A former “ethical hacker” with a number of high-profile institutions plans to host a blockchain security demonstration live at South By South West (SXSW) 2019. According to a press release, Rob Pope, currently of Dogtown Media and formerly a security specialist with HSBC and Barclays, will present on the weaknesses of various encrypted systems associated with crypto.Along with a live hacking demonstration, the presentation will aim to give the average crypto user tips on how to adequately secure their own digital asset holdings.Crypto is Secure but Can’t Account for Human ErrorThe presentation will be titled, “Crypto Crime: How to Steal Cryptocurrency.” It will take place at South By South West (SXSW) 2019, one of the planet’s largest conferences and festivals of film, music, and tech. The event is being held in Austin, Texas between March 8 and 17.Presenting the demonstration will be Rob Pope, the co-founder of Dogtown Media, a mobile technology company based in Venice Beach, California and boasting an impressive roster of clients – Google, YouTube, Lexus, RedBull, and Citi Bank, to name but a few. Previously, Pope has worked as an “ethical hacker” for Barclays, HSBC, and the London Metropolitan Police Department.According to the press release, Pope will demonstrate:“… why cryptocurrency is not as secure as the general public believes.”Much of the rest of the release details various high-profile exchange hacks. It also highlights the total cost of such cyber criminal acts in recent years.Although the precise content of the presentation remains to be seen, the wording of the press release implies that the $1.7 billion in stolen cryptocurrency reported last year was down to flaws in the blockchains and encryption methods used when building the cryptocurrencies themselves. Whilst it is true that certain cryptocurrencies have indeed been maliciously comprised previously, there has never been a reported incident of a private key being “hacked” in the purest sense.Hackers reportedly stole $1.7 billion in crypto during 2018.Cryptocurrencies are incredibly secure. Unfortunately, humans are often not. If the kind of security vulnerabilities hinted at in the SXSW press release were associated with any of the leading cryptos, there would be no conversation to be had about their security since the entire premise of crypto would have already failed. Hackers prey on human vulnerabilities much more successfully than they do on flaws in now-seriously-battled-tested code, as is the case with Bitcoin.To illustrate this argue with an incredibly basic example: if you locked your car and left the keys on its roof overnight, can you really blame its security system when you wake up without a car?Based on these facts, it seems more likely that Pope’s demonstration will be much more about how more traditional hacking tools like key loggers, as well as more modern attacks such as those used in the recent CookieMiner effort to compromise Mac users’ exchange accounts, are being used against crypto holders.As mentioned, Pope’s presentation will also highlight ways in which users can improve their own security when using digital assets. Such education is crucial if the kind of universal monetary sovereignty promoted by Bitcoin is to one day be achieved.If you’re at SXSW this week, you can check out Pope’s session at 5pm in the Hilton Austin Downtown’s Salon K on March 15. Related Reading: Google Security Expert: Crypto is Like Catnip for Cyber CriminalsFeatured Images from Shutterstock.
Archives for March 13, 2019
Gerald Cotten reportedly used his own money to fund customer withdrawals. At the time, the Canadian Imperial Bank of Commerce had frozen their bank accounts, questioning their provenance. His widow, Jennifer Robertson, told Coindesk that while she didn’t have a lot of knowledge as regards his operating the exchange, he had told her that much.
Cotten Used Personal Wealth to Fund Customer Withdrawals During Legal Fight
“[H]e told me that he had been putting his own money back into QCX to fund user withdrawals in 2018 while the CIBC money remained frozen. I believe Gerry had the best interests of the business in mind, and cared for his customers.”
QuadrigaCX also reportedly needs to find a new law firm to guide it through the legal process. Ernst & Young reportedly discovered a conflict of interest with Quadriga’s initial law firm, Stewart McKelvey. Details of that conflict of interest have not bee made public. Nevertheless, the firm will no longer represent QuadrigaCX.
QuadrigaCX Widow Seeks ‘Equitable Resolution’
She closes the letter by saying:
“[M]y intention is to continue to support the process and to ensure a fair and equitable resolution is obtained.”
