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Podcast: Chainalysis’ Chief Economist on the Data Behind Blockchain Forensics

Podcast: Chainalysis’ Chief Economist on the Data Behind Blockchain Forensics

“It has been a year of success, but something not talked about enough in cryptocurrency is what it takes to build a business,” said Philip Gradwell, the chief economist at blockchain forensics firm Chainalysis, on the latest episode of the Bitcoin Magazine Podcast. “We provide software for compliance and investigations, but underneath it all, we’re a data company trying to understand how value flows between different entities. That looks kind of like information provision — Bloomberg. But, it’s hard to find a comparison for what we do in the traditional world because blockchains allow for new types of analysis that were not previously possible.”

The work of blockchain analysis companies such as Chainalysis isn’t always welcomed by privacy advocates. However, if you’re a Bitcoiner who cares about the future of the industry, this work is always worth watching.

There tend to be two great narratives that we hear about in how these companies affect Bitcoin.

One is that they bring more transparency and, in turn, increase Bitcoin’s adoption and legitimacy. The other is that they are leveraging data from the Bitcoin blockchain to provide better surveillance for corporate entities and nation-states at the expense of financial privacy.

Coming to the end of what appears to be a successful year of growth, Chainalysis cut 20 percent of its workforce back in November 2019. This episode of the Bitcoin Magazine Podcast features an interview with Gradwell, talking about what exactly is gleaned from blockchain analysis products, why they are seeing so much growth in the Asia-Pacific region, why his firm had to let go of 39 employees and whether it is putting resources into tracking off-chain transactions.

Follow Gradwell and Hollerith on Twitter and read more here:

The following content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial or other advice. Nothing contained in this presentation constitutes a solicitation, recommendation, endorsement or offer by BTC Media, The Let’s Talk Bitcoin Network, or any third party service provider to buy or sell any securities or other financial instruments.

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ING Bank Working on a Crypto Custody Project for Digital Assets

ING Bank Working on a Crypto Custody Project for Digital Assets

Last Updated on December 13, 2019

Amsterdam-based ING Bank is planning a new custodial technology for digital assets. Reuters recently revealed the hush project at the Dutch banking giant.

ING speaks out

Reuters reported that the project is being run in Amsterdam. The bank is undertaking multiple initiatives in blockchain technology and cryptocurrencies. In a written statement sent to Reuters, the bank confirmed sources’ accounts and said that it

“sees increasing opportunities with regard to digital assets on both asset-backed and native security tokens.”

ING Bank Working on a Crypto Custody Project for Digital Assets

The bank is focusing on creating blockchain technology that could let its client access digital tokens in a compliant way. The bank is not the first to explore blockchain technology for enhancing its existing suite of products. Wall Street giant JP Morgan is already using a homegrown token to handle transactions within its globalized system.

A number of financial firms believe that traditional assets like equities and bonds could be tokenized using blockchains and then be traded on distributed ledgers. This will help in creating a more streamlined, tamper-proof system that would also be useful in reducing costs in the capital markets.

Custodial solutions for cryptocurrencies

Several companies have started providing custodial solutions for digital coins. Coinbase, a prominent US exchange has custodial options. Fidelity, one of the largest asset management companies in the world, also launched its crypto arm this year, which provides custodial services. Common assets under custody are Bitcoin and Ethereum. Some other firms have also announced their intention to provide similar solutions to clients, especially to the institutional crop.

Cryptocurrencies are still operating in an unstructured ecosystem. There is a lack of adequate infrastructure in the industry, especially when it comes to custody and back-office. Major companies entering the space could help in building this infrastructure and clear the roadblocks for a major client who wants to get a taste of the new asset class.

Reuters suggests that over 33 projects from some large companies, which were launched in the past four years, are still in the testing phase. It is unclear whether ING’s system has gone beyond the testing phase. However, since such a large lending entity in Europe is working on the technology, it might be able to give a significant push to the crypto industry.

