#116: Ethereum's latest crisis shows again why decentralization is so difficult

Forking hell

Not rendering correctly? View this email as a web page here. Chain   Letter Blockchains, cryptocurrencies, and why they matter 01.17: Forking hell Welcome to Chain Letter! Great to have you. Here's what's new in the world of blockchains and cryptocurrencies.  Ethereum was meant to get a major revamp this week. The software upgrade, which was scheduled to begin on January 16 and take a few days to complete, was supposed to introduce five new features designed to improve the blockchain network's performance and set the stage for additional future upgrades. But after third-party researchers realized one of the changes would make the network more vulnerable to hackers, the so-called "hard fork" had to be postponed at the last minute.   The decision to postpone by Ethereum's developers was not merely an inconvenience for those who want it to evolve and eventually become a blockchain-based alternative to the web. It once again highlighted how Ethereum may need to sacrifice some of its beloved "decentralization" if it is ever to achieve its ambitious mission.   Postponed again: Four of the features of the upgrade, called Constantinople, were supposed to improve the speed, efficiency, and cost of transacting on the network. The fifth, which until this week had been the most controversial, would have changed the network's economics by shrinking the cryptocurrency reward that the network's "miners" receive in return for using their computing power to secure the blockchain. This move is designed to prepare miners from a planned move away from the current method of securing the chain, which rewards computing power above all.   Constantinople has been postponed once before. It was originally slated for last November, but developers discovered a bug while testing it in October and decided to delay the upgrade until January. Things were going smoothly this time until Tuesday night, when ChainSecurity, a startup that audits smart contracts, came across another potential problem.   Unintended consequences: The ChainSecurity team discovered a dangerous unintended consequence of one of Constantinople's changes: certain smart contracts, small computer programs that are stored in Ethereum's blockchain and designed to automatically move cryptocurrency around, would now be vulnerable to a type of malicious attack called "re-entrancy." Attackers could have exploited the bugs to trigger the contracts to do things they aren't supposed to do, like send them money so they could run off with it, according to ChainSecurity cofounder Petar Tsankov. Shortly after ChainSecurity flagged this for Ethereum's developers, they decided to postpone Constantinople out of "an abundance of caution."   Though most of the community appeared to be on board with Constantinople, many miners harbored misgivings about their rewards being cut. The risk is that the change will drive many miners to quit because they will be unable to profit, and mining power will become more concentrated, says Peter Pratscher, CEO of Bitfly, a Vienna-based startup that runs Ethermine, the network's largest mining pool (Ehtermine's roughly 75,000 miners represent around a quarter of Ethereum's total mining capacity.)   It's...complicated. There are other, wider issues, beyond bugs and smaller mining rewards. With well-funded competitors like EOS emerging, many in the community feel that the Ethereum needs to develop efficient decision-making processes, particularly for highly technical decisions, without sacrificing decentralization.   In practice, though, the notions of decentralization and centralization aren't so black and white. A truly decentralized network has no single point of failure, but the phenomenon is tough to quantify, and the term tends to mean different things to different people depending on the context. Ultimately, Ethereum's goal is to build a censorship-proof version of the web that billions of people will adopt. Technical decisions are bound to get complicated as the system gets more complex, and the risk of unintended consequences will only be heightened. To pull it off, Ethereum may need to become more like a traditional organization. Perhaps a bit of centralization is unavoidable. (also see "Ethereum thinks it can change the world. It's running out of time to prove it.")   As for Constantinople, it's on hold indefinitely for now, but we are likely to learn more about the next steps after the core developers meet again on January 18. Technology, delivered. Discover more cutting-edge tech by signing up for our other newsletters today. Loose Change Fill your pockets with these newsy tidbits. A company called Valor is apparently attempting a "hostile takeover" of XRP, Ripple's cryptocurrency. (Axios) US cryptocurrency payment processor BitPay says it handled more than $1 billion worth of payments in 2018, for the second consecutive year. (CoinDesk) Developers in the Marshall Islands are still planning to launch a controversial national cryptocurrency this year, despite the international controversy it has sparked. (ETHNews) A new privacy-focused cryptocurrency called Grin has launched, and it's been estimated that $100 million has already been invested in resources for mining it. (CoinDesk) The Money Quote "There is a lot of uncertainty. Regulators see this and they think 'what exactly are we giving you permission to sell a futures product on?'"   —Crypto-focused attorney Nelson Rosario. Rosario and other insiders tell  The Block that financial regulators are wary of approving Ethereum futures contracts because they don't understand the implications of the network's planned transition to an unproven proof-of-stake consensus mechanism.. We hope you enjoyed today's tour of what's new in the world of blockchains and cryptocurrencies. Send us some feedback, or follow me @mike_orcutt. Was this forwarded to you, and you'd like to see more? Artificial intelligence is here. Own what happens next. Attend EmTech Digital 2019 March 25-26, 2019,‌ St. Regis Hotel San Francisco, CA View this in a browser You received this newsletter because you subscribed with the email address: ‌contacto1745.send-mail@blogger.com‌ ‌edit preferences   |   ‌unsubscribe‌   |   follow us                ‌ MIT Technology Review One Main Street Cambridge, MA 02142

SegWon't

To view this email as a web page, go here.

