do not embody it, and a time delay for transactions to clear. As a result, every transaction that is not conducted in person via cash depends on some extension of credit and thus involves intermediating third parties, and that in turn necessarily involves some counterparty risk.

It is fascinating how little we understand this today, but the truth becomes obvious on close examination: Every transaction today is either based on cash (instant title exchange and clearing) or credit (which involves trust relationships and counterparty risk). Services like Venmo, Google Payments, PayPal or dozens of others are no different in this respect from Visa, Mastercard or American Express. They can be more or less expensive, charge different user fees, and employ different interfaces and security protocols. But in the end, these services all rely on credit terms and do not offer instant clearing. They simply cannot because the decrepit technology of national monies does not allow it.

Cryptocurrency as a means of facilitating exchange is different in another respect. Its value is not tied to a nationalized currency at all. Not only that, it has no value as a commodity or asset at all. Its value is based on the use value of services provided by the cloud-based distributed ledger.

The massive use of credit-based exchanges as we see in national monies would not exist in Bitcoin precisely because the technology disintermediates the financial industry, removing both the need for trust relationships as well as clearing services. Might there emerge a market for crypto-substitute monetary derivatives? Only the evolution of these markets can reveal this for sure, but this much remains true. It will not be about creating new money being allowed by the protocol. The distinction between money and money substitutes will be clear and not obscured by retrograde documentation technology.

At the same time, the scaling problem of prevailing blockchain solutions will likely necessitate a convention of using off-chain platforms for smaller transactions, as Nick Szabo has suggested. Such transactions do involve counterparty risk but not credit creation as such; such networks operate more like debit cards. The main blockchains will likely be used for final settlements while “lightning networks” become trust-based credit tools (money substitutes) — by choice but not by necessity.

Additionally, the massive industry associated with credit-based transactions includes a vast machinery of fraud prevention and prevention of identity theft. This is also made unnecessary because identity is cryptographic and not personal.

Credit Markets

All this said, there is still a role for credit markets in cryptocurrency. They emerge precisely as they would in a purely specie-based monetary regime in which everyone carried around their own coins or stored them in the home. If you have excess monetary reserves in your own possession, you may be willing to loan them for others to use and do so at a profit. In order to reduce the risk of default and guarantee your investment, you need collateral; this can take any form. You also need to establish a trust relationship, same as with any other loan market.  

The difference is subtle but foundational. When you loan virtual money, you lose title to that money, just as if you had transferred physical property. Contractual terms would specify the ways in which a later exchange would occur in accordance with the terms of use. Again, the way to think about this is how it works in a cash economy: You loan a friend $20 and hand him cash. You cannot get it back by force. As the lender you rely on establishing a contractual relationship that creates expectations for future payment, along with some measure of risk.

These markets have already developed. Companies like Bitbond and BTCPOP offer services both for lending money and borrowing money, with the terms of exchange favoring both parties. For now, such standalone services are risky simply because the upstart sector is replete with sketchy schemes and fraud (“Lend your BTC to me and I will pay you back, I promise.”).

Much more promising is a simple margin lender service provided by dollar/Bitcoin exchanges themselves. The borrower does not take direct possession of the coins but is rather extended by the exchange at the behest of the customer who wants to earn a regular rate of return. An example is the lending service provided by Poloniex. The trouble these markets have so far encountered is that holding crypto is more profitable than lending it at prevailing rates. This might not always be true.

As these markets develop, it would not be a surprise to discover that the rate of return for the lender would be above the rate one would earn from nationalized money. The risk of default would not be guaranteed in any way as with government-backed financial institutions, much less a central bank that is capable of printing unlimited amounts of money. On the other hand, this would also eliminate the moral hazard of making unwise loans or securitizing debt obligations without proper documentation, such as happened during the housing bubble.

In the century of central banking, we’ve seen interest rates decline inexorably and the terms of credit issuance shifting dramatically to favor longer terms, ever less collateral and ever more confusing titles for ownership. In cryptocurrency-based credit markets, we are likely to see the opposite trend: shorter terms, higher collateral requirements, very clear titles demarcating indisputable rights of ownership and enforcement of terms built into lending protocols.