We must note that ABN AMRO, another Dutch banking giant tried to create a custodial cryptocurrency wallet. The bank gave up on the idea of suggesting a lack of interest.

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Enterprise Blockchain on … Bitcoin? Bitfury Is Giving It a Go With Exonum

Enterprise Blockchain on … Bitcoin? Bitfury Is Giving It a Go With Exonum

“Blockchain, not Bitcoin.”

This rallying cry became a hallmark of the 2017 market boom and continued to reverberate in the subsequent cryptocurrency bear market. Entrepreneurs and institutions from every corner of every industry tried to shoehorn blockchains into use cases for everything from pharmaceuticals to bananas. 

“Just slap a blockchain on it,” the idea went, and thus some of the world’s unnecessary enterprise blockchain applications were born. 

Several years later, people are figuring out that you don’t need a blockchain for, well, most things really. In the fallout of 2017’s explosive market environment, blockchain incubator ConsenSys laid off more than half its staff, State Street bank fired 100 developers to basically shutter its distributed ledger arm, and Ripple recently closed shop on its storage platform Omni.

As the dominoes of distributed ledgers and enterprise blockchains continue to topple, it may seem surprising, then, that one of the oldest Bitcoin companies is digging deeper into a blockchain for businesses. But that’s precisely what Bitfury is doing — and it’s adding Bitcoin to the mix.

Exonum Meets Bitcoin

Bitfury was founded in 2011 and made its name developing bitcoin mining hardware and software. Its business has since branched out, and it’s laid down roots in the questionably fertile ground of enterprise blockchain platforms with Exonum.

Launched in 2017, Exonum is an open-source solution for building permissioned blockchain applications. The project has over 5,000 commits from 46 developers on GitHub and is presented as a tool to “[power] distributed ledgers in virtually any problem domain, including FinTech, GovTech, and LegalTech,” according to its project documentation.

This version of Exonum is entirely open-source, but its latest iteration, Exonum Enterprise, is a blockchain as a service. Unlike its prototype, which is self-deployed, the Exonum Enterprise offering includes setup and DevOps support along with other tools for Bitfury’s clients. It’s also anchored to the Bitcoin blockchain.

The idea here is to increase transparency. Enterprise blockchains like Exonum are permissioned (private) while Bitcoin’s blockchain is public (permissionless). Blockchains, for Bitcoin’s use case, anyway, are meant to be decentralized, (basically) immutable and completely transparent because these design features make it both auditable and secure to ensure against fraud. Private blockchains, on the other hand, offer none of these guarantees because they are centralized.

Something like Exonum Enterprise, then, is trying to mediate between the permissioned nature of a private chain and the permissionless nature of a public chain. By anchoring data on the Bitcoin blockchain (i.e., submitting data to the network periodically to reflect the state of the private network), Bitfury wants to give clients the control of a private network while simultaneously giving them the assurances and transparency of a public one. 

This is why it opted toward Bitcoin as an anchor, because it is the most robust of the public blockchain batch.

“We chose to use the Bitcoin blockchain because it is the most secure blockchain by several metrics, but notably that the cost to attack and rewrite the Ethereum blockchain is about 10 times less than the cost to attack/rewrite the Bitcoin blockchain,” Exonum head Gleb Palienko told Bitcoin Magazine.

How Exonum Enterprise Works

The Exonum Enterprise blockchain promises speeds of up to 5,000 transactions per second through its proprietary Byzantine-fault-tolerance-based consensus mechanism. This speed varies based on node capacity, however; for instance, a low-end node that creates a block every 60 seconds costs $1,250, while one that adds a block every second costs $5,000, according to Forbes. The nodes are hosted on the cloud for clients, rather than supported via in-house hardware.

How many nodes a business might need depends entirely on what the blockchain will be used for and how many entities will operate it, though Bitfury recommends at least four for “basic scenarios.”

