In short, a bug was detected in Bitcoin Core that would enable a rogue miner or group of miners to perform duplicate transactions and burn block rewards, forcing nodes off the network in the process.
The transactions and inflation could have easily be spotted by the network, but it would have been incredibly hard to find a solution on how to deal with them after the fact.
Thankfully the bug, which was around since early 2017, hasn't been exploited.
A miner wanting to exploit the bug would have needed to create an invalid block and thus lose the block reward of 12.5 BTC.
You can read the full disclosure on the Bitcoin Core blog, which is very informative, as well as the post by the Bitcoin Cash developer who discovered the vulnerability.
There are quite a number of thoughts that stem from this.
One is the debate around the need for multiple clients.
The other is that the security of Bitcoin is not an assumed guarantee and that the chances of complete collapse in the future are >0%. We can fork, we can patch and we can come up with other creative solutions, but it seems like this is not a top-of-mind thought for many people subscribing to the digital gold thesis (like yours truly).
Sometimes, something happens that makes you rethink a lot of what you think you know and what you believe.
Yesterday was such a day. XRP temporarily overtook ETH as the second most valuable cryptocurrency.
No particularly convincing reasons could be found for the 50%+ jump in Ripple's price, with volumes spiking to levels not seen since the January madness.
In general, to someone who has been an Ethereum fan this makes no sense whatsoever. But the market is the market. Sure it could be manipulated, but it's undeniable a lot of people are fascinated by XRP given its touted real-world usage, and don't really care about the uselessness of the coin itself, the centralization and so on.
And, to add to that, the narratives around ETH ability to fundamentally capture value are still quite elusive.
All in, a great cue to continuously rethink theories on what holds value and why.
-- Bonus: the day before the spike, Preston Byrne published a timeline piece on XRP, providing evidence of it being created by Ripple Labs.
Delighted to finally feature a post by Patrick, one of the highest signal-to-noise non-celebrity tweeter (give him a follow!).
In his latest essay he dives at the intersection of governance, blockchains and AI, describing a maybe not so dystopian future where decentralized autonomous co-operatives become friendly AIs and start controlling physical and digital resources. And crucially, he touches on what it all means for us humans:
"What this actually means is that the Commons, at scale, will have no end. No off switch. The Commons will constantly build value for the participants. It will be inherently baked into the architecture. That is the stepping off point into the true DAO’s. However, we will have zero control."
Ears are still buzzing from Berlin Blockchain Week two weeks ago, but if you've missed out on the coolest projects that came out of it, here's an excellent round up of the winners (take a look at Game of Snarks to get a sense for the potential applications of ZK proofs, something our mind is not quite prepared to process yet!). Also, a honorable mention to this excellent work on Dapp UX for the masses.
And for a retrospective on all the past ETHGlobal event, themes and most exciting projects look no further than Linda's post on Building a Developer Community.
-- Bonus: 12 reasons why Lane Rettig is bullish on Ethereum.
Excellent data-rich deep dive into forks by Alex of Placeholder.
The data for now points against the dominant narrative of "frictionless forking sucking value away from large networks", with user and crucially developers tending to be very loyal to the parent chains and brand new communities emerging around the child chains. It will be interesting to revisit this over time.
Sometimes one just has to call it quits: despite still being solvent, the Cofound team have decided to voluntarily wind the business down and make good its token holders:
"The purpose of Cofound.it was to build a platform and protocol to enable an alternative VC ecosystem; to continue with this purpose for a market that does not exist is not responsible.
From the beginning Cofound.it was created to set better crowdfunding practices, we did so at the beginning and are hopefully doing so at the end.".
Cofound made the headlines in less suspicious times when in June 2017 it raised what back then classified as the largest public presale ever, closing $15M (57k ETH) and subsequently cancelling the public ICO for its "decentralized startup incubator". Oh, how different the times were! Barely 12 months later and it's game over. With still $14M in net assets though (pretty close to what they raised, good treasury management!), they clearly didn't run out of cash, perhaps only of steam. According to the CEO, the market they aimed to address completely dried up over this time period, with public ICOs (not so unexpectedly) disappearing under mounting global regulatory pressure. After a failed attempt to pivot, it was time to draw a line. The tone of his farewell letter feels genuinely bittersweet, grateful but filled with disappointment about an industry that has gone through an over-hype cycle:
"The state of technology today does not match the hopes raised by thousands of ICO projects. The blockchain space has been full of over-promises, and it’s largely the community that has had to take the blows so far."
Now someone (a guy by the name of Ervin Ursic, whose previous business was acquired with a portion of token supply) has taken over the management of the business with the aim of winding it down swiftly.
The most interesting bit about all this is that CFI token holders are effectively getting a shareholder-like treatment despite technically not deserving one by the law (tokens != legal rights over assets): for all the talk about projects trading at market caps lower than their treasury balances, Cofound's plan is to return their net assets to token holders after liquidation. Which is pretty honorable overall and a sign that the team behind it is acting professionally and in good faith. Whether a similar outcome could have been achieved via decentralized governance by the token holders remains to be seen.
