Republican Leader Claims Blockchain Can Make US Government More Efficient
Rep. Kevin McCarthy, the current Republican Minority Leader
in the United States House of Representatives, said on Tuesday, March 12, that blockchain can make the U.S. Congress a more efficient and transparent place. Speaking to the Select Committee for Modernization of Congress, McCarthy said that blockchain technology has changed the paradigm of security in the financial world: “Blockchain is changing and revolutionizing the security of the financial industry. Why would we wait around and why wouldn’t we institute blockchain on our own, to be able to check the technology but also the transparency of our own legislative process?”
The lawmaker also suggested that Congress use “21st century technology” to make the government more friendly, but at the same time more accountable. “We have an opportunity to take this window to make this place more effective, more efficient, and most importantly, more accountable," he concluded. McCarthy became a member of the U.S. House of Representatives in 2007, serving as House Majority Leader from 2014 to 2019, and as House Minority Leader since January 2019. The Select Committee for Modernization of Congress was established during the 116th Congress in early 2019. Democratic congressman Derek Kilmer chairs the committee, which forms recommendations for modernizing the legislative branch.
As Cointelegraph reported in October, U.S. Representatives Doris Matsui and Brett Guthrie proposed a new bill, dubbed the "Blockchain Promotional Act 2018," to the House of Representatives. The bill aimed to create a working group to study the potential impact of blockchain across the policy spectrum, and to establish a common definition of the technology. More recently, the state of Wyoming passed two blockchain-related bills. The first laid groundwork for storing so-called certificate tokens representing stocks on a blockchain “or other secure, auditable database,” and permitted their digital transfer. Another acknowledged the establishment of special purpose depository institutions to serve blockchain-related businesses, as they are often unable to receive services from federally-insured banks.
Article Produced By
Opinion: Europe Must Embrace Blockchain to Avoid “Cybercolonization”
On September 27, the EU Competitiveness Council met in Brussels to discuss how to support Europe’s digitization, particularly with regard to artificial intelligence — an area that has tremendous potential, but also faces extreme global competition. AI, of course, runs on data. The unfortunate reality is that U.S. tech companies control and exploit large amounts of European data, in turn monopolizing our digital economy.
That’s why I, among 16 other executives, signed a letter to the council’s ministers—who engaged in a public policy debate and “competitiveness check-up” at Thursday’s meeting—urging a focus on these monopolies and the unfair business practices they get away with, from the exclusion of third parties to spontaneous changes to terms and conditions to unjustified interference, to name a few. There are alternatives to giving away the data, and thus, sovereignty,—something I emphasized as part of the National Digital Council in France and as the leader of numerous working groups focused on AI and privacy.
France, for one, has worked hard to attract major foreign investment in this space, opening AI hubs while seemingly ignoring the fact that Google, Apple, Facebook and the like don’t pay taxes in the country, yet still extract significant wealth from it. This hurts innovation and many local startups working hard to improve the region. London, Paris, Berlin, and Zug are popular tech destinations, yet they often get overshadowed or pushed out of the market because of the dominant U.S. players. Google, of course, dominates web search market, conducting 77% of all internet searches and processing 400,000 every second—gathering significant amounts of data in the process. Such dominance means, as AI specialist Cedric Villani aptly put it, that large foreign companies threaten Europe with “cybercolonization.”
Online platforms that mediate buying and selling account for a whopping 60% of the private consumption of digital goods and services. Europe cannot be lax and blindly open its market to foreign platforms who are only creating monopolies. Their goal is to lock both buyers and sellers into their ecosystem—to be the central point of the majority of digital transactions. This level of centralization has become synonymous with a dependency on tech oligopolies, and a lack of country sovereignty. Even the “local” companies we think we have working in AI are often very dependent on U.S. tech.
The good news is that every problem that exists with closed, proprietary marketplaces and platforms can be solved easily with blockchain. Through the GDPR, Europe and France have already been the first to regulate data privacy, protecting both individual rights and digital sovereignty from foreign tech giants. Blockchain—which in fact has developed faster in Europe than in Silicon Valley—can take this a step further, and can transform Europe in to the next Crypto Valley. Decentralized AI means that algorithms run directly on end-user devices, preventing sensitive data from being sent to the cloud at all.
Also, rather than having an intermediary between people buying and offering digital goods and services, blockchain allows peer-to-peer marketplaces. These marketplaces often have no fees, meaning all of the value can be captured by buyers and sellers. On the other hand, when U.S. tech giants hold a monopoly they can charge significant fees, force certain types of payments, and coerce end-users in a myriad of other ways. With a decentralized approach, no single person or company controls the content. The suppliers and buyers decide for themselves what should be included in the marketplace.
It can be tempting to want to make Europe attractive to some of the biggest names in tech and AI, but we must recognize what we are sacrificing by doing so. Many local startups can’t compete because having a monopoly means you can, more or less, do whatever you want—even if that means engaging in unfair business practices or doing things that are good for your bottom line but bad for actual users. One way to avoid such cybercolonization, though, is to embrace decentralized technologies. They’re the key to both innovation and sovereignty.
