- Blockchain and Cryptocurrencies at the World Economic Forum in Davos!
- Ukraine: Politicians hold Bitcoin worth 180 Million Euros!
- This is how Pump Groups manipulate Prices!
- Coinbase cooperates with Trading Technologies!
- People's Bank of China works on its own Cryptocurrency!
- Still Malware in many Crypto Apps!
- The Protection of Privacy - Part 4 (Dash)
What does the business elite say?
Blockchain and cryptocurrencies also played a role in Davos this week. Among other things, Christine Lagarde, Theresa May and Emmanuel Macron talked about how to respond to the challenges of the crypto market in the future.
This Friday, the 48th annual meeting of the World Economic Forum ends in Davos, Switzerland. Since Tuesday, a large part of the most powerful representatives from politics, society and business had met there to exchange views. Of course, the elites of the global economy this year have not been around the topic of blockchain - the focus was of course on the application area cryptocurrencies. What exactly was discussed in Davos?
Critical words on Bitcoin
Nobel laureate Joseph Stiglitz made the start in terms of cryptocurrencies on Tuesday, when he expressed his incomprehension to Bloomberg over the existence of Bitcoin. With the US dollar, we already have a good global exchange medium, so his reasoning, so why would you need the Bitcoin. The only conceivable explanation that Stiglitz invokes is the desire for secrecy. If one were to "out-regulate" this use case from Bitcoin, one would deprive it of its existence. The fact that the Bitcoin was originally designed as an alternative to the centrally-steered Bretton Woods financial system with the US dollar as the international reserve currency ignored Stiglitz thereby diligently.
IMF head Christine Lagarde also spoke on the topic. In one panel, she stated that the IMF is already working intensively on the opportunities and challenges of cryptocurrencies. Illegal transactions made with the help of cryptocurrencies are unacceptable, but one must keep an eye on the innovations that the new technology brings with it. US Treasury Secretary Steven Mnuchin, a participant in the same panel, said that his top priority was to ensure that cryptocurrencies were not needed for illegal activities such as black market trading or money laundering. To this end, he suggested a common approach to regulation - at least at the level of the G20 states.
British Prime Minister Theresa May also points in a similar direction, pointing out that one must observe what these currencies are used for. Your Finance Minister, Philip Hammond, took a closer look at the issue, saying that sustainable regulation of cryptocurrencies is advisable before cryptocurrencies grow so much that they can significantly impact the global economy. French President Emmanuel Macron also tackled the issue and proposed a global agreement to create a suitable environment for crypto-investors.
On the sidelines of the event was also George Soros to speak, which again spoke against cryptocurrencies. Thus, Bitcoin can not act as a currency due to the high volatility, as it can sometimes in one day fluctuations of up to 25%. Thus, according to Soros no reliable long-term obligations such as the payment of salaries can be received.
Panel: The Crypto Asset Bubble
The highlight was finally on Thursday: a separate panel entitled "The Crypto-Asset Bubble". As the name implies, for about an hour it was discussed the opportunities and risks of cryptocurrencies and how to invest in them. The focus was on the question to what extent the Bitcoin can be regarded as a currency. Speakers included Jennifer Zhu Scott, Founding Partner of Radian Blockchain Ventures, Neil Rimer, General Partner at Index Ventures SA, and Cecilia Skingsley, Deputy Chairman of the Swedish Central Bank (Sveriges Riksbank), as well as Yale Professor and Nobel Laureate Robert Shiller. who had caused quite a stir last week with his comments on Bitcoin.
Watch the full "The Crypto Asset Bubble" panel on youtube:
So Shiller also had the opportunity to defend his statements. He expressed his enthusiasm for the blockchain as a technology and wished for a stronger focus on this aspect of Bitcoin. Fittingly, he refers to Bitcoin as an "interesting experiment", but not as a "permanent part of our lives" - statements that underscore his previously expressed skeptical interest in cryptocurrencies. In the beginning of the Bitcoin futures, however, the traditionalist sees the possibility of stabilization.
Cecilia Skingsley beats in a similar vein by describing the Bitcoin as too volatile to use it as an equivalent to traditional money. To be able to act as money, an object must fulfill different criteria. This includes the value retention, a low fluctuation or a stable exchange rate - these points they see in Bitcoin and other cryptocurrencies not met. Although Sweden plans long term the step into a cashless society, possibly connected with the publication of an e-crown, however, one does not know yet whether a block chain solution should be used.