QuadrigaCX reportedly lost over $140 million in assets when Cotten unexpectedly died overseas. The claim to have lost all the funds in cold wallets controlled by the dead CEO has been called into question by investigations from Ernst & Young, who were appointed as the monitor by the Canadian court.
Various investigations into the missing funds have made different conclusions. CEOs of both Kraken and Coinbase believe the funds were gone by early 2018, and that something else has happened to them.
QuadrigaCX Holdings Still A Mystery
In a most interesting boondoggle, the exchange sent nearly half a million dollars to the dead CEO’s cold wallets long after his death.
The actual current holdings of QCX have been disclosed in a report by Ernst & Young, and don’t paint a pretty picture of the exchange’s management abilities. The missing funds have still not been veritably located, but there is wide suspicion that they don’t actually exist anymore.
Jennifer Robertson last made headlines when she demanded $225,000 from Quadriga’s meager holdings in order to repay her for paying legal costs of the exchange. A lawyer for the creditors released a statement that said, in part:
“The repayment contemplated by the cash flow is inappropriate until such time as the monitor has reviewed the requested information […]”
The QuadrigaCX implosion has made world headlines. The particular oddness of the exchange’s losses is something that can only happen with cryptocurrency. The strange circumstances of Cotten’s death create a shroud of mystery. It’s all too attractive for journalists and the reading public.
Several other exchanges exist in Canada, but the market has a particular black mark following the downfall of Qudriga as well as the MapleTrade scandal last year.
In most cases, Canadian citizens can use international exchanges, such as those in the US. Given the track record of home-grown exchanges, that might be advisable to Canadians. According to a website that ranks Canadian Bitcoin exchanges, Quadriga’s failure also affected another local exchange, Coinsquare.
The Basel Committee on Banking Supervision (BCBS), a supranational banking watchdog, has warned that the growth of crypto assets like bitcoin pose a threat to banks and global financial stability, despite “very limited direct exposures.”
BCBS Lays into Bitcoin, Says it’s Not a True Store of Value
In a March 13 newsletter statement, the BCBS said that crypto assets fail both as money and “digital gold.”
“While crypto-assets are at times referred to as ‘crypto-currencies’, the Committee is of the view that such assets do not reliably provide the standard functions of money and are unsafe to rely on as a medium of exchange or store of value. Crypto-assets are not legal tender, and are not backed by any government or public authority.”
The Committee, which sets global regulatory standards for banks, is primarily concerned with the high degree of volatility associated with the “immature” cryptocurrency class. But the watchdog also raised the alarm over crypto’s liquidity risk, credit risk, market risk, operational risk, money laundering and terrorist financing risk, and legal and reputation risks.
If a bank plans to acquire exposure to crypto-assets, the Committee recommends that the institution, “at a minimum,” implements crypto-specific due diligence, governance and risk management, disclosure, and supervisory dialogue.
Increased Capital Requirements?
There is speculation that the BCBS’ latest crypto guidance could be a lead-up to more stringent capital requirements for banks planning to integrate digital assets into their portfolios. Furthermore, any new crypto rules will require more precise definitions and distinctions between tokenized, enterprise digital assets, which are relatively low risk, and more volatile cryptocurrencies.
For example, Todd McDonald, the co-founder of R3, a blockchain consortium of over 200 financial institutions, wrote a blog post about token classification. Meanwhile, the Global Digital Finance Group, a crypto-asset trade body, authored a paper that proposed dividing tokens into three categories: consumer, payment, and financial asset.
An Evolving – and Maturing – Industry
This guidance comes at a time when the crypto industry is increasingly evolving beyond the 2017 initial coin offering (ICO) mania towards more institutionally-vetted securities token offerings (STOs) and so-called stablecoins. Even establishment financial services firms like JPMorgan Chase have recently launched proprietary digital currencies that represent fiat assets.
Additionally, several other large Wall Street firms like Fidelity, Goldman Sachs, Bank of New York Mellon Corp, and Northern Trust Corp have made headlines for their initiatives to add custody for bitcoin and other digital assets into their product offerings.