Article Produced By
Dr. Rand Hindi
From Stablecoins to Blockchain Trials: Japanese Players Are Going Crypto as the Local Government Is Overseeing the Market
The beginning of the year was particularly eventful
for the Japanese crypto ecosystem, which is generally considered to be a major part of the industry. First of all, Japan’s Central Bank (BoJ) issued a study on the role of central bank digital currencies (CBDCs) in the current monetary system, a topic that was widely discussed by the country’s officials last year. Secondly, major domestic trading company and investment bank, Marubeni Corporation and Daiwa Securities Group, reported blockchain-related advancements in their businesses. Finally, local banking giant Mizuho Financial Group announced the launch of its custom stablecoin. Time to observe this news closer and see what has been happening with crypto in Japan.
It’s still unclear whether Japan will issue a CBDC
Japan’s authorities have been notably hesitant about the idea of introducing a CBDC, which might seem surprising at first, given that cryptocurrencies can be used as a legally accepted means of payment in the country (although they are not considered “legal tender”). CBDCs — just like Bitcoin (BTC) and altcoins — are also virtual currencies. The main difference is that they are issued and controlled by a federal regulator. Hence, CBDCs are not decentralized, unlike many digital assets. Basically, they represent fiat money, albeit in digital form. Each CBDC unit acts as a secure digital equivalent to a paper bill and can be powered with distributed ledger technology (DLT). Consequently, if central bank decides to issue a CBDC, it becomes not only its regulator, but an account holder as well, as people would have to store and access their digital money via this bank. That places CBDC-issuing central banks on a par with private banks.
CBDCs could be seen as central banks’ response to the growing popularity of cryptocurrencies, which bypass regulators’ purview due to their decentralized design. Federally-issued currencies, in turn, aim to take some of the main features from crypto — namely the convenience and security — and combine them with the proven attributes of the conventional banking system, in which money circulation is regulated and reserve-backed. At this point, the BoJ has publicly criticized the concept of CBDCs twice. First, in April 2018, its deputy governor, Masayoshi Amamiya, declared that such currencies can have a negative impact on the existing financial system. Specifically, he expressed his concern about taking on the role of private
“The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks' financial intermediation.”
Then, on Oct. 20, Masayoshi Amamiya expressed his doubts regarding the effectiveness of CBDCs, adding that his agency won’t be issuing its digital currency in the near future. Specifically, Amamiya responded to a theory suggesting that CBDCs can help governments overcome the "zero lower bound" — a situation in which interest rates fall to zero and the central bank loses the capacity to stimulate the economy. According to this approach, a CBDC would enable central banks to charge more interest on deposits from individuals and firms, and hence motivate them to spend money and vitalize the financial system.
The deputy governor questioned that theory, claiming that charging interest on central bank-issued currencies would only work if central banks fully eliminate physical money from the local economy. Otherwise, the public would still continue converting digital currencies into cash in order to avoid paying interest. The elimination of fiat money in Japan is “not an option for us as a central bank,” since cash is a popular method of payment in the country, Amamiya added. Indeed, Japanese society is still mostly cash-based, as about 65 percent of transactions are reportedly done in paper money (which is more than double that of other developed economies).
The BOJ deputy governor continued that thought by stressing that his agency is not planning on creating a CBDC that can be widely used by the public for settlement and payment purposes. The shift to bank-issued crypto from the existing sovereign currencies seems to be "quite a high hurdle,” as crypto assets are often associated with speculative investments and do not represent a stable means of payment, he noted. Further, the central bank examined the role of CBDCs in the current monetary system in a report released on Feb. 19. The paper was written by representatives of the University of Tokyo and the BoJ. The report divided possible CBDCs into two categories, the first being those accessible to the general public for daily transactions instead of banknotes and the other as those limited for large-value settlements.
Interestingly, after explaining that CBDCs of the latter kind wouldn’t bring a lot of new features to the monetary system — as it has already been digitized — the report’s authors focused on the first category throughout most of the document. The report stressed that DLT could be applied to such token-based CBDCs. The working paper noted that blockchain-based CBDC could lower the level of anonymity of its users, as cash money cannot be tracked and hence is used for criminal activities. Here, the authors referenced the example of the People's Bank of China (PBoC), which announced its intent to issue a digital currency to curb tax evasion back in 2016. Notably, the document doesn’t necessarily reflect the official views of the BoJ and was published to stimulate further discussion on the topic, which suggests that Japanese officials have not given up on the idea of issuing a CBDC.
The FSA continues to apply scrutiny toward the local crypto industry
The Financial Services Agency (FSA), the national financial regulator, is known to have a tight grip on local digital asset exchanges. It comes as no surprise, given that the country has witnessed the two largest crypto hacks in history: namely, last year’s outlandish $532 million Coincheck hack and the notorious crash of Tokyo-based Mt. Gox. In the wake of those security breaches, the watchdog has introduced numerous precautions, including on-site inspections of exchanges’ offices and mandatory risk management system reports.
As per Japan’s Payment Services Act, amended in April 2017, all digital currency exchanges in the country are required to be registered with the FSA. The agency has granted the most compliant players with licenses. Currently, the pool of exchanges cleared to serve the Japanese market currently is represented by 17 platforms: Money Partners, Liquid (previously known as Quoine), Bitflyer, BitBank, SBI Virtual Currencies, GMO Coin, Btcbox, Bitpoint, Fisco Virtual Currency, Zaif, Tokyo Bitcoin Exchange, Bit Arg Exchange Tokyo, FTT Corporation, Xtheta Corporation, Huobi and Coincheck. The latter managed to secure its license just recently, almost a year after it suffered from a major hack.