The Future of Sound Money

Christine Lagarde is right: There are dramatic challenges to the status quo that are being offered up by the advent of cryptocurrency. Monetary exchange will operate the same as cash exchange, and the sophistication of our payment and settlement technologies will sync up with the sophistication of our financial tools.

In some respects, cryptocurrency might appear to be more stingy than our current highly leveraged, unstable and centrally regulated systems. In contrast, the new world will be financially sound, stable, radically disintermediated, decentralized and democratized because anyone, of any financial means and access to financial institutions, can participate within it.

We’ve only begun to think about what a radical change it would be if our money actually gained value over time (as crypto has for nine years, and the dollar did in the late 19th century), so that you actually grow more wealthy merely by not spending. Such a change would be huge, not only for finance but also for the culture at large.

For more than a century, the banking system has been used to fund the state, destabilize the economy, loot private savings, exclude people who don’t have access, promote financial dependency and even make violence possible on an unprecedented scale, all because we didn’t have a different technology for making possible monetary exchange. That monopoly is now being shattered. Sound money is born. The panic of the ruling class has just begun.

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Hyperledger and Linux to Offer a Massive Open Online Blockchain Course

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Hyperledger, the international blockchain collaboration of corporate giants and young startups in partnership with the Linux Foundation, is launching a new free Massive Open Online Course (MOOC) to meet the rapidly accelerating worldwide demand for blockchain education.

The pace at which the “red hot” blockchain technology market is evolving and increasing in popularity makes it difficult for the established education system to keep up with the demand.

In an announcement, Brian Behlendorf, Executive Director of Hyperledger said:

“Interest in blockchain technology is exploding. Software developers, product teams, and business managers are all desperately eager to figure out how this technology can solve real-world problems.

“This first introductory-level course is carefully designed for both non-technical and technical audiences, to bring everyone further up the learning curve and get started with it on their own business needs.”

The Linux Foundation, responsible for training and certifying more developers in open source software than any organization in the world, together with the worldwide open source community, is aiming to solve the hardest technology problems by creating the largest shared technology community in history.  

The MOOC will be on the edX.org website, a free online education platform started by MIT and Harvard University in 2012. The site is now a collaborative effort of more than 50 top-rated universities and colleges including Cornell, University of California Berkeley, the Sorbonne, McGill, Juilliard, the University of Hong Kong, Oxford, Notre Dame, the University of Tokyo and the University of Toronto.

MOOC is Designed for Technical and Non-Technical Audiences

Some universities, like the University of Edinburgh, MIT, Stanford, University of California Berkeley and Princeton University, have already begun to offer courses in blockchain technology and cryptocurrencies at the college level, while a new Blockchain University is tailoring its courses to professionals looking to upgrade their knowledge. The University of Nicosia in Cyprus offers the world’s first MSc in Digital Currency. But these courses are designed for the post-secondary and graduate knowledge level markets.

In contrast, Hyperledger’s MOOC is set up for both beginners and trained developers, and includes an introduction to the Hyperledger organization and its key business blockchain platforms, including Hyperledger Fabric and Sawtooth.

It covers key features of blockchain and distributed ledger technologies, current Hyperledger projects and common use cases, and the differences between various types of Hyperledger projects in the fields of finance, banking, Internet of Things, supply chains and manufacturing technologies.

The course includes how to install Hyperledger Fabric and Sawtooth frameworks and how to build simple applications on top of the Fabric and Sawtooth frameworks.

In a statement, edX CEO and MIT professor Anant Agarwal noted:

“Hyperledger and blockchain are two key skillsets that are increasingly in demand in today’s digital world. Our global community of learners have told us that they are seeking courses to help them gain the career-relevant skills they need for the modern workplace. We are thrilled to once again partner with the Linux Foundation to offer a course on this popular, in-demand subject that will provide the building blocks needed for success within the exciting and rapidly expanding field of blockchain technologies.”

Recent job numbers show that the demand for cryptocurrency jobs has doubled in the past six months and are soon to triple from 2016. The job board AngelList reports that cryptocurrency job postings remain one of the largest non-corporate startup opportunities..

Pre-registration is now open. The free Hyperledger course will become fully available on October 25, 2017 (with the option to add a verified certificate of completion for $99).

