Crypto-Powered: Understanding Bitcoin, Ethereum, and DeFi
Until one understands the basics of this tech, they won’t be able to grasp or appreciate the impact it has on our digital bank, Genesis Block. https://reddit.com/link/ho4bif/video/n0euarkifu951/player This is the second post ofCrypto-Powered— a new series that examines what it means forGenesis Blockto be a digital bank that’s powered by crypto, blockchain, and decentralized protocols. --- Our previous post set the stage for this series. We discussed the state of consumer finance and how the success of today’s high-flying fintech unicorns will be short-lived as long as they’re building on legacy finance — a weak foundation that is ripe for massive disruption. Instead, the future of consumer finance belongs to those who are deeply familiar with blockchain tech & decentralized protocols, build on it as the foundation, and know how to take it to the world. Like Genesis Block. Today we begin our journey down the crypto rabbit hole. This post will be an important introduction for those still learning about Bitcoin, Ethereum, or DeFi (Decentralized Finance). This post (and the next few) will go into greater detail about how this technology gives Genesis Block an edge, a superpower, and an unfair advantage. Let’s dive in… https://preview.redd.it/1ugdxoqjfu951.jpg?width=650&format=pjpg&auto=webp&s=36edde1079c3cff5f6b15b8cd30e6c436626d5d8
Bitcoin: The First Cryptocurrency
There are plenty of online resources to learn about Bitcoin (Coinbase, Binance, Gemini, Naval, Alex Gladstein, Marc Andreessen, Chris Dixon). I don’t wanna spend a lot of time on that here, but let’s do a quick overview for those still getting ramped up. Cryptocurrency is the most popular use-case of blockchain technology today. And Bitcoin was the first cryptocurrency to be invented.
Bitcoin is the most decentralized of all crypto assets today — no government, company, or third party can control or censor it.
Bitcoin has two primary features (as do most other cryptocurrencies):
Send Value You can send value to anyone, anywhere in the world. Nobody can intercept, delay or stop it — not even governments or financial institutions. Unlike with traditional money transfers or bank wires, there are no layers of middlemen. This results in a process that is much more cost-efficient. Some popular use-cases include remittances and cross-border payments.
A few negative moments in Bitcoin’s history include the collapse of Mt. Gox — which resulted in hundreds of millions of customer funds being stolen — as well as Bitcoin’s role in dark markets like Silk Road — where Bitcoin arguably found its initial userbase. However, like most breakthrough technology, Bitcoin is neither good nor bad. It’s neutral. People can use it for good or they can use it for evil. Thankfully, it’s being used less and less for illicit activity. Criminals are starting to understand that transactions on a blockchain are public and traceable — it’s exactly the type of system they usually try to avoid. And it’s true, at this point “a lot more” crimes are actually committed with fiat than crypto. As a result, the perception of bitcoin and cryptocurrency has been changing over the years to a more positive light. Bitcoin has even started to enter the world of media & entertainment. It’s been mentioned in Hollywood films like Spiderman: Into the Spider-Verse and in songs from major artists like Eminem. It’s been mentioned in countless TV shows like Billions, The Simpsons, Big Bang Theory, Gray’s Anatomy, Family Guy, and more. As covid19 has ravaged economies and central banks have been printing money, Bitcoin has caught the attention of many legendary Wall Street investors like Paul Tudor Jones, saying that Bitcoin is a great bet against inflation (reminding him of Gold in the 1970s). Cash App already lets their 25M users buy Bitcoin. It’s rumored that PayPal and Venmo will soon let their 325M users start buying Bitcoin. Bitcoin is by far the most dominant cryptocurrency and is showing no signs of slowing down. For more than a decade it has delivered on its core use-cases — being able to send or store value.
At this point, Bitcoin has very much entered the zeitgeist of modern pop culture — at least in the West.
When Ethereum launched in 2015, it opened up a world of new possibilities and use-cases for crypto. With Ethereum Smart Contracts (i.e. applications), this exciting new digital money (cryptocurrency) became a lot less dumb. Developers could now build applications that go beyond the simple use-cases of “send value” & “store value.” They could program cryptocurrency to have rules, behavior, and logic to respond to different inputs. And always enforced by code. Additional reading on Ethereum fromLinda XieorVitalik Buterin.
Because these applications are built on blockchain technology (Ethereum), they preserve many of the same characteristics as Bitcoin: no one can stop, censor or shut down these apps because they are decentralized.
Just as tokens grew in popularity in 2017–2018, so did online marketplaces where these tokens could be bought, sold, and traded. This was a fledgling asset class — the merchants selling picks, axes, and shovels were finally starting to emerge.
I had a front-row seat — both as an investor and token creator. This was the Wild West with all the frontier drama & scandal that you’d expect.
Binance — now the world’s largest crypto exchange —was launched during this time. They along with many others (especially from Asia) made it really easy for speculators, traders, and degenerate gamblers to participate in these markets. Similar to other financial markets, the goal was straightforward: buy low and sell high. https://preview.redd.it/tytsu5jnfu951.jpg?width=600&format=pjpg&auto=webp&s=fe3425b7e4a71fa953b953f0c7f6eaff6504a0d1 That period left an embarrassing stain on our industry that we’ve still been trying to recover from. It was a period rampant with market manipulation, pump-and-dumps, and scams. To some extent, the crypto industry still suffers from that today, but it’s nothing compared to what it was then.
While the potential of getting filthy rich brought a lot of fly-by-nighters and charlatans into the industry, it also brought a lot of innovators, entrepreneurs, and builders.
The launch and growth of Ethereum has been an incredible technological breakthrough. As with past tech breakthroughs, it has led to a wave of innovation, experimentation, and development. The creativity around tokens, smart contracts, and decentralized applications has been fascinating to witness. Now a few years later, the fruits of those labors are starting to be realized.
I know that for the hardcore crypto people, what we covered today is nothing new. But for those who are still getting up to speed, welcome! I hope this was helpful and that it fuels your interest to learn more. Until you understand the basics of this technology, you won’t be able to fully appreciate the impact that it has on our new digital bank, Genesis Block. You won’t be able to understand the implications, how it relates, or how it helps. After today’s post, some of you probably have a lot more questions. What are specific examples or use-cases of DeFi? Why does it need to be on a blockchain? What benefits does it bring to Genesis Block and our users? In upcoming posts, we answer these questions. Today’s post was just Level 1. It set the foundation for where we’re headed next: even deeper down the crypto rabbit hole. --- Other Ways to Consume Today's Episode:
We have a lot more content coming. Be sure to follow our channels: https://genesisblock.com/follow/ Have you already downloaded the app? We're Genesis Block, a new digital bank that's powered by crypto & decentralized protocols. The app is live in the App Store (iOS & Android). Get the link to download at https://genesisblock.com/download
Crypto-Powered: Build on Legacy Finance, Prepare To Die
The success of today’s high-flying fintech unicorns will be short-lived as long as they’re building on legacy financial infrastructure. https://reddit.com/link/hmw3sm/video/7sbwo5nh7g951/player This is the first post of ourCrypto-Poweredseries where we look at what it means forGenesis Blockto be a digital bank that’s powered by crypto, blockchain, and decentralized protocols. --- Today we start a new series called Crypto-Powered. This will be similar to our last series, Spreading Crypto, but now we’re exploring a new theme. At Genesis Block, we’re building a digital bank that’s powered by crypto, blockchain technology, and decentralized protocols. Yes, lots of buzzwords. What does any of it mean?How does it give us an unfair advantage? What superpowers are unlocked?What are the benefits for users? In this series, we’ll answer all of these questions. Grab some popcorn. Sit down. Put your feet up. Make yourself comfortable. Let us take you on a journey. Let us be your tour guide down the crypto rabbit hole… But hold on! Pump those brakes. Before we dive into the crypto rabbit hole, we need to establish some context. We can’t talk about the future of money unless we first understand the problems of money today. We need to understand what’s broken with legacy finance. So let’s do a quick primer on the current state of finance. That will set the stage for the rest of the series. Alright, let’s go.