Data from these Exonum Enterprise nodes can be relayed to the Bitcoin blockchain on a variable basis. This process, which is automated, involves publishing the root hash of any Exonum Enterprise block’s Merkle tree to the Bitcoin blockchain. Put another way, Exonum Enterprise etches a references to the Exonum Enterprise blockchain’s data into the Bitcoin blockchain without revealing the underlying data itself; from here, those with eyes on this particular blockchain can reference Bitcoin’s ledger to see if the hash matches the Merkle root on their private blockchain. Bitfury charges $10 for every transaction sent to the Bitcoin network, according to Forbes.

“This allows Exonum Enterprise clients to verify their blockchain and get a cryptographic proof of the data’s existence and authenticity,” Palienko said. “Anchoring to the Bitcoin blockchain ensures that users cannot rewrite data on the public blockchain without detection, and can assure customers/investors/regulators that companies are not engaging in ‘double bookkeeping.’”

The veritability of each proof, though, is contingent on how often an organization decides to publish hashes onto Bitcoin. They can choose to do so every block, every hour, every day, every week, every month or never at all. For the hybrid model to truly unlock the benefits of its Bitcoin overlayer, Bitfury recommends a daily anchoring at minimum. 

But under this model, the more often the Exonum Enterprise blockchain anchors to Bitcoin, the better. If, for example, a company only verified the state of its private chain on Bitcoin once a week, you would have no way of verifying that the ledger wasn’t tampered with between each weekly entry. A daily entry would offer increased auditability, while an hourly one would offer more assurances still.

Who’s Using Exonum Enterprise?

Bitfury told Forbes that 35 organizations are currently leveraging Exonum Enterprise in its open-source form. Palienko told us that they are in the process of “onboarding new Exonum Enterprise clients” at the moment.

And what industries may benefit from the solution? When asked for examples of Exonum real-world use cases, Palienko referenced the software’s use by the Ukranian government for its state-run auctioning platform, SETAM. Since it has been deployed, Exonum Enterprise has underpinned 4,000 auctions for a total $24.5 million in sales, according to Bitfury. Other use cases listed on the Exonum website include asset, identity and supply chain management. 

Many Bitcoiners would no doubt be skeptical of Exonum Enterprise, given its enterprise blockchain roots. The option to anchor data to Bitcoin might pique their interest in the project somewhat, but they may still call the actual utility of a private blockchain into question.

Even so, Palienko and the rest of the Bitfury team believe that the volume of interest they’ve received from different organizations speaks for the utility of the platform. As the blockchain-as-a-service narrative continues to unfurl and search for successful use cases, perhaps Bitfury has struck a happy medium with private control and public guarantees — if those who use Exonum opt to publish data more often than not, that is.

“We have seen growing interest from businesses for blockchain solutions — the immutability, transparency and decentralization a private blockchain can provide even just within an organization is immensely appealing from a business standpoint,” Palienko said. “Additionally, enterprise blockchains with anchoring can provide the same level of security as public blockchains while also being more flexible and controllable for internal operations.”

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Is eToro’s Foray into Debit Set to Challenge Robinhood’s?

Is eToro’s Foray into Debit Set to Challenge Robinhood’s?

Multi-asset social trading platform eToro has confirmed its plans to launch a debit card to cryptocurrency news platform CoinRivet. The confirmation followed the leakage of the plans late last week when an anonymous source within eToro sent a series of emails to a number of financial news outlets exposing details on how the card will look and operate. According to the emails, the card is expected to be launched by Q2 2020.

In a statement emailed to Finance Magnates, eToro PR and communications manager Katie Evans said that “regarding the debit card, we can confirm that this is something we are working on.”

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“However, it isn’t something we can provide any further detail at this point in time other than to say that as a business, eToro has always evolved its product line up to meet the needs of our 12 million registered users across 100+ countries,” Evans added.

