Category:Exchanges - Bitcoin Wiki

d down, k up, everybody's a game theorist, titcoin, build wiki on Cardano, (e-)voting, competitive marketing analysis, Goguen product update, Alexa likes Charles, David hates all, Adam in and bros in arms with the scientific counterparts of the major cryptocurrency groups, the latest AMA for all!

Decreasing d parameter
Just signed the latest change management document, I was the last in the chain so I signed it today for changing the d parameter from 0.52 to 0.5. That means we are just about to cross the threshold here in a little bit for d to fall below 0.5 which means more than half of all the blocks will be made by the community and not the OBFT nodes. That's a major milestone and at this current rate of velocity it looks like d will decrement to zero around March so lots to do, lots to talk about. Product update, two days from now, we'll go ahead and talk about that but it crossed my desk today and I was really happy and excited about that and it seemed like yesterday that d was equal to one and people were complaining that we delayed it by an epoch and now we're almost at 50 percent. For those of you who want parameter-level changes, k-level changes, they are coming and there's an enormous internal conversation about it and we've written up a powerpoint presentation and a philosophy document about why things were designed the way that they're designed.
Increasing k parameter and upcoming security video and everybody's a game theorist
My chief scientist has put an enormous amount of time into this. Aggelos is very passionate about this particular topic and what I'm going to do is similar to the security video that I did where I did an hour and a half discussion about a best practice for security. I'm going to actually do a screencasted video where I talk about this philosophy document and I'm going to read the entire document with annotations with you guys and kind of talk through it. It might end up being quite a long video. It could be several hours long but I think it's really important to talk around the design philosophy of this. It's kind of funny, everybody, when they see a cryptographic paper or math paper, they tend to just say okay you guys figure that out. No one's an expert in cryptography or math and you don't really get strong opinions about it but game theory despite the fact that the topics as complex and in some cases more complex you tend to get a lot of opinions and everybody's a game theorist. So, there was enormous amount of thought that went into the design of the system, the parameters of system, everything from the reward functions to other things and it's very important that we explain that thought process in as detailed of a way as possible. At least the philosophy behind it then I feel that the community is in a really good position to start working on the change management. It is my position that I'd love to see k largely increased. I do think that the software needs some improvements to get there especially partial delegation delegation portfolios and some enhancements into the operation of staking especially.
E-voting
I'd love to see the existence of hybrid wallets where you have a cold part a hot part and we've had a lot of conversations about that and we will present some of the progress in that matter at the product updates. If not this October certainly in November. A lot of commercialization going along, a lot of things going on and flowing around and you know, commercial teams working hard. As I mentioned we have a lot of deals in the pipeline. The Wyoming event was half political, half sales. We were really looking into e-voting and we had very productive conversations along those lines. It is my goal that Cardano e-voting software is used in political primaries and my hope is for eventually to be used in municipal and state and eventually federal elections and then in national elections for countries like Ethiopia, Mongolia and other places. Now there is a long road, long, long road to get there and many little victories that have to begin but this event. Wyoming was kind of the opener into that conversation there were seven independent parties at the independent national convention and we had a chance to talk to the leadership of many of them. We will also engage in conversation with the libertarian party leadership as well and at the very least we could talk about e-voting and also blockchain-based voting for primaries that would be great start and we'll also look into the state of Wyoming for that as well. We'll you know, tell you guys about that in time. We've already gotten a lot of inquiries about e-voting software. We tend to get them along with the (Atala) Prism inquiries. It's actually quite easy to start conversations but there are a lot of security properties that are very important like end-to-end verifiability hybrid ballots where you have both a digital and a paper ballot delegation mechanics as well as privacy mechanics that are interesting on a case-by-case basis.