Fintech & Unbundling
Over the last decade, legacy financial institutions (banks in particular) haven’t been meeting the needs of younger, more digital generations. As a result, fintech startups have emerged and effectively unbundled the consumer banking stack. Whether it was Robinhood for investing, TransferWise for cross-border payments, SoFi for student loans, Wealthfront for wealth management, or Digit for saving… these innovative upstarts all focused on a single use-case and nailed it. https://preview.redd.it/iwrpg6ek7g951.png?width=800&format=png&auto=webp&s=7648d28955ea4e12795826dc78cdf70d41ffaef1 While great for a period, this led to a lot of fragmentation. Users needed to split their finances across many different services and keep track of what money was where. The cognitive load for many users became overwhelming.
While many of these high-flying fintech unicorns have seen incredible success, I believe it will be short-lived as long as they’re building on legacy financial infrastructure. It’s a realization I’ve come to only recently. In years past, whenever I met a fintech entrepreneur, they’d always suggest that they’d never do a startup in traditional finance again. Too complex. Too expensive. Too slow. I always shrugged it off. Wimps. How hard can it be? I really didn’t believe or understand that pain until we started Genesis Block. And it wasn’t until we began integrating with some of our partners (Evolve Bank & Trust, I2C, Visa, etc) that I really started to understand. https://reddit.com/link/hmw3sm/video/vei2flrq7g951/player The rumors are true. Those fintech entrepreneurs were all right. The pain is real.
Trying to innovate in legacy finance is like running on a hamster wheel blindfolded while powerful, evil rats randomly throw explosives inside.
It feels like you are never making any progress and at any moment you can be destroyed. Luckily at Genesis Block, we’re only integrating with legacy finance at the edges — the onramps and offramps (money in, money out). We’ve worked with great partners and so far have been able to navigate the treacherous terrain.
Legacy Finance is Broken
You must be wondering why and how is it so bad. It’s all the things you’d expect… The antiquated tech stack of financial institutions. The frustrating process of working with big, bureaucratic, slow-moving organizations. The prehistoric payment systems that haven’t improved in decades (for example, ACH payments and their strange batch processing practices). The countless unnecessary middle-men on every card swipe (merchant, acquiring bank, processor, card network, issuing bank). The slow settlement times. Systems rife with fraud. An industry oozing with predatory practices and unethical behavior. The moth-eaten laws & regulations that are NOT innovator-friendly (mostly due to powerful Wall Street incumbents who control politicians). https://reddit.com/link/hmw3sm/video/2hdxxch38g951/player The list goes on and on. Maybe someday we can dedicate an entire series to it. It’ll be a good bedtime story.
The more familiar I become with how legacy finance works, the more convinced I am that the future of money cannot be built on that foundation.
The fintech darlings of Silicon Valley are all building on extremely shaky ground that is ripe for massive disruption. They will spend so much time looking backward (integration, compatibility, regulation) that they will have very little time to look forward (innovation, progress, disruption). They will be tangled in the quagmire of archaic tech and the tentacles of outdated regulation. I don’t believe the ultimate winners in consumer finance will come from the current cohort of fintech unicorns. And that’s because these companies are all building on the pipes of legacy finance.
The future of consumer finance belongs to those who build with blockchain technology & decentralized protocols at its core, and know how to best take it to the billions of people around the world.
That’s our thesis at Genesis Block. Our last series went deep on how the tech reaches and touches end-users. This new series is all about what’s under the hood — crypto & blockchain — and how that gives us an unfair advantage in the world of consumer finance.
While some fintech products are giving users the ability to buy & hold crypto (Robinhood, Revolut, Cash App), they aren’t leveraging the technology beyond that. And they most certainly aren’t building their infrastructure around it. So let’s ask the dumb VC question that some of you are thinking: what if these fintech companies or big banks just copy what we’re doing at Genesis Block? What if they add blockchain and crypto? https://reddit.com/link/hmw3sm/video/c0je9dvx8g951/player Sorry, you can’t just “add crypto” as if a pizza topping in a Doordash order. That’s not how it works. I mean, you can say you are doing that, but it’s not real. That’s just Innovation Theater. The systems behind banks and fintech are deeply integrated with legacy financial rails. Trying to retroactively add blockchain in any meaningful way would be like trying to make a 2020 Lambo with a 1910 Ford Model T engine. No matter how talented their engineers are, it just ain’t gonna happen. Not unless they burn it all down and start over. Massive risks. A classic case of Innovator’s Dilemma. Will anyone have the courage? I don’t know. I think they are much more likely to acquire someone like Genesis Block than gamble their entire business on it. But we aren’t cheap. These new, decentralized protocols are complex, fast-moving, and full of snags. Our team has been in this space for many years — we understand the security tradeoffs, the protocol nuances (we spent a lot of time actually building them), and enough self-awareness to know what we don’t know. Our team at Genesis Block can run circles around traditional banks and fintech companies. Certainly, they have large audiences and strong balance sheets — which can’t be underestimated. But when it comes to unlocking the enormous, new value to users, as long as the incumbents are building on legacy financial infrastructure, they simply cannot compete with us.
The empires created in the 21st-century world of finance will be crypto-native companies that deeply understand decentralized tech and know how best to leverage it. It will be the teams who build on “crypto rails” first, with bridges back to legacy finance second.
That’s our thesis at Genesis Block. In this series, we intend to lay out a convincing argument for why that’s true.
So now that the stage is set and we’ve introduced the series, I think you’re ready to start learning why blockchain technology is our superpower, our unfair advantage. You are ready to dive into that crypto rabbit hole. But first, a word of caution. Once you go in, you may never want to come out. It’s what happened to me and so many others. Once you see the potential & promise of this incredible technology, you won’t be able to ignore it. You won’t stop thinking about it. It’ll capture your imagination like few other things can. Don’t be afraid of it. Let it take you. --- Other Ways to Consume Today's Episode:
We have a lot more content coming. Be sure to follow our channels: https://genesisblock.com/follow/ Have you already downloaded the app? We're Genesis Block, a new digital bank that's powered by crypto & decentralized protocols. The app is live in the App Store (iOS & Android). Get the link to download at https://genesisblock.com/download
Mitch McConnell's Brother-in-Law One of the Masterminds of Trump-Russia
Jim Breyer, Mitch McConnell's brother-in-law, Facilitates Russia’s Takeover of Facebook through Yuri Milner In 2005 Jim Breyer, a partner at Accel Partners, invested $1 million of his own money into Facebook and gained a seat on the board (1). In Feb 2009 Jim Breyer visited Russia with a number of other Silicone Valley investors. While there, Yuri Milner, a Russian tech entrepreneur who founded DST with close ties to the Kremlin, hosted a dinner to cap the entire event (2). As one Moscow source put it:
DST has the backing of the big boys at the top in the Kremlin, which is why it will go from strength to strength (5)
Milner found out Breyer liked Impressionist art and took him to Russian’s Hermitage Museum to view Matisse paintings otherwise closed off to the public. Three months later Yuri Milner’s DST invested into Facebook at a bloated value. (2)
Mr Milner dismissed suggestions that at a valuation of $10bn he overpaid for his stake in Facebook, especially given that the social networking site has yet to prove it has turned to profit. (3) it’s seen as a desperate and rather vulgar deal on the one hand—Milner buying a small stake in Facebook, valuing the entire company at $10 billion—and, on the other, Facebook debasing itself by taking Russian money. Russian money! In fact, it seems rather like a desperate deal for both parties (in the midst of the banking crisis, Facebook has only two other bidders for this round—and none from the top VC tier) (4)
By the end of 2009, DST would own 10% of Facebook. Later revealed by the Paradise Papers, DST’s investments into Facebook were financed by the Russian government through state-owned Gazprom. That’s right, in 2009 Russia owned 10% of Facebook. (6) Soon after, the two continued to work together on other investments. Breyer introduced Milner to Groupon, and Milner helped Breyer’s Accel invest into Spotify (7). In 2010 an Accel representative joined a gaggle of Silicon Valley investors to Russia and signed a letter promising to invest into the country (8).
Jim Breyer and Rupert Murdoch Then in Nov 2010 Jim Breyer invested into Artsy.net, run by Rupert Murdoch’s then-wife, Wendi Deng, and Russia oligarch Roman Abramovich’s then-wife, Dasha Zhukova. Jared Kushner’s brother, Josh, also invested in the fledgling company (1). At the time Rupert Murdoch’s News Corporation had a joint venture with the Russian mob-linked oligarch Boris Berezovsky, called LogoVaz News Corporation, that invested in Russian media (4). It was Berezovsky’s protege close to Putin, Roman Abramovich, who tied Berezovsky to the mob.