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India Trials a Power Grid on the Blockchain to Incentivize Sustainable Energy

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Access to reliable energy is the foundation of economic development and human society. Yet reliable energy can come at a steep environmental cost.

Today’s energy systems are being rapidly reexamined and transformed by both private businesses and public organizations. Innovation coupled with changing policy and consumer demands has prompted The World Economic Forum’s System Initiative On Shaping the Future of Energy. The WEF noted that four out of five of the Initiative’s goals can be addressed in some way through the application of blockchain technology:

  1. Enable innovation to accelerate opportunities towards smarter and more efficient energy use;

  2. Enable the cost-effective reduction of energy’s environmental footprint;

  3. Enable universal access to affordable reliable energy; and

  4. Improve system resilience and security.

One area of application that has been of interest for its utility, efficiency and sustainability is the blockchain application to microgrids.

MaaS in India

Multinational IT provider, Tech Mahindra, and the peer-to-peer based energy trading platform, Power Ledger, have created a new service for clientele specifically interested in microgrids. Microgrids are distributed energy systems that act as a single controllable entity with respect to a larger energy grid network.

A microgrid’s key feature is that it can connect and disconnect from a larger grid network, enabling it to operate both as a part of a larger grid or in “islandmode” as its own grid. The new service offering includes a package of technical services and a platform for customers to set up and operate their own microgrid called “Microgrid-as-a-Service” (MaaS).

The MaaS platform integrates multiple energy assets such as solar, battery storage, electric vehicle chargers and analytics to measure energy efficiency. MaaS is intended to offer resilient and reliable electricity that is also local and less carbon reliant.

While the MaaS product provides technical control over a microgrid, Power Ledger’s blockchain-based platform acts as an added transactional layer that reimburses users for excess clean energy produced by allowing peers to store and trade it at a local level. The blockchain also manages all energy debits and credits of accounts, automates trading and measures each participant’s ongoing financial statements. The blockchain does this by tracking the data flow from smart electricity meters — an Internet of Things application for the energy sector.

The Power Ledger blockchain-based software platform will begin in late 2017 as a virtual trial run on those Tech Mahindra campuses in India that are already hooked up to microgrids.  

Location proves to be a key factor for the project’s success based on two reasons. Data from urban microgrids are typically more complex due to population density; they can, therefore, better demonstrate the strengths of using a blockchain-based platform for microgrids. Also, urban microgrids are much more common in India as opposed to OCED countries where they are mostly employed in rural settings.

“Trialing in India is a major opportunity to change the way communities source the energy required to take part in a modern global economy,” said Power Ledger’s Managing Director, David Martin.

An Economic Environment Ready for Disruption

The fact that India’s economy has been declining since the beginning of 2017 enhances the project’s case for using a blockchain to improve the country’s bottom line. In the first six months of 2017, the country’s gross domestic product fell from 7 percent to 5.7 percent. This may be due in part to reform efforts by Prime Minister Narendra Modi in the last year.

In June, Modi announced a complete overhaul of India’s tax system. Back in November 2016, he banned the 500 rupee ($7.50) and 1,000 rupee ($15) paper notes, calling them “worthless pieces of paper,” as a way to limit fraud and corruption. These banned notes were said to make up about 86 percent of all cash in circulation, according to CNN Money.

Opportunities for digitization using blockchain technology, and especially for cryptocurrencies like bitcoin, are a much needed alternative to several of their systems that do not already have effective nodes of trust built in.

Power Ledger has already proved that its platform can work for both homeowners and businesses. In Busselton, Australia, their peer-to-peer trial showed households can save about $470 ($600 AUD) per year on electricity bills. The forward vision for using blockchain-based platforms to trade energy within microgrids is to enable building owners, campuses, and even “smart cities” and other communities to produce and manage their own affordable electricity and then trade any excess generation.


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GoldMint Brings the Blockchain to Global Gold Markets

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Buying, selling and trading gold is about to become easier, safer
and more efficient than ever thanks to
GoldMint’s innovative new
blockchain models.

Gold has a long history with investors as a revered store of
value. As an asset, it provides a reputable alternative amid the instability of
fiat money and can serve as a safe haven during a global financial crisis. More
recently, gold has served as a viable hedge for the growing markets of
cryptocurrencies and their tendency toward hyper-volatility.