Notably, the agency’s tough supervision has prompted some major players to quit the Japanese market. Thus, Binance, one of the world’s largest crypto exchanges that had once opened an office in the country, turned to Malta — the famously crypto-friendly country — after the Japanese regulator had slapped it with a warning in March 2018. Similarly, local social messaging app Line has also decided to exclude the domestic market prior to the launch of its cryptocurrency exchange, citing local regulatory difficulties.
Nevertheless, the FSA’s severity hasn’t scared everyone off. As many as 190 exchanges are reportedly pending the agency’s approval to enter the local market. Perhaps the most notable example here is United States-based Coinbase, which has made positive remarks about Japan’s crypto regulatory climate in the past, saying that the FSA’s intense focus on security is “good for us.” Given that Coinbase originally planned to establish its operation in Japan within 2018, the financial agency is likely to approve or decline its application at some point in the next few months. Moreover, the Japanese arm of the internet giant Yahoo will reportedly open their own crypto exchange “in April 2019 or later.” Other players that will potentially open a crypto exchange in Japan include Mitsubishi UFJ Financial Group, the largest domestic bank, and Money Forward, the company behind a popular financial management application.
In December 2018, the FSA published a draft report that introduced the new regulatory framework for cryptocurrencies and initial coin offerings (ICOs) in the country. In it, the agency continued to strengthen security requirements for local crypto exchanges, focusing on private keys management, among other things. Further, the FSA urged players to join the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body comprised of domestic industry participants. Moreover, the financial watchdog suggested that ICOs might become subject to securities regulation in the future. Indeed, previously, local media reported that the agency was going to introduce new ICO regulations to protect investors from fraud.One of the FSA’s potential next steps is to regulate unregistered firms that solicit investments in cryptocurrencies. According to Cointelegraph Japan, there is a loophole in the country’s existing regulatory framework that allows unidentified companies that collect funds in crypto rather than fiat currencies to stay in a gray zone, and the watchdog intends to close it.
Industry players have asked to reduce the current tax rate
In February 2019, the Japan Association of New Economy (JANE), a business industry association led by Hiroshi Mikitani, the CEO of Japanese e-commerce giant Rakuten, asked the FSA to reduce the current tax rate for crypto trading income. Specifically, JANE inquired whether it was possible to tax crypto in compliance with progressive taxation instead of general taxation. According to Cointelegraph Japan, income from trading cryptocurrencies is currently taxed at 55 percent in Japan. Imposing progressive taxation on crypto gains would reduce it to 20 percent — the same rate that is applied to stocks and forex markets in the country. The association has also asked the FSA to impose no tax on crypto-to-crypto transactions.
Previously, in October 2018, local news agency Sankei reported that the Japanese National Tax Agency was planning to adjust the tax filing system for cryptocurrencies in order to corroborate that local traders report their gains. Currently, such profits are classified as “miscellaneous income” in the country. Basically, Japanese crypto holders have to pay between 15 and 55 percent on gains declared on their annual tax filings. The top amount applies to people who earn more than 40 million yen ($365,000) annually.
Stablecoins and bank-controlled digital currencies are on the rise in Japan
Over the past few months, at least two major digital currencies developed by Japan’s major banks and IT-industry players have received important updates, , the origins of which – as well as a detailing of related projects – was covered in a separate Cointelegraph article.
Japanese banking giant Mizuho Financial Group, which has over $1.8 trillion in total assets, will reportedly launch its bespoke stablecoin for payments and remittance services as soon as March 1. Dubbed “J-Coin,” the new digital currency platform aims to directly link existing bank accounts with digital wallets. According to reports, the project is being developed in a partnership with around 60 counterpart financial institutions — which host around 56 million user accounts combined. The currency will reportedly be managed by a dedicated mobile app, J-Coin Pay, which uses QR codes at checkout to complete retail payments. As per local financial newspaper Nikkei Asian Review, the currency will resemble a stablecoin fixed at a price of 1 yen (~$0.01) per unit, while transfers between bank accounts and J-Coin wallets are set to be free of charge.
In February, domestic IT giant GMO Internet confirmed its plans to launch a yen-backed stablecoin called GYEN this year. There are few details about the project at the moment. The company’s representatives has so far only revealed that the firm has set up a subsidiary and appointed a person responsible for GYEN operations to issue the stablecoin in 2019. The company had to shut down some of its other crypto-related operations, however. In late December, GMO announced it was quitting the Bitcoin mining hardware sector, citing “extraordinary loss” in Q4 last year. In Q3, GMO's cryptocurrency projects reportedly brought the company around 2.6 billion yen ($22.8 million) despite “the harsh external environment.”
Japan’s largest firms are actively tapping blockchain for their business
Numerous Japanese private firms — including banks, brokerages, trading giants and IT players — have announced blockchain-related news within the past few months, cementing Japan’s reputation as one of the most technology-focused countries. Here are the main companies, along with their projects:
Banks and brokerage
Sumitomo Mitsui Banking Corporation (SMBC), Japan’s second-largest bank
In February, SMBC completed a proof-of-concept (PoC) using blockchain consortium R3’s Marco Polo trade finance platform. Marco Polo is a Corda-powered venture developed by R3 and Irish tech firm TradeIX, connecting banks via a trade network. SMBC, which is currently the only Japanese bank participating in the Marco Polo scheme, said it had partnered with Mitsui & Co. — one of the largest “sogo shosha” (general trading companies) in Japan — to enhance efficiency in trade processes. “[The] PoC was conducted between SMBC and Mitsui & Co. which aims to improve productivity in its trade operations, by testing modules such as Receivable Finance and Payment Commitment (Payment Undertaking),” the press release explained,
“SMBC expects to commercialize Marco Polo in the first half of FY2019 [the financial year 2019] after verification of the PoC.”