Sponsored by   January 17, 2019 SCALING SEGWIT: It's been over a year since the scaling upgrade known as segregated witness, or SegWit, was activated on the bitcoin network. Yet, only an estimated 36 percent of all bitcoin transactions are actually using it. Why the minimal adoption rate? It’s largely because, like any backward-compatible upgrade (otherwise called a soft fork), SegWit ensures participants in the bitcoin network that haven’t upgraded to the same software can still follow the same network, only under a slightly less-restricted ruleset. As a result, some bitcoin businesses and exchanges have put off making the switch to enable SegWit transactions despite the low-fee advantage that it presents when sending bitcoin payments. “Some of the [venture capital]-backed companies don’t care about paying bitcoin fees,” said Rusty Russell, a developer for blockchain technology firm Blockstream. “They can burn a million dollars a week on bitcoin fees and nobody really cares because what they care about is user adoption numbers.” Still, Russell and Aaron Lasher, chief strategy officer at bitcoin wallet company BRD, suspect that pressure for SegWit adoption will increase for businesses in the event of a bitcoin price increase. Full Story CANADIAN CONCERNS: More than a month after Canadian crypto exchange QuadrigaCX won a legal dispute with a banking partner, users are still complaining about delayed withdrawals, concerns only exacerbated by a recent announcement that the exchange's founder and CEO, Gerald Cotten, died of Crohn's disease in early December.  A number of users have been complaining about long-delayed funds on social media platforms such as Reddit and Twitter. One user, Canadian resident Xitong Zou, told CoinDesk that these concerns come from QuadrigaCX’s poor communication with its customers. Though the company is active on social media, its team does not answer questions which may reassure clients, he said. Part of the problem in approving withdrawals comes from the legal dispute, said José Reyes, managing director and owner of Billerfy, QuadrigaCX's payment processor. He told CoinDesk that his company was having issues finding a banking partner to issue funds, and that delays may continue for the foreseeable future.  In contrast, interim president and CEO Aaron Matthews wrote in a letter to customers that “our goal was to resolve this issue within the next two weeks and we remain committed to that goal.” Full Story​ EXPENSIVE GRIN: Grin, a new privacy-oriented cryptocurrency, has long drawn the interest of cypherpunks. But another more surprising group turned out in force to mine the coin that formally went live on Tuesday: investment firms. “We have been watching the whole show today. With maybe the most expensive genesis block one in history,” Dovey Wan of Primitive Ventures told CoinDesk of the launch. Wan’s partner at Primitive, Eric Meltzer, also commented on the event in his newsletter “Proof of Work” this week, noting: “There is (by our conservative estimates) 100 million dollars of mostly VC money invested into special-purpose investment vehicles to mine Grin. This does a lot of weird things: it turns a bunch of people who would have been buyers of grin into sellers of it, it changes the composition of the early holder roster, and it means the chain will launch with an extremely high degree of security via high PoW hashrate.” Chris Dannen of Iterative Capital, a fund with a strong focus on mining, said that “a plurality of Chinese GPU farms are already hashing” on Grin. So why the demand? “This is the thing that comes closest to bitcoin,” said a partner at a crypto investment firm who spoke on the condition of anonymity. “In a lot of investors’ minds it kind of pattern-matches to ‘bitcoin 2.0.’” Full Story​ CoinDesk’s Crypto-Economics Explorer aggregates data points across the industry to measure the size and opportunity of crypto markets. In addition to price and market cap, CoinDesk’s explorer provides users with a comprehensive way to view the crypto-economic forces that shape an asset’s market maturity, growth and potential. Network interest is important in determining the activity occurring within a blockchain’s internal ecosystem. Exchange interest is also valuable to understand the trading dynamics. Today, Jan. 17, we observed two key metrics from each category: OnChain Volume and Exchange Volume (OffChain Volume). We then measured the ratio between those values, which is called the On-Off Ratio, for the top five coins by market cap going back