The BCBS said it will “in due course clarify the prudential treatment of such exposures to appropriately reflect the high degree of risk of crypto-assets.”
It is currently coordinating this work with other supervisory bodies and the Financial Stability Board.
Bitcoin (BTC) has been firmly planted within the $3,000 region for the past several months and has failed to reach any price point that allows it to experience a sustainable price surge fueled by increased buying pressure.Although in the short-term Bitcoin appears to be stable in the upper $3,000 region, one widely used technical indicator is now signaling that the cryptocurrency may soon incur a massive influx of selling pressure.Technical Indicator Shows That Bitcoin’s Slight Upwards Momentum is SlowingAlthough Bitcoin has established some levels of stability around its current price of $3,900 for the past several weeks and volatility has been steadily decreasing, as a recent Bloomberg report points out, Bitcoin’s Moving Average Convergence Divergence indicator has been declining since mid-February, which may signal that the cryptocurrency will soon incur significant selling pressure.This indicator, which is most commonly referred to as MACD, offers traders and analysts insight into the momentum and trends of a specific asset, and is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA. This indicator’s primary use is for gauging the strength or weakness of specific price trends.As noted in the report, the MACD is currently showing that since mid-February, “long-term buying demand for Bitcoin are deteriorating, potentially showing that selling pressures could intensify.”Bloomberg notes that Bitcoin’s MACD is signaling that the crypto’s price strength is quickly fading.Mike McGlone, a Bloomberg Intelligence analyst, spoke about Bitcoin’s current price action, bearishly noting that conditions now are eerily similar to how they were in November of 2018 just prior to the widespread market drop.“The entire industry is ripe to resume a path to lower prices…Conditions are akin to November, just prior to the collapse. Prices are consolidating within narrowing ranges, with a few sharp bear-market rallies that appear fleeting,” he explained.Despite Dreary Market Outlook, are BTC’s Fundamentals Improving? Although the markets are currently caught in a persisting bear market that is showing few signs of improving, there may be multiple factors related to increased adoption that could soon lead the markets to recover much of their recent losses.Will increased adoption help save the crypto markets?Recently, multiple major figures in the tech industry have grown increasingly vocal about their interest in crypto, with Apple co-founder Steve Wozniak recently noting that current BTC prices are not the result of fundamental weakness, Twitter and Square CEO Jack Dorsey noting that he is currently spending a large amount of money acquiring Bitcoin, and Tesla CEO Elon Musk recently lauding Bitcoin as “brilliant.”Recently, a prominent analyst spoke to MarketWatch about the importance of not valuing price over fundamental strength and adoption, explaining that a focus on development and adoption far trumps a focus price growth.“No matter how strange it may sound to crypto enthusiasts, the best thing that can happen with the crypto market is a moderate dynamic in which all participants can concentrate on the development and implementation of technologies, rather than on prices jumps,” Alex Kuptsikevich, a markets analyst at FX Pro, explained. When considering the amount of fundamental growth the crypto industry as a whole is currently undergoing, and accounting for the growing movement amongst tech leaders to praise Bitcoin, it seems inevitable that the technology will ultimately garner widespread adoption, despite the current gloomy state of the markets.Featured image from Shutterstock.
The Stellar lumen has just become the latest cryptocurrency to be listed on Coinbase’s professional exchange.
Coinbase Pro announced Wednesday that it was accepting deposits of XLM, with trading support coming once sufficient liquidity is established. The process will take a minimum of 12 hours, according to a blog post.
The cryptocurrency is not yet available on Coinbase’s retail platforms, including coinbase.com or its Android and iOS apps.
Stellar was started by Ripple co-founder Jed McCaleb, with lumens aimed at being part of a low-cost payment network.
According to Coinbase’s blog post, “since its launch in 2014, its vision has been to unite the world’s financial infrastructure so that money can flow quickly and cheaply between banks, businesses, and people. The Internet connected the world’s computers so that information could be shared globally. Stellar aims to do the same for money.”
Coinbase Pro first announced it was considering XLM last December, when the exchange identified more than 30 digital assets it was looking into supporting. Since its initial announcement, the platform has added support for Civic, District0x, Loom Network, Decentraland, XRP, Dai, Golem network and zilliqa.