Goguen, voting, future fund3, competitive marketing analysis of Ouroboros vs. EOS, Tezos, Algorand, ETH2 and Polkadot, new creative director
We'll keep chipping away at that, a lot of Goguen stuff to talk about but I'm going to reserve all of that for two days from now for the product update. We're right in the middle, Goguen metadata was the very first part of it. We already have some commercialization platform as a result of metadata, more to come and then obviously lots of smart contract stuff to come. This update and the November update are going to be very Goguen focused and also a lot of alternatives as well. We're still on schedule for an HFC event in I think November or December. I can't remember but that's going to be carrying a lot of things related multisig token locking. There's some ledger rule changes so it has to be an HFC event and that opens up a lot of the windows for Goguen foundations as well as voting on chain so fund3 will benefit very heavily from that. We're right in the guts of Daedalus right now building the voting center, the identity center, QR-code work. All this stuff, it's a lot of stuff, you know, the cell phone app was released last week. Kind of an early beta, it'll go through a lot of rapid iterations every few weeks. We'll update it, google play is a great foundation to launch things on because it's so easy to push updates to people automatically so you can rapidly iterate and be very agile in that framework and you know we've already had 3500 people involved heavily in the innovation management platform ideascale and we've got numerous bids from everything. From John Buck and the sociocracy movement to others. A lot of people want to help us improve that and we're going to see steady and systematic growth there. We're still chipping away at product marketing. Liza (Horowitz) is doing a good job, meet with her two three-times a week and right now it's Ouroboros, Ouroboros, Ouroboros... We're doing competitive analysis of Ouroboros versus EOS, Tezos, Algorand, ETH2 and Polkadot. We think that's a good set. We think we have a really good way of explaining it. David (David Likes Crypto now at IOHK) has already made some great content. We're going to release that soon alongside some other content and we'll keep chipping away at that.
We also just hired a creative director for IO Global. His name's Adam, incredibly experienced creative director, he's worked for Mercedes-Benz and dozens of other companies. He does very good work and he's been doing this for well over 20 years and so the very first set of things he's going to do is work with commercial and marketing on product marketing. In addition to building great content where hope is make that content as pretty as possible and we have Rod heavily involved in that as well to talk about distribution channels and see if we can amplify the distribution message and really get a lot of stuff done. Last thing to mention, oh yeah, iOS for catalyst. We're working on that, we submitted it to the apple store, the iOS store, but it takes a little longer to get approval for that than it does with google play but that's been submitted and it's whenever apple approves it or not. Takes a little longer for cryptocurrency stuff.
Wiki shizzle and battle for crypto, make crypto articles on wiki great again, Alexa knows Charles, Everpedia meets Charles podcast, holy-grail land of Cardano, wiki on Cardano, titcoin
Wikipedia... kind of rattled the cage a little bit. Through an intermediary we got contact with Jimmy Wales. Larry Sanger, the other co-founder also reached out to me and the everpedia guys reached out to me. Here's where we stand, we have an article, it has solidified, it's currently labeled as unreliable and you should not believe the things that are said in it which is David Gerard's work if you look at the edits. We will work with the community and try to get that article to a fair and balanced representation of Cardano and especially after the product marketing comes through. We clearly explain the product I think the Cardano article can be massively strengthened. I've told Rod to work with some specialized people to try to get that done but we are going to work very hard at a systematic approval campaign for all of the scientific articles related to blockchain technology in the cryptocurrency space. They're just terrible, if you go to the proof of work article, the proof of stake or all these things, they're just terrible. They're not well written, they're out of date and they don't reflect an adequate sampling of the science. I did talk to my chief scientist Aggelos and what we're gonna do is reach out to the scientific counterparts that most of the major cryptocurrency groups that are doing research and see if they want to work with us at an industry-wide effort to systematically improve the scientific articles in our industry so that there are a fair and balanced representation of what the current state of the art are, the criticisms, the trade-offs as well as the reference space and of course obviously we'll do quite well in that respect because we've done the science. We're the inheritor of it but it's a shame because when people search proof of stake on google usually wikipedia results are highly biased. We care about wikipedia because google cares about wikipedia, amazon cares about wikipedia.