six months. This simply tells us how many dollars moved on the blockchain for every dollar moved on exchanges. A ratio above 1 would indicate higher OnChain Volume relative to exchange, and vice versa. This should be used to evaluate the utilization of a blockchain compared to its coin’s usage as a trading asset. The graph shows EOS, ETH, and XRP typically performing below 1 (indicating more exchange volume in relation to OnChain volume), with XRP having a few blips above 1. XRP has the highest standard deviation, at 8.22, indicating that there are events that swing either exchange volume or OnChain volume in a rapid unilateral fashion. While BTC usually hovers around 1, in mid-November we observed it starting to trend consistently below 1 with an average of .80 and median of .86. BCH had taken the opposite trend around the same time with an average of 2.58 but with a median of .50. Check out the CoinDesk Crypto-Economic Explorer to learn more.  SPONSOR SECTION   The Oxford Fintech Programme gives you the tools you need to build the future of transactions and commerce. In this online fintech programme, you'll explore emerging technologies that will disrupt marketplaces and financial services, and examine the state of the industry and plan disruptive intra- or entre-preneurial interventions. Find out more.   VOLATILITY DROP: Bitcoin's price volatility has dropped 98 percent year-over-year. The world's largest cryptocurrency by market cap saw its price spread nearly $3,500 on Jan. 16, 2018, but this range was only $61, a full 365 days later. The volatility drop accompanies a 74 percent price drop year-over-year as well. Full Story BEST OF THE BEST CREDIT KARMA: With the fall in the price of bitcoin last year, U.S. investors apparently lost a combined $1.7 billion after selling their holdings – that's $718 each. However, many won't claim the loss with the IRS, and that’s a mistake, says Credit Karma. In a new survey, the website found that just 53 percent of U.S. bitcoin investors plan to report bitcoin gains or losses on their tax returns, while 19 percent are undecided. Of those who sold at a loss, over a third don’t plan to report it. As the site points out, investors can claim a tax deduction on capital losses and offset any gains made during the tax year to a limit of $3,000. So why are investors not making the most of the tax break? The survey suggests a lack of knowledge is key, with a majority thinking they did not have to report gains or losses and others (22 percent) not knowing how to.  THE REST ROLL CALL: The Virtual Commodity Association, a crypto consortium looking to form a registered self-regulatory organization, is making strides amid a broader push to pre-empt government oversight, says this profile in Roll Call.  So far, the group is composed of Bitstamp Inc., bitFlyer USA Inc., Bittrex Inc. and the Gemini Trust Company LLC. The four firms hope to oversee virtual commodity markets, similarly to how self-regulatory groups in the stock market police their own space.  If successful, the push could streamline approval for the trading of digital assets and related products, Roll Call explains, citing bitcoin exchange-traded funds (ETFs) as one example.  The VCA is in an early stage, however, and it is not yet clear how quickly the group will proceed.  FORBES: The "genius” idea at the heart of bitcoin, according to a piece from Forbes, is the way miners make it possible to have a digital currency that users can trust, but not issued by any single authority. Not only that, but they manage and create the currency too. The solution neatly sidesteps this issue we see today with "huge government authorities issuing and controlling abstract and paper currency at will, manipulating it to meet political goals," says the contributing author, David Black. At the core of the issue that bitcoin solved is money supply and the way central authorities manipulate it with policies that "shift with the political winds."  Bitcoin is run by volunteer miners who are governed by the rules of the protocol and incentivised to be honest. As the cherry on the cake, says Black, while they record every transaction, they can’t see who is making them, so there’s no “snooping.” As a result, bitcoin “deserves the attention and credit it’s gotten.” WHO WON #CRYPTOTWITTER Copyright © 2018 CoinDesk. All rights reserved. Our mailing address is: 250 Park Avenue South New York, NY, 10003, US Want to change how you receive these emails? You can update your preferences or unsubscribe from this list