The price of XLM/USD has increased just over 30 percent in the past four days – 5 percent of which came after Coinbase Pro’s announcement Wednesday – and is currently trading at $0.11, according to CoinDesk price data.
Stellar is the 12th most-traded cryptocurrency in the past 24 hours, accumulating a total of roughly $140 billion in trading volume, according to CoinDesk’s price page.
Jed McCaleb image via CoinDesk archives
CipherTrace, a blockchain analytics company, is partnering with the Republic of Malta’s sole financial regulatory agency to ensure that all crypto transactions within the country are free of money laundering and other similar financial crimes.
As the Times of Malta reported on March 11, 2019, the Malta Financial Services Authority (MFSA) has enlisted the help of U.S.-based company CipherTrace to audit cryptoasset services that operate within Malta’s jurisdiction.
The MFSA will require potential cryptocurrency agents, like individuals operating exchanges, wallets and ICOs, to formally register with the MFSA. CipherTrace will then “provide the MFSA with powerful oversight tools to automate regulatory processes and audit the risk management of virtual asset businesses licensed in Malta,” claimed CEO Joseph Cuschieri.
Blockchain analytics companies, which have proliferated in the bear market, have come under public scrutiny as of late for their stated goal of deanonymizing blockchain transactions and the privacy implications that this presents. One such company, Chainalysis, made a public statement of their privacy policies in early March to try and pre-empt some of these criticisms.
Malta sits at an interesting crossroads in this particular issue as a result of this. Attempting to position itself as a blockchain hub for quite some time, the government has passed laws to attract crypto businesses, and has met with a degree of success. With these moves, however, the risk of financial crimes has increased. As such, the Times of Malta reported that the timeline for Malta’s approval of crypto licenses “[depends] on the due diligence assessment — including competence in the field of anti-money laundering and the counter funding of terrorism.” CipherTrace, it seems, is the latest of several blockchain companies to earn the Maltese government’s confidence. Using its tools, the MFSA could keep tabs on a number of financial crimes.
ASIC chip manufacturer Canaan Creative is closing the gap between itself and industry leader Bitmain after a massive infusion of capital.
In its latest funding round, the Chinese mining company has raised several hundred millions of dollars, Chinese publication Securities Times reports. Dubbing Canaan Creative as the second-largest mining firm in the world, the publication notes that the funding has raised the company’s overall valuation to $1 billion.
This influx of capital comes after an explosive period of growth for the industry’s second-largest mining manufacturer. According to Securities Times, the company sold 9,727 units in 2015, a number that would grow thirtyfold to 295,000 in 2017. Its 2015 sales generated some $7.1 million in revenue and $2.25 million in net profit. By 2017, its sales would rake in $193 million in revenue and $53.8 million in net profit.
These numbers, which surfaced from a Canaan Creative IPO prospectus that failed to substantiate into an actual sale after the application expired, show that the company’s position is encroaching on Bitmain’s territory.
As detailed by financial disclosures Bitmain made to the Hong Kong Stock Exchange in preparation for its own IPO, the company took in $82 million in profit in 2017. However, CoinDesk reports that in an updated IPO prospectus, the firm posted roughly $500 million in losses for Q3 of 2018, endangering its prospects for a successful public offering.
The bear market is mainly to blame for Bitmain’s struggles, along with the fact that the company funneled much of its capital and crypto holdings into bitcoin cash (BCH). As revealed in the company’s original IPO prospectus, the company began accumulating bitcoin cash from the forked coin’s inception in 2017 through 2018, increasing its holdings to over 1 million BCH during the two-year period.
As Blockstream CSO Samson Mow pointed out on Twitter, given bitcoin cash’s price depreciation, this would account for some $500 million in losses. This could potentially be the source of losses as detailed in the updated prospectus, and these losses have likely worsened as bitcoin cash’s value was basically cut in half by its own coin split in November, while also suffering from the market’s overall decline in the same month.
