Cryptocurrency exchange Bithumb officially announced that they will be delisting Monero (XMR) from their trading platform as of June 1.
According to local media outlet Newsway, Bithumb’s delisting auditory board decided to permanently remove the coin after it was provisionally delisted in April.
Recently, Monero has been in the spotlight due to reports of Telegram users using XMR to purchase illegal pornographic material — much of which involved minors.
Monero reportedly the Nth room’s favorite cryptoDue to the security infrastructure that protects the identities behind XMR transactions, Monero was allegedly the preferred crypto used by the sexual video ring. This has added layers of complexity to investigations made by South Korean police.
Bithumb also cited the fact that XMR trading volumes have shrunk significantly in recent months.
Commenting on ways the exchange will combat illegal transactions through its platform:
“We are conducting a technical review related to securing traceability through ongoing discussions with each foundation on virtual assets with similar characteristics other than Monero.”
The company added that they adhere to policies on providing a safe and legal environment for crypto transactions.
Decision made after Huobi Korea delisted MoneroCointelegraph reported on April 12 that Huobi announced they would be ending support for Monero amid the scandal. However, they did not quote the Nth room case explicitly as one of the reasons behind the delisting.
On March 25, reports appeared that four local crypto exchanges were assisting local law enforcement authorities in their investigations related to the case.
Cryptocurrency exchange Bithumb officially announced that they will be delisting Monero (XMR) from their trading platform as of June 1.
Telegram Open Network is off to a very uncertain future. Earlier this week, Telegram CEO Pavel Durov announced his company’s “active involvement with TON” was over, following a drawn-out legal battle with the United States Securities and Exchange Commission.
The project remains decentralized, however. Although TON lost its main ideologist, an independent community of validators has recently launched the blockchain platform separately from Telegram. So, what is TON without Durov’s supervision, and should other high-scale crypto projects — such as Facebook’s Libra — be even more worried about the SEC coming after them?
What was Telegram’s idea for TON?TON is a blockchain platform aimed at facilitating payments and hosting decentralized applications beyond the scalability levels of Visa. Its in-house tokens are called Grams (GRM).
The project was initiated by Telegram, an open-source encrypted messenger co-founded by two Russian entrepreneurial brothers, Pavel and Nikolai Durov. Per the roadmap, TON would be integrated into the Telegram application, which boasts over 400 million monthly users worldwide and is favored by the blockchain and cryptocurrency community.
TON began to gain recognition soon after Telegram first announced the idea in 2017, and in one year’s time it reportedly raised almost $1.7 billion in two private token sale rounds, which remains one of the most financially successful initial coin offerings to date.
However in October 2019, just a few days ahead of the release date, the SEC stepped in with a lawsuit that accused Telegram of violating U.S. securities law by holding an unregistered security sale. Because the SEC had managed to get a temporary restraining order against Telegram and TON, the project release was put on hold. In March, a U.S. court recognized that the SEC had “shown a substantial likelihood of success” in proving that Telegram’s Grams were unregistered securities.
On April 30, after a series of launch delays, Telegram offered a reimbursement plan for its investors, offering them to either opt for an immediate refund at 72 cents on the dollar or “loan”' their stake to the platform for 12 months in exchange for repayment at 110 cents on the dollar scheduled for April 30, 2021. Telegram subsequently agreed to provide the SEC with “its communications […] regarding any agreements offered or entered into with the Initial Purchasers” of the Gram tokens by May 20.
Nevertheless, Durov announced on May 12 that Telegram was discontinuing its TON project and explicitly criticized the U.S. government’s involvement and efforts to prevent the launch of the decentralized project, writing:
“Unfortunately, we — the 96% of the world’s population living elsewhere — are dependent on decision makers elected by the 4% living in the US.”
“A case study in how to do absolutely every single thing wrong”Unlike the majority of ICOs, TON wasn’t a public offering. According to the documents Pavel Durov filed with the SEC at the time, a minimum investment of $1 million was required to partake in the Gram token sale. Although the investor list has not been publicly disclosed, a number of U.S. venture capital firms including Benchmark, Sequoia Capital and Lightspeed Venture Partners are said to have participated in the offering.
The sale was likely limited to accredited investors in order to avoid scrutiny from U.S. regulators. Public documents from 2018 show that Telegram had informed the SEC that both of its twin $850 million offerings were allegedly made under Rule 506(c) and/or Regulation S under the Securities Act of 1933, so the offering was not required to be registered with or qualified by the SEC. Since the SEC filing, the company has publically stressed that the tokens should not be associated with expectations for profits, implying that they do not constitute securities as per the Howey test.
The SEC’s argument, in turn, rests on the assumption that because some TON investors were based in the U.S. — the complaint states that $424.5 million belonged to 39 U.S.-based purchasers — the potential Gram holders “will be able to sell billions of Grams into U.S. markets” and therefore continue the unregistered token sale.