According to the Mirror Online, Abramovich paid Berezovsky tens, and even hundreds, of millions every year for "krysha", or mafia protection. (5)
In June 2011, Rupert Murdoch ended his foray into social media by selling Myspace to Justin Timberlake (2) and elected Jim Breyer to the board of News Corp (3).
Jim Breyer invests in Wickr with Erik Prince In 2012 Breyer invested in a encrypted messenger app, Wickr. Other investors include Gilman Louie and Erik Prince. To understand the connection, we need to go back to 1987. Breyer, newly hired to Accel Partners, made his first investment with Louie’s video game company that owned the rights to the Soviet Union’s first video game export, Tetris (1). Louie went off to become the founding CEO of the CIA-backed In-Q-Tel which invested in Palantir. Palantir’s founder, Peter Thiel, sat on the board of Facebook with Breyer (2)(3). On the board of In-Q-Tel is Buzzy Krongard (7), the man who helped Erik Prince’s Blackwater receive their first CIA contract, who also joined the board of Blackwater in 2007 (6). Around that same time, 2012-2013, Prince met Vincent Tchenguiz, founder of Cambridge Analytica's parent company, SCL (8), and was introduced to Cyrus Behbehani of Glencore, one of the purchasers of Rosneft stock detailed in the Steele Dossier (9). Cyrus Behbehani sat on the board of RusAl with Christophe Charlier, who is also Chairman of the board at Renaissance Capital (10), an early investor of DST (11).
Jim Breyer and Yuri Milner invest in Prismatic That same year, 2012, Jim Breyer invested in Prismatic, a news aggregate app, with Yuri Milner.
Prismatic’s technology works by crawling Facebook, Twitter and the web (“anything with a URL”) to find news stories. It then uses machine learning to categorize them by Topic and Publication. Prismatic users follow these Topics and Publications, as well as Individuals and the algorithm then uses these preferences and user-activity signals to present a relevant Newsfeed. (1)
Sounds like the beginning of what could be a propaganda dissemination tool. That goes in-line with Yuri Milner’s vision of Social Media. Milner’s theory:
“Zuckerberg’s Law”: Every 12 to 18 months the amount of information being shared between people on the web doubles... Over time people will bypass more general websites such as Google in favor of sites built atop social networks where they can rely on friends’ opinions to figure out where to get the best fall handbag, how to change a smoke detector, or whether to vacation in Istanbul or Rome. “You will pick your network, and the network will filter everything for you,” Milner explained. (2)
So how does Milner intend to utilize the data gathered through social media? Let’s see what Milner did to Russia’s top social media site, VK:
In January 2014, Durov sold his 12 percent stake to Ivan Tavrin, the CEO of major Russian mobile operator Megafon, whose second-largest shareholder is Alisher Usmanov, one of Russia’s most powerful oligarchs, a man who has long been lobbying to take over VK. Then, in April 2014, Durov stated he had sold his stake in the company and became a citizen of St Kitts and Nevis back in February after "coming under increasing pressure" from the Russian Federal Security Service to hand over personal details of users who were members of a VK group dedicated to the Euromaidan protest movement in Ukraine. (3)
The Euromaidan protest ousted the Russian-backed president of Ukraine, Viktor Yanukovych, whom Paul Manafort had worked to install. (4)
Facebook talks US Elections with Russia In Oct 2012 Zuckerberg traveled to Moscow and met Dmitry Medvedev where they had a very interesting conversation:
Mr. Zuckerberg and Mr. Medvedev talked about Facebook’s role in politics, though only jokingly in reference to its importance in the American presidential campaign, according to Mr. Medvedev’s press office. (1)
While there he also visited Victor Vekselberg's Skolkovo, who’s currently under investigation by Mueller for donations to Trump (2).
As Obama’s effort to reboot diplomatic relations [with Russia] sputtered, federal officials began raising alarms about the Skolkovo Foundation’s ties to Putin. “The foundation may be a means for the Russian government to access our nation’s sensitive or classified research, development facilities and dual-use technologies” (3)
And took time to teach Russian's how to hack Facebook friend data, the same hack used by Cambridge Analytica, Donald Trump’s campaign data firm.
In a 2012 video, Facebook's Simon Cross shows the Moscow crowd how they can "get a ton of other information" on Facebook users and their friends. "We now have an access token, so now let's make the same request again and see what happens," Cross explains (YouTube). "We've got a little bit more data, but now we can start doing really interesting stuff. We can get my friends. We can get some more information about one of my friends. Here's Connor, who you'll meet later. Say 'hello,' Connor. He's waving. And we can also get a ton of other information as well." (4)
Facebook later hired the individual who hacked Facebook and sold the data to Cambridge Analytica (5). A month after that visit, Putin propaganda mouth-piece Konstantin Rykov, claims he began helping with Trump’s presidential aspirations (6). Days later, Trump registered “Make America Great Again” (7). The following year, Russia's Troll Factory, the Internet Research Agency, was created as was Cambridge Analytica.
Andrei Shleifer and Len Blavatnik Len Blavatnik, a US-Russian oligarch currently under investigation by Mueller, graduated from Harvard in 1989 and quickly formed Renova-Invest with Viktor Vekselberg, another oligarch under Mueller’s investigation (7)(8). Since then Blavatnik has maintained close ties to the university. In 1992, after the fall of the Soviet Union, Andrei Shleifer led a consortium of Harvard professors to assist Russia’s vice-president, Antaoly Chubais, with the privatization of Russia’s state-run assets. Scandal broke when it was revealed Shleifer, through Blavatnik’s company and with Blavatnik’s guidance, invested in the very companies he worked to privatize. (6) Years later, Shleifer continued to fund loans to Blavatnik for Russian ventures through his hedge fund, managed by his wife, Nancy Zimmerman (9), and created the Russian Recovery Fund which bought $230 million of Russian debt from Julian Robertson’s Tiger Management (10), who’s seed fun, Tiger Global, later invested in Milner’s DST. Len Blavatnik and Viktor Vekselberg are major investors in Rusal (11). Schleifer is still a professor at Harvard.
Breyer and Harvard On April 2013, two months after Breyer was elected to the board of Harvard (1), Len Blavatnik, donated $50 million to the school (2) and joined the Board of Dean’s Advisors (3)(4) and Harvard’s Global Advisory Council (6) alongside Breyer. The next month Breyer announced plans to step down from the board of Facebook with an intention of focusing on his latest Harvard appointment (5). In 2016 Len Blavatnik donated over $7 million to GOP candidates, including $2.5 million to Mitch McConnell himself (7).
Breyer invests in Russian Companies In 2014 Breyer’s Accel Partners invested in Russian hotel booking site, Ostrovok, along with Yuri Milner, Esther Dyson (1), Mark Pincus, and Peter Thiel (2). Accel Partners also invested in Avito.ru in 2012 (3) and KupiVIP.ru in 2011 (4).
Jim Breyer, Blackstone Group, and Saudi Arabia In 2011 Schwarzman was named to the board of the Russian Direct Investment Fund (2), headed by Kirill Dimitriev. In June 2016, during Trump’s presidential campaign, Jim Breyer met with Saudi Crown Prince Mohammed bin-Salman, or MBS (8). The next month Breyer joined the board of Blackstone Group (1) alongside Stephen Schwarzman and Jacob Rothschild (3). In the past Blackstone Group had loaned Kushner Companies a combined $400 million over multiple projects (7). In the 2018 election cycle, Schwzarman donated $5 million to the pro-McConnell superPAC, Senate Majority PAC (13). Jacob’s brother, Nat, is business partners with both Oleg Deripaska (4), Rupert Murdoch, and Dick Cheney (5). Nat is also a major investor in Glencore, one of the purchasers of Rosneft stock detailed in the Steele Dossier (6), and RusAl. In January 2017, Breyer’s business partner at Wickr, Erik Prince, was introduced to Dimitriev by MBS’s emissary, George Nader, and the Crown Prince of the UAE (10). On October 22, 2018, three weeks after the murder of Jamal Khashoggi, when most American investors were spooked away from Saudi Arabia, Jim Breyer showed up at an MBS-hosted Saudi business summit alongside Kirill Dimitriev of the Russian Direct Investment Fund (9). That same day, MBS pledged $20 billion for Blackstone Group's new infrastructure fund (11) to fund Elaine Chao's $1.5 trillion infrastructure plan (12). Elaine Chao, Mitch McConnells wife and Jim Breyer's sister-in-law, is Trump's Secretary of Transportation.