Neil Rimer, who looks at cryptocurrencies from an investor perspective, is enthusiastic about the asset. He describes the Bitcoin and the underlying blockchain technology as probably the "most daring, most generous and profound invention" he has seen in his career. Although he admits that cryptocurrencies are still in their infancy and are currently still a hobby-related matter. However, they have already achieved many remarkable things, according to Rimer.
Jennifer Zhu Scott with vision for the future
Blockchain expert Jennifer Zhu Scott looked at the discussion from a broader perspective and averted short-term price fluctuations. Instead, she went into the deeper analysis and found out that things are going wrong in the traditional financial system. Thus, the processes in the international financial sector would be in imbalance to the seamless technological possibilities. She saw the possibility that blockchain, as the technology behind cryptocurrencies, has the potential to completely change the system as a disruptive force.
So the topic has arrived in the middle of the global economy and is attracting attention from many sides at the most important global conference of the year. However, the controversial and sometimes too narrow-minded statements show that we are still a long way from a deeper understanding.
As part of the registration process, 57 Ukrainian politicians, government officials and corporate CEOs have confirmed that they own a total of 21,128 Bitcoins.
As can be gathered from a study, the largest number of Bitcoin owners of Ukraine sit in the Odessa regional council. In second place is the Verkhovna Rada, the only legislative body in the single-chamber system of Ukraine. Definite legislation is currently pending, which does not prevent officials from holding cryptocurrencies.
21,128 Bitcoins worth over 180 million euros are held by officials of the Eastern European state. Over the past two years, the 57 government members have registered their Bitcoin as intangible assets.
The official list clearly mentions Dimitry Golubov on top in the Verkhovna Rada. According to official figures, the Ukrainian politician is in possession of 4,376 Bitcoins. In the past, he has been accused of criminal activities in cyberspace but has not been confirmed.
The study appears to be based on a demand from the public to disclose digital assets. To this end, one has demanded from the official side in the course of an anti-corruption investigation disclosure. For this purpose, a system was specially developed. Opendatabot examines data from Ukrainian companies and government officials.
Regulatory situation in Ukraine not clarified
The regulatory situation for cryptocurrencies has not yet been fully clarified in the Ukraine. For example, the National Bank of Ukraine does not recognize Bitcoin as a means of payment. Already in August last year, the Ukrainian National Bank has criticized the regulatory proposals of other countries. The definition as "intangible assets" or as a "virtual good" was not enough for them. Thereafter, representatives of the government and the bank met in September last year and announced closer definitions for the time to come. The latest report in this regard dates back to November, when officials announced future tax exemption for cryptocurrencies. However, a definite decision has not been made to this day.
Pump groups manipulate prices of cryptocurrencies by having their members arrange large-scale crypto purchases. But only the initiators win.
Similar to windy stock traders trying to make quick money with penny stocks, a number of crypto investors seem to be filling their pockets as well. According to a report in the Future Zone, so-called pump-groups, which use the messenger telegram to communicate with each other, promise their members high profits by manipulating crypto courses. However, almost always only the initiators win.
The whole thing should work like this: By telegram message in a corresponding group their members are informed, at which time on which crypto exchange which crypto currency will be manipulate. These are mostly unknown currencies with a very low trading volume. Buy hundreds or even thousands of users at the same time coins or tokens of such a currency, their course is driven within a very short time to unexpected heights - after a few minutes or hours, the haunt is over, the price drops back to the original level.
Cryptocurrency manipulations: Short-term price rash due to pump action at Compcoin. (Graphic: Coinmarketcap)
In a recent action focusing on the Compcoin (CMP) cryptocurrency, the price went up by 1,890 percent and then down again, according to Futurezone. Who sold at the peak, so could be happy about a significant increase in his commitment. But that's where the problem lies. Of course, not everyone can win in such an action. In concrete terms, only the initiators of a pump usually win, as explained on Reddit.
Manipulating cryptocurrencies with pump actions: Stay away!
Those who set up such pump groups, have a knowledge advantage and set up before the announcement of joint purchase over a long period favorable with the coins. After starting the action, the units are quickly repelled - usually automatically. The other participants must be lucky enough to be fast enough that there are enough willing buyers to follow them, so they can get rid of their coins. So you can only be warned about participating in such pump actions!
The two US-based companies Coinbase and Trading Technologies International want to join forces to make cryptocurrency trading accessible to a wider audience.