Daiwa Securities Group, Japan’s second-largest securities brokerage
Daiwa Securities had also announced the completion of a blockchain PoC. The pilot project, dubbed “JPX Proof-of-Concept Testing for Utilization of Blockchain / DLT in Capital Market Infrastructure,” allegedly involved 26 companies, including financial institutions, system providers and institutional investors. The reported goal of the pilot was to increase the efficiency of blockchain tech in the post-trade process. According to the results of the trial, the blockchain system is expected to reduce operational costs and allow for the easier development of new products and services.
SBI Holdings, the first bank to own a cryptocurrency exchange in Japan
SBI Holdings has also struck an agreement with R3 to work in Japan, purportedly to develop local use of its Corda blockchain platform. According to the official announcement, the new joint venture will “support provision and introduction of the Corda license, arrange schemes for its actual use beforehand, as well as promote collaboration with overseas offices of R3 and other Corda partners.”
Mitsubishi UFJ Financial Group (MUFG), the world’s fifth-largest bank
On Feb. 20, MUFG announced it will launch a new blockchain-based payment system in collaboration with U.S. content delivery network Akamai. Titled the “Global Open Network,” the platform aims to utilize MUFG’s payment industry reach to strengthen its position in the increasingly competitive blockchain payments market. The project is scheduled to launch in the first half of 2020. Previously, MUFG had revealed its initiative to establish a remittance corridor with Brazil using Ripple (XRP).
Itochu, one of the five-largest companies in Japan
On Feb. 1, Itochu announced the start of a PoC aimed to develop a blockchain traceability system, in which buyers and sellers can record the date, time, location and other transaction details on blockchain through a mobile app. The press release stresses that the start of the new trial is contributing “to the achievement of the 17 Sustainable Development Goals listed in ‘The 2030 Agenda for Sustainable Development’ adopted by the United Nations.”
It also adds:
“The aim of developing a blockchain traceability system [is to ensure] stable procurement and supply of raw material for our investment companies and trading parties, improving the traceability of its distribution.”
Line, host of Japan’s major messenger app
As 2018 was drawing to a close, Line signed a memorandum of understanding with local financial player Nomura Holdings to form a blockchain alliance. Nomura — which provides investment, financing and related services to individual, institutional and government customers — Line and LVC Corporation — which oversees messenger's digital asset and blockchain business units — will reportedly sign a formal contract by the end of March 2019. More details will be announced closer to the date. As Cointelegraph previously reported, Line is actively involved in developing crypto products. For instance, in January 2018, the company announced it would launch its own crypto exchange and in-app trading space for its 200 million active monthly users.
Energy and utilities
Marubeni Corporation, Japanese trading company that has expanded into the U.S. and Europe In late February, Marubeni teamed up with U.S.-based blockchain startup LO3 Energy to use the technology to increase automation and efficiency in its renewable energy offerings. “The Japanese energy sector is in the midst of a drastic transition, and there are increasing numbers of private power producers and suppliers interested in developing new customer offerings particularly in the renewable energy space,” LO3 Energy CEO Lawrence Orsini commented in the press release: “Initially this project is internally focused, but it is very much driven by the desire from Marubeni to explore the opportunities that blockchain management systems can offer in the transaction of energy throughout Japan.”
Fujitsu, Japan’s IT firm, a Global 500 company
On Jan. 29, Fujitsu reported that it successfully tested a blockchain-based solution to address inefficiencies in electricity surplus management. Specifically, Fujitsu partnered with local power distribution company Eneres to use the technology to increase the success rates of power sharing, which is administered through a process known as Demand Response (DR). DR is an agreement between utility companies and consumers, aimed to anticipate periods of peak demand by ensuring surplus power is available to those who need it. Fujitsu claims that, in its current form, DR is an inefficient mechanism and blockchain has proven to improve it. “Fujitsu has now devised a system in which electricity consumers can efficiently exchange among themselves the electricity surpluses they have produced through their own electricity generation or power savings,” the press release reads, noting: “The result was an approximately 40% improvement to the DR success rate.”
Article Produced By
Riot Blockchain Plans Launch of Regulated Cryptocurrency Exchange in the US
Publicly traded United States-based company Riot Blockchain
has filed with the Securities and Exchanges Commission (SEC) to launch a new regulated cryptocurrency exchange called RiotX in the U.S. by the end of Q2 2019. The regulator published the documents on March 14. The company declares in the filing that its subsidiary, RiotX Holdings Inc, would operate the new exchange. Furthermore, the exchange’s banking services would be handled by an Application Programming Interface (API) created by software company SynapseFi.
The API is planned to, among other functions, serve as a security enhancement by tracking user location in order to prevent fraudulent use of the service. For instance, improper use would include the use of the exchange in U.S. member states where it is not allowed, more precisely Wyoming and Hawaii. RiotX users would be allowed to create accounts connected to accredited banking institutions in the U.S., and transfer and hold both fiat and cryptocurrencies. Per the filing, the exchange will also be collaborating with exchange software provider Shift Markets.