“The U.S. federal securities laws do have a broader reach than many may realize,” John Berry, a partner at Munger, Tolles & Olson LLP and a former SEC senior officer who worked at the agency for over eight years, told Cointelegraph. He outlined several possible scenarios for how Telegram could deal with the SEC to get TON back on track:
“Fix the fact that it raised money in the past without following the SEC’s registration rules and register the sale of the Grams with the SEC if it wants to raise more money by selling Grams. Both of those will require cooperating with the SEC. The only other option for Telegram is to press forward with its appeal of the Telegram trial court ruling that said Telegram violated the registration rules — if Telegram wins its appeal, then it could go forward with its fundraising without registering the Grams at all. But that appellate option will take some time as Telegram’s appeal winds its way through the appellate court process.”
Tom Trowbridge, the president of financial technology firm Triterras and a former executive of Hedera Hashgraph — the company that also limited its 2018 ICO to accredited investors to comply with U.S. regulations — told Cointelegraph that “Telegram is a case study in how to do absolutely every single thing wrong in structuring and building a compliant project.” He elaborated:
“If Telegram was comfortable with TON being a security, the SEC would have little issue. But to be classified as a utility, SEC cares about 5 things: decentralized governance, a functioning independent ecosystem, coin release commensurate with use, decentralized value creation and a US investor base. Telegram was 0-5.”
According to Trowbridge, Telegram “couldn't have made it any easier” for the SEC to shut down its blockchain project: “The SEC was able to do so while remaining 100% consistent with its previous actions and guidance in the space. And the allowance of projects like Hedera to release their coins show the SEC does want to allow compliant projects to proceed.” Carol Goforth, a professor at the University of Arkansas School of Law, also highlighted certain problems with Telegram’s offering in a conversation with Cointelegraph:
“Keep in mind that a different issuer might get a different result in a different court, but the extremely broad reach of the Telegram order (foreclosing the issuance of GRAMs anywhere during the pendency of the case) creates a huge potential problem for an issuer who wants to be compliant. Note that there ARE exemptions available for purely foreign sales, although Regulation S has some difficult requirements.”
Not every issuer might care about the SEC’s opinion, Goforth continued, and the agency might have a difficult time trying to block a company that has no assets in the U.S. and operates from a jurisdiction with different rules. “However, for a truly global offering that wants to be in compliance with varied national laws, the Telegram order is quite problematic,” she argued.
Konstantinos Stylianou, an associate professor of competition law and regulation at the University of Leeds, was not surprised by Telegram’s capitulation either, telling Cointelegraph that “TON ran into a very specific problem, the definition of securities, and SEC’s stance on this is well-known,” adding:
“Financial regulators have to be strict by nature; they are the main gatekeepers to financial markets. Sometimes this means that they adapt belatedly, but we’ll get there. TON was a straightforward case that the SEC had replayed with KIK and the outcome was all but certain.”
Why TON itself is still aliveTON is an open-source project, and Telegram has stressed before that it has no control over the blockchain. In fact, the company published TON’s entire code on Github in October 2019. That allowed “Free TON,” an independent community of validators, to launch a TON-based blockchain earlier this month.
“Free TON was born because Telegram could not launch the network,” Ron Millow, Free TON’s “communications evangelist” and the chief business development officer at TON Labs — a third-party group of the blockchain’s infrastructure developers — explained to Cointelegraph:
“We are extremely saddened to see them forced to walk away from the fight, but theirs was just one battle. The free software has a life of its own and cannot be stopped, and so it gave a community the necessary motivation to pick up where they left off.”
According to Millow, the major difference between Telegram’s TON and Free TON is that the latter was launched “without any investors and by a community rather than an entity.” Free TON developers are “ecstatic” about their project, Mitja Goroshevsky, Free TON’s “technology evangelist” and the chief technology officer of TON Labs, told Cointelegraph, adding:
“We are flooded with support from all over the world with developers wanting to join the community and help it grow. Not counting all of our other groups and channels, just the developer groups jumped to almost 3,000 members in the span of a week, 2,035 of which at this moment have signed the Free TON Declaration of Decentralization.”
Some people from the original TON community are skeptical of the initiative, however. One of the founding members of TON Community Foundation who partook in the blockchain project's development told Cointelegraph that without Telegram’s resources and its audience of almost half a billion users through its messenger app, adoption will be a tough task:
“I don't think that ANY TON project that is or will be launched without the Telegram direct support will have any significant adoption. […] Most of those who participated in TON (except those who initiated the Free TON) were attracted to the whole story because of Telegram's user base.”
Daniel Perez, the head of TON Spain, told Cointelegraph that launching TON without Durov “feels pointless.” He is also leery about TON sidekicks, namely the Free TON initiative. “I doubt Pavel Durov gave them permission to use the name TON in launching an alternative called ‘Free TON,’” he said, referring to the Telegram CEO’s letter where he warned readers to not trust projects with their “money or data” that use the “TON” abbreviation.