San Francisco-based crypto exchange Coinbase and Trading Technologies International, a software developer based in Chicago, want to continue to distribute crypto-trading. According to the press release, they want to make cryptocurrency trading more accessible to institutional investors such as traders, brokers, asset managers, futures trading advisors, and hedge fund and risk managers. In doing so, they are joining the current trend of the implications of the traditional stock market and the crypto market:
While Coinbase is already in cryptography, Trading Technologies International, with its broad customer base, will expand Coinbase's business. They are planning both products for the spot market and for the foreign exchange market. The first products are scheduled for March 1 by the two companies.
Rick Lane, CEO of Trading Technologies, is thrilled:
A well networked cooperation
Trading Technologies is well connected in the financial world. The company has connections to 45 markets worldwide, including the pioneers of the Bitcoin futures CBOE and CME.
The first round of Bitcoin futures of CBOE and CME has ended yesterday. With well planned actions, investors were able to benefit from the Bitcoin course without having to keep the crypto currency themselves. It remains to be seen how and whether the launch of the new tools will impact the crypto market, but suggests that cryptocurrencies are increasingly arriving in the mainstream.
According to a representative of the Chinese central bank, the People's Bank of China (PBoC) could already work on its own cryptocurrency.
A Yicai article said that the president of the bank, Fan Yifei, had provided details of a potential central bank cryptocurrency.
Fan explained that the bank's currency would basically be different from other decentralized tokens. Centralized administration and distribution are the priorities of the new currency.
"The central bank cryptocurrency will be the bank's responsibility to the public. The form of this responsibility will not change just because the physical form of the money is digitized. Therefore, we must guarantee the central role of the PBoC in publishing the central bank cryptocurrency, "Fan wrote. He also added:
He also stated that the new currency is unlikely to run through a peer-to-peer system. Among other things, peer-to-peer systems ensure that a degree of anonymity can be guaranteed. This will not be the case with PBoC's cryptocurrency because the bank can see all transactions. This is to prevent illegal activities such as money laundering and financial fraud.
It was recently announced that the bank had established a department to investigate its own cryptocurrency. The head of the department, Yoa Qian, expressed himself last year in much the same way as the president of the bank. He explained at the time that a government digital currency was not dependent on the decentralization of the blockchain.
According to a recent study by RiskIQ's security researchers, 20 official app stores are still offering over 660 apps for download that contain dangerous malicious software. The cybercriminals have their personal data aside from the wallets of the smartphone owners. Unfortunately, to date, only a few operators of App Stores control the software offered there on any backdoors.
The behavior of App Store operators has not changed much since the last warning of malicious software last November. Many companies allow downloading of an update or a new app without any checks due to time constraints. Security researchers from RiskIQ have examined 18,408 apps for the most diverse operating systems of various download portals such as APKPlz, SameAPK, Apple's App Store, Google Play etc. on back doors. The Android Store Google Play found the most proportionally with 272 malicious programs. A total of 661 apps fell through the exam. For high-tech bridges, the result was far more negative. In comparatively superficial tests, errors were found in 90% of all cases in the programming or transmission of the sensitive data, which meant that users could easily access mobile credit. However, the investigation of high-tech bridge was limited only to apps for Android smartphones.
Cybercriminals are acting globally in an almost "lawless digital world," commented RiskIQ manager Fabian Libeau on the findings of the latest survey. Those who entrust their coins to an app should choose them wisely. Above all, you should look in the app stores before any installation on the number of downloads performed so far and the previous customer reviews in order to reduce the risk. Alternatively, there is the possibility to use only official apps of the online trading venues, where you are already registered. This also applies in the case when alternative apps have a comparable or even larger functionality.
Unfortunately, this press release does not include a list of malware-related apps and their source.
The California security company RiskIQ found in the course of their investigation also that various hackers have put a lot of time in the search engine optimization in advance. Who wants to hide a backdoor in his own software, inquires beforehand, which search terms was often searched by the name or description of the app. Most hackers have included keywords such as "bitcoin exchange", "bitcoin wallet" or "cryptocurrency" in the English language app stores to maximize the number of possible installations of their app and thus their revenue.
About the column
In this column I take a closer look at one aspect of cryptocurrencies: the protection of privacy. In each issue, I'll take a closer look at a cryptocurrency and see how the privacy of the user is protected.