Which type of curren(t) do you want to see(cy)? A analysis of the intention behind bitcoin(s). [Part 2]
Part 1 It's been a bit of time since the first post during which I believe things have crystallised further as to the intentions of the three primary bitcoin variants. I was going to go on a long winded journey to try to weave together the various bits and pieces to let the reader discern from themselves but there's simply too much material that needs to be covered and the effort that it would require is not something that I can invest right now. Firstly we must define what bitcoin actually is. Many people think of bitcoin as a unit of a digital currency like a dollar in your bank but without a physical substrate. That's kind of correct as a way to explain its likeness to something many people are familiar with but instead it's a bit more nuanced than that. If we look at a wallet from 2011 that has never moved any coins, we can find that there are now multiple "bitcoins" on multiple different blockchains. This post will discuss the main three variants which are Bitcoin Core, Bitcoin Cash and Bitcoin SV. In this respect many people are still hotly debating which is the REAL bitcoin variant and which bitcoins you want to be "investing" in. The genius of bitcoin was not in defining a class of non physical objects to send around. Why bitcoin was so revolutionary is that it combined cryptography, economics, law, computer science, networking, mathematics, etc. and created a protocol which was basically a rule set to be followed which creates a game of incentives that provides security to a p2p network to prevent double spends. The game theory is extremely important to understand. When a transaction is made on the bitcoin network your wallet essentially generates a string of characters which includes your public cryptographic key, a signature which is derived from the private key:pub key pair, the hash of the previous block and an address derived from a public key of the person you want to send the coins to. Because each transaction includes the hash of the previous block (a hash is something that will always generate the same 64 character string result from EXACTLY the same data inputs) the blocks are literally chained together. Bitcoin and the blockchain are thus defined in the technical white paper which accompanied the release client as a chain of digital signatures. The miners validate transactions on the network and compete with one another to detect double spends on the network. If a miner finds the correct solution to the current block (and in doing so is the one who writes all the transactions that have elapsed since the last block was found, in to the next block) says that a transaction is confirmed but then the rest of the network disagree that the transactions occurred in the order that this miner says (for double spends), then the network will reject the version of the blockchain that that miner is working on. In that respect the miners are incentivised to check each other's work and ensure the majority are working on the correct version of the chain. The miners are thus bound by the game theoretical design of NAKAMOTO CONSENSUS and the ENFORCES of the rule set. It is important to note the term ENFORCER rather than RULE CREATOR as this is defined in the white paper which is a document copyrighted by Satoshi Nakamoto in 2009. Now if we look at the three primary variants of bitcoin understanding these important defining characteristics of what the bitcoin protocol actually is we can make an argument that the variants that changed some of these defining attributes as no longer being bitcoin rather than trying to argue based off market appraisal which is essentially defining bitcoin as a social media consensus rather than a set in stone rule set. BITCOIN CORE: On first examination Bitcoin Core appears to be the incumbent bitcoin that many are being lead to believe is the "true" bitcoin and the others are knock off scams. The outward stated rationale behind the bitcoin core variant is that computational resources, bandwidth, storage are scarce and that before increasing the size of each block to allow for more transactions we should be increasing the efficiency with which the data being fed in to a block is stored. In order to achieve this one of the first suggested implementations was a process known as SegWit (segregating the witness data). This means that when you construct a bitcoin transaction, in the header of the tx, instead of the inputs being public key and a signature + Hash + address(to), the signature data is moved outside of header as this can save space within the header and allow more transactions to fill the block. More of the history of the proposal can be read about here (bearing in mind that article is published by the bitcoinmagazine which is founded by ethereum devs Vitalik and Mihai and can't necessarily be trusted to give an unbiased record of events). The idea of a segwit like solution was proposed as early as 2012 by the likes of Greg Maxwell and Luke Dash Jnr and Peter Todd in an apparent effort to "FIX" transaction malleability and enable side chains. Those familiar with the motto "problem reaction solution" may understand here that the problem being presented may not always be an authentic problem and it may actually just be necessary preparation for implementing a desired solution. The real technical arguments as to whether moving signature data outside of the transaction in the header actually invalidates the definition of bitcoin as being a chain of digital signatures is outside my realm of expertise but instead we can examine the character of the individuals and groups involved in endorsing such a solution. Greg Maxwell is a hard to know individual that has been involved with bitcoin since its very early days but in some articles he portrays himself as portrays himself as one of bitcoins harshest earliest critics. Before that he worked with Mozilla and Wikipedia and a few mentions of him can be found on some old linux sites or such. He has no entry on wikipedia other than a non hyperlinked listing as the CTO of Blockstream. Blockstream was a company founded by Greg Maxwell and Adam Back, but in business registration documents only Adam Back is listed as the business contact but registered by James Murdock as the agent. They received funding from a number of VC firms but also Joi Ito and Reid Hoffman and there are suggestions that MIT media labs and the Digital Currency Initiative. For those paying attention Joi Ito and Reid Hoffman have links to Jeffrey Epstein and his offsider Ghislaine Maxwell. Ghislaine is the daughter of publishing tycoon and fraudster Robert Maxwell (Ján Ludvík Hyman Binyamin Hoch, a yiddish orthodox czech). It is emerging that the Maxwells are implicated with Mossad and involved in many different psyops throughout the last decades. Greg Maxwell is verified as nullc but a few months ago was outed using sock puppets as another reddit user contrarian__ who also admits to being Jewish in one of his comments as the former. Greg has had a colourful history with his roll as a bitcoin core developer successfully ousting two of the developers put there by Satoshi (Gavin Andreson and Mike Hearn) and being referred to by Andreson as a toxic troll with counterpart Samon Mow. At this point rather than crafting the narrative around Greg, I will provide a few links for the reader to assess on their own time:
Now I could just go on dumping more and more articles but that doesn't really weave it all together. Essentially it is very well possible that the 'FIX' of bitcoin proposed with SegWit was done by those who are moral reprobates who have been rubbing shoulders money launderers and human traffickers. Gregory Maxwell was removed from wikipedia, worked with Mozilla who donated a quarter of a million to MIT media labs and had relationship with Joi Ito, the company he founded received funding from people associated with Epstein who have demonstrated their poor character and dishonesty and attempted to wage toxic wars against those early bitcoin developers who wished to scale bitcoin as per the white paper and without changing consensus rules or signature structures. The argument that BTC is bitcoin because the exchanges and the market have chosen is not necessarily a logical supposition when the vast majority of the money that has flown in to inflate the price of BTC comes from a cryptographic USD token that was created by Brock Pierce (Might Ducks child stahollywood pedo scandal Digital Entertainment Network) who attended Jeffrey Epstein's Island for conferences. The group Tether who issues the USDT has been getting nailed by the New York Attorney General office with claims of $1.4 trillion in damages from their dodgey practices. Brock Pierce has since distanced himself from Tether but Blockstream still works closely with them and they are now exploring issuing tether on the ethereum network. Tether lost it's US banking partner in early 2017 before the monstrous run up for bitcoin prices. Afterwards they alleged they had full reserves of USD however, they were never audited and were printing hundreds of millions of dollars of tether each week during peak mania which was used to buy bitcoin (which was then used as collateral to issue more tether against the bitcoin they bought at a value they inflated). Around $30m in USDT is crossing between China to Russia daily and when some of the groups also related to USDT/Tether were raided they found them in possession of hundreds of thousands of dollars worth of counterfeit physical US bills. Because of all this it then becomes important to reassess the arguments that were made for the implementation of pegged sidechains, segregated witnesses and other second layer solutions. If preventing the bitcoin blockchain from bloating was the main argument for second layer solutions, what was the plan for scaling the data related to the records of transactions that occur on the second layer. You will then need to rely on less robust ways of securing the second layer than Proof Of Work but still have the same amount of data to contend with, unless there was plans all along for second layer solutions to enable records to be deleted /pruned to facilitate money laundering and violation of laws put in place to prevent banking secrecy etc. There's much more to it as well and I encourage anyone interested to go digging on their own in to this murky cesspit. Although I know very well what sort of stuff Epstein has been up to I have been out of the loop and haven't familiarised myself with everyone involved in his network that is coming to light. Stay tuned for part 3 which will be an analysis of the shit show that is the Bitcoin Cash variant...
