Tuesday, March 5, 2019

Hacked off

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DAMAGE CONTROL: After days of pressure and a #deletecoinbase movement, Coinbase will be letting go of former employees of the Hacking Team employed by its recent acquisition, blockchain analytics firm Neutrino.

Coinbase CEO Brian Armstrong announced Monday evening that the company would be parting ways with former Hacking Team members, regardless of whether or not they’re still affiliated with the organization. It is unclear how many employees this will impact, beyond the three senior executives listed on the firm’s website: CEO Giancarlo Russo, CTO Alberto Ornaghi and CRO Marco Valleri.

The move comes after widespread criticism of Coinbase after the acquisition was first announced Feb. 19. Hacking Team previously aided governments known to commit human rights abuses.

In his post, Armstrong explained that, “We had a gap in our diligence process. While we looked hard at the technology and security of the Neutrino product, we did not properly evaluate everything from the perspective of our mission and values as a crypto company.” Full Story

45 DAYS: Canadian crypto exchange QuadrigaCX has another 45 days to try and locate its missing millions. A judge granted the exchange an extension on its stay of proceedings during a hearing on Tuesday, meaning its customers cannot sue Quadriga until the stay is lifted or expires.

Nova Scotia Supreme Court Judge Michael Wood also approved the appointment of a chief restructuring officer, though the title may not fit. Rather than organizing a restructuring of Quadriga, the CRO will be tasked with helping EY run the exchange and potentially organize the sale of its trading platform further down the line.

While a number of other matters were addressed, Wood returned to the question of what comes next for Quadriga. Based on the circumstances, he pondered whether the exchange might be better suited moving from a creditor protection filing under the CCAA to something more akin to bankruptcy proceedings.

“This isn’t so much a restructuring as it is a claims process and liquidation … it does look like an end process,” he said. Full Story

CRYPTO SAVINGS: Crypto lending startup BlockFi can now offer deposit accounts providing compound interest to its customers. Announced Tuesday, the new BlockFi Interest Account (BIA) is live, and can offer an interest rate as much as 6 percent annually, paid on a monthly basis in crypto.

This monthly interest would then be compounded to produce a 6.2 percent annual percentage yield (APY).

Users can deposit bitcoin or ether to earn interest from the offering, and can withdraw their funds at any time. Accounts are custodied by the Gemini Trust Company, which was co-founded by Cameron and Tyler Winklevoss, and all assets held will be insured.

BlockFi director of marketing Brad Michelson told CoinDesk that the account “helps crypto investors grow their wealth with one of the most powerful tools in finance – compound interest.” Full Story

FUTURES BOOST: Cryptocurrency futures provider Crypto Facilities says it has seen “tremendous growth” since being acquired by U.S.-based crypto exchange Kraken last month.

Sui Chung, the subsidiary's head of indices and pricing products, told CoinDesk that trading volume increased more than 500 percent since the acquisition, with nearly $1 billion in futures being traded across the bitcoin, ether, XRP, litecoin and bitcoin cash products the company offers.

Crypto Facilities, which offers bitcoin and ether references rates to CME Group, believes some of this boost came from the Kraken acquisition itself, Chung explained.

“I think obviously having the support of a major U.S. exchange helped and obviously Kraken bringing our product set to a very loyal user base … that Kraken branding carries a lot of weight,” he said. Full Story

LOOKING UP? Bitcoin has regained some poise after yesterday's 2.4 percent drop and could see further gains as the support of the widely followed 5-week moving average (MA), currently at $3,703, is proving a tough nut to crack for the bears. Notably, the moving average is reporting bullish conditions for the first time since August 2018. Continued bull defense of that key support, could invite a wave of buying and a re-test of recent highs near $4,200. Full Story

BEST OF THE BEST

CARREFOUR: French retail giant Carrefour is continuing its efforts to apply blockchain tech to the tracking of its food supply chains with a new initiative aimed to inform consumers about its fresh micro-filtered milk products.

The firm announced Sunday that data on the products will be placed on a blockchain, allow consumers to scan a QR code on the packaging to access "a wealth of information" and track the milk from the farm to the store refrigerator.

The dairy products are sourced from animals within 30 km (18 miles) of the dairy, with the cows being fed GMO-free feeds and raised on farms with practices that "ensure animal welfare," the firm said.

The blockchain platform will give consumers highly granular data, even offering the GPS coordinates of the farms supplying the milk, as well as information on animal feed and more.

THE REST

THE NEXT WEB: Opera has revealed it will soon bring its cryptocurrency-focused web browser to Apple devices. Coming soon after it launched the software for Android, the Opera Touch product for iOS will similarly be loaded with a built-in crypto wallet that supports ethereum tokens and crypto collectibles (or non-fungible tokens) like CryptoKitties.