As Cointelegraph reported in August last year, the SEC had intensified its investigation into crypto mining firm Blockchain Riot, which first came to the regulator’s attention in April 2018. The SEC’s investigation and subpoena information request began after Riot Blockchain changed its name to include blockchain at the peak of industry hype, and shifted their focus from biotechnology to mining. The regulator had previously noted that firms that changed their name to include blockchain would face increased scrutiny.
More recently, a dedicated analysis by Cointelegraph provides details about another similar instance: Long Blockchain Corp., previously known as Long Island Iced Tea, a publicly traded company that shifted from its beverage production business to mining. As of the beginning of March, Long Blockchain Corp. sold their beverage business, more than a year after their name change.
Article Produced By
Crypto Exchange Bittrex International to Host Its First Public ‘Initial Exchange Offering’
Crypto exchange Bittrex is hosting its first token sale
— dubbed an Initial Exchange Offering (IEO) — on Bittrex International, its Malta-based digital asset trading platform. The news was announced in an official press release published on March 11.
Bittrex International, which operates within an EU and Maltese crypto regulatory framework, will officially start the IEO on Friday, March 15, the press release announces. Bittrex users will be able to use Bitcoin (BTC) to purchase “XRD” tokens, developed by international gaming data blockchain project Raid. According to the press release, Raid is a project that rewards gamers for sharing data,as part of a tokenized ecosystem that aims to enhance marketing and business growth and foster other improvements for gaming companies.
Bittrex CEO and co-founder Bill Shihara has said that IEOs on the platform will allow international token investors to back new blockchain projects “with the peace of mind that comes from Bittrex International regulated in Malta.” Bittrex has outlined the details of the IEO, which will end when a hard cap of 17 billion XRD (~$6 million) is reached. Bittrex is currently within the top 50 largest crypto exchanges globally by adjusted daily trade volume, seeing about $73 million in trades on the day to press time.
Bittrex International’s foray into token sales follows major crypto exchange Binance’s token sale platform Launchpad, which recently hosted the high-profile — and extremely swift — token sale for the Tron-based BitTorrent token (BTT) this January. The BTT sale netted $7.1 million dollars with the sale of 50 billion tokens within 15-18 minutes. In February, Launchpad hosted a similarly speedy public token sale for AI and smart contract project Fetch.AI.
Article Produced By
Startup Finturi Raises $2.2 Million for Its Blockchain-Based Invoice Finance Platform
Dutch blockchain startup Finturi has secured 2 million euro ($2.2 million)
to enable businesses to secure loans against invoices via blockchain tech, the company tweeted on March 12. Founded in September 2018, Finturi aims to help businesses finance invoices by linking them with financiers to borrow money against invoices, using blockchain and artificial intelligence (AI), according to a report by startup-focused publication EU-Startups.com on March 11. Finturi has reportedly raised its first investment via an angel round led by NetSam Participaties BV, which evidently participated in an investment round for the first time, according to Crunchbase. Finturi’s blockchain-based invoice finance platform is scheduled to launch in the third quarter of 2019. According to the report, the Finturi team plans to provide a completely peer-to-peer (P2P) platform in future that includes businesses’ clients.
Expressing concerns about many new businesses face difficulties with raising capital, Finturi CEO Johannes Brouwer stated that the firm aims to enable businesses to get loans against invoices within 24 hours. According to Finturi’s CEO, the upcoming platform will provide financiers with a “platform for investing in invoices with minimum hussle.” The lead investor from NetSam Participaties BV said that blockchain tech combined with AI has a massive potential in eliminating inefficiencies in existing financial processes by cutting costs, accelerating processing time and providing better security.
Recently, five Japanese banks entered into a partnership to launch blockchain-based financial services infrastructure. Targeting a range of financial operations for efficiency improvements, the banks will leverage IBM’s expertise during the development phase. Last week, economist and notorious crypto critic Nouriel Roubini argued that blockchain has nothing to do with the future of financial services. Roubini excluded the term from the list of major technologies that he sees as leading to a manufacturing or fintech revolution, including AI, machine learning, big data and the Internet of Things.
Article Produced By
Tipping the Scales: Could Unit-e Finally Break Blockchain’s Scalability Impasse?
Amid a seemingly constant stream of new concepts
claiming to be key to crypto to breaking through to the financial mainstream, one immovable issue remains ever-present: scalability. The crypto community is abuzz with new projects relating to the issue, from the Bitcoin (BTC) Lightning Network to a brand new cryptocurrency designed by some of the top names in crypto and American academia. Cointelegraph takes a look at the latest scalability developments and what they can bring to blockchain and crypto. Some of the United States’ finest academic and technological have come together in a new project aiming to launch a globally scalable decentralized payment network, according to a press release published on Jan.17.
The brainchild of this group of tech professionals and leading American academics is called “Unit-e,” a new cryptocurrency that aims to end the scalability issues plaguing both blockchain and cryptocurrencies alike. Unit-e is receiving funding from Distributed Technologies Research (DTR), a nonprofit organization based in Zug, the central nexus of Switzerland’s so-called Crypto Valley. In addition to the newly launched DTR, Unit-e has also received an injection of funds from San Francisco-based Pantera Capital.