The emails leaked last week also detail how eToro will allow users to spend eToro profits on recurring payments. Business Insider reported that the debit card would be eToro’s latest attempt to “[offer] users a more rounded set of services…eToro is moving to diversify its revenue — but it seems that, at least for now, it’s largely focusing on the trading industry.”

eToro could be “moving to diversify its revenue” to fend off competition

The card may also be an attempt by eToro to try and set itself apart from the increasingly-crowded commission-free trading space. Finance Magnates previously reported that eToro officially became commission-free in May of this year on stocks and ETF trading.

Indeed, platforms like Freetrade and Robinhood are becoming increasingly popular; Robinhood’s commission-free trading app is making its debut in the UK (the land of its namesake), according to an official blog post from the company posted on November 19.

eToro has headquarters in London, so Robinhood’s entry into the country may put a bit of extra pressure on eToro to offer a more diverse set of services.

A startup company called “Freetrade”  has also established itself in the UK, and offers access to US and UK stocks and has begun a waiting list for companies in several countries across Europe in preparation for an expansion.

Robinhood achieved a $7.6 billion valuation with the completion of a $323 million fundraising round in July. In 2018 (the last time period for which such data is valuable), eToro was valued at $800 million.

And, interestingly enough, Robinhood is also in the process of launching its own debit card, which it announced in October as part of its new Cash Management feature. According to the announcement, the card will offer users an annual percentage yield of 2.05% and will allow users to “spend directly from your brokerage account.” The new feature theoretically allows users to earn interest on money that they’re not currently investing with Robinhood.

eToro is building acquisitions, partnerships

eToro has also been building up acquisitions and partnerships, seemingly as a way to set itself apart from similar platforms.

For example, Business Insider pointed to eToro’s November acquisition of crypto portfolio tracker app Delta as an attempt to build out its product suite.

In October, eToro signed a six-month partnership deal with the Ultimate Fighting Championship (UFC). eToro is also  an official club partner to six UK-based Premier League football clubs.

”The source behind the leak is understood to be attempting to expose what they believe is blatant profiteering.”

According to CoinRivet, “the source behind the leak is understood to be attempting to expose what they believe is blatant profiteering, accusing the brokerage company of capitalizing on its customers.”

However, eToro responded by saying that it is proud to be a yield-led organization, and that profit is what its customers are after, too.

“When we started eToro our goal was to disrupt the world of trading. We wanted to change the way people think about trading and investing, ultimately reducing dependency on traditional financial institutions and make trading and investing more transparent and fun. This mission remains our guiding light and we will continue to evolve both organically and by acquisition in order to bring our customers the very best experience.”

“At a time when other fintechs state that they are not even targeting profitability, we are proud to be a well funded, profitable business that is growing both in terms of geographical coverage but also product range. This solid base and 12 years of experience allows us to continue to add to the services that we offer our clients and to continue to open up finance for all.”

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China Releases Year-End Crypto Rankings

China Releases Year-End Crypto Rankings

China Releases Year-End Crypto Rankings

China’s Center for Information and Industry Development has published its year-end crypto project rankings. Thirty-five projects were evaluated and ranked overall as well as in three separate categories. Bitcoin has risen in ranking while EOS remains China’s favorite.

Also read: China Ranks 35 Crypto Projects as President Xi Pushes Blockchain

Year-End Crypto Rankings

The Center for Information and Industry Development (CCID), under China’s Ministry of Industry and Information Technology, released the 15th update of its crypto project rankings on Friday. While the hype for blockchain technology initiated by President Xi Jinping has somewhat subsided, the center continues its work on evaluating and ranking crypto projects. This month’s release is the last one this year. The center evaluated the same 35 projects in December as it did for the previous rankings in September.

In addition to the overall ranking, the CCID evaluated all the projects based on their basic technology, applicability, and creativity. EOS remains at the top of the overall ranking, followed by Ethereum and then Tron. The center started ranking Tron in February, debuting it at number two overall. However, in July, it dropped to the third place and Ethereum regained its number two ranking. In September, Tron overtook Ethereum once again but only to fall to the third place once more this month. NULS ranks fourth, followed by Lisk, Neo, Steem, and Bitshares. BTC has risen from the 11th spot to the 9th spot. BCH also improved, rising from the 30th spot to the 27th spot.