GoldMint aims to make a mark in today’s evolving markets by
backing its virtual token, GOLD, with actual gold from prevailing precious
metals ecosystems. The company’s goal is to drive the future of gold markets
using an automated vending machine model — one where individuals can purchase,
sell and trade gold with ease and efficiency using the GOLD crypto asset.

The company aims to make its native GOLD tokens the unit of trade
for these transactions, exchangeable for real gold via a process that verifies
the quality of the metal traded by small sellers using the blockchain. Because
of the importance of ensuring that gold on exchanges be of a certain quality,
GoldMint has rated its crypto assets against the London Bullion market (LBMA).
In other words, one GOLD crypto asset equates to one ounce of gold on the LBMA,
which is rated 999 in purity. Therefore, any gold that becomes a part
of GoldMint’s ecosystem must possess that pure or derived level of gold
content from weight.

Of practical significance is the company’s
comprehensive peer-to-peer (P2P) solution that allows businesses such as
pawnshops to raise credit.
Moreover, GoldMint seeks to deliver on a feature called “vending
gold,” introducing something it calls the “Custody Bot.”

When asked about the roadmap ahead, founder and CEO Dmitry Pluschevsky had this to say:

“We plan to build a global P2P system of crediting secured by gold
so that some people would be able to help others regardless of politics and
without risk for both sides.”

Custody Bot and the Future of Gold Vending

Gold vending reflects a new approach to an old concept: The Custody Bot buys gold and then a person can purchase the GOLD crypto asset, which is equivalent to a given amount of physical gold. This concept has sparked interest in a number
of affluent locales around the world, the most popular of which is
Dubai.

With this vending model in mind, GoldMint plans to introduce a
concept allowing for the purchase of gold on the blockchain, using
representative tokens that are traded quickly, securely and economically. This
is where GoldMint and its Custody Bot come in.

Custody Bot is the solution
that GoldMint utilizes to ensure that the collateral offered by a business such
as a pawnshop can be audited and verified. It provides a means of offering a
temporary hold, purity inspection and long-term storage vessel of physical gold
on the GoldMint blockchain. Once the Custody Bot has completed the assessment
process for the gold, it can be safely stored until it is retrieved via a
special code unique to each item stored. This process not only affords a higher
level of verifiability, but facilitates the trustworthy delivery of information
to the blockchain.

Using this innovative approach, lenders profit when the owner
reclaims the stored gold in Custody Bot, or in the case of an unclaimed pledge,
when it is sold off by the pawnshop. GoldMint thus serves as a valuable tool
for investors seeking to add gold to the blockchain for speed and security,
with the added benefit that they can independently verify the purity of their
gold.

“One of the next generations of Custody Bot will operate in
retail, on the street,” said
Pluschevsky. “A
new generation of pawnshops in the form of vending machines will appear at each
gas station. And the next step will be the home Custody Bot, which will allow
you to evaluate the gold items while storing them at home.

GoldMint Crowdsale Ongoing Now

GoldMint’s crowdsale, which commenced
on September 20, allows participants the opportunity to purchase
MNTP token. This token will eventually migrate over to the blockchain under
the name MNT, and will be used to verify the GOLD transactions on GoldMint’s
blockchain.

Note: Trading and investing in digital assets is
speculative. Based on the shifting business and regulatory environment of such
a new industry, this content should not be considered investment or legal
advice.

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Interview: Cryptographer Silvio Micali on Bitcoin, Ethereum and Proof of Stake

Interview: Cryptographer Silvio Micali on Bitcoin, Ethereum and Proof of Stake

Silvio Micali is an MIT professor and Turing Award–winning cryptographer known for his work in technologies that form the bedrock of blockchains today: public-key cryptosystems, digital signatures, pseudorandomness and multiparty computations. He is also the co-inventor of the zero-knowledge proof.

In the ’90s, he worked on Byzantine agreement, a protocol for getting nodes in a distributed system to agree on a state change. And in 2012, he and long-time collaborator Shafi Goldwasser were co-recipients of the A.M. Turing Award, essentially, the “Nobel Prize in computing.”

Upon learning about Bitcoin three years ago, Micali turned his attention from mechanism design, which had consumed him for the previous seven years, and dove headlong into creating a proof-of-stake algorithm. His project is called Algorand.

