Thursday, May 21, 2020

When Inert Coins Move

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May 21, 2020

TOP SHELF

Yesterday, some of the earliest mined bitcoin moved places after more than a decade of dormancy.

Whale Alert – a popular, mostly-automated Twitter account that tracks major crypto transactions – broadcasted the message across the cryptoverse, saying 40 coins mined in the first month of the network’s operation had transferred from a "possible #Satoshi owned wallet,” referring to Bitcoin’s long silent creator, Satoshi Nakamoto.

This unfounded connection – based on the age of the bitcoin, and the fact that they had never moved – caused a minor market stir.

Since then, blockchain archeologists and Bitcoin sleuths have poked holes in the theory that the coins are Nakamoto’s, who, as far as we can tell, has never moved a single satoshi from the horde of bitcoin he mined in the network’s early days. (Except for a test transaction sent to Hal Finney.)

Determining the sender of these coins is impossible, for now. But the occurrence is a moment to reflect on some important insights about the Bitcoin community, infrastructure and market.

Of the approximately 18.5 million coins already mined, about 2 million are dormant – either unspent because the keys have been lost, or for other personal or technological reasons. Nakamoto once referred to lost coins as a “donation” to the network.

The Bitcoin protocol hardcaps the total supply of Bitcoin at 21 million coins, but knowing that some coins have been “donated” has led some researchers to a new metric: Realized Capitalization. This measure discounts Bitcoin’s total supply by roughly 15%, to account for lost or otherwise inaccessible coins.

When previously inert coins move – be they Nakamoto’s or not – this should challenge the assumption that coins in deep storage are out of circulation. Unless they've been tossed in the bin. Therefore, a price adjustment is logical.

A partial cause for yesterday’s price movements were fears that Nakamoto has returned, and could potentially dump billions of dollars worth of bitcoin on the market. Nakamoto’s seemingly altruistic, or at the very least, mysterious, “donation” to the Bitcoin community hangs over the market like the sword of Damocles.

Like Nakamoto’s motivations, it’s also an open question as to how many coins he holds. In 2013, Sergio Lerner wrote a blog post estimating the Satoshi stockpile to be around 1 million bitcoin. Years later, derivatives exchange BitMEX recounted and found the horde to be in the neighborhood of 700,000 coins.

Both estimates look at a technical detail called the ExtraNonce value to determine what blocks Nakamoto was likely to have mined. It’s analysis of this same block feature that leads many to assume yesterday’s transaction did not belong to Nakamoto, but one of the dozens of other miners assumed to be live on the network.

Curiously, at the time these bitcoin were mined, bitcoin itself had no market value. The block reward is now worth just shy of half a million dollars. There were also no CoinJoins or SegWits, modern wallet features yesterday's transaction utilized, nor a host of blockchain analyzers watching where these coins will jump to next.

How far Bitcoin has come!

Castle Island Venture’s Nic Carter, in conversation with Moneymail developer Lawson Baker, said the biggest clue into the identity of the owner of the coins could come in a couple of days. Just look for the OP_RETURN field, a place to encode permanent messages on the Bitcoin blockchain, Carter said. We'll be watching.

MEDIA DIET

Red Flags: Citizen, the mobile application that alerts its more than two million users to crime and disaster around them, has launched a contact tracing functionality, called SafeTrace, in the fight against the coronavirus. The application, which makes use of GPS and Bluetooth proximity tracking and stores data in a centralized manner, has raised alarms among privacy experts and technologists . “GPS data tracking a person’s movements is very revealing, and difficult to effectively anonymize,” said Ángel Díaz, counsel at the Liberty and National Security Program of The Brennan Center for Justice in New York.

Brazil Banks Investigated: On Wednesday, Brazil’s antitrust watchdog, the Administrative Council for Economic Defense (CADE), voted to continue its investigation of banks who denied financial services to crypto brokers in alleged violation of Brazilian competition law. CADE’s nearly two-year-old inquiry into Itaú Unibanco, Banco do Brasil, Santander, Inter, Bradesco and Sicredi now returns to the General Superintendency for further review. Those six banks, which comprise nearly 80% of Brazil’s deposit market share, could face eventual sanctions and even be forced to provide financial services to crypto brokers.