Another rather surreal aspect about this wind down is that there are suspicions of insider trading, clearly not something a 2 year old start-up would normally have to worry about, highlighting one of the many dichotomies of this industry and adding that extra dose of drama.
For now we'll file this one under the 'unwinding ICOs' folder alongside Digipulse detokenization that we covered in #61, but buckle up as similar stories emerge over the next 6-12 months. And some won't look nearly as pretty as this one.
- On sale. Trezor One is now only EUR69 + VAT. Bargain! - Hacked. Another exchange gets hacked to the tune of $60M worth of crypto, 2/3 of which from customer wallets. Who is still leaving their assets on exchanges??
- USDT. Yet another university study supposedly demonstrates how Tether issuances do not impact subsequent Bitcoin returns, while they do impact traded volumes.🤷
- EOS-land. The Multicoin team have spun out a new project aiming to become an EOS block producer focused on voter education and engagement. This once more highlights the evolving role of crypto investors.
- Chaum is back! With a horribly named, but super ambitious project aimed at upping Bitcoin.
- IPFS. Cloudfare have announced an IPFS gateway. You'll be able to access content stored on IPFS from your browser, or even host a website entirely on IPFS, without having to operate a node. Fred Wilson is already raving about it (both are USV investments).
- Contracts. Legalzoom is partnering up with Clause to offer smart legal contracts. Great to see traditional companies embracing blockchain tech.
- Mining. Both Bitfury and Bitmain released new ASIC chips this week. The mining wars continue.
Pretty big deal here, as dYdX is unveiling the first product to trustlessly trade on margin.
Expo will initially support Short Ethereum ‘sETH’, an ERC-20 token pegged to a short ETH position, and will add support for additional short and leveraged assets in the future.
The product looks really slick and modern.
The mechanics of the protocol (obtaining a loan, spot trading) are abstracted away from the trader, significantly simplifying the margin trading experience.
Expo automatically: - Sources lending liquidity in the underlying asset from various dYdX lending partners - Sources spot liquidity from decentralized exchanges - Locks collateral into the position - Mints new short or leveraged tokens to give the user margin exposure
The future of programmable finance is taking shape right in front of our eyes.
A "zero knowledge succinct non-interactive argument (SNARG)" that has a transparent setup, is plausibly post-quantum secure, and uses lightweight cryptography coming out of Berkeley.
A new cool ERC standard for tokenized securities and security tokens in general, by the TokenSoft team.
"token issuers can enforce transfer restrictions within their smart-contract, enabling them to control when those tokens can be transferred, how many tokens can be transferred, and under what conditions."
New York based VC firm Future Perfect Ventures, led by Jalak Jobanputra, is raising a $50M 2nd fund, this one dedicated exclusively to blockchain startups.
It counts celebrity LPs such as Marc Andreessen, Chris Dixon and Chris Sacca and half of target is already in the bag.
It looks like the UK government may be under increasing pressure to regulate crypto assets, following a report published by the Treasury Committee that makes a strong case for regulation (and at the very minimum for addressing consumer protection and AML).
Hopefully the government also reads all the way through to:
"If the UK develops a proportionate regulatory environment for crypto-assets, the UK could be well placed to become a global centre for this activity".
The NY regulatory scene continues to shape up as hostile to crypto as ever, with a new report summarizing the findings from an investigation started in April and now referring Binance, Kraken and Gate.io to the New York Department of Financial Services for possible violation of digital-currency regulations. For a detailed dissection of it we humbly defer to the always excellent and way more qualified Katherine Wu from Messari.
Other relevant links: - The tweetstorm by the NYAG herself summarizing the report. - Kraken's sarcastic response. - Coinbase correcting the record on claims that 20% of its volumes are from prop trading, plus an additional take by Ben Hunt that sits half-way.
Quite a different tone is palpable in Congress, where 3 bills will be presented in the coming weeks in support of a light-touch approach to regulation, including a safe harbor for non-custodial use of cryptocurrencies which would be a boon to the industry.
Coincenter also weighed in with some powerful lines:
"The Internet thrived as a global force for good and a largely American-led innovation, but that history was not inevitable. America became a welcoming home for technologists because of commonsense safe harbors passed by Congress in the 90s to protect web infrastructure builders (the CDA and the DMCA). Representative Emmer’s bills would be an important part of mainiting America’s position as the global home of innovation. The bills will ensure that developers and entrepreneurs continue to lead the way as open blockchain networks fulfill the still-outstanding promises (digital money, security, identity) of the internet revolution."
The original headline was a little misleading, and in fact Coindesk ended up changing the title of the post from its first version:
"No Tokens We've Seen Are Securities"
to
"No Securities Crypto Token Approved To Date".
In short, the MAS will regulate security tokens (and so far none have been approved), but it does not intend to regulate utility tokens (without mentioning which of the existing ones fall under that category).