If you ask Alexa who is Charles Hoskinson, the reason why Alexa knows is because it's reading directly from the wikipedia page. If I didn't have a wikipedia page Alexa would know that so if somebody says Alexa what is Cardano it's going to read directly from the wikipedia page and you know and we can either just pretend that reality doesn't exist or we can accept it and we as a community working with partners in the broader cryptocurrency community can universally improve the quality of cryptocurrency pages. There's been a pattern of commercial censorship on wikipedia for cryptocurrencies in general since bitcoin itself. In fact I think the bitcoin article is actually taken down once back in, might have been, 2010 or 2009 but basically wikipedia has not been a friend of cryptocurrencies. That's why everpedia exists and actually their founders reached out to me and I talked to them over twitter through PMs and we agreed to actually do a podcast. I'm going to do a streamyard, stream with these guys and they'll come on talk all about everpedia and what they do and how they are and we'll kind of go through the challenges that they've encountered. How their platform works and so forth and obviously if they want to ever leave that terrible ecosystem EOS and come to the holy-grail land of Cardano we'd be there to help them out. At least they can tell the world how amazing their product is and also the challenges they're having to overcome. We've also been in great contact with Larry Sanger.
He's going to do an internal seminar at some point with with us and talk about some protocols he's been developing since he left wikipedia specifically to decentralize knowledge management and have a truly decentralized encyclopedia. I'm really looking forward to that and I hope that presentation gives us some inspiration as an ecosystem of things we can do. That's a great piece of infrastructure regardless and after we learn a lot more about it and we talk to a lot of people in ecosystem. If we can't get people to move on over, it would be really good to see through ideascale in the innovation management platform for people to utilize the dc fund to build their own variant of wikipedia on Cardano. In the coming months there will certainly be funding available. If you guys are so passionate about this particular problem that you want to go solve it then I'd be happy to play Elon Musk with the hyperloop and write a white paper on a protocol design and really give a good first start and then you guys can go and try to commercialize that technology as Cardano native assets and Plutus smart contracts in addition to other pieces of technology that have to be brought in to make it practical.
Right now we're just, let's talk to everybody phase, and we'll talk to the everpedia guys, we're going to talk to Larry and we're going to see whoever else is in this game and of course we have to accept the incumbency as it is. So, we're working with obviously the wikipedia side to improve the quality of not only our article but all of the articles and the scientific side of things so that there's a fair and accurate representation of information. One of the reasons why I'm so concerned about this is that I am very worried that Cardano projects will get commercially censored like we were commercially censored. So, yes we do have a page but it took five years to get there and we're a multi-billion dollar project with hundreds of thousands of people. If you guys are doing cutting-edge novel interesting stuff I don't want your experience to be the same as ours where you have to wait five years for your project to get a page even after government's adopted. That's absurd, no one should be censored ever. This is very well a fight for the entire ecosystem, the entire community, not just Cardano but all cryptocurrencies: bitcoin, ethereum and Cardano have all faced commercial censorship and article deletions during their tenure so I don't want you guys to go through that. I'm hoping we can prove that situation but you know you don't put all your eggs in one basket and frankly the time has come for wikipedia to be fully decentralized and liberated from a centralized organization and massively variable quality in the editor base. If legends of valor has a page but Cardano didn't have one until recently titcoin, a pornography coin from 2015, that's deprecated, no one uses it, has a page but Cardano couldn't get one there's something seriously wrong with the quality control mechanism and we need to improve that so it'll get done.
submitted by stake_pool to cardano [link] [comments]