With Bitmain’s finances in decline, Canaan Creative’s growth has it pulling closer than ever before to Bitmain’s first place in the industry. Ebang, another top Chinese mining firm, announced its own IPO around the same time as Bitmain, though the bearish market and thinning returns also have the company reporting 2018 losses. The Securities Times coverage of Canaan Creative’s latest funding round did not disclose the company’s 2018 numbers.
At the time of publication, Canaan Creative had not responded to Bitcoin Magazine’s request for comment.
The narrative that Bitcoin uses as much electricity as [insert small nation’s name here] annually is almost as tired as “tulip-mania” or comparisons to the “dot-com bubble” at this point. Yes, the Bitcoin network is power-hungry but that hardly tells a full picture of its environmental impact.Around the world, there are examples of Bitcoin miners coming up with innovative ways to get more out of their mining units; whether through recycling excess energy or powering them with off-grid renewable energy resources.Is Bitcoin Fuelling a Drive Towards Renewable Energy Resources?According to a post on the Bitcoin subreddit, one Bitcoin miner has been forced to turn to solar power in light of the dwindling profitability of mining for Bitcoin during the bear market. The original poster, Candese, states that not only is solar energy harnessed through panels the cheapest form of power available to them, but the savings made on taxes and through not having to transfer power from the grid are expected to be as much as 75%.Crypto mining operations require lots of electricity. This has drawn criticism.These savings have actually made the series of S9 Antminer units profitable to run, despite dwindling prices and them being now dated Bitcoin mining hardware. Candese responded with the following to one of many questions about the setup:“They are actually not profitable when running on the grid. I’m also getting a battery to be able to run 24/7, that’s the next phase.”However, solar electricity powering the miners is not the only energy-saving measure being used by the environmentally-conscious Redditor. Canese says that thanks to a fairly sizeable collection of hardware (including the S9s, a few servers, and Casanode) being used at the undisclosed location “in a cold country” there is no need to use heating on the property. Since the basement stays at an ambient 7 degrees around the year, air conditioning to stop the computer equipment from overheating is also superfluous to requirements.Bitcoin Mining Going Green?The example of Candese’s solar powered Bitcoin mine with recycled heat energy is not the first of a Bitcoin mining operator experimenting with the idea of putting excess energy from the high-power computer chips to use elsewhere.Back in 2017, NewsBTC reported on the pair of Russian entrepreneurs who managed to create a heating system in a Siberian cottage powered by Bitcoin miners that, at the time, was generating profits of $430 each month. The property makes use of cheap hydroelectric power and, given the climate of its location, the heat created from the units is much-needed during the nine months each year that central heaters are an absolute-must.Similarly, there was the story of the Czech entrepreneur who wanted to extend the tomato growing season by using energy from his mining operation to heat his crop.Who would imagine that mining cryptocurrencies and agriculture can work together? The first batch of cryptomatoes is ready to be harvested. We are using the excess heat for the tomato greenhouse and it is working:-) pic.twitter.com/U7qqKTshqO— Kamil Brejcha (@KamilBrejcha) March 10, 2018Finally, the dropping of cryptocurrency prices during the ongoing bear market has forced large scale miners to address their own energy consumption. This has driven many to explore renewable, clean energy resources, rather than rely on electricity produced by fossil fuels. Examples of mining relocating to small industrial towns in parts of Canada known for their abundant cheap hydroelectric power show a clear drive towards greater efficiency in the an industry criticised for its supposed wastefulness. Related Reading: Research Associate: Conversations Around Bitcoin and Energy Have Been OversimplifiedFeatured Images from Shutterstock.
Cryptoraves, a company that is working on the tokenization of social media, had its bank account shut down last month by JP Morgan, not long after news of JPM Coin broke. Eventually, the crypto startup was told that they were working in a “prohibited industry,” but they couldn’t get more details than that.
Account Closed One Day After Launching JPM Coin
Meanwhile, JPM Coin is a blockchain solution, and JP Morgan itself works in digital currencies for some clients.
Nevertheless, the bank told Cryptoraves:
“After a recent review of your account, we have decided to end our relationship with you.”