China Releases Year-End Crypto RankingsCCID’s crypto rankings for December.

The CCID describes itself as “a first-class scientific research institution directly under the administration of the Ministry of Industry and Information Technology of China.” It provides professional services to the government including research, consulting, evaluation, certification, and research and development, according to its website. The center has been working on its Global Public Blockchain Technology Assessment Index since the beginning of last year. The rankings are compiled by CCID (Qingdao) Blockchain Research Institute, an entity established by the CCID, in collaboration with other organizations such as the CCID Think Tank and the China Software Evaluation Center. “The result of this assessment will allow the CCID group to provide better technical consulting services for government agencies, business enterprises, research institutes, and technology developers,” the CCID previously explained.

This Month’s Sub-Rankings

The CCID explained that the basic technology sub-category mainly evaluates the technical implementation of the public chain, primarily examining its functions, performance, security, and decentralization. This month, EOS and Tron still occupy the first and second places, the center noted, adding that “The average value of the basic technology sub-index has not changed much from the previous period.”

China Releases Year-End Crypto Rankings

The applicability sub-index mainly evaluates the comprehensive level of the applications that the public chain actually supports, including node deployment, wallet applications, development support, and application implementation. In this evaluation period, the center revealed that “The average value of the overall applicability index increased significantly from the previous period.” The creativity sub-index mainly examines the continuous innovation of the public chain, including the number of developers, code updates and code impact. The center noted that compared to the previous period, the average creativity sub-index has only increased slightly.

What do you think of this latest CCID rankings? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


Images courtesy of Shutterstock and CCID.


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Bitcoin, Blockchain, BTC, CCID, China, chinese, crypto assets, crypto rankings, Cryptocurrencies, Digital Currency, EOS, Ethereum, Government, tron, Virtual Currency, Xi Jinping
Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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Ho, Ho, Ho, or No, No, No: WIll BTC See a Santa Rally This Year?

Ho, Ho, Ho, or No, No, No: WIll BTC See a Santa Rally This Year?

Well, folks, it’s almost that time of year again. Q4 is drawing to a close, chestnuts are roasting on an open fire, and Bitcoin investors closely watching to see if Rudolph’s nose will flash red or green in the days leading up to the end of the year; after all, it could be time for a good ol’ Bitcoin Santa Rally.

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A “Santa Rally” or “Santa Claus Rally”–which actually is not, in fact, unique to Bitcoin or even cryptocurrency–is when there is a sustained increase during the price of an asset throughout the last week of December and into the first two trading days in January.

What causes “Santa Rallies” to happen?

Investopedia explains that there are several possible explanations for this phenomenon. One theory points to sentimental causes–that holiday cheer and holiday bonuses result in an injection of new capital into the market.

A more practical theory explains that the cause is likely the fact that institutional investors–who tend to be pessimistic–go on vacation around this time of year, leaving the markets to retail investors (while the cat’s away, the mice will play.)

This phenomenon is well-documented outside of the crypto world. Over 65% of Decembers since the 1960s have resulted in positive gains for shareholders. However, within the cryptosphere, which is just over 10 years old, the phenomenon has also been observed.

For example, on December 1st of 2017, the price of BTC was roughly $10,840; by January 1st, 2018, the price had risen to roughly $13,902 (though Bitcoin had risen to nearly $20,000 midway through the month, and a severe price crash followed soon after.) The year prior to that (2016), BTC was roughly $750 on December 1st and $970 on January 1st, 2017. 2015 to 2016 also saw an increase from $360 to $430.

BTC 2016-2017

However, the Santa rally is not a guarantee–take, for example, last year. On December 1st, 2018, BTC was hovering around $4,240; on January 1st, it had fallen to $3,750, although the price had fallen as low as $3,200 in mid-December. Similarly, from 2013-2014, Bitcoin recovered from a mid-December crash to roughly $420 to $770 by the first of the year, though it had started the month at roughly $1,000.