Put simply, Algorand relies on a novel form of Byzantine agreement with only nine expected steps. In each step, committee members, chosen at random in a private lottery, are replaced. The result is a high-security system with a negligible risk of forks.

According to Micali, recent tests show Algorand can process 2 MB blocks in 17 seconds, compared to Bitcoin, which produces a 1 MB block every 10 minutes. (A paper on these results will be presented at SOSP, the biennial ACM Symposium on Operating Systems Principles, later this month.)

In an interview with Bitcoin Magazine, Micali explained why he thinks proof of stake is superior to proof of work, the consensus algorithm that underlies most cryptocurrencies today, including Bitcoin and Ethereum. Although Ethereum, more often viewed as a smart contract platform, aims to transition to proof of stake next year.

Unnecessary Evil

Micali thinks proof of work was a great idea when it first came out, but now that we have seen the consequences, he calls it an “unnecessary evil” for several reasons.

“The first time I heard about Bitcoin, I saw all the difficulties. To me, the main difficulty is the waste of computational resources. That is really appalling,” he said. “It drives up prices and depletes the planet of resources.”

Second, he sees miners as “a new center of power” and an orthogonal force to the real users of the system: the coin holders.

“If five mining pools can control what goes in or does not go in a block, in what sense is the ledger decentralized? You don’t want miners having control over the ledger, particularly when they have low margins, are far away and accountable to no one. I think it is a recipe for disaster,” he said.

Finally, transaction ambiguity does not sit well with him. In Bitcoin, occasionally two blocks are found at roughly the same time, creating a temporary fork in the chain. When that happens, the branch with the greater hash power is elongated, while the other and its blocks “disappear.” If your transactions happened to be in an orphaned block, it will eventually get picked up again in the main chain, but for Micali, the idea is unsettling.

“Every time I see my transaction is in a block, I worry the block may disappear. But never mind anxious people like me; banks may not be willing to take on the additional risk,” he said. “Can you imagine a financial world where wire transfers could be taken back?”  

Natural Democracy

Micali thinks proof of stake is a better option. In proof of stake, there are no miners, just the coin holders. Further, a coin holder’s ability to create or validate a block is based on how many coins in the system he or she owns.

“This is a natural interpretation of democracy,” Micali said. “Your influence in maintaining the integrity of the system is based on how much you are really invested in the system.”  

But there is a catch: creating a proof-of-stake algorithm is hard to do. While several projects claim to have come up with a secure protocol, Micali thinks some of those claims are questionable. “The fact is, people can claim anything they want,” he said.

One of the biggest challenges in proof of stake is the “nothing at stake” problem. If the chain forks, the optimal strategy for any coin holder is to extend both chains to earn additional block rewards or to double spend. That goes against the central design goal of all blockchains: getting users to converge on a single chain.

Some projects are looking at ways to sculpt their proof-of-stake protocols by adding perks or punishments to get coin holders to abide by the rules. As part of that, some proof-of-stake systems require users to put up a type of security deposit or bond.

Micali feels a well-designed proof-of-stake cryptocurrency should stand on its own, however, without extra measures. He thinks bonding opens doors to bad actors.

“Let me ask you, what fraction of your disposable income can you put on the table and not touch?” he said and suggested that honest people will put up only a small amount, ceding control to bad actors with big pockets.

“The danger is that only bad people will give up control over a large amount of money to manipulate the system. And if they earn much more money by misbehaving, they will be happy to lose what they put on the table,” he said.

He also disagrees with the idea of using punishment to get users to fall in line.

“A weak state rules through threats and fear,” he said, comparing the practice to barbaric punishments used by some nations to fight crime. Why do they do it? Because criminals are so rarely caught, he said. “So once they catch one, they disembowel the poor guy.”

He continued, “Do you want to oust somebody who misbehaves? Of course. But a well organized system is one in which you don’t need to punish people.”

Bitcoin and Ethereum

Most people view Bitcoin solely as a cryptocurrency, but Micali thinks the greatest value of Bitcoin and Ethereum are as enablers of smart contracts, in which users can stipulate if-then conditions around payments.  

“At the end of the day, doing only payments is easy,” he said, adding that he did not want to trivialize the problem. “Of course, decentralized payments are better than centralized payments, but what really differentiates a cryptocurrency from any other form of money is that you can actually do a smart contract.”