Russian Denial / Academia Project / Coinstar / Devvio

Subscribe | View in browser $BTC (1:04 p.m. EST): $3,658.15 (0.01%) // 90-day high: $6,860.85 // 90-day low: $3,286.14 / / More… $BCH ABC (1:04 p.m. EST): $130.58 (0.56%) // 90-day high: $632.22// 90-day low: $80.95 // More… $ETH (1:05 p.m. EST): $122.75 (-0.74%) // 90-day high: $229.12 // 90-day low: $85.11 // More… $LTC (1:05 p.m. EST): $31.33 (-1.65%) // 90-day high: $54.64 // 90-day low: $22.09 // More… $XRP (1:05 p.m. EST): $0.32 (-0.62%) // 90-day high: $0.53 // 90-day low: $0.28 // More… Here are the 10 most important stories about bitcoin and cryptocurrencies today       1. The Russian government denied a claim that it plans to buy billions of dollars of bitcoin to offset economic sanctions from the United States. Elina Sidorenko, chairperson of an interdepartmental working group of the State Duman for managing risks, said the report is without merit. "The Russian Federation, like any other country in the world, is simply not ready today to somehow combine its traditional financial system with cryptocurrencies," she said. Vladislav Ginko, a Russian economist, made a claim last week that the Russian government would use discretionary funds to buy a large amount of bitcoin. –ETHEREUM WORLD NEWS       2. Professors from seven universities, including MIT and Stanford, have joined together to create a digital currency. The goal is to create a coin network that can create faster transaction speeds far above bitcoin. Known as Unit-e, the project is the first initiative of Distributed Technology Research, a non-profit foundation with backing from Pantera Capital Management. The organization plans to launch its coin in the second half of this year with the hope of reaching 10,000 transactions per second. –BLOOMBERG       Ad Intelligence is creating stronger connections. Today's world generates 2.5 quintillion bytes of data every day. Sifting through that much available information is hard. Micron is helping analyze that data to create stronger connections between AI, organizations, and most importantly, people.​​ Learn More. 3. Coinstar plans to allow customers to purchase bitcoin from some of its kiosks in California, Texas, and Washington. A regular sight in grocery stores, Coinstar counts loose change and turns it into gift cards. As part of its bitcoin service, Coinstar will partner with ATM startup Coinme. The service will be available at Coinstar kiosks in Safeway and Albertsons stores, although the company did not say how many of its 20,000 kiosks would be enable with bitcoin purchasing ability. –GEEK WIRE       4. Blockchain startup Devvio claims its new protocol can handle more than 8 million transactions per second. The protocol, simply called Devv, was unveiled and demonstrated last week at the Consumer Electronic Show. If the claims are true, Devv would be able to compete with traditional financial networks in terms of scalability, but be far less expensive to use. It would also help answer some of the larger scaling challenges the cryptocurrency world has faced. Devvio uses Proof of Validation, a consensus mechanism similar to Proof of Authority, where validators collect transactions and randomly take turns proposing new blocks on a chain. –COMPUTER WORLD       Ad Meet monday.com - The #1 project management tool for teams!  This tool simplifies the way teams work: You can manage, plan and track projects in one collaborative space. monday.com is a super flexible tool. It's fun to work with and easy to use. Start your free trial now! Throwback Thursday The delay to the Constantinople upgrade on the ethereum blockchain brought back memories of the challenges the crypto community faced last year in launching Segregated Witness. As CoinDesk reported, so far only 36 percent of all bitcoin transactions actually use it – more than 16 months after it went live. The reason behind the low adoption can be complicated, but it mostly comes down to SegWit's backward compatibility. Those that do not use SegWit are not harshly penalized, as the same software can follow the same network only under a less-restricted ruleset. As a result, a large portion of the community has put off making the switch. Every Thursday, we'll revisit a news story or innovation from the past. If you have a suggestion for a Throwback Thursday feature, or anything else you'd like to see us cover, hit reply to this email! -David       5. The Next Web has a handy guide on bitcoin mining pools – how they work, what are the benefits, and how to get started. –THE NEXT WEB 6. Joe Lubin, one of the co-founders of ethereum and the current head of ConSensys, has joined the board of the crypto exchange ErisX. –THE BLOCK CRYPTO 7. Litecoin continues to sponsor the UFC, recently announcing a sponsorship with Ben Askren, a former Olympian who will fight at UFC 235. –AMB CRYPTO 8. Bitcoin's price volatility has dropped 98 percent in the past year. –COINDESK 9. A bitcoin theft victim has sued AT&T for $224 million, citing gross negligence that led to him losing millions in cryptocurrency. –THE NEXT WEB 10. An eToro analyst sees no correlation between bitcoin and either gold or the stock market. –COINGAPE       Written and curated by David Stegon. He has been a reporter for 15 years, the past 10 focused on technology. Follow him @davidstegon. Editing team: Lon Harris (editor-in-chief at Inside.com, game-master at Screen Junkies), Krystle Vermes (Breaking news editor at Inside, B2B marketing news reporter, host of the "All Day Paranormal" podcast), and Susmita Baral (editor at Inside, recent bylines in NatGeo, Teen Vogue, and Quartz. Runs the biggest mac and cheese account on Instagram).       Ad Owl Labs is the creator of the Meeting Owl, the first 360-degree smart conference camera. Learn more.

We're Hiring! Learn more. | Sponsorship opportunities Copyright © 2019 Inside.com, All rights reserved. Our mailing address is: Inside.com 767 Bryant St. #203 San Francisco, CA 94107 Did someone forward this email to you? Head over to inside.com to get your very own free subscription! You received this email because you subscribed to Inside Bitcoin. Click here to unsubscribe from Inside Bitcoin list or manage your subscriptions.