As per the press release, the core members of the team involved in developing Unit-e are based in Berlin, with the team largely consisting of “open-source and distributed systems engineers.” DTR Foundation Council Member and Co-Chief Investment Officer at Pantera Capital Joey Krug acknowledged that, although the current technology represents a stumbling block for the adoption of cryptocurrencies on a wider scale, Unit-e is aware of this and is incorporating that knowledge into its
“A lack of scalability is holding back cryptocurrency adoption. The Unit-e developers are turning this research into real scalable performance that will benefit a huge swath of decentralized financial applications.”
Giulia Fanti, one of DTR’s lead researchers and assistant professor of electrical and computer engineering at Carnegie Mellon University, explained to Cointelegraph why scalability is important and what this project is doing to
“Scalability is difficult to tackle in part because there are so many moving parts in blockchain systems. The ideal design should have low storage, computation, and communication costs, all while guaranteeing security and decentralization. Any of these requirements alone can be challenging to optimize, and the combination of these requirements is legitimately a very difficult problem.
“I think two key factors make our project interesting: The first is that we are doing research at all levels of the stack, ranging from the network to consensus to economics, instead of focusing on just one area. This is important because the subsystems of blockchains are very interconnected. The second factor is that we didn't limit ourselves to people who already work on blockchains. Instead, we brought in experts from areas that are critical to blockchains – e.g., networking, economics, information theory, distributed systems – and asked them to approach these problems using the expertise of their respective fields."
Pramod Viswanath, a researcher for DTR
and professor of electrical and computer engineering at the University of Illinois Urbana-Champaign also spoke to Cointelegraph about how scalability has been an issue in the early stages of any technology:
“Global scalability is usually quite hard for any technology. As an example, consider cellular wireless systems. Every man, woman and child on Earth has one now. But wireless technology itself is not new at all. Marconi demonstrated a wireless communication link across the Atlantic Ocean in 1901 and it took 100+ years for the technology to really scale globally. It took huge innovations beyond Marconi's technology for wireless to scale globally. A big part of this innovation was system or full stack design, redesigning all aspects of the radio stacks.
“Bitcoin is the equivalent of Marconi's historic wireless transmission: Bitcoin demonstrated that secure distributed trust is possible. But it came at the cost of poor performance (throughput, latency). We are redesigning the full stack of cryptocurrencies in our quest at the getting global scalability.”
During the interview, Viswanath said that he was aware of the tendency for projects that claim that they are a one-trick fix for the many issues bogging down the crypto and blockchain sectors. As a result, Viswanath stated that their project was kept quiet until solid research could be presented, in the hope that scientific output could form the basis of Unit-e as opposed
to mere fantasy:
“We are aware of the noise in the crypto community. This is why we took a very conservative approach. We have been in stealth mode for over a year, coming out in the open only when we found that we have already demonstrated a large bit of the claims/promises that Unit-e is making. Indeed, the standard ‘white paper’ in crypto projects is replaced in our case by a ‘150+ page research manifesto,’ which itself is a succinct summary of 10+ research papers by us in the past year, each written for a scientific audience in the appropriate level of engineering and mathematical formalization. These scientific outputs are really the basis behind the claims of Unit-e, not so much as wishful thinking.“
In spite of the myriad challenges the hitherto insurmountable issue of scalability has presented, Fanti is optimistic about the progress being made and believes that developers shouldn’t shy away from experimentation in
“I think scalability is a very important issue to solve if cryptocurrencies and blockchains more generally are going to gain (or even keep) traction. We're now at the point where there is demand for these technologies, but the growing pains are starting to be evident. So it's critical to explore scalability solutions. At the same time, it can be difficult to experiment with drastically new scalability solutions in already-existing systems due to technical and political inertia. Because of this, we felt there were some clear benefits to building a standalone system with the flexibility to try out different ideas. The hope is that these ideas can eventually benefit the whole community.”
Babak Dastmaltschi, chairman of the DTR Foundation Council is bullish on blockchain and cryptocurrencies. Much like Viswanath, Dastmaltschi expressed his belief that this transitional era for cryptocurrency is not unlike the birth of the telecommunications industry and the
dawn of the internet:
"The blockchain and digital currency markets are at an interesting crossroads, reminiscent of the inflection points reached when industries such as telecom and the internet were coming of age. These are transformative times. We are nearing the point where every person in the world is connected together. Advancements in distributed technologies will enable open networks, avoiding the need for centralized authorities. DTR was formed with the goal of enabling and supporting this revolution, and it is in this vein that we unveil Unit-e."
Fanti commented that one of the most encouraging things about the blockchain community is the readiness for cooperation among its members. In this way, those working on Unit-e have been able to learn from previous projects attempting to tackle scalability, such as the Bitcoin Lightning Network. Fanti outlined that, although both projects center around the same focal point, there are some key
differences between the two:
“Like the Lightning network, we are very focused on scalability. I think one key difference is that because we are starting from scratch, we have the freedom to completely rethink other parts of the blockchain (e.g., consensus mechanisms) that are difficult to change in more established systems. That being said, some of our research is quite related to scalability of the Lightning network, and payment channel networks in general.
“Some scalability challenges in payment channel networks haven't really come to a head yet, in part because adoption is still growing. But once these technologies become more widely used, it will become increasingly important to understand how to route and schedule packets – much like the internet. We hope that some of the research going on for Unit-e can also benefit the Lightning Network and other projects in the payment channel network space, just as we are learning from their prior work.”
What is the Scalability problem.?