Bob The Magic Custodian



Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses.
Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes.

First, some background. Here is a summary of how custodians make us more secure:

Previously, we might give Alice our crypto assets to hold. There were risks:

But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
See - all problems are solved! All we have to worry about now is:
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are!

"On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid".
"Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since."

"As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!"
"Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?"

"Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party."
"Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!"

"What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven."
"Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!"

"We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies.
And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often".

How many holes have to exist for your funds to get stolen?
Just one.

Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so?
If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security.

The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle.

And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet?

Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds.
So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever.

Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see.
It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation.
A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7.

History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance.
Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.)
Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive.

Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today.
Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well.
Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do.

Facts/background/sources (skip if you like):



Thoughts?
submitted by azoundria2 to QuadrigaInitiative [link] [comments]

Polkadot — An Early In-Depth Analysis — Part One — Overview and Benefits

Polkadot — An Early In-Depth Analysis — Part One — Overview and Benefits
Having recently researched Polkadot, as with other projects, I wanted to document what I had learnt, so that others may potential find it useful. Hopefully providing a balanced view, it will consist of three articles outlined below.
Part One — Polkadot Overview and Benefits (This article)
Part Two — In-Depth look at the Consensus
Part Three — Limitations and Issues
I will provide links throughout, providing reference to sections, as well as include a list of sources at the bottom of the article for further reading.
https://preview.redd.it/pr8hmkhhe6m51.png?width=700&format=png&auto=webp&s=58331d0411e684b4c511d59aeabeb789205d8a44

Overview

Frustrated with the slow development of Ethereum 2.0, Dr. Gavin Wood, co-founder of Ethereum and inventor of Solidity, left to begin work on Polkadot, a next generation scalable blockchain protocol that connects multiple specialised blockchains into one unified network. It achieves scalability through a sharding infrastructure with multiple blockchains running in parallel, called parachains, that connect to a central chain called the Relay Chain.
Whilst it shares some similarities with Ethereum 2.0, one key differentiator is that it uses heterogeneous sharding, where each parachains can be customised through the Substrate development framework, enabling them to be optimised for a specific use case and running in parallel rather than same across all shards. This is important as when it comes to blockchain architecture, one size does not fit all and all blockchains make trade-offs to support different features and use cases.
All parachains connect to the relay chain, which validates the state transition of connected parachains, providing shared state across the entire ecosystem. If the Relay Chain must revert for any reason, then all of the parachains would also revert. This is to ensure that the validity of the entire system can persist, and no individual part is corruptible. The shared state makes it so that the trust assumptions when using parachains are only those of the Relay Chain validator set, and no other. Since the validator set on the Relay Chain is expected to be secure with a large amount of stake put up to back it, it is desirable for parachains to benefit from this security.
This enables seamless interoperability between all parachains and parathreads using the Cross-chain Message Passing (XCMP) protocol, allowing arbitrary data — not just tokens — to be transferred across blockchains. Interoperability is also possible to other ecosystems through bridges, which are specifically designed parachains or parathreads that are custom made to interact with another ecosystem such as Ethereum, Bitcoin and Cosmos for example, enabling interoperability. Because these other ecosystems don’t use the same shared state of Polkadot, finality is incredibly important, because whilst the relay chain can roll back all the parachains, it can’t roll back the Ethereum or Bitcoin blockchains for example. This is discussed further in part three.
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The relay chain is responsible for the network’s shared security, consensus and cross-chain interoperability. It is secured by Validators and Nominators staking the native DOT tokens. Ultimately scalability for the ecosystem is determined by how scalable the relay chain can be. The number of parachains is determined by the number of validators on the relay chain. The hope is to reach 1000 validators, which would enable around 100 parachains. With each parachain being capable of around 1,000 transactions per second.
Nominators stake their DOT tokens with validators they trust, with the validators likely charging a small commission to cover running costs. If a validator is found to have performed misconduct a percentage of the their stake but also the nominators stake will be slashed depending upon the severity. For Level 4 security threats such as collusion and including an invalid block then 100% of the stake will be slashed.What’s really important to understand is that both the validators own stake and the nominated stake will be slashed, so you could lose all your DOT that you have staked against a validator if they perform maliciously. Therefore, it’s very important not to just try and maximise rewards and being oblivious to the risk, not only can you lose all your DOT, but you are making the entire system less secure (addressed in part three). There have already been several minor slashing incidents so far, so something to really consider.
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Auction for Parachain Slots

Due to the limited number of parachain slots available, there needs to be a method to decide who gets a parachain slot. This is achieved through a candle-auction where participants bid with DOT to secure a lease on a parchain slot to secure a 6 — 24 month period, with the highest bidders winning. DOT isn’t spent, but rather locked for the duration of the lease and unable to participate in staking and earn rewards. In the event they are unsuccessful in securing a further slot, then the lease expires and the DOT will be returned.
Of the 100 parachain slots that they hope to be able to accommodate, between 10 and 30 will be reserved for system parachains, with the remaining available for either auction slots or used for parathreads. Whilst the DOT is returned, due to the limited number of slots available this could result in significant amounts of DOT needing to be acquired to secure a slot. How the auction mechanics effect the price of DOT also remains to be seen, with potentially a rise from the start of the auction, followed by a fall before the lease ends and the DOT are returned. The plan is to continuously have a small amount of parachain auctions going throughout the year, to minimise any unwanted effects. How comfortable developers will be with locking significant amounts of funds in a highly volatile asset for an extended amount of time, also remains to be seen. They could also be in a position where they can no longer afford to keep their lease and have to downgrade to a parathread (providing the application will still function with the reduced performance or migrate to another platform). See this article for more details on the auction mechanism
https://preview.redd.it/wp8rvxlme6m51.png?width=387&format=png&auto=webp&s=496320d627405362142210e1a4c17ebe43e1f8a1