Based on that, he thinks that both Bitcoin and Ethereum would benefit from implementing the best consensus algorithm available. Currently, both systems are “huffing and puffing,” he said. Bitcoin is constrained to 7 transactions per second, while Ethereum can process only 15 per second, compared to Visa’s 2,000 per second.

“If the blockchain scales, isn’t it better for Bitcoin and Ethereum? If the blockchain has a [mathematical] proof of security, isn’t it better for its users?” he said. “If the blockchain cannot be hijacked by miners who are accountable to nobody and live in some faraway jurisdiction, isn’t that a plus for all users?” Micali thinks so.

The post Interview: Cryptographer Silvio Micali on Bitcoin, Ethereum and Proof of Stake appeared first on Bitcoin Magazine.

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China’s ICO Ban Puts GigaWatt In Unique Territory

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China has long been a dominant player on the global Bitcoin map. By 2016 over 90% of Bitcoin’s global trading volume took place there. Moreover, mining operations were in abundance due to China’s cheap electricity. It is no coincidence that Bitmain, the world’s largest Bitcoin mining equipment manufacturer, is a Chinese company.

While China still dominates crypto mining and mining equipment manufacturing, the country’s Bitcoin trading volume has fallen. When regulations led to bans on no-fee trading and restrictions on Chinese Bitcoin exchanges in early 2017, Bitcoin trading volumes in China plummeted. Bitcoin trading activity diverted to countries like Japan.

 

At the beginning of September, China issued a ban on Initial Coin Offerings (ICOs), an unregulated cryptocurrency-based crowdfunding practice that attract capital for new startup companies and projects. This regulatory act sent shock waves through the global Bitcoin community.  

 

As part of the ban, authorities requested that ICO participants be refunded for their contributions. Moreover, the People’s Bank of China and China’s central bank demanded that Bitcoin exchanges be closed.


Mining Resilience 

 

As an emerging presence in the global crypto-mining industry, U.S.-based mining solution provider, Giga Watt, stands in unique territory given theses recent developments. Located in America’s Pacific Northwest—in close proximity to a number of power-producing hydroelectric dams—the Giga Watt Project is proving to be North America’s new major crypto mining player.

The Giga Watt Project’s founder and CEO, Dave Carlson, has little concern over China’s ICO ban: “I don’t see the ban having a large impact on Bitcoin. I’m not convinced that ICOs are inherently linked to the ecosystem.”

While Carlson believes that Chinese authorities still see value in the rapid growth of cryptocurrency, he thinks that this value has been trumped by their will for regulatory control. However, China’s regulatory developments haven’t affected the the Giga Watt Project’s strategic direction. “Because there are many other blockchain processing opportunities outside of Bitcoin, it’s not even a blip on our radar,” noted Carlson. He added, “Personally, I predict that ICOs will return to China, but only on their terms.”

In the meantime, Carlson will continue to lead the Giga Watt Project’s aim of building a mining network unlike anything before it. Currently, the project has three operating units, with 2.25 megawatts ready for tokenization. In addition, three of Giga Watt’s state-of-the-art Giga Pods are now complete. Access to Giga Watt services will be allocated to token holders on a first come, first served basis.


Blockchain-based Computing

A key takeaway in Carlson’s response to China’s ICO ban is what he envisions for the future. Bitcoin mining will likely pale in comparison to new forms of blockchain-based computing methods, and Carlson sees this as one way the industry will mature and stabilize. “As Bitcoin’s value rises, the ability for miners to drive difficulty by adding hashpower becomes harder and harder as much more computing is required.” In this matured industry, Carlson anticipates that Bitcoin’s blockchain will be leveraged, pointing to RSK’s smart contract as an example. “I am hopeful that blockchain-based computing will boost revenue and provide new opportunities.”

The post China’s ICO Ban Puts GigaWatt In Unique Territory appeared first on Bitcoin Magazine.