Hello again. It's been a while. People have been emailing me about once a week or so for the last year to ask if I'm coming back to Bitcoin now that Bitcoin Cash exists. And a couple of weeks ago I was summoned on a thread called "Ask Mike Hearn Anything", but that was nothing to do with me and I was on holiday in Japan at the time. So I figured I should just answer all the different questions and answers in one place rather than keep doing it individually over email. Firstly, thanks for the kind words on this sub. I don't take part anymore but I still visit occasionally to see what people are talking about, and the people posting nice messages is a pleasant change from three years ago. Secondly, who am I? Some new Bitcoiners might not know. I am Satoshi. Just kidding. I'm not Satoshi. I was a Bitcoin developer for about five years, from 2010-2015. I was also one of the first Bitcoin users, sending my first coins in April 2009 (to SN), about 4 months after the genesis block. I worked on various things:
My main effort was an implementation of a Java library called bitcoinj. This was the engine used in the first p2p mobile wallet ("Bitcoin Wallet for Android"), and the first p2p desktop wallet that was faster to run than Bitcoin [Core] itself (MultiBit). These together were responsible for around 2.5 million user installs at a time when downloading the full block chain was becoming too slow for normal users to tolerate and the only alternative was a "bitbank" or cloud-hosted wallet. It was used in the first trustless gambling site (SatoshiDice), over 100 products and projects, and many academic research papers.
With Gavin Andresen and others I designed some upgrades to the Bitcoin protocol like Bloom filtering and BIP70.
With Matt Corrallo I implemented and demonstrated the first version of (micro)payment channels. I put together a demo of a file server that charged micropayments using a GUI called Payfile (mentioned in New Scientist here). I used to have a video of this but unfortunately it no longer seems to be on YouTube. Payment channels went on to be used in the design of the Lightning Network.
You can see a trend here - I was always interested in developing peer to peer decentralised applications that used Bitcoin. But what I'm best known for is my role in the block size debate/civil war, documented by Nathaniel Popper in the New York Times. I spent most of 2015 writing extensively about why various proposals from the small-block/Blockstream faction weren't going to work (e.g. on replace by fee, lightning network, what would occur if no hard fork happened, soft forks, scaling conferences etc). After Blockstream successfully took over Bitcoin Core and expelled anyone who opposed them, Gavin and I forked Bitcoin Core to create Bitcoin XT, the first alternative node implementation to gain any serious usage. The creation of XT led to the imposition of censorship across all Bitcoin discussion forums and news outlets, resulted in the creation of this sub, and Core supporters paid a botnet operator to force XT nodes offline with DDoS attacks. They also convinced the miners and wider community to do nothing for years, resulting in the eventual overload of the main network. I left the project at the start of 2016, documenting my reasons and what I expected to happen in my final essay on Bitcoin in which I said I considered it a failed experiment. Along with the article in the New York Times this pierced the censorship, made the wider world aware of what was going on, and thus my last gift to the community was a 20% drop in price (it soon recovered).
The last two years
Left Bitcoin ... but not decentralisation. After all that went down I started a new project called Corda. You can think of Corda as Bitcoin++, but modified for industrial use cases where a decentralised p2p database is more immediately useful than a new coin. Corda incorporates many ideas I had back when I was working on Bitcoin but couldn't implement due to lack of time, resources, because of ideological wars or because they were too technically radical for the community. So even though it's doesn't provide a new cryptocurrency out of the box, it might be interesting for the Bitcoin Cash community to study anyway. By resigning myself to Bitcoin's fate and joining R3 I could go back to the drawing board and design with a lot more freedom, creating something inspired by Bitcoin's protocol but incorporating all the experience we gained writing Bitcoin apps over the years. The most common question I'm asked is whether I'd come back and work on Bitcoin again. The obvious followup question is - come back and work on what? If you want to see some of the ideas I'd have been exploring if things had worked out differently, go read the Corda tech white paper. Here's a few of the things it might be worth asking about:
Corda's data model is a UTXO ledger, like Bitcoin. Outputs in Corda (called "states") can be arbitrary data structures instead of just coin amounts, so you don't need hacks like coloured coins anymore. You can track arbitrary fungible assets, but you can also model things like the state of a loan, deal, purchase order, crate of cargo etc.
Transactions are structured as Merkle trees.
Corda has a compound key format that can represent more flexible conditions than CHECKMULTISIG can.
Smart contracts are stateless predicates like in Bitcoin, but you can loop like in Ethereum. Unlike Bitcoin and Ethereum we do not invent our own VM or languages.
Transactions can have files attached to them. Smart contracts in Corda are stored in attachments and referenced by hash, so large programs aren't duplicated inside every transaction.
The P2P network is encrypted.
Back in 2014 I wrote that Bitcoin needed a store and forward network, to make app dev easier, and to improve privacy. Corda doesn't have a store and forward network - Corda is a store and forward network.
It has a "flow framework" that makes structured back-and-forth conversations very easy to program. This makes protocols like payment channelss a lot quicker and easier to implement, and would have made Lighthouse much more straightforward. A big part of my goal with Corda was to simplify the act of building complicated decentralised applications, based on those Bitcoin experiences. Lighthouse took about 8 months of full time work to build, but it's pretty spartan anyway. That's because Bitcoin offers almost nothing to developers who want to build P2P apps that go beyond simple payments. Corda does.
The flow framework lets you do hard things quickly. For example, we took part in a competition called Project Ubin, the goal of which was to develop something vaguely analogous in complexity to the Lightning Network or original Ripple (decentralised net-out of debts). But we had about six weeks and one developer. We successfully did that in the time allowed. Compare that to dev time for the Lightning Network.
Corda scales a lot better than Bitcoin, even though Bitcoin could have scaled to the levels needed for large payment networks with enough work and time. It has something similar to what Ethereum calls "sharding". This is possible partly because Corda doesn't use proof of work.
It has a mechanism for signalling the equivalent of hard forks.
It provides much better privacy. Whilst it supports techniques like address randomisation, it also doesn't use global broadcast and we are working on encrypting the entire ledger using Intel SGX, such that no human has access to the raw unencrypted data and such that it's transparent to application developers (i.e. no need to design custom zero knowledge proofs)
One Reddit user lost $500,000+ USD worth of ICX tokens!
A reminder to NEVER EVER input your private keys on any bogus website & to double check website urls entered. See: https://www.reddit.com/helloicon/comments/7nt40c/how_to_get_back_my_icx_from_scammers_account/ How to protect yourself 1) Get a Ledger Nano S or Trezor ASAP, they work well with many wallets and sites like MEW and it takes less than 5 minutes to learn how to use one! Don't delay, buy one today! Here's a good tutorial on using Ledger with MyEtherwallet. https://www.youtube.com/watch?v=_RvDPQHERtc Note: It is impossible for your wallets to be hacked when using a Ledger. Brief run down of Ledger: - When you buy this unit, it gives you 24 seed words you write down on a piece of paper, these keywords should never touch your computer. If you ever lose your Ledger, you can buy a new one and restore all your wallets from these 24 seed words. The ledger protects you by never revealing your private keys. If your PC is infected, your wallets would still be fine. 2) Enable 2FA on all exchanges. 3) If you use Google Authenticator, make sure you write down your keys - not having this information means you will be locked out if you lose your phone or it gets broken. A better alternative is Authy, however make sure Devices -> Allow Multi-device is switched OFF. 4) Install Virus & Malware Scanner with Anti-key logger. A good solution is Zemana AntiLogger, this software includes both real-time scanning & anti-key logging features. All keyboard inputs are encrypted. It also gets high praises from the industry. 5) Double check all inputs. When sending tokens to a new wallet/exchange, always send a small amount to confirm if the send works before sending a large amount. 6) Don't trust anyone. Don't post your gains on social media with your real names attached (e.g. Facebook). See https://www.nytimes.com/2017/08/21/business/dealbook/phone-hack-bitcoin-virtual-currency.html
JP Morgan shits on BTC and blockchain daily in the news calling it a scam. Then they announce their ground breaking technology. A cryptocurrency that is backed by actual USD. Basically a copy of TetheTrueUSD/StableCoin/Paxos Standard. Congratulations your only the fifth entity to come up with this. Only a few years late. We should shit on them as a cryptocurrency community but I would be more inclined to trust them over Tether. https://www.nytimes.com/2019/02/14/business/dealbook/jpmorgan-cryptocurrency-bitcoin.html
This first problem WaltonChain fixes for China: their Clothing Industry.