Parathreads

For applications that don’t require the guaranteed performance of a parachain or don’t want to pay the large fees to secure a parachain slot, then parathreads can be used instead. Parathreads have a fixed fee for registration that would realistically be much lower than the cost of acquiring a parachain slot and compete with other parathreads in a per-block auction to have their transactions included in the next relay chain block. A portion of the parachain slots on the Relay Chain will be designated as part of the parathread pool.
In the event that a parachain loses its slot then it can transition to a parathread (assuming the application can still function with the reduced and varied performance of sharing the slot between many). This also enables small projects to start out with a parathread and then upgrade to a parachain slot when required.

Token

DOT is the native token of the Polkadot network and serves three key functions. (i) It is staked to provide security for the relay chain, (ii) to be bonded to connect a chain to Polkadot as a parachain and (iii) to be used for governance of the network. There is an initial total supply of 1 billion DOT with yearly inflation estimated to be around 10% providing the optimal 50% staking rate is achieved, resulting in rewards of 20% to those that stake (net 10% when take into account inflation). Those that don’t stake lose 10% through dilution. Should the amount staked exceed the optimal 50% then reward rates reduce as well as inflation to make staking less attractive. Likewise if its below 50% then rewards and inflation rate will be higher to encourage staking. Staking isn’t risk free though as mentioned before.

Governance

Polkadot employs an on-chain governance model where in order to make any changes to the network, DOT holders vote on a proposal to upgrade the network with the help of the Council. The council is an entity comprising a 23 seats each represented by an on-chain account. Its goals are to represent passive stakeholders, submit sensible and important proposals, and cancel dangerous or malicious proposals. All DOT holders are free to register their candidacy for the Council, and free to vote for any number of candidates, with a voting power proportional to their stake.
Any stakeholder can submit a public proposal by depositing a fixed minimum amount of DOTs, which stays locked for a certain period. If someone agrees with the proposal, they may deposit the same amount of tokens to endorse it. Public proposals are stored in a priority queue, and at regular intervals the proposal with the most endorsements gets tabled for a referendum. The locked tokens are released once the proposal is tabled. Council proposals are submitted by the Council, and are stored in a separate priority queue where the priorities are set at the Council’s discretion.
Every thirty days, a new proposal will be tabled, and a referendum will come up for a vote. The proposal to be tabled is the top proposal from either the public-proposal queue or the Council-proposal queue, alternating between the two queues.
The Technical Committee is composed according to a single vote for each team that has successfully and independently implemented or formally specified the protocol in Polkadot, or in its canary network Kusama. The Technical Committee is the last line of defence for the system. Its sole purpose is detecting present or imminent issues in the system such as bugs in the code or security vulnerabilities, and proposing and fast-tracking emergency referenda.

Ecosystem

Whilst parachains aren’t currently implemented at this stage, there is a rapidly growing ecosystem looking to build on Polkadot with substrate. Polkadot’s “cousin”, the canary network Kusama used for experimentation, was launched last year by the same team and contributes to the early growth of the overall ecosystem. See here for a list of the current projects looking to build on Polkadot and filter by Substrate based.
https://preview.redd.it/rt8i0hqpe6m51.png?width=700&format=png&auto=webp&s=f6bcf26fa84463765f720c3074ee10157c2735f6
Now that we have covered the basics, in part two I will explain how the consensus mechanism in Polkadot works and covering more of the technical aspects.
submitted by xSeq22x to CryptoCurrency [link] [comments]

The Bitcoin Conspiracy (an enthusiast's perspective)