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Bitcoin Price Analysis: There May Still Be Some Life in These Exhausted Bulls

Bitcoin Price Analysis

Over the last week, the BTC-USD market has seen some major price swings. At one point, the price nearly reached $4500 only to see it pull back down to the low $4100s. And now, within two days, the price has topped back out in the low $4400s. There has been some major chop and seemingly erratic dumps and price hikes, but overall there seems to be a common upward trent within the macro market movements:

Figure_1 (10).JPGFigure 1: BTC-USD, 4-Hour Candles, Bitfinex, Macro Trend

Since the bottom of the bear run last month, bitcoin has seen several rallies that have continued along a generally positive trend. The figure above shows a trend of higher highs, higher lows and an upper/lower boundary that is converging. This type of price activity is called a rising wedge.

Coupled with this price growth is a trend of decreasing volume throughout the length of the wedge. A rising wedge is generally a bearish trend that shows weakening bullish pressure as each subsequent rally becomes smaller and smaller. As the price corrects, there are rallies that bring the price to new highs, but ultimately rally on smaller and smaller volume.

As of the time of this article, the latest rally has failed to make a new high in the low $4400s. A breakdown of this wedge could lead to a substantial price drop of approximately $500 below the point of breakdown. The approximate price target would be around $3700.

Although rising wedges are bearish in nature, that doesn’t mean new highs aren’t in store for bitcoin. The macro trend is currently showing a potential bearish move, but there is still some strength in the market. The market is currently trending above the 50 EMA and 200 EMA which, by many standards, is representative of a trending bullish market. Although the price is trending upward and the overall EMA signals are showing potential upward continuation, there are pretty clear signs of bullish exhaustion on the macro scale:

Figure_2 (10).JPGFigure 2: BTC-USD, 4-Hour Candles, Bitfinex, Bullish Exhaustion

As stated earlier, the rising wedge is paired with decreasing volume which is a clear giveaway that upward momentum is waning. To complement this exhaustion, the RSI and MACD are showing clear signs of bearish divergence in the current market and are demonstrating a lack of the bullish momentum necessary to sustain a bull market.

If the rising wedge breaks to the bottom, we can expect the support levels to lie on the Fibonacci Retracement values shown above. The ultimate price target of the rising wedge would have BTC-USD testing the 50% retracement values.

On a very, very macro scale, there are clear signs of overall bullish exhaustion since the beginning of its run from the low $1000s:

Figure_3 (10).JPGFigure 3: BTC-USD, 1-Week Candles, Bitfinex, Macro Bullish Exhaustion

Two very clear indicators of bullish momentum loss lie on the RSI and the MACD. The price of bitcoin has pushed to strong, new highs but it has left the momentum indicators weakening. The RSI is showing strong macro divergence, and the MACD is on the verge of flipping bearish for the first time since the ETF was denied back in April.

It’s not hard to argue that bitcoin has seen heavy price growth and needs a little room to breath. It is entirely possible the market won’t see any strong pullback and it may go sideways. However, in the event that a sustained market pulls the price down, we can expect to find support along the midline of the Bollinger Bands in the low $3000s. It’s important that the above chart and market implications of this macro divergence are occurring on candles that are one week. So, while this doesn’t mean the market will just suddenly plummet, it is important to understand that a substantial price drop could be in bitcoin’s future.

Even though I gave plenty of bearish arguments, it should be noted that these predictions are on a macro scale, and the immediate trend is showing strong support along the 50 and 200 EMAs. The market is bullish until proven otherwise. As the saying goes: “the trend is your friend.” Bitcoin has had one heck of a year so far, but I think it’s important to point out the clear signs of a macro bullish exhaustion:

Summary:

  1. Bitcoin is finding support and showing a bullish trend along the 50 and 200 EMAs.

  2. On a macro level, the trend is pushing upward but is showing a potential bearish move if the market breaks out of the rising wedge identified in Figure 1.

  3. A breakout of this wedge would have its price target in the $3700s.

Trading and investing in digital assets like bitcoin, bitcoin cash and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

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Op Ed: A Roadmap For How the Blockchain Can Open Up Foreign Property Investment

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For most individuals, investing in foreign property seems out of reach. The barriers, however, have far less to do with one’s income and more to do with issues around information, namely quality and verifiability. It is not just the cost of property but also the expense in hiring local advisers that makes foreign real estate a rich man’s game.

Blockchain technology has the potential to significantly lower these barriers, making property investment a viable option for a larger swathe of the population. In short, distributed ledgers can provide greater transparency into the availability, detail and oversight of properties in more inaccessible areas.