This is an article I wrote a while back and intended to share after improving it. Never did that, but I wanted my research to be out there for those who want to learn more about what WaltonChain is trying to fix. WaltonChain = Blockchain + RFID, to be used initially in supply chain management. Launching first into China's 175 billion dollar-per-year clothing industry. BlockChain: As we all know, BlockChain is a booming technology with many still undetermined use cases. RFID is a massively booming industry (with a more stable infrastructure for growth than blockchain) because it drastically speeds up the movement of goods on the supply chain side of retail. According to ChainLink, a top research firm in supply chain management, the use of RFID is expected to double in size over the next three years. An in-depth article discussing its value and growth projection can be found here. Supply chain management is the industry responsible for moving goods around the world, and China moves A LOT of goods around the world, especially clothing (more on that below). Let's talk now about who is already using these technologies in supply chain management: Blockchain: Upon learning about the blockchain, IBM and Wal-mart took immediate action thanks to its ability to verify tracking documentation (a critically important yet extremely expensive component in supply chain management). The vice president of food safety at Wal-mart has referenced it as "the holy grail" for supply chain management. Blockchain is a seriously big deal for the industry which ships things all over the world. RFID: In 2014, the clothing retail outlet Kohl's (the 10th largest retailer in the US) ran a test which utilized RFID chips for retail inventory tracking in their clothing story. RFID chips were a massive success, and they then began rolling them out for use nation-wide in all of their stores. Macy's, the 6th largest US-retailer, is currently tracking 50% of their clothing in manufacturing and supply chain management with RFID and has publicly announced a goal to be "100% RFID" by 2018. This shit is blowing up in clothing as it has been shown to provide up to an 80% efficiency boost in tracking items in manufacturing/transportation. Enter the late Charlie Walton (inventor of the RFID), and the team who bear's his name: WaltonChain. They seek to combine the speed and accuracy improvements of RFID with the verification and documentation improvements of blockchain, and bring them to the 175 billion dollar-per-year industry of Chinese clothing exports (as well as their domestic production). China produces and exports more value in clothing than the next four top global clothing exporters combined (read: China OWN's the global clothing industry). However, there have been upcoming threats from countries like like India, Vietnam, and Bangladesh lately, and China has begun to lose its grip on the global clothing industry. Therein, China is looking for a win (businesses and governments included) as other countries undercut their export costs to steal market share. WaltonChain provides a solution to this exact problem - stem the flow of clothing exports moving to other countries by reducing the export costs associated with supply chain management. Implementing this system will be easier in China than in these other rising markets due to their engineering/technological superiority, so if they can make this work it should last for a long while. This is a huge undertaking, but the gravity of it's potential impact makes it understandable why people like Jin Xiji are on-board, and the Chinese government is expressing interest/support. Personally, I'll be keeping an eye out for more news about government support, perhaps through an incubator program, or perhaps via additional big-players being brought on. WaltonChain has the potential to be a real game-changer in cutting export costs for China in a market where they need to gain back a competitive advantage. I'm looking forward to following closely as it all plays out. Edit: Here's an additional interesting article that points out other potential applications for what WaltonChain is building here, as MIT has shown that RFID can be used to help drones move packages around inside (or outside) warehouses. China has already seen widespread adoption of drone technology, and I think this could be an additional great application should they consider looking into at some point in their future (if they are not already).
Bitcoin Drama: BitFinex, one of the largest trading platforms, was hacked. Approx. $70million of user funds stolen. Is the exchange liable? Discuss!
Ok, so here's a summary of events thus far, as I understand them: BitFinex.com, one of the largest cryptocurrency trading platforms by volume, was hacked. The hacker made off with approximately $70million worth of bitcoin. That much is known and confirmed. BitFinex, as I mentioned, handled a huge chunk of trading volume. They also allowed margin trading and margin lending (the latter of which they referred to as "swaps" until the CFTC recently told them to knock that off). Customer "wallets" on BitFinex were handled by a third party company (supposedly for security purposes) called BitGo, who advertises "100% security" on their website. The wallets managed by BitGo were "multi-sig wallets", which basically means that everyone involved in the transaction (BitFinex, BitGo, and the individual user) must 'verify' a transaction with their key for it to be processed. Somehow, this hacker managed to bypass this or exploit something to be able to drain customer accounts. Presumably this is due to the hacker somehow manipulating BitFinex's wallet system to "tell" BitGo that the customer's key was valid, and use BitFinex's key to validate the transaction, similar to how a bank will process a transaction on a stolen debit card if you know the owner's PIN number. BitGo's system saw these transactions as valid as a result and processed them accordingly, emptying hundreds or thousands of user accounts per the hacker's request. Now comes the fun part. These users are understandably upset. BitFinex had individual users as well as corporate clients. Some accounts likely lost millions. Many, many accounts likely lost tens of thousands of USD equivalent. BitFinex is proposing bringing the site back online so users can see whether or not their accounts fell victim to the hacker and eventually allowing those who weren't to withdraw their bitcoin. No one knows what will happen to those whose accounts were drained though. To make this even more interesting, BitFinex seems to be domiciled in either Hong Kong or The British Virgin Islands, depending on which corporate entity you're looking at (according to what I've heard, anyway. I have no idea what the truth is there or how their organization is structured). Here are some articles about this fiasco: http://insidebitcoins.com/news/bitfinex-hack-means/36353 http://www.coindesk.com/bitfinex-bitcoin-hack-know-dont-know/ http://www.nytimes.com/2016/08/04/business/dealbook/bitcoin-bitfinex-hacked.html?_r=0 http://hackingdistributed.com/2016/08/03/how-bitfinex-heist-could-have-been-avoided/ Here are some of the other Reddit threads: https://np.reddit.com/Bitcoin/comments/4vtuxo/bitfinex_security_breach_trading_will_be_halted/ https://np.reddit.com/Bitcoin/comments/4vupa6/p2shinfo_shows_movement_out_of_multisig_wallets/d61oe33 https://np.reddit.com/Bitcoin/comments/4vztlv/bitfinex_update/ The guy in charge of BitFinex's community outreach and PR is zanetackett and his post history gives an interesting glimpse into the situation as well (and honestly, I commend him for busting his ass to answer everyone's questions and concerns, even if they hate the answers. I know I would hate to be in his shoes right now). I'm sure if I'm wrong on any of these facts, he will come in here to correct me, since I've usertagged him here. Now for the questions and discussion points: -Is BitFinex legally liable for customer losses here? -Is BitGo legally liable for customer losses here? -What, if any, recourse do customers who had their bitcoin stolen have, and against who? -Should BitFinex "socialize losses" by making every remaining account take a loss in order to contribute to a fund intended to return some of the lost bitcoin to the victims, as some users without much legal knowledge have proposed? To me, this whole thing is fascinating. I have no horse in this race, and I did not lose anything as a result of this hack, but this area is so new, law wise, that it creates several very unique issues due to the lack of regulation (even though there is some now, at least in some countries), the jurisdictional issues, and the confusion surrounding liability. I'd love to see a serious legal discussion ensue here and hear everyone's thoughts. Hopefully we can avoid the "har har, that's what you get for playing with fake money" comments and stick to the legitimate legal discussion. Enjoy! UPDATE: Regarding the jurisdiction issues, according to their VP of business development, Bitfinex operates under a Hong Kong corporation, Renrenbee Limited (holder of the MSO license), which is wholly owned by a BVI corporation, iFinex Ltd. (the holding company). The information released by the CFTC, however, is a bit different: "BFXNA Inc. d/b/a Bitfinex is a corporation formed and existing under the laws of the British Virgin Islands, and has its principal place of business [in Hong Kong]." UPDATE #2:BitGo has made an official announcement.