When asked about this, a Free TON community representative told Cointelegraph that Durov’s message doesn’t apply to them because they don’t ask people for money or delicate data: “Free TON supports this statement. The Free TON community will never ask for money or private data other than a name when signing the Declaration of Decentralization, without which of course there cannot be a signature.” However, according to the Free TON website, users are required to state their name, country, email address and Telegram username to join the network and sign the declaration.
As previously reported by Cointelegraph, the Free TON community has issued around 5 billion TON Crystal tokens, which are similar to Grams. Specifically, the Free TON blockchain browser shows that there are 5,000,547,737 TON Crystal tokens as of press time. 85% of them are distributed to Free TON partners and users, and 10% are intended for developers. The remaining 5% will be used to reward the community’s validators. Additionally, Free TON has recently announced that they are launching the first validator contest on May 18.
Should others be worried?When asked whether Telegram’s capitulation might have larger repercussions for the industry, most experts found this scenario unlikely. Stylianou told Cointelegraph that the credibility or trustworthiness of the crypto market will not be affected, while regulatory laws will eventually recognize its unique features: “In fact, the convoluted securities definition that hasn’t yet caught up with the reality and potential of the crypto-economy is the problem, not the other way around.” Goforth shared a similar sentiment:
“Blockchain has such potential for a secure, rapidly accessible, tamper-resistant chain of title (and for other uses as well) that I do not see any possibility that it will fall by the wayside. In addition, as regulation develops further, I am hopeful that the SEC will eventually propose exemptions targeted to cryptoassets, at least in part to fulfill that agency’s mission to facilitate efficient functioning of our capital markets.”
As for Libra, another high-scale project that has been facing the SEC’s scrutiny, its chances to pull through may be higher. According to Trowbridge, Libra “has already taken lessons from Telegram” by launching its decentralized governance of companies and by making substantive changes to the platform after receiving feedback from regulators.
For Goforth, the initial question for Libra is not one of compliance, but whether buyers would purchase it for anything other than use. “As a stablecoin, the price would not generally be expected to fluctuate, and thus Libra might not make a suitable speculative investment,” she argued. “If Libra goes ahead, it will be a vote of confidence in the crypto-economy,” Stylianou concluded. “But that still doesn’t foretell ICOs fate.”
The crypto news headlines at the start of May with regard to Kleiman v. Wright were mostly variations on the theme of Craig Wright’s Satoshi case going to trial. The two parties appear well entrenched in their positions, and lawyers for both sides have said they expect the trial to begin as scheduled on July 6, 2020, in Florida.
Does this mean there will be no settlement? “This is not like an ordinary commercial dispute where the parties can agree they’ve got a 50-50 chance of winning on an ambiguous contract provision, so they just split the difference,” Jason Gottlieb, a partner and the chair of Morrison Cohen LLP’s White Collar and Regulatory Enforcement Practice Group, told Cointelegraph, adding: “There’s a lot of money on the line, and for Dr. Wright, his reputation. It’s a relatively hard case to settle.”
A settlement requires “two to tango,” noted Florida attorney Bradford Patrick, and one of the parties here, Craig Wright, is no ordinary litigant. “There will be no resolution because he would rather play with fire to the end,” he told Cointelegraph. Still, “never say never,” added Gottlieb. “Most cases settle.”
Slapping Wright with sanctions?Meanwhile, skirmishing continues. On May 5, the plaintiffs announced their intent to file a sanctions motion, and on May 8, they filed a motion for partial summary judgment on the defendant’s affirmative defenses. What do we make of that?
Given defendant Wright’s behavior in the case, it isn’t surprising that the plaintiffs might file a sanctions motion — which basically punishes Wright for improper conduct — especially if they believed Wright submitted a false list of Bitcoin addresses in response to the court’s order, as claimed, suggested Grant Gulovsen, an Illinois attorney who focuses on cryptocurrency and blockchain matters. Gulovsen told Cointelegraph:
“This may not have much significance in terms of the ultimate outcome of the case, but to the extent that the crypto community believes strongly one way or another about the credibility of the defendant, I think this is very significant.”
And even if the plaintiffs do not prevail on the sanctions motion, added Gottlieb, it would “remind the judge of all the bad behavior that Dr. Wright has exhibited throughout the case, in the hopes of influencing any later close calls, and depriving him of the benefits of any doubts.”
As for the plaintiffs’ motion for partial summary judgment on the defendant’s affirmative defenses, this was made under seal due to the confidentiality order in place, so no one really knows what’s in it. Asked to speculate, Gottlieb told Cointelegraph:
“Frankly, I would expect plaintiffs to come out swinging in this summary judgment motion, and possibly eliminate some or all of the affirmative defenses in the case. It is possible that they may be shooting to affirmatively win the case on summary judgment.”