Tokenization makes real estate investments more liquid and divisible among a greater number of people — an attribute that greatly reduces transaction costs and increases economies of scale.

The various levels of complexity are the reason why foreign real estate investors often resort to hiring local advisers. The costs incurred in hiring local advisers or services can add up to more than the actual property.

As business lawyer, economist and Brickblock adviser Dr. Wolfgang Richter notes, “The various fees make it unfeasible for people to invest small amounts; thus, investing is only advantageous for those with a lot of capital.”

The decentralized, fluid and incorruptible nature of blockchain technology may present a solution to the barriers that aspiring property investors are confronted with.

Providing a Trusted, Verifiable Source of Data by Demystifying Information

As it stands, one of the greatest challenges for potential investors is understanding whether a property is appropriate for investment.

Investors may see a property they like — but how can they understand whether the financial, cultural and security prospects of the surrounding area fit their risk profile? And how can they trust that the information is even correct? Ensuring the accuracy of data and overcoming language barriers makes this process extremely difficult.

The same goes for valuations — how verifiable are they? How is a potential buyer who hasn’t set foot in the country meant to ensure that the current value is fair?

Companies and advisers interested in widening their client pool to international investors can collect, store and present critical information to individuals in a clear and transparent fashion. According to Richter, this information includes “a thorough description of the assets, including a valuation by an external expert, as well as documentation that demonstrates a credible management structure.”

In essence, the distributed ledger eliminates much of the complexity of compiling, verifying and ensuring the integrity of real estate data.

Eliminating the Need for Costly Trustee and Company Structures

Most trustee and company structures exist solely to hold and maintain records. Ensuring that the appropriate data is filed, maintained and accurate — especially as requirements differ across each country — requires extensive resources.

However, with blockchain technology, all data concerning the investment deal and ongoing valuation can be stored in a decentralized database where it can’t be altered or manipulated.

Between not having to pay high marketing fees for documentation and additional costs to store and verify information, investors have more cash to park in their investments.

Reducing the Need for Local Finances and Administration

Tokenization enables real estate investments to be divided and translated into digital tokens. Tokens can be distributed and traded between investors without any need to transfer into local currency.

The ability to buy and sell property via tokens eliminates the need for local bank accounts, which often require a high initial deposit from foreign individuals or are outright impossible to open due to residence requirements. Thanks to the nature of borderless cryptocurrencies, the size of local documentation is vastly reduced — further lowering administration costs. In addition, follow-up transactions for investors can be handled easily because of the liquid nature of the tokens and because of the transparency afforded by the distributed ledger.

Transforming Real Estate Into a More Liquid Asset

Tokenization also turns a somewhat illiquid asset into a highly liquid one. Tokens can be traded or liquidated much more easily and rapidly than an individual property or shares in a typical real estate fund.

Opening Up Accessibility to a Wider Variety of Foreign Real Estate

Dividing up a real estate investment into smaller-sized tokens not only makes it more cost-effective to invest in foreign property, but also enables investors to deploy their capital across more properties. As the amount required to invest can be low, individuals can spread out risk by investing in a variety of tokenized real estate offerings.

A blockchain-backed platform investing in foreign real estate is nascent, not exotic. As companies or advisers build up track records, grading systems aligned to the data in the distributed ledger can help individuals evaluate the risk associated with specific offerings. Investors will be able to gauge the aptitude of potential real estate investments as easily as they do stocks or bonds.

“Regulation will help this process along,” says Richter. Of course, regulators are still getting their heads around the necessary oversight for tokenization structures. There are also questions about tax issues. Yet, as Richter notes, “There are already structures available based on other types of existing offerings which can provide guidance.”

All in all, blockchain technology stands to open up a wider variety of foreign real estate assets to a larger proportion of the population. While some may feel that investing in property may not make sense for those with less capital than today’s investors, the reality is that real estate — like other real assets — can help offset volatile currencies or inflation. It’s a proposition that many individuals have found themselves excluded from. As with many other areas of finance, blockchain technology stands to make it more inclusive.

This is a guest post by Jakob Drzazga. Opinions expressed are his own and do not necessarily reflect those of BTC Media or Bitcoin Magazine.

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