It’s also been built to be Web 3.0 ready and can be loaded with ethereum dapps. According to The Next Web, no launch date has been set but early adopters can now sign up to test the browser.

Opera said that it’s making the effort to launch on iOS “in response to popular demand from the Ethereum community.”

FORBES: In the latest article looking at how cryptocurrencies can finally achieve mass adoption, Forbes contributor Darryn Pollock says the industry needs to look to social media. While the whole world is waking up to the potential of cryptos, the tech on offer is still far too complex for, say, your granny to ever think about getting to grips with, he writes.

However, Facebook too, once struggled with user adoption and it took some years before people came round to the idea of posting their private lives online for all to see. But, in the end they did, and "the social media wildfire started."

Part of the issue for cryptos is that there are so many projects working in different directions, whereas social media always had one aim, "connectivity." Decentralization also doesn't help, according to Pollock, as it prevents crypto projects from building an identity.

Increased focus on crypto’s “only real killer application” – as a currency – and following the social media example, could ultimately “force the mass adoption that it has the potential to achieve,” he concludes.

WHO WON #CRYPTOTWITTER

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#129: The Quadriga fiasco: That's going to leave a mark.

The Quadriga story is starting to look like a historic crypto-catastrophe. The story has always sounded odd: the unexpected death of Gerald Cotten, the CEO of popular Canadian exchange QuadrigaCX, had left more than $140 million of the exchange's users' funds inaccessible, since he was the only one in the company able to access the money. The recent news that offline cryptocurrency storage systems that were supposed to be holding the money have been empty since April makes it sound even more suspicious.

In case you're not up to speed: QuadrigaCX claims that Cotten died while traveling in India in December. In late January, the company said in a court filing that Cotten had maintained "sole responsibility" for handling QuadrigaCX's so-called cold wallets (as opposed to hot wallets, which are connected to the internet), and that since his death no one at QuadrigaCX has been able to access them. Early in February, the Nova Scotia Supreme Court appointed consulting firm Ernst and Young (EY) as a "monitor" in charge of trying to locate Quadriga's lost money.

A bad situation turned worse for QuadrigaCX's users on February 12, when EY revealed that the exchange had accidentally sent nearly half a million dollars worth of additional Bitcoin to a cold wallet that it couldn't access. Since then, EY has been trying, without much success, to recover money from the company's wallets as well as from 10 third party payment processors that it believes are holding money on behalf of QuadrigaCX. In its latest report, filed March 1, EY asserted that several cold wallets it has identified as QuadrigaCX's have in fact been empty for months. In other words, the funds it supposedly couldn't access may never have existed in the first place (though EY did not say whether there may be other wallets).

Independent journalist Amy Castor has been maintaining a helpful timeline of all the twists and turns of this story, which includes a number of mysterious characters besides Cotten.

Now that the mystery has captured the wider world's attention, it's starting to feel reminiscent a previous catastrophe that damaged the public's perception of the industry enough to severely set it back in its growth. Sure, the industry recovered, and has come a long way since 2014, when the most important exchange at the time, Mt. Gox, collapsed and lost nearly half a million dollars. But how can it be taken seriously when a popular exchange can still just up and lose $100 million of its users' funds and have little hope of ever recovering the money? Like in the case of the Mt. Gox collapse, when all is said and done, the QuadrigaCX fiasco will have left its own unique mark on the industry.

Guessing at the shape of Facebook's blockchain dream: A new report from the New York Times has revealed new details about Facebook's secretive blockchain project that suggest it may be close to bearing fruit. But we still have a lot more questions than answers.

Bloomberg reported in December that Facebook has been developing a so-called stablecoin—a digital currency whose value is pegged to a traditional currency, often the US dollar. The Times report seems to confirm this; five people familiar with the project said the first product was likely to be a stablecoin. Apparently, Facebook could guarantee the currency's value by backing it with dollars, euros, and other national currencies held in Facebook bank accounts. According to the Times, the company has already been in talks with exchanges about listing a coin for consumers.

The earlier report from Bloomberg suggested that Facebook's coin would be available to users of its messaging service WhatsApp, who would be able to send it to contacts. The Times notes that Facebook is overhauling its messaging infrastructure to connect WhatsApp, Facebook Messenger, and Instagram. In theory, that would make a digital coin accessible to the 2.7 billion people who use at least one of those three apps each month.

We have so many questions, though. Will the coin really run on a blockchain? If so, how much control will Facebook have over the ledger? How will it make money off it, and prevent criminals from using it? And how will it handle user privacy? The Times suggests the company is considering system designs that don't rely on the energy-intensive mining process that Bitcoin and similar currencies use. What will it use as an alternative? At least one thing is clear: a dominant technology company launching a fiat-currency-backed digital coin doesn't sound much like the decentralized future that many blockchain enthusiasts have in mind.

Leaders in the field are looking beyond cutting-edge research to examine the impact that AI technologies are having in the world.