Geographic Details: Block.one, a primary EOS developer wielding about 9% of the total token supply, is about to begin voting in the ecosystem, after years of holding back its influence. In a note last Friday, the Cayman Island-based company outlined criteria it would use to decide on which block producer candidates to support and vote for, including information pertaining to the public disclosure of the “location of the node.” While Block.one representatives downplay the significance of this geographic information, other stakeholders believe it could lead to favoring specific countries.

New Shareholder: IBM has become a shareholder in we.trade, the trade-finance platform jointly owned by 12 European banks, signaling further consolidation across the enterprise blockchain space. While IBM has been a technology partner since the beginning, we.trade has always intended ween itself off the Hyperledger-based IBM Blockchain Platform and take its tech stack in-house. Ciaran McGowan, we.trade’s CEO, said this financial relationship with Big Blue will help the platform in its next phase of global expansion.

Digital Dividend: Online retailer Overstock has finally distributed its digital dividend to shareholders, after a series of delays including an investor class action suit against the company and the ousting of the dividend’s brainchild former Overstock CEO Patrick Byrne. The digital security, called OSKTO, can now be freely traded on Overstock subsidiary tZERO’s blockchain-underpinned platform. Shareholders need to open a brokerage account with a broker-dealer that subscribes to the tZERO ATS to trade the securities, the firm said.

Genesis Brokerage: Genesis Global Trading is moving toward full-service prime brokerage – covering lending, trading and custody – with the acquisition of crypto custodian Vo1t. The terms of the deal were not disclosed. “We’re coming at this after having a successful business on the trading and lending side,” said Genesis CEO Michael Moro. “The goal is for clients to be able to do any and all activities with Genesis.”

Blockchain Strategy: A U.S. lawmaker introduced a bill calling on the Federal Trade Commission (FTC) to survey how blockchain technology is being used by other nations as well as outline a comprehensive blockchain strategy for the United States.

'Bloodbath': Highly leveraged crypto hedge funds are struggling to recover from recent volatility, reports the Financial Times.

Digital Euros: Societe Generale issued €40 million worth of covered bonds as security tokens that were then settled by the Banque de France, the nation’s central bank, in blockchain-based digital euros. (The Block)

Synthetic, Priceless Token Model: The UMA Project community approved contracts that allowed creating its first token: ETHBTC. This is also the first experiment with UMA’s priceless token model, which minimizes the need for oracles, allowing for the synthetic ETHBTC token to track the relative value of ETH to BTC, without requiring users to stake either of the two cryptos.

Staking Services: Coinbase Custody now offers staking services for Cosmos and Algorand tokens. Last year the firm added staking support for Tezos tokens. (The Block)

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MARKET INTEL

Buyers Exhausted? Bitcoin prices look to be struggling with buyer exhaustion, having put in a negative performance in the last 24 hours despite positive developments on both the macro and technical fronts. Despite intimations from JP Morgan and Goldman Sachs calling upon the Federal Reserve to step up its inflationary bond purchase programs, analysts at Stack, a provider of cryptocurrency trackers and index funds, expect bitcoin to consolidate in the range of $8,000–$10,000 for some time.

THE BREAKDOWN

Dollar's Strength Weakens the World: Lyn Alden, founder of Lyn Alden Investment Strategy, joins The Breakdown to discuss why the U.S. dollar’s persistent hegemony is bad for everyone.

WHO WON #CRYPTOTWITTER

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Wednesday, May 20, 2020

📌 Reddit's Cryptocurrency, Rare BTC Event, and the Hacker Who Saved the Internet

May 20, 2020 | Issue #118

MUST READS

The Confessions of Marcus Hutchins, the Hacker Who Saved the Internet

At 22, Marcus Hutchins stopped WannaCry, the worst cyberattack the world had ever seen. Three months later, the FBI arrested him. This is the untold story of how he went from an international hero to a convict looking at 10 years in prison.

Something Rare in Bitcoin Just Happened...

Earlier today, a Bitcoin UTXO more than 11 years old, was spent on-chain (you can see the transaction here). Those coins were first mined on February 9, 2009, only one month after Bitcoin was launched. This is the first time since 2017 that someone spent coins dating back to 2009.