As you know, a large amount of Bitcoin has been taken from Bitfinex, and Bitfinex utilized BitGo software as part of its security solution. While we have worked tirelessly with the team at Bitfinex to investigate the theft, the Bitcoin is gone. Our focus now is to protect the remainder of Bitfinex coins and all of our other customers’ coins. Our job is to protect your Bitcoin and continue to improve the security of the service. BitGo systems were not breached in this attack and our software functioned correctly. This may seem like an inadequate explanation, because everyone wants to know “what needs to change to avoid what happened in this case,” and we understand that. Fortunately, the Bitfinex configuration was unique and other BitGo customers do not need immediate changes.
We are still working out the details so nothing is set in stone, however we are leaning towards a socialized loss scenario among bitcoin balances and active loans to BTCUSD positions. The numbers being quoted are erroneous as nothing has been decided as of yet and we are still in the process of settling positions and balances. More details are to follow tomorrow. Furthermore, tomorrow we will be posting a FAQ on the blog that will answer most of the questions we have been asked over the past couple days.
Presumably they are being advised by counsel, but this just sounds crazy to me. Not only did the users never agree to a socialized loss system for losses resulting from a hack, but that seems to be implying that they accept liability for the loss. Personally I feel this puts them in the worst possible scenario, one where they are likely liable for all losses, and the users who are not made 100% whole will likely be able to successfully sue for the difference between what they are paid back and what they lost. Yikes. UPDATE #4: BitFinex has announced how they plan to move forward and compensate for losses.
Following the theft on August 2nd, the Bitfinex team has been working tirelessly towards bringing the platform back online in a secure and controlled manner. We have finalized the accounting of losses incurred and are currently coordinating strategic plans for compensating customers. We intend to come online within 24-48 hours with limited platform functionality. Additional announcements will be made as we progressively enable more platform features and return to full operations. We appreciate that our customers and the public want this handled quickly, but it needs to be done a way in which all assets are secure and immune from vulnerabilities. Every resource is being leveraged to make that happen in a safe and optimal way. As disclosed in earlier announcements, all withdrawals, open orders, and open funding offers have been canceled and all financed positions have been settled. Exact settlement prices were published on August 3rd. After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses. We are actively discussing various strategic options with numerous potential investors as part of our strategy to fully compensate our customers. Such discussions, however, are in early stages and will likely take time to play out. In the meantime, In place of the loss in each wallet, we are crediting a token labeled BFX to record each customer’s discrete losses. Tokens will be distributed without release or waiver. The BFX tokens will remain outstanding until redeemed in full by Bitfinex or possibly exchanged—upon the creditor’s request and Bitfinex’s acceptance—for shares of iFinex Inc. We are still sorting out many details on this; we will post further updates in the coming days. Thank you for your continued patience and for the many generous offers of support that we have received over the last several days. Notwithstanding this attack, we continue to believe in the possibilities associated with bitcoin. We will continue to update our customers and the public as and when we can.
Maybe it's just me, but between converting customer funds to compensate other customers, and issuing an unregistered security, this sounds like horrible ideas all around and I'm surprised any legitimate lawyer would sign off on such a plan.
In August of 2016, a group calling itself the Shadow Brokers emerged with a treasure trove of purported NSA hacking tools. The group released only a small portion of its take and eventually tried unsuccessfully to auction the good stuff. When no one offered to pay, Shadow Brokers decided to give it away for free. In an enterprise setting, however, disabling the Windows Firewall and allowing remote desktop connections is quite common. That's where these exploits were designed to work, and the Shadow Brokers data appears to reveal that the NSA used these tools against at least one eyebrow-raising target: a SWIFT bureau in the Middle East.
Following The Money
As part of the Bush administration's War on Terrorism the Terrorist Finance Tracking program was set up. Under TFTP, the U.S. gained the ability to monitor transactions carried out via SWIFT. Why target SWIFT specifically? There are upwards of 11,000 banks in 200 countries that use it, and they exchange around 15 million messages a day. If you need to keep an eye on large amounts of money moving internationally, SWIFT is the key.
A leaked PowerPoint slide appears to confirm that the NSA had successfully set up backdoor monitoring on 9 banks running SWIFT Alliance Access (SAA) servers. At least three others at another SWIFT Bureau were targeted, but they had not been compromised at the time of creation of the PowerPoint presentation in 2013.
Large multinational companies are the prime targets of Business Email Compromise (BEC), which is a type of online scam that usually begins with an attacker compromising a legitimate email account and tricking the company’s financial officer to wire funds to their accounts. Typically the companies that fall victim to these scams deal with foreign suppliers and habitually use wire transfer payments. Victims of BEC scams have increased 270% since the start of 2015, and this year saw one of the largest amounts lost by an enterprise. Read more
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a global transaction messaging network used by banks and other financial entities such as foreign exchanges and investment firms. Unfortunately, this year saw attackers targeting SWIFT clients, compromising and manipulating organizations into sending fraudulent money transfer requests. It’s unclear how many of these attacks were actually successful, but in June, SWIFT sent its clients a letter warning them about the possible dangers. The organization also urged clients to update their software and tighten their cyber defenses.
The post includes a link to a selection of files and folders. One sub-folder called "exploits" includes executable files with apparent codenames such as "Eternalsynergy," "Erraticgopher," and "Emeraldthread."
"This is phenomenal data, it has all the hallmarks of slickly produced internal attack tools," Hacker Fantastic continued. "I am certain that analysis on this data will turn up another 0day [zero day]." Security architect Kevin Beaumont told Motherboard in a Twitter direct message, "All of the Windows implants are new to VirusTotal [an online file scanning tool], which suggests they've not been seen before."
New details about a second attack involving Swift — the messaging system used by thousands of banks and companies to move money around the world — are emerging as investigators are still trying to solve the $81 million heist from the central bank of Bangladesh in February. In that theft, the attackers were able to compel the Federal Reserve Bank of New York to move money to accounts in the Philippines. The second attack involves a commercial bank, which Swift declined to identify. But in a letter Swift plans to share with its users on Friday, the messaging network warned that the two attacks bore numerous similarities and were very likely part of a “wider and highly adaptive campaign targeting banks.”
Evidence is emerging that the SWIFT (Society for Worldwide Interbank Financial Telecom) attacks began as far back as October 2015 when the Philippines bank was first hit, two months prior to the discovery of the failed attack on Tien Phong Bank in Vietnam.
There are many more articles beyond these, but what it looks like is the Shadow Brokers or some associated individuals pulled off a series of bank heists prior to releasing the applications to the open market. That also open the question of what the NSA was doing with the applications? They could have have been tracking "suspects" but it seems they could have also been moving money for any reason they chose without records being left in the banking system. The possible exploits were only exposed after a series of bank robberies exposed the power of the tools the NSA had developed. It seems once again crimes have exposed the government's illicit powers concealed by the intelligence community (IC). It is entirely possible that the tools were used legally and only to expose private records of terrorists and spies under FISA warrants, but who knows. The only thing that exposed these exploits was the theft. Kinda makes ya wonder, huh? The evidence and the different styles of hacking listed in the articles about the bank heists suggests that an initial group stole some NSA hacking tools and pulled off the Bangladesh heist. They may or may not have done Ecuador or the Philippines but it seems that at some point the exploits were sold on the open market, but that does not exclude some clandestine deals with other groups that also have employed the exploits. Once the initial 81 million was stolen they distributed the exploits to other groups who may have also attacked the SWIFT system and other targets to make forensics on nation state level zero day attacks that much more difficult. Several groups attempting independent attacks increased the attack vectors making identification even more difficult. It also appears that the hackers may have targeted banks that had the Trojans installed initially. So why would they go for relatively small scores when they essentially owned the SWIFT system. Could the hackers be attacking networks already infected with the Trojan. It really makes sense when you think about the banks they hit. The NSA installs the Trojans to "observe" suspected transactions. The hackers obtain the exploits, found the Trojans phoning home and used them to own the infected systems, modified the attack vectors to transfer money. Why not skip the phishing attack when there was already infected banks. Take the path of least resistance that leads back to someone the American government would never admit lead away from the hackers. Of course that means anyone including the IC could have manipulated transactions, but hey that wouldn't have been a robbery would it. Really the tools could have been used to track transactions, but they could have facilitated the IC surreptitious movement of money to fund operations. In all reality it was very clever, make a score, don't get greedy, prevent the creation of a M.O. to narrow investigations and identify the perpetrators. But identifying clever when they managed to steal exploits from the NSA and could use the exploits to attack the banking system. Just the fact that they can't be identified means they are pretty slick and the exploits are not for the novice user. There were some skills at work here. What else was done with the exploits and who are they? Shadow Brokers Group Releases More Stolen NSA Hacking Tools & Exploits Saturday, April 08, 2017
Besides dumping some NSA's hacking tools back in August 2016, the Shadow Brokers also released an encrypted cache of files containing more NSA's hacking tools and exploits in an auction, asking for 1 Million Bitcoins (around $568 Million). However, after failed auction, the group put up those hacking tools and exploits for direct sale on an underground website, categorizing them into a type — like "exploits," "Trojans," and "implant" — each of which ranged from 1 to 100 Bitcoins (from $780 to $78,000). Now, the Shadow Brokers has finally released password for the encrypted cache of NSA's files, allowing anyone to unlock and download the auction data dump.