Nixing expert witnesses?Also on May 8, Craig Wright filed a motion to exclude the opinion testimonies of five plaintiffs’ expert witnesses — including Andreas Antonopoulos, a crypto speaker and author of the book Mastering Bitcoin. The motion to exclude the experts is fairly straightforward and common, according to Gottlieb. Whether a person has sufficient scientific or technical expertise to provide an opinion is up to the judge. With regard to Antonopoulus, for instance, Gottlieb believes that:
“If his only contribution is to submit a screenshot of a Bitcoin price, then, yes, I would expect he would be excluded. However, if he is providing expert testimony on the issue of how one discerns a Bitcoin price, I could see that as being relevant for expert testimony.”
Expert witness testimony is covered under Rule 702 of the Federal Rules of Evidence and Experts, noted Gulovsen, and in addition to being “qualified as an expert by knowledge, skill, experience, training, or education,” a witness can only provide opinion testimony if four other criteria that ensure the expert is reliable and knowledgeable are met — all in all, a fairly high bar.
According to the attorney, there are arguments to be made whether the first three witnesses fit the aforementioned criteria, while it’s more difficult to assess the other two as “the arguments are more nuanced.”
The plaintiffs are attempting to admit Antonopoulos’s testimony on economic damages — how much money the estate of David Kleiman is entitled to — in particular, what the “price” of Bitcoin was on certain dates to use as a basis to come up with that calculation. Gulovsen is of the opinion that:
“Since Antonopoulos is not an economist, he is not qualified ‘as an expert by knowledge, skill, experience, training or education’ to testify as to what the ‘price’ of Bitcoin was on a certain date, and should not be permitted to offer damage-related testimony.”
The plaintiffs are also trying to admit Antonopoulos’s testimony because of certain online communications purportedly authored by Satoshi Nakamoto. This, too, might be problematic because jurors can read Nakamoto’s communications — e.g., emails — themselves and decide. “And since Antonopoulos never met Satoshi and, admittedly, doesn’t know who Satoshi is, his testimony about the communications is unhelpful to the jury,” said Gulovsen.
Gordon Klein is a law professor whose testimony relates to the legal standards necessary for establishing an oral partnership in Florida. Gulovsen observed that testimony that relates to “what the law is” in a given case is improper because that is the job of the court — i.e., the judge — adding:
“As a result, Klein’s opinion not only fails to ‘help the trier of fact to understand the evidence or to determine a fact in issue but would likely confuse the jury as to what law should be applied.”
Matthew Edman is a computer scientist whose forensic analysis testimony relates to whether certain purported alterations to documents are “consistent” with having been made by Craig Wright. A problem for the plaintiffs here might be that “Edman has no formal training as a forensic expert and is, therefore, not qualified ‘as an expert by knowledge, skill, experience, training, or education’ on the subject of forensic analysis.”
In most cases, if experts are prohibited from testifying at a trial, it speaks more to the fact that the plaintiffs’ lawyers should have hired more appropriate experts — than failings of the experts themselves, Gulovsen added, summarizing for Cointelegraph that the defense’s possible arguments against the first three witnesses, including Antonopoulos, are still not clear cut: “I have no opinion as to whether the arguments will prevail.”
Victory on his own terms?This lawsuit appears to belong to that rare class of civil cases where one party clashes irrespective of litigation expenses or legal fees or even any apparent economic consequences. The protagonists in such cases are often “egoists — who have loads of money — and can afford to fight to the end — win, lose or draw — to satisfy their own image as winners,” said Patrick.
“Settlement becomes unlikely because they chose to put themselves in the driver’s seat on the obstacle course in the first place. They desire victory on their own terms,” added Patrick, telling Cointelegraph that Wright is not likely to bury the hatchet with a settlement.
Gulovsen, for his part, said he would be surprised if this case actually goes to trial. “But if it does, the only thing I’ll be looking for is whether I’ve got enough popcorn stashed in the pantry to last for the duration.”
The price of Bitcoin (BTC), the top cryptocurrency by market capitalization, is trading down 2.59% for today’s session at $9,540, erasing the push towards $10,000 late on Thursday.
Ether (ETH), the second biggest crypto by market cap, is down a little less by 1.72% and retesting the critical $200 level, while XRP also attempts to maintain a key level of $0.20.
Cryptocurrency market 24-hour view. Source: Coin360
1-week chartThe weekly candle chart for the Bitcoin shows it’s currently trading above high time frame resistance of $9,300, having recovered the majority of the 20% flash sell-off last weekend, where support was found close to the 20-week moving average.
The Moving Average Convergence Divergence (MACD) indicator illustrates the upward momentum and general trend reversal since the selloff in early March.
Volumes have remained above average for the week, with two and a half days of trading remaining, highlighting the bullish response to take the price of Bitcoin back across the $9,000 following last week’s pre-halving drop
Should the bulls break resistance around $10,000, a relatively fast move to test $11,500 and the middle of the range above would be the target although Bitcoin has not traded at these prices since August 2019.
BTCUSD 1 Week chart. Source: Tradingview
1-day chartThe one-day chart shows that BTC/USD is currently finding some support today at the $9,300 level after a sudden drop as price approached $10,000. In other words, Bitcoin has formed a lower high on the daily timeframe.