What’s in store for this year?

An inflection point approaches

Last Monday, Bloomberg predicted that Bitcoin was approaching an “inflection point” as the price was continuing to fall toward the lower limit its Trading Envelope Indicator.

“The gauge smooths moving averages to map out higher and lower limits, with a break below the lower band potentially preceding a retreat similar to the one seen on Sept. 24, when the coin fell 12% in one day,” the article said. “A bounce off the lower limit, on the other hand, could signal support at that level and, possibly, a rally similar to the one seen on Oct. 25, when Bitcoin posted a 15% gain.”

Since that piece was posted, the price of Bitcoin has risen from roughly $7,280 to approximately $7,500 at press time. But where could it go from here?

Willy Woo: “on-chain momentum is crossing into bullish”

Cryptocurrency analyst Willy Woo Tweeted on Saturday, December 7th, that he has observed a trend reversal toward a more bullish sentiment in the price of BTC. Specifically, Woo wrote that “on-chain momentum is crossing into bullish,” and pointed toward the upcoming “halvening.”

“Halvening”, or “halving”, is a term that refers to the instances when BTC mining rewards are cut in half. On the Bitcoin network, halving happens regularly at preset intervals of every 210,000 blocks. This is built into the Bitcoin protocol; the next halvening is scheduled for May 14th.

While there’s not a direct correlation between halvenings and the price of BTC, increases in BTC’s valuation have often followed.

The most popular theory behind these price increases seem to be that fewer mining rewards result in less cryptocurrency is being mined. The increased scarcity that results from the decrease in mining drives the price of that cryptocurrency up. Therefore, if miners have less incentive to keep doing their work, less coins will be mined, and the coins that are mined will be more valuable.

“The 1000 whales that control 50% of all bitcoin don’t care about on-chain [transactions].”

However, entrepreneur Charles Fuchs tweeted in response to Woo that on-chain transactions only tell a part of the story: “the 1000 whales that control 50% of all bitcoin don’t care about on-chain [transactions],” he wrote.

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In other words, the massive amounts of cryptocurrency that are traded off of the Bitcoin blockchain often aren’t immediately reflected in the markets. Therefore, making observations and predictions of on-chain volume can only be effective to a certain extent.

Bearish opinions

However, according to cryptocurrency analyst Eric Thies, things aren’t looking up for Bitcoin. “$BTC is done for a while…short the corn,” he wrote on Twitter.

However, in response to a Tweet by @CredibleCrypto, Thies acknowledged that it’s possible that the sell signal will have disappeared by the end of the month.

Mitoshi Kaku,technical Analyst and Creator of The “Waves & Particles Trading System” at Ikagi, responded critically to this:

Charles Hoskinson says “crypto is unstoppable”; Tom Lee sees possible positive motion from new money and China

But while a Santa Rally could yield some positive short-term results, what are experts saying about the long term?

Charles Hoskinson, co-founder of Ethereum and the creator of Cardano, seems unabashedly bullish about what’s in store for cryptocurrency. “ We will see 10k btc again and welcome 100k,” he wrote last week. “Crypto is unstoppable. Crypto is the future.”

However, Tom Lee, Managing Partner and the Head of Research at Fundstrat Global Advisors, also seems to be fairly confident about the future.

“I think bitcoin’s weakness since July is understandable,” he said recently to CNBC. “I don’t think adoption has really grown since July and if you can’t grow adoption, network effects don’t take place and so bitcoin drifts lower. But does this change the 10-year, five-year, or even two-year outlook for bitcoin? I don’t think so.”

Lee noted that the increasing availability of institutional-grade investment products and services in crypto could bring new money into the space, and that China’s increased interest in blockchain technology could be good for the cryptocurrency ecosystem.

What are your thoughts about the year ahead for Bitcoin? Share them in the comments below.

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