Cryptoraves so far is a token meant to “boost credibility” on social media. A Twitter user can request free tokens and send them to other Twitter users. The tokens have no actual value, so, therefore, shouldn’t currently run afoul of securities regulations.
Cryptoraves’s Bryan Plasters writes in a blog post:
“We did send two wire transfers to Gemini to buy ETH and LOOM in order to cover future blockchain fees. We suspected that these transactions flagged our account, but the Chase rep would not confirm this. They would not give us a reason for the closure. We called the number in the letter and the agent told us to visit a branch for these details. Visiting our branch resulted in no other details except when our branch rep pressed the agent (yep as the primary course of action, our rep called the same phone number), they said we were operating in an ‘prohibited industry’. I guess JPM’s own blockchain department didn’t get the memo?”
JP Morgan Fires Loyal Customer
Sadly, the proprietors of Cryptoraves, LLC, had been happy with their long-standing relationship with JP Morgan Chase. They say they’ve been doing business for 15 years there, and that they’ve never had a problem as a result of crypto activities prior to this.
The interesting thing about JP Morgan’s shuttering of their account is the timing. The letter is dated just one day after JP Morgan launched JPM Coin. JPM Coin, of course, is a solution for international payments offered to major clients. It is used to subvert high international fees for a small percentage of JP Morgan’s daily $6 trillion in transfers.
This is, of course, not the first time Chase has closed accounts related to the crypto industry. Every now and then someone comes up for air and reports that the banksters have bullied them out of the regular banking world.
The trend is rather widespread. Bloomberg reported earlier this month that JP Morgan had blacklisted most crypto startups. Sam Bankman-Fried, an expert on the subject, told them:
“It’s not illegal for big banks to bank the crypto industry, but it’s a massive compliance headache that they don’t want to put the resources in to solve.”
Banking with crypto is a problem consistently faced by traders and holders. The simple act of sending a deposit to an exchange can result in account closure.
Where there’s a long line for beer today, there could one day be a Civic vending machine.
At its booth at SXSW Wednesday, the decentralized identity startup Civic was on hand to showcase three vending machines selling local staples – Shiner Bock and Austin Amber beer. The demo is a test for a product that Civic plans to roll out officially later this year: a $15,000 machine that can verify a user’s age and accept payment via crypto. The units are currently available for pre-order.
“We’re merging identity and payment into one transaction,” Civic’s Titus Capilnean told CoinDesk.
Since opening for business last Sunday, Capilnean estimated that the machines sold about 150 beers per day for a total of roughly 100,000 CVC – or $7,600 – in sales.
Tokens from the sales were airdropped to SXSW attendees by the company itself.
Beers cost 200 CVC each, or about $12 at the start of the event, Capilnean said. iPhone users who downloaded the Civic Pay app and verified their identity received enough CVC to buy one round. Then after making a couple taps on the machine and selecting the desired cold one, the unit shows a QR code that the user scans with their app, and payment is made.
“Basically, we built these and tested them here,” Capilnean said of the SXSW demo. It was the first time Civic ran sales and identity verification at once with the general public.
Though all transactions made through the app are settled in crypto, the idea is that users can interact with it fairly easily, just as they would in fiat. Civic first demoed its ability to verify ages with Anheuser-Busch at Consensus 2018, but this year the startup has upped that functionality by enabling sales via a mobile app.
Technical issues weren’t the only hurdle the company had to overcome.
“We got the Texas Alcoholic Beverage Commission to be on board with this happening,” Capilnean said. Once state regulators were convinced, SXSW organizers felt comfortable with the product, too.
The priority, Capilnean said, was somehow making sure that people under 21 weren’t drinking. From the Beverage Commission’s perspective, it didn’t matter if humans or machines did the proper verification.
While not disclosing potential partners, Capilnean said Civic is already in talks with companies that might contract with Civic in places where alcohol distribution could be improved. To take pressure off servers, sporting events and bars, for example, might be places that could use vending machines to verify age.
Still, Capilnean said Civic believes music festivals are the most immediate opportunity.
Civic vending machines. (Photo by Brady Dale for CoinDesk)