On Dec. 23, BTC statistics website Bitcoinvisuals.com announced that the capacity of the Bitcoin Lightning Network surpassed $2 million. Born from a white paper first published in 2015 by Joseph Poon and Thaddeus Dryja, the BTC Lightning Network is a second-layer payment protocol that functions on top of the BTC blockchain. Much like Unit-e, the network aims to tackle the scalability issues weighing down the crypto sector. However, as opposed to adapting the mechanics of the blockchain itself, the BTC Lightning Network seeks to increase transaction speed by using payment channels. The results of this approach help speed up transaction speeds between users because transactions are not recorded on the blockchain until the channel closes. The news of the increase in the network’s capacity comes against the backdrop of a dismal period of decreasing crypto prices, famously dubbed the “crypto winter.” In spite of the vertiginous drops witnessed across the crypto sector throughout the 2018, the network managed to maintain strong growth.
In spite of being lauded for its efforts to reduce the transaction time between users, the network has attracted criticism for one major aspect: Although the transactions take place on top of the blockchain, they don’t enjoy the same level of security. As a result, it’s unlikely that the method will result in the transfer of large transactions, as these would need the backup of decentralized security that can be guaranteed only through the original blockchain layer. As of Dec. 23, the capacity of node channels supporting the Lightning scaling protocol was 496.8 BTC, only just falling short of a landmark 500 BTC. December also witnessed an increase in channels connecting nodes, with 14,352 unique channels doing so by late December. The Lightning Network also drew praise from crypto trailblazer Nick Szabo who said that the current state of technical development in the sector would lead to an uptick in second-layer solutions in 2019.
Major central bank institution casts doubt on potential of blockchain in current state
A new report published on Jan. 21 by the Bank for International Settlement (BIS) has found that Bitcoin’s problems are only solvable by moving on from a proof-of-work (PoW) system. BIS is a Swiss-based organization comprised of 60 central banks that reportedly account for 95 percent of global GDP. According to the report, the nature of the blockchain infrastructure will result in a steady increase in transaction times as a result of only a limited number of new Bitcoin ever being created. This report also found that transaction fees would no longer be able to support mining expenses and that the transaction speeds would be so slow that the network could
become virtually unusable:
“Simple calculations suggest that once block rewards are zero, it could take months before a Bitcoin payment is final, unless new technologies are deployed to speed up payment finality.”
The report comments favorably on solutions such as the BTC Lightning Network, stating that “The only fundamental remedy would be to depart from proof-of-work.” The report adds however, that a departure from the existing system would “probably require some form of social coordination or institutionalization, and concludes that “in the digital age too, good money is likely to remain a social construct rather than a purely technological one.”
MIT professor says blockchain must increase scalability
On Jan. 21, Massachusetts Institute of Technology (MIT) professor Silvio Micali became the latest U.S.-based academic to outline which major aspects of blockchain systems must be improved in order to maximize all the benefits that the technology entails. In an interview with Bloomberg, Micali stated his view that security, decentralization and scalability are three core aspects of blockchain systems that must function simultaneously in order to deliver an inclusive and borderless economy. With regard to scalability, Micali emphasized that a decentralized system requires a higher level of technology in order to ensure the same degree of participation that centralized systems currently enjoy. Micali outlined his optimism about future prospects for the technology once it is optimized to a degree to which the current issues regarding scalability and security can finally
“Only a true decentralized system, where the power is really so spread that is going to be essentially practically impossible to attack them all and when you don’t need to trust this or that particular node, is going to bring actually the security we really need and deserve.”
In January, MIT Technology Review furthered its bullish stance in claiming that 2019 would be the year that blockchain systems would finally enjoy normalization and wider adoption.
In September, Blocksteam’s Liquid Network sidechain for the Bitcoin blockchain was publicly announced. First discussed in 2015, the project has now been launched with the view of improving liquidity between Bitcoin exchanges and brokers. The blog post from Blockstream states that the Liquid sidechain would allow faster transactions between users as a result of a native Liquid Bitcoin (L-BTC) asset backed by a “two-way peg” to Bitcoin, Confidential Transaction Technology and Issued Assets that aim to bring “Bitcoin-like features to traditional assets.” The Liquid Network FAQ page explains that the Liquid Network differs from the Lightning Network in that its transactions are not “limited in amount of channel capacity.”
“Wall Street’s Bookkeeper” enters test phase of DLT replatforming
On Nov. 6, the Depository Trust & Clearing Corporation (DTCC) announced it had commenced the test phase of its attempt to replatform its Trade Information Warehouse (TIW) using distributed ledger technology (DLT). The project is the fruit of a collaboration between IBM, Axonia and R3. If successful, the project would represent a considerable leap forward in both scalability and the potential scope of major blockchain projects.
In light of the historic attempts to overcome scalability issues, the DTCC’s attempt to shift its TIW to the blockchain is especially ambitious due to the fact that it processes 98 percent of derivatives transactions worldwide. Furthermore, the statement adds that the DTCC’s subsidiaries “processed securities is valued at more the U.S. $1.61 quadrillion.” As per the release, the DTCC’s Global Trade Repository service processed around 40 million over the counter (OTC) positions weekly, along with 1 billion monthly communications via its licensed trade repositories group.