Tracing a "Bitcoin is saving the economy of [country]!" claim to its roots: Venezuela
Another excerpt, I'm sure you'll enjoy. I've linked the refs, the Reason article is bloody rabid. Probably won't bother with the fabulous Bitcoin fanfic since, the actual media are bad enough on this one. Venezuelans are relying on Bitcoin to eat! Periodically, there will be a rash of news stories claiming that Bitcoin has become popular in some country suffering economic problems, such as Venezuela, India or Argentina – because the word “Bitcoin” makes a headline catchy, even if there’s nothing to the story. This transmutes into claims that Bitcoin will definitely take over the world, any day now. Or in response to scepticism about Bitcoin, advocates will just answer “But, Venezuela!” These always fall apart on closer examination. Venezuela is a typical example: all the coverage traces back to a story in Libertarian magazine Reason, fiercely advocating Bitcoin as a way to avert the spectre of socialism and regulation. One of their interviewees had been arrested for stealing electricity to mine bitcoins, which the author describes as a “government crackdown” on “freedom” because “bitcoin mining is arguably the best possible use of electricity in Venezuela”. A story in The Guardian in the wake of the Reason story appears to be where the rest of the press picked it up. It speaks of some Venezuelans relying on Bitcoin for “basic necessities,” and was based on interviews with a Bitcoin exchange owner, one of his employees and two of his customers. The author had previously written of Argentina and bitcoin. These two questionably-founded stories were echoed and elaborated upon by the rest of the press, including – amongst many others – the Washington Post claiming that Bitcoin mining is “big business” in Venezuela, the New York Times that Bitcoin has “gained prominence” because of Venezuela or BBC News repeating claims from a Bitcoin boosterism blog – all of this being factoids repeated in a media game of “telephone.” The Venezuelan volume on LocalBitcoins (a site for arranging person-to-person Bitcoin trades) at the time was on the order of 300-400 BTC/week, which isn't nothing but is negligible in the context of a whole country, and tracked fairly closely with LocalBitcoins usage in other countries. . 1 Jim Epstein. “The Secret, Dangerous World of Venezuelan Bitcoin Mining: How cryptocurrency is turning socialism against itself”. Reason, January 2017. 2 Kamilia Lahrichi. “Growing number of Venezuelans trade bolivars for bitcoins to buy necessities”. The Guardian, 16 December 2016. 3 Kamilia Lahrichi. “Argentina’s Bitcoin Scene Booms”. International Finance Magazine, July-September 2015. 4 Mariana Zuñiga. “Bitcoin ‘mining’ is big business in Venezuela, but the government wants to shut it down”. Washington Post, March 10 2017. 5 Nathaniel Popper. “S.E.C. Rejects Winklevoss Brothers’ Bid to Create Bitcoin E.T.F.” Dealbook, New York Times, 10 March 2017. 6 Leisha Chi. “Bitcoin digital currency hits three-year high of $1,000”. BBC News, 3 January 2017.
NYT demonstrates why a permission-less currency protects liberty.
https://www.nytimes.com/interactive/2018/12/24/business/dealbook/mass-shootings-credit-cards.html?fbclid=IwAR2EJY8Hp9Otg0lU898qVNTXfSVj4vQCce8bYs4WCyVdqhvvBiuVdOewZ44 The New York Times has made one of the better arguments for Bitcoin that I've seen this year. This article openly discusses the aspects of mass shooters purchasing weapons using credit cards, and how law enforcement is advocating for intervention on the part of payment processors. Regardless of how anyone here feels about firearms, I feel we can agree that people should be free to spend their money on any amount of product provided they are not breaking the law. The result of course is a call for banks to either outright prevent purchasing firearms using credit cards (which may include debit) or report such purchases to the government or law enforcement for follow up. In either case, provided the purchaser is engaging in legal action, this would constitute a law enforcement response akin to The Minority Report. Purchase too much, and the police may be at your door asking questions. Bitcoin's power via a permission-less system guarantees that people are able to spend their money with whoever they desire without needing the permission of centralized payment processors like Visa, or the permission of banks like Chase. While the subject of firearms is certainly controversial, it is naive to believe such scrutiny would be limited in this area. If the government and the public begin holding banks responsible for every come committed made possible by their banking services, banks will readily turn over any information to avoid regulations. This is what we all fight for with our Bitcoin support. Bitcoin provides the best case for liberty when it comes to the free exchange of goods and services. We are facing down a future by which central banks will collude with government to spy on citizens and punish behavior that is perfectly legal, but only because it isn't deemed "normal". The level of freedom that Bitcoin can provide is likely more than we could possibly imagine.
The New York Times DealBook Summit. Watch from anywhere in the world, free of charge. Take your place alongside the most consequential newsmakers in business, policy and culture. Search NYTimes.com. Clear this text input. Go. Site Navigation Site Mobile Navigation. Posts published by Dealbook. 79 Results . DealBook Jul 20, 2015 Jul 20, 2015. Morning Agenda: Greek Banks Open By Dealbook. GREEK BANKS OPEN Greek banks opened for the first time in three weeks this morning, The Financial Times reports. Restrictions on international transfers remain but the withdrawal ... All of a sudden, with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert. Another potential use of Bitcoin micropayments is to fight spam. Future email systems and social networks could refuse to accept ... That news touched off a sell-off in virtual currency markets Monday morning, briefly leading to a swoon of more than 20 percent in the price of Bitcoin, to $535. The price recovered somewhat after developers and researchers in the Bitcoin community said the problems were less an indication of flaws in the currency than of bad decisions at Mt. Gox. Dealbook Bitcoin Collides With Government Concerns. NATHANIEL POPPER and NEIL GOUGH December 19, 2013. Bobby Lee is the chief executive of BTC China, the largest Bitcoin exchange, which said that it would no longer accept deposits in renminbi. Peter Parks/Agence France-Presse — Getty Images. If Bitcoin is a bubble, as its critics contend, it is showing signs of deflating. A rapid succession ...
This video is unavailable. Watch Queue Queue. Watch Queue Queue DealBook's Andrew Ross Sorkin and Evelyn M. Rusli discuss Facebook's valuation after the social networking site raised $500 million from Goldman Sachs and a Russian investor. Watch more videos at ... New York Times DealBook Conference with Andrew Ross Sorkin of the New York Times and CNBC. » Subscribe to CNBC: http://cnb.cx/SubscribeCNBC About CNBC: From ... An article in Newsweek that says it has found the real Satoshi Nakamoto, the alias used by the creator of the virtual currency Bitcoin, has prompted many ent... New Kinds of Money and Leadership Strategies for the 21st Century - Duration: 22:39. ... DealBook: 2017: Entrepreneurism, Politics and the New American Dream - Duration: 23:57. The New York Times ...