As expected, some people are claiming that this is Satoshi moving his coins, in turn driving the price of Bitcoin down almost immediately.

You can ignore the FUD though, based on prior research from SatoshiBlocks, this block is NOT believed to be Satoshi.

Reddit Rolls Out 'Community Points' on Ethereum to Incentivize Positive Behavior

Reddit just made a statement by rolling out two coins on two subreddits.

While it's just a beta launch, Reddit is arguably the first major social media outlet to utilize public blockchains and cryptocurrencies to reward its existing users. The incentive is to let users reward each other for their contributions... and ultimately promote positive behavior.

Key takeaways:

The new Community Points system is using tokens issued on Ethereum
The tokens are $MOONS for the subreddit r/CryptoCurrency, and $BRICKS for the subreddit r/FortNiteBR
With 2.4M subscribers between the two subreddits, this is a big moment for both Ethereum and Reddit... If it proves to be successful, this new feature could make its way towards the rest of Reddit's 400M users.

In the broader scope, Reddit is essentially launching two "Loot Tokens." If you have no idea what those are, you may want to check this out.

It will help you get up to speed on the emerging asset class that Reddit is now apart of.

CryptoList: A Hand-Researched List of Over 8,000 Companies and People in Crypto

Whether you're launching your own crypto startup, looking to connect with industry leaders, or just investing in crypto, you'll be sure to get value out of CryptoList.

CryptoList compiles 8,600+ companies and people in crypto with 4,500+ verified email addresses to get you access to the businesses and individuals that matter most to your business.

We spent thousands of hours researching the crypto ecosystem so you don't have to.

SPONSOR

DEEP DIVE

Crypto Lender BlockFi Hacked

Crypto lender BlockFi, who's been on a tear of user signups and revenue, says it experienced a data breach last week due to a SIM card swap attack on an employee's phone number. The hacker attempted to withdraw client funds but was unsuccessful. Instead, they resorted to stealing account activity information, customer emails, and postal addresses of ~50% of retail clients.

To be clear, BlockFi is stating that funds, passwords, and non-public identification information are secure.

Bad News: Clients that were holding a large amount of Bitcoin or other cryptocurrencies will have to start watching their backs.

Good News (for BlockFi): News of the data breach was largely drowned out by BitMEX going offline.

Tuur Deemester: Why the Bottom is In

Tuur Deemester, one of our favorite OG crypto analysts, joined Messari last week to talk about the recent halving, the next phase of BTC adoption, whales, and to share some epic predictions. We highly suggest you watch it here.

His latest prediction? The bottom is in and the next bull market is here.

His reasoning? While retail isn't flooding back in just yet, he does believe that institutions, family offices and billionaires are. He believes this next cycle could take us to $50,000-$100,000 BTC.

We get crazy predictions all the time, but maybe Tuur's on to something. This narrative is perfectly captured in Messari's lastest post-halving report, covering the now-legitimized institutional investment market.

(Relatable news: Bakkt announced they have expanded their custody business to cover more than 70 clients.)

Steem Network to Seize 23.6 Million Steem from Users

A hardfork was scheduled today which has seized the accounts of several Steemit users, and drained $5 million worth of STEEM coins from their wallets.

Ethereum's Vitalik Buterin eloquently chimed in on this sticky situation.

REGULATORY FRONT

Another Exchange Delists Monero Amid Ongoing Sex Scandal

Just weeks after Huobi exchange delisted Monero (XMR), Bithumb has officially announced they will also be delisting Monero from their trading platform as of June 1.

Monero has been in the news recently due to reports of Telegram users using XMR to purchase illegal pornographic material — much of which involved minors.

In other news, the European supercomputers that you may have heard about recently that were programmed to search for a vaccine for COVID-19 were remotely hijacked to mine cryptocurrency. Guess which one...

Company That Sued FTX and Ripple Now Sets Its Sights on BitMEX

A new lawsuit from BMA LLC, the same group suing Ripple and FTX, is accusing crypto derivatives exchange BitMEX of illegal activities.

BMA alleges that BitMEX was designed to engage in illegal activities such as racketeering, money laundering and market manipulation, earning the defendants "billions of dollars in illicit profits."