Last week, both the 100 and 200-day moving averages (MA) also acted as the first line of defense alongside the 20-week MA. The 50-day MA is on course to cross above both the 100 and 200-day moving averages before the end of the month.
The so-called “golden cross” typically signals to the market to expect higher prices and will be positive for the Bitcoin bulls. However, Bitcoin has a tendency to initially react adversely to such a bullish sign.
BTCUSD 1-week chart. Source: Tradingview
The MACD on the one-day chart shows that it is threatening to cross bullish above zero, meaning that Bitcoin is generally maintaining its bullish trend. However, like the RSI, there is evidence of weakness within the uptrend now as resistance has been confirmed at $10,000.
The On Balance Volume (OBV) indicator also highlights a loss in the cumulative volume trend to the upside. The indicator bears the scars of the high volume breakdown last week and has not yet quite found the bullish volume to recover the upward trend.
BTCUSD 1-day chart. Source: Tradingview
4-hour chartThe four-hour chart highlights in more detail the potential weakness described on the one-day chart. Volume over the last day topped out at a failed retest of $10,000, but price remains supported above key resistance, which is very positive.
The four-hour MACD, however, clearly demonstrates the downturn in momentum, which is also supported by the Stoch-RSI that’s also trending to the downside. Both hint that there may need to be a consolidation to allow the indicators to reset.
As we move into the CME close on Friday, traders may be looking to offload risk, particularly given the sell-off on spot exchanges over last weekend. Therefore, price action on Friday may be representative of such.
Should there be a selloff over the weekend once more, the point of control around the $8,900 level would be the first to show real buying interest as the bulls battled to break the level all week.
BTCUSD 4-hour chart. Source: Tradingview
A brief look at a combined order book representing large buy and sell orders as a heat map on the below chart shows that there is a large amount of selling interest around the $10,000 level, which is effectively capping price for now.
BTCUSD 4-hour chart. Source: Bitcoinwisdom
Market sentiment The forward curve for the futures price of Bitcoin remains in contango with the futures price being around 1% higher than the present spot price for contracts ending in July.
This has steadily increased over the recent weeks demonstrating a more positive outlook for the price of Bitcoin in months to come. However, the premium on the future price at 1% is very low in comparison to previous bull runs and indicates that the bulls are not in a state of euphoria suggesting traders are more cautious this time around.
Listed BTC futures/perpetual swaps. Source: Skew
The CME futures chart shows that Open Interest (unsettled derivative contracts) is at all-time highs, crossing the $500m level, with interest really ramping up since the selloff in March and being significantly higher than other notable highs at $10,000 and $14,000 back in 2019.
Generally speaking, open interest rising as price increases is a positive sign as more money and attention are entering the market.
As we have seen previously, however, particularly high open interest on the CME and other derivative exchanges for Bitcoin has had an inverse relationship with the price shortly thereafter.
Therefore, this increase at the CME is of particular interest as it has made highs at a critical point of resistance and indicates there may be an explosive outcome once the market has determined in which direction it intends to move.
CME Bitcoin futures open interest. Source: Skew
A review of the Crypto Fear and Greed index shows that the market remains in a state of fear having recovered from somewhat understandable extreme fear seen with the $4K bottom in March.
Despite having recovered significantly, the market sentiment clearly mirrors that of the futures market in demonstrating a conservative outlook on the price by the public.
Crypto Feat & Greed index. Source: Alternative.me
Looking forwardIt is clear that interest in the Bitcoin market has continued to gather pace and has overwhelmingly helped the price of Bitcoin recover rapidly in recent months. This is encouraging for the market, demonstrating that there are plentiful mechanisms for the market to enable the inflow of liquidity.
Many new entrants to the market are betting on Bitcoin being a safe haven asset, over which remains some debate. Hence this being borne out in the open interest levels. The next two weeks and the close of May will prove pivotal for the market, which will see the bulls and bears continue to battle over the $10K level with $9,300 being a critical level for the bulls to break.
Bears having previously enjoyed short positions on Bitcoin from around $10,000 in the past will most likely be looking to push prices back down to the $6,500 level, which would be expected to be met with resilience from the bulls at $8,000. Whereas a capitulation on the bearish side would most likely see Bitcoin press towards $11,500 very quickly.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
According to a new report by dGen, counterfeits of the “Made in Italy” label caused a loss of €12.4 billion ($13.4 billion) in 2016 alone. Such losses directly impact both the income and future survival of many Italian artisans.
The prestige of being “Made in Italy”The Italian fashion industry, and the country’s association with artisan craftsmanship, both feed into the prestigious reputation of the “Made in Italy” label. Indeed, if it were registered as a brand, it would be the third-most valuable global property (after Coca Cola and Visa).
The label’s high profile associations have led to an ever increasing problem with counterfeit goods. These fakes facilitate intellectual property theft, and tarnish the reputation of the label, the brands, and artisans who the label represents. They also cost the industry billions of dollars as a whole.