Introduction
Dash is an old hand among the cryptocurrencies and uses an innovative model of governance. Dash has so-called master-nodes, which among other things enable the private sending of transactions. How private you really are in Dash and what privacy can possibly compromise, let's take a closer look at this article.
Particularities
As mentioned earlier, the fundamental peculiarity of Dash is the network of master nodes that provide level 2 scaling capabilities. The two most important functions for the Dash network are the features "InstantSend" and "PrivateSend". To run a masternode, 1,000 Dash must be frozen as a pledge. This currently equates to just under $ 800,000. In return for their services, the masternodes receive 45% of the Block Rewards (approximately 7 Dash per month per masternode).
PrivateSend
Dash offers the network a native CoinJoin service called PrivateSend. CoinJoin means that a group of users lump their coins together and mix. For a third party, the clear origin of the individual coins is thus obscured.
The principle of mixing can be imagined as follows: You fly in a helicopter over a highway and follow a red car. In this example, mixing is like a bridge under which you momentarily lose sight of the car. On the other side of the bridge, suddenly two (or even more) red cars come to light, so you can not be sure which car is the original one.
The Coin Mixing process runs in the background behind Dash and follows these steps:
- The PrivateSend transaction is broken down into defaults of (0.01 Dash, 0.1 Dash, 1 Dash, 10 Dash ...).
- The wallet sends a coin-mixing request to the masternode network.
- If two users send a similar message where the default values are the same, a mixing session starts. A randomly selected masternode mixes all inputs and then instructs the respective wallets to repay the money themselves, but to a so-called change address.
- To be more secure, a new mixing session is started. With each round, the number of possible coin-mixing participants increases exponentially, making it harder to track the origins of a coin.
- This process runs in the background of the Wallet, so that the stocks are already anonymized, if a user wants to make an anonymous transaction.
A maximum of three people take part in a mixing round. The maximum number of mixing rounds is eight. The number of possible participants is listed in the following table:
Number of rounds possible participants
1 - 3
2 - 9
4 - 81
8 - 6561
Weaknesses
The following section details two of the most problematic attacks:
Masternode Snooping Attack:
To anonymize Dash, a random masternode is determined by the CoinJoin process. For this master mode, the process is completely transparent, that is, the input and output addresses of the participants are visible. When a "malicious" masternode records PrivateSend transactions, privacy is compromised. This attack is partially mitigated by the fact that you can mix up to eight rounds - so theoretically assigned to eight different masternodes. The more malicious masternodes in the network, the lower the privacy achieved. The number of masternodes is limited by the required 1,000 Dash. With the current money supply of 7,836,000 Dash, a maximum of 7836 Master Nodes are possible. Currently there are about 4,500. Extrapolating the cost of about half of all master deaths will yield $ 1,687,500,000. Seriously attacking the network is therefore not favorable.
Sybil Attack:
In contrast to the masternode Snooping Attack, in a Sybil Attack a masternode is not "malicious", but a peer who participates in the CoinJoin. A malicious participant in a CoinJoin has privileged information about the source and destination of a transaction and can exclude its own coins. The cost of a Sybil Attack is only the transaction fees for a PrivateSend transaction.
Current state of the technology
While solutions to both of these problems are known, the attack options have not yet been eliminated. The Masternode Snooping Attack can be mitigated by so-called "Masternode Blinding". This means that the Masternodes themselves know nothing about the origin or destination of a PrivateSend transaction.
The Sybil Attack could be bypassed by a round of mixing with itself. For this, however, it is necessary that the transaction should not be distinguished from actual multi-party mixings. Currently this is not yet integrated in the Dash protocol.
For your own privacy, it is recommended to use the maximum possible number of mixing rounds. However, this can be more expensive compared to other transactions in the Dash network.
View in the future
With Dash Evolution, the PrivateSend feature will be redesigned. Masternode blinding should be implemented. The release for the DashPay Evolution Wallet on the Livenet should be published in February 2018.
Summary
Dash is a cryptocurrency with a unique governance model of the masternodes. The masternodes feature the "PrivateSend", where attendees mix their Dash in a CoinJoin to disguise their lineage. The anonymity achieved is not based on cryptography (such as RingCT at Monero or Zero Knowledge Proofs at Zcash) and can currently be compromised by malicious participants in the system. For maximum security, I always recommend using the maximum number of mixing rounds.
If you like to read Part 1 (Bitcoin) just click HERE!
If you like to read Part 2 (Monero) just click HERE!
If you like to read Part 3 (Zcash) just click HERE!
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