In a 19-week study headed by the DTCC in collaboration with both Accenture and R3, the trio found that DLT is scalable enough to support the high-trade volumes of the U.S. equities market. Findings in the report allegedly show that DLT is able to process an entire trading day’s volume at peak rates, amounting to 115,000,000 daily trades, which equates to roughly 6,300 trades per second for five hours on end. In order to accurately recreate the chaotic environment of exchanges, brokers-dealers and market participants, Accenture worked on a network of more than 170 nodes. The model subsequently captured matched equities trades from exchange DLT nodes. The DTCC also published information about the ongoing work to transform its TIW via DLT,
such as blockchain:
“Currently, public blockchains supporting cryptocurrencies operate at single or double digit per second performance, which, until now, was the only indication of the potential volume that a private DLT might be able to support. “To make sure that we really demonstrated robustness and completeness, we wanted a target high enough to measure the performance and allow it to maintain that for a continuous period of time.”
Jennifer Peve, managing director of business development and fintech strategy at DTCC, outlined that the scale of the project required an entirely new approach
“The reality is that for the private distributed ledger, there wasn’t a known performance or scalability figure, all we had to go on was public blockchains for Bitcoin performance, and that is not an apple-to-apple comparison. Private blockchains are fit for purpose for our industry. They have a very different architecture, different privacy and sharing models, data storage, smart contract functionality and governance model. There are a number of factors that go into performance and scalability of a distributed ledger."
Head of Clearing Agency Services at DTCC Murray Pozmanter was also optimistic about the results of the ambitious efforts to create adequate
“We are excited to lead this important work to advance the performance capabilities of DLT and help create new possibilities for leveraging the technology more broadly across financial markets. As an early adopter of DLT, we are encouraged by the results of the study because they prove that the technology’s performance can scale to meet the needs of markets of different sizes and maturity.”
In spite of the successful testing so far, the group stresses that the study only tested basic functionality. The next phase of the replatforming is expected to take place in Q1 2019.
Article Produced By
Kaspersky CEO: Cryptocurrencies Are Great, But the World Is not Ready Yet
Eugene Kaspersky, the CEO of the cybersecurity giant Kaspersky,
stated in a recent interview that “cryptocurrencies are a great idea, but the world is not ready for them yet.” Kaspersky made the statement to financial news website Arabian Business on March 1. Kaspersky elaborated, stating that he believes that in the future — “perhaps in a 100 years’ time” — the world will be united under a single government, which turn will have a single, digital currency. According to the entrepreneur, “the world must be united if we want to have encrypted currencies. At the moment, governments will want to control them.” He also argued that in the future, digital currencies will see little competition for use, as he predicts the dominance of a
“Some other currencies may be available, but on a global scale the currency will be unified.”
Kaspersky also noted that he believes that the future currencies will be digital, arguing, however, that “today’s digital currencies, such as Bitcoin (BTC), cannot replace the current financial system.”
Still, he concedes:
“Some of the ideas and techniques on which these [crypto]currencies are based can be used in the future currency with little modification, leveraging blockchain technology.”
Kaspersky had previously expressed a similar view on crypto in the past. As Cointelegraph reported in December 2015, he said that while “cryptocurrency is a great invention” he is also convinced that “geopolitically this world is not ready to use it yet.” As previously reported, the co-founder and CEO of Twitter, Jack Dorsey, also thinks the future holds the potential for a single, dominant digital currency. He, however, has argued that the global currency will be Bitcoin.
Article Produced By
QuadrigaCX Reportedly Stored ETH on Kraken, Bitfinex and Poloniex, Research Finds
Cryptocurrency exchange QuadrigaCX probably stored a significant quantity of Ethereum (ETH)
in other crypto exchanges, according to new evidence. This claim was made in a report published by crypto research and consulting platform ZeroNonCense on Feb. 28, which obtained corroborating information from Kraken CEO Jesse Powell and MyCrypto CEO Taylor Monahan. More precisely, the author of the report reportedly “believes that there is a very strong possibility” that nearly 650,000 ETH belonging to QuadrigaCX were stored on the Kraken, Bitfinex and Poloniex crypto exchanges during QuadrigaCX’s operations. The report claims that the fact that QuadrigaCX had accounts on all those exchanges is established and proven, and that at the time they were sent, the funds were worth over $100 million.
As Cointelegraph reported in February, following the sudden death of its founder Gerry Cotten, cryptocurrency exchange QuadrigaCX was reportedly missing CA$190 million dollars ($145 million) in digital assets. ZeroNonCense explains that — given the affidavit of the founder’s widow Jennifer Robertson that neither she nor other individuals involved with the exchange knew where Cotten stored the crypto assets — it is possible that they were not aware of these storage practices. According to the report, Robertson also claimed in the affidavit that Cotten may have stored some of QuadigaCX’s funds on other exchanges. A report by Big Four audit firm Ernst & Young, which claimed that the exchange’s cold wallets have been empty and unused since April 2018, could be explained by the possibility that the assets are instead stored on those exchanges, ZeroNonCense hints.
The report concludes that if QuadrigaCX’s funds are still on the aforementioned exchanges, their retrieval should be trivial and could allow the platform to regain solvency and resume its operations. As Cointelegraph reported at the beginning of February, ZeroNonCense previously released a report claiming that QuadrigaCX never had the $190 million in Bitcoin (BTC) it supposedly lost access to when its CEO unexpectedly died. Also in February, news broke that Canadian banks have shown hesitation concerning the management of insolvent cryptocurrency exchange QuadrigaCX’s assets because of money laundering concerns.
Article Produced By