Blockchain to the rescueThe Italian government has acknowledged the threat of counterfeiting and identified blockchain technology as a potential solution. The government recently allocated €15 million to support the rapid implementation of digital technologies, including the financing of a joint project between IBM Italy and the artisan community.
Aspects of the industry that are being considered for improvement include: authentication of goods and raw materials through the supply chain, a secure ledger of intellectual property rights, provable sustainability and ethical practices, and closer relationships between brands and their customers.
It is hoped that such measures will curb the rise of counterfeit goods and secure the future of Italian artisans.
Fashion is not the only area in which Italians have been valuing authenticity as of late. Cointelegraph recently reported that Italian firm, LKS, has created a blockchain-based system that can allegedly prevent the spread of fake news
Decentralized Finance, or DeFi, has been making strides in providing tools for users to take control of their own money and truly be their own bank. However, the assets that power this revolution exist primarily on blockchains, and historically these networks don’t easily communicate with each other. This creates real roadblocks and liquidity issues for many of the applications that are trying to revolutionize finance. New solutions could pave the way for greater “cross-chain composability,” which would mean users with almost any decentralized holdings could easily use it as collateral to get involved with Decentralized Applications, or DApps, across all networks. One of the first assets that many are setting their sights on is Bitcoin, which still reigns as king — the most commonly held cryptocurrency.
The Current Issue of Cross-Chain ComposabilityWhile there are many unique DeFi applications already released or in development, virtually all of them work on one specific blockchain. Ethereum and EOS are popular choices, for example, but there are several others. For now, Ethereum DApps need to transact using Ether or Ethereum Tokens, EOS DApps must stick with EOS and so on, as these are the only assets the network is designed for. While there has still been notable success in the early iterations of these services, it is obvious that everything would become much smoother, especially for the end user, if any asset could be seamlessly moved wherever it is needed regardless of native blockchain. This matter is also known as “interoperability,” and many see the future as a place where all chains and DApps can easily transfer value between each other. For now, most protocols are effectively isolated, but with the right implementations, the value across all of these networks could become “unchained.”
Generally, the solution to this issue is to create a protocol that can accurately and quickly transfer value between different blockchains. This is easier said than done, but there has been a lot of research put into coming up with a trustworthy way to do it. A few different approaches that have been explored include “Atomic Swaps,” “Wrapped Bitcoin,” and “pTokens.” While the overall goal is to get virtually any chain to be able to interact with any other, keep in mind that many are hoping to see Bitcoin specifically become frictionless and able to move onto other networks. The sheer size of Bitcoin’s market cap could do wonders for the DeFi ecosystem if there were no walls blocking its use from the most popular DApps. The solutions just mentioned all take different approaches to this, and we will walk through each of them now.
One problem, many solutionsWe’ll start with the aforementioned “Atomic Swaps.” What this process involves is using a specific type of smart contract, called a hashed timelock contract, or HTLC, to move value across networks. In this system, two parties (one from each blockchain) effectively agree to a predetermined transfer across both networks, and the contract ensures that the transaction is not executed until both sides have fulfilled their conditions. The “timelock” element means that the contract expires if not completed by a specific time. This whole protocol ensures that the exact amount of value that is removed from one blockchain is created on the second, therefore “transforming” one asset into another.
There are currently some limitations on atomic swaps, however. One is that the process is still fairly technical and would not be readily accessible to the majority of users. However, what is probably the biggest issue is that both blockchains must have the same hashing algorithm and support HTLCs. While many popular coins do share algorithms, such as Bitcoin’s SHA-256, it is still not universal. Considering the goal is to integrate Bitcoin into DeFi solutions, this creates a problem. Neither Ethereum nor EOS — the most popular platforms for finance DApps — share this algorithm, and hence won’t allow for this functionality.
Another solution which works around this limitation is something called Wrapped Bitcoin (WBTC). WBTC is a token that gets pegged to Bitcoin but exists on another network. In order to create the new asset, a specific amount of coin is sent to a custodian, and through a smart contract that custodian then mints an equal value of tokens to be used on the other network. To reverse the process and redeem the Bitcoin, the user must then enter into a “burn” contract, which basically is the reverse of minting, where the tokens are returned to the custodian and the Bitcoin is sent back to the original user.
The downside here is that, currently, Ethereum-based WBTC is the only major offering available. A Tezos version has been launched as well, and theoretically other blockchains could implement the same model, but it could take time to see those types of developments emerge. It is true that Ethereum offers a wide variety of DApps, and hence this is a step in the right direction. This at least allows for Bitcoin holders to take part in DeFi without having to directly sell into a new network, but there still isn’t enough universality here to make this a “one size fits all” answer. On top of this, the WBTC system is centralized, and many feel that trusting a third-party custodian runs a bit against the philosophies of DeFi, and hence would like to see a more trustless solution.