I keep coming across comments, especially in this sub, from people claiming that Bitcoin was created by the CIA or some government agency as part of the plan for the NWO and cashless society. I want to share my experience and try to clear up the confusion surrounding this topic.
I first got involved with Bitcoin in late 2016 when I heard about it and got some while at a libertarian festival. Back then it was still very popular among the agorist community and was being promoted as THE silver bullet that was going to disrupt the global fiat banking system.
Putting preconceptions aside, a new user might ask, "what's so special about Bitcoin? We already have digital currencies."
Well, you only need to read the first page of the whitepaper to discover what the original intent of Bitcoin was. It most definitely was not intended to be a tool for central banks to subjugate the world to a centralized global currency. Quite the opposite in fact. Read the full whitepaper here.
When I first learned about Bitcoin, it forced me to learn about economics, then the Federal Reserve, then one by one the dominoes fell and down the conspiracy rabbit hole I went. In 2017 (actually it started a few years earlier, but I wasn't paying attention back then) there was a very heated debate in the Bitcoin community regarding scaling.
I'll try to break it down simply:
In the very early days, when Bitcoin was just a project being worked on by a few very technical people, no one knew about it. All it took was a handful of people running the software on their laptops to mine new coins. Since there was not much computing power on the network, it meant there could easily be a spam attack where a malicious user could join the network and generate many gigabytes of spam transactions that would overload and crash the network. To prevent this, Satoshi implemented a limit of 1MB per block, to protect the network until there was enough computing power to be able to handle larger blocks.
This measure worked, and Bitcoin grew exponentially.
Satoshi vanished in 2010, after WikiLeaks attracted unwanted attention to the project by accepting Bitcoin donations. He left clear instructions for his successors that the 1MB block size limit was meant to be increased once the network could support high levels of user traffic. At the time, there still was not much use, so it wasn't until around 2014 that blocks started hitting the 1MB cap and all of a sudden users had to compete (by paying higher transaction fees) in order to get their transaction mined into the next block.
Up until then, sending a Bitcoin transaction would cost $0.0001 (hundredth of a penny) or less, no matter if you were sending $0.10 or $1,000,000. Now, since block space was limited, fees started to rise, as miners would only include the transactions with the highest fees. Over the next couple years, transaction fees went up dramatically, at times reaching as high as $100 to send a single transaction.
The solution was obvious - raise the block size limit.
But this led to a heated debate, and this is where the conspiracy became obvious to those who were paying attention. Since Bitcoin was decentralized and open source, anyone could contribute, but certain people controlled the commit access to the github repo, and it became apparent that those individuals had been compromised, as any and all mention of increasing the block size was met with fierce resistance.
There was a misinformation campaign to discredit anyone arguing for larger blocks. The argument was that larger blocks would mean users could not run the software on their low-power personal devices and laptops; that by increasing the block size it would lead to mining centralization. Well, if you read the whitepaper linked above, you'll see that Satoshi predicted this. He knew mining would eventually be left to "specialized server farms" while normal users could use what he termed Simplified Payment Verification (SPV) wallets.
But this point was consistently shot down in the community, and especially on /bitcoin. There was a MASSIVE censorship campaign in the bitcoin subreddit that continues to this day where anyone who questions the official narrative or even asks a basic technical question is immediately banned. /bitcoin today is nothing but a cesspit of price memes and misinformation. Go to /btc for the uncensored discussions (but beware of trolls).
In 2017 the debate was finally settled, sort of. Now known as "Bitcoin Core" (the name of the official Bitcoin software), the developers implemented a change known as SegWit (Segregated Witness) which fundamentally altered the way the software validates transactions. It was implemented as a "soft fork" rather than a "hard fork".
I'll explain the difference.
In a fork, the network comes to a consensus on new rules that all participants must follow. In a hard fork, the changes are non-backwards compatible, so all users must update their software or else be left behind on a dead network. Hard forks happen all the time in software development, but in the case of SegWit, the developers refused to make any non-backwards compatible changes for fear it might alienate users. Again, another unfounded fear. "We can't ever upgrade the technical capabilities of the network (such as the block size) because some people might not go along with it."
All kinds of mental gymnastics were performed to justify their refusal to increase the block size, and there was nothing anyone could do about it except fork as an independent project. The 1MB block limit is now essentially set in stone for BTC. So in August 2017, Bitcoin Cash (BCH