Putting humans at the center of the discussion is critical to ensure that society will benefit from fair, unbiased tools. Join us at EmTech Digital this month to learn more about the human impact of AI.

Loose Change

Fill your pockets with these newsy tidbits.

Coinbase has responded to the uproar over its recent acquisition of blockchain analytics startup Neutrino by pushing out the Neutrino employees who had previously worked for Hacking Team, a controversial company that sold spyware to governments. (Coinbase)

Controversial stablecoin Tether will launch a new version of the token for the Tron blockchain. (CoinDesk)
Hackers have apparently turned the website for the Bangladeshi embassy in Egypt into a crypto-mining operation. (Cyberscoop)
Meanwhile, according to new data from IBM, cybercriminals dramatically shifted their focus from ransomware to cryptojacking in 2018. (Fortune)
Cryptocurrency startup Circle, which was valued last year at $3 billion, is looking to raise $250 million more. (The Information $)

Artificial intelligence is here. Own what happens next.

Attend EmTech Digital 2019
March 25-26, 2019,‌ St. Regis Hotel
San Francisco, CA

Coffee for crypto? ☕️

March 5, 2019

Equity for Coffee? Bakkt Deal Nets Starbucks "Significant Equity" in the Firm

According to a new report from The Block, Starbucks will begin accepting Bitcoin in all of its stores to make the age-old idea of buying a cup of coffee with crypto a reality - at scale.

The implementation will use Bakkt's payment software to instantly convert the digital asset to fiat so that Starbucks can avoid crypto on its books but still help onboard adoption.

The upside for Bakkt? Exposure in 29,324 Starbucks stores around the world that cater to more than 15 million Starbucks Rewards members.

But at what price?

While the actual details of the plan are under wraps, sources "suggest it is disproportionately high given they did not actually make a cash investment."

Back in August, Starbucks actually denied the idea of accepting Bitcoin using Bakkt and wrote that "customers will not be able to pay for Frappuccinos with Bitcoin."

But now, with a sizable Bakkt equity carrot dangling in front, it seems Starbucks couldn't resist the temptation.

What about mobile payments?

While in-store acceptance is a cool feature, we don't know whether or not the deal will also cover mobile payments.

If it does, it will be a game changer since Starbucks' mobile payment system is actually the most popular in the United States, beating Apple and Google, with more than 23.4 million users.

Previously, Starbucks vice president of partnerships and payments Maria Smith hinted at the addition of digital assets saying "Starbucks is committed to innovation for expanding payment options for our customers."

NEWS

#DeleteCoinbase Finally Got to Armstrong as Ex-Hacking Team Members Plan to Exit

Controversy erupted last week when online discussion revealed that Coinbase's acquisition of blockchain analytics firm Neutrino would actually include past members of Hacking Team, a spyware company that had been exposed for selling products to authoritarian governments.

Now, after a strong pushback campaign from users marked by #DeleteCoinbase on Twitter, CEO Brian Armstrong is doubling back and now plans to phase the ex-Hacking Team employees out.

Armstrong stated:

"Together with the Neutrino team [...] [we] have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase."

Still needs the technology

While Armstrong called the Neutrino acquisition a "gap in [Coinbase's'] due diligence process," he reiterated that Coinbase needed the startup's technology for its impressive blockchain analytics tools.

Prior to Armstrong's statement, Coinbase director of institutional sales Christine Sandler defended the acquisition because the exchange's previous blockchain analytics provider was selling user data for financial gain.

One provider, Elliptic, has since published an article to refute Sandler's claims saying her comments "fundamentally misunderstand the data."

LAUNCH

You Can Now Get Interest in a Crypto Savings Account

Announced today, crypto lending startup BlockFi is breaking ground with its newest offering: a crypto deposit account that provides compound interest.

Called BlockFi Interest Account (BIA), the venture will offer customers an annual interest rate of 6% that will be paid monthly via crypto.

When all said is done, that amounts to 6.2% after taking into account compounding.

A twist on traditional savings

The new offering is an impressive twist on traditional savings accounts.

"It helps crypto investors grow their wealth with one of the most powerful tools in finance – compound interest," director of marketing Brad Michelson told CoinDesk.

And it sure does. With a 6.2% yield, it towers over traditional savings accounts that offer an average of just 0.01%. Although there is more risk involved, even if the prices of Bitcoin and Ether fall, BlockFi can still afford to pay its customers.

For now, account holdings are being stored by Gemini Trust Company and will start with just Ethereum and Bitcoin deposits.

BITS

But wait, there's more...

🚨 Cryptopia has reopened its website with resumed user balances before the hack after a slight delay.
🚀 Kraken's futures trading nears $1 billion in the first month of operations.
⛏ Bitcoin mining revenue begins a slow recovery after 18-month lows.

MEME