Unlocking every blockchainOne project attempting to find a road to frictionless liquidity is known as pTokens. pTokens were originally developed by the company Provable Things, and look to go further by making every blockchain compatible with every other. What makes this possible is something known as a “Trusted Execution Environment,” or TEE, which is basically a server that interacts with the two blockchains you are looking to transfer between. The TEE is effectively the custodian from the WBTC system, and can be set up so that it can transact the swaps between any two chains in a way that is fully auditable. From the pToken white paper:
In general, a TEE runs a small-footprint operating system which exposes a minimal interface to the main operating system running on the device. This smaller footprint reduces the potential attack surface of the TEE. Because of this, TEEs can run applications with high security requirements, such as cryptographic key management, biometric authentication, secure payment processing and DRM.
So far pBTC tokens are the only ones that have been implemented, but plans are already in motion for pLTC, pUSDT, pDAI, pTRON and many more. Generally, these tokens are all being designed for Ethereum and EOS, as those are where they are needed most, but in time, this same technology could be applied across virtually any blockchain.
One project that seeks to leverage pTokens to make DeFi easier is known as Equilibrium. The system allows for users to put up crypto collateral in order to mint EOSDT, a decentralized stabletoken that can be used to interact with any DApp the platform offers. In its first iteration, only EOS was supported for collateralization, but more recently, Bitcoin has been integrated into the system as well. This means that anyone holding Bitcoin can easily transfer its value into EOSDT, take part in any DApps they choose, and even turn it back into Bitcoin at any time. This is the closest we have seen to the type of frictionless liquidity that many claim is essential to bringing about a wider DeFi adoption. Equilibrium has announced that by tapping into Bitcoin, they have been able to raise the circulation cap on EOSDT by $100,000,000. Considering how many other projects exist out there to be collateralized, this could be just the beginning of a much larger liquidity pool.
With the functionality of pTokens, the sky is theoretically the limit. With more and more assets supported, users will find it easier to begin getting involved in DeFi applications. Hopefully, this will encourage even more interoperability, as any project not supported cross-chain will start to feel archaic. This should also enhance ongoing user experience, as more of the techniques described here will be happening behind the scenes, and from an outsider’s perspective, should just work.
While there is still much to do, major strides have already been made. Being able to leverage Bitcoin itself, still by far the most popular asset in the whole DeFi space, is almost certainly essential for a broader adoption to ensue. If these projects can keep pushing and go further to where virtually any asset can seamlessly move across chains, then one of the biggest hurdles to making this space user-friendly will be eliminated. Based on the way things are going, the future is looking very optimistic.
Learn more about EquilibriumDisclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
A blockchain-based marketplace is today launching for creators of “synthetic media,” a term used to describe video, image or voice material generated through artificial intelligence algorithms.
On May 15, Cointelegraph interviewed Arif Khan, CEO of Alethea AI, the firm behind the project, about the legal and moral quagmire that “deepfakes” and other AI-generated content have created for online media consumption.
Khan’s wager is that blockchain can play a role in ensuring that this content is circulated responsibly by providing infrastructure for licensing, circulating and monetizing legal and permissioned creations, as distinct from unlabelled and potentially nefarious media:
“We must distinguish between deepfakes (harmful, unpermissioned e.g. deepfake porn, deepfake misinformation political campaigns) and synthetic media (permissioned use of faces and voices, creating AI-generated clones of your soon-to-be-deceased parent’s voice with their permission to read an audiobook for your kids).”
In partnership with software firm Oasis Labs, all content generated for Alethea AI’s marketplace will be labeled using the Oasis API in an attempt to restore control to content creators as well as to those whose images can be manipulated.
Similar to the blue tick verification that Twitter provides, the company believes that secure blockchain validation on its platform will establish a barrier between valid and suspicious material. Legal permissions and consent will be the fundamental criteria for synthetic media that can be circulated and monetized, Khan said.
He pointed to the public furore earlier this year over law enforcement agencies’ access to Clearview AI, an app that could match faces to photos scraped from social media platforms by using neural net technology:
“Clearview AI stole people’s faces and sold them to security agencies without their consent. A person’s face and voice data belongs to the individual and no corporation or regulator should own this. With the Oasis Parcel API, the aim is to have this data be confidentially and securely stored and accessed through the Oasis blockchain. The user retains control of their data, who can access it […] and choose how to monetize this data.”
Now that AI is being used to go beyond facial recognition and simulate authentic appearances, Khan conceded that, ultimately, it will fall on regulators and citizens to collectively determine what kind of synthetic media is in line with the public interest — and rapidly — “given how bad actors can use this technology.”
He argued that Altethea’s model for permissioned synthetic media will help to educate the public on “the positive use-cases that can emerge from this technology.”
To illustrate what Alethea AI considers to be the positive potential of AI-generated content, the company states:
“Synthetic media […] does not require humans to physically interact, which is crucial during the pandemic as movie studios are unable to produce new content due to quarantine restrictions.
We can now enable actors and their talent agencies to license out their face and voice data in a secure manner […] Our faces and voices are becoming fully portable, composable and tradable and we will enable users to exercise their creativity within legal and permissioned domains.”
As to whether there might be something faintly dystopian in the proposal that synthetic media is attractive precisely because it does not require humans to physically interact, Khan said:
“30+ million Americans are unemployed. Dystopia is already here with a President who retweets deepfakes/cheapfakes on a quarterly basis (my rough estimate). Our Creator program is designed to facilitate the creation of synthetic characters and provide an income-earning opportunity for the myriad of creative use-cases that synthetic media will unlock.”
Work on Ethereum 2.0 is now almost entirely directed toward fixing bugs, with the team trying to synchronize all existing clients into one single version of the blockchain.
An after-action report of the Ethereum 2.0 implementers call, held on May 14, reveals that the majority of the work is devoted to fixing code bugs and improving ways of detecting them.
For the latter, Mehdi Zerouali of Sigma Prime reported major progress in designing “fuzzing” techniques, which feed bogus data to the program in order to find where it breaks.
Sigma Prime analysis already helped finding several low-level bugs in Ethereum 2.0 client software and the libraries they rely upon. Specifically, the analysts found an infinite loop bug in the Teku client and a memory segmentation fault in Nimbus.
Clients focusing on bugsSince clients are responsible for holding and validating the blockchain, it is important that they are fully synchronized with each other. For Ethereum 2.0, seven separate clients are under development.
Most of them are working on optimizations for the Schlesi testnet, the first multi-client Ethereum 2.0 testnet that simulates the mainnet environment.
The initial Schlesi network was launched with the Prysm and Lighthouse clients, developed by Prysmatic Labs and Sigma Prime, respectively. The former was already running a well-known single-client testnet, as Cointelegraph reported recently.
Following the launch of Schlesi, PegaSys’ Teku client also joined the testnet, while Nimbus and Lodestar are achieving only limited success so far.
Renewed launch hypothesized for JuneAfri Schoedon, the lead on the Schlesi testnet initiative, explained on the call that the network had a tough start. Bugs prevented the first launch, and once that was fixed, transaction finality “was terrible” due to the clients crashing often.
But Schoedon commended the client developers for their responsiveness in fixing these issues, which allowed the network to stabilize. “I think we’re all surprised how stable it is,” he added.
Given these successes, Schoedon proposed launching a new multi-client testnet that would be even closer to mainnet specification, targeting the yet unimplemented 0.12 spec, as opposed to the current 0.11.2.
“I would carefully target June 2020 as the launch date,” Schoedon added, though he noted that this depends strongly on the release of 0.12 clients.
He wished for the new testnet to start with three clients at genesis, while also enabling “dry runs” of the deposit contract that bridges Ethereum 1.0 and 2.0.
Open interest on Chicago Mercantile Exchange Bitcoin options has skyrocketed over the past few days, to hit $142 million as of May 15.
According to data from market analytics company, Skew, this represents a gain of over 1000% from just $12 million of open interest at the end of April.
Bitcoin halving sees massive interest in options tradingCME saw an initial spike in options volume on May 5 and May 6, with both days pushing towards $10 million. However this dropped off to a more usual $1 million on Friday May 8, the last trading day before the Bitcoin halving.
Options volume on the day of the halving, May 11, leapt back up to $17 million, and each of the three days since then has seen volume of between $30 million and $40 million.
This brought the open interest to $142 million at close of business yesterday, over 10 times the amount registered at the end of April.
Institutional investment is still on the riseAs Cointelegraph reported, institutional investment in Bitcoin (BTC) has continued to rise in the build up to and following Monday’s Bitcoin halving.
Notably, companies such as Grayscale and Fidelity Digital have reported increased interest, and hedge fund manager Paul Tudor Jones recently claimed that almost 2% of his equity is held in Bitcoin.
Open interest in CME’s Bitcoin futures also hit an all-time high last week.
The major cryptocurrency, Bitcoin (BTC), continues to be actively used for illicit activity. Anonymous hackers have taken the data of over 129 million Russian car owners to expose it on the darknet in exchange for cryptocurrency.
The leaked information includes the full names, addresses, passport numbers and other data belonging to millions of Russian car drivers, Russian news agency RBC reported May 15. The authenticity of data has reportedly been confirmed by an employee of a local car sharing company.
The leaked data is being sold for cryptocurrency, RBC said, citing an original report by local publication Vedomosti. As such, the full version of the database costs 0.3 BTC, which amounts to about $2,900 as of press time. The hackers also offered to buy some “exclusive” data for 1.5 BTC ($14,400), the report notes.
Cryptocurrencies are being increasingly used for illicit activity on darknet markets. According to Chainalysis — a New York-based blockchain analytics firm — the volume of darknet markets’ crypto flows doubled in 2019 for the first time in four years.
Cybercriminals often sell stolen data on the darknet for almost nothing or even give it away for free. In mid-April 2020, hackers were selling over 500,000 accounts of popular video conferencing platform Zoom for less than a penny each.
In March, cryptocurrency fund Trident Crypto Fund suffered a major security breach, resulting in the theft of 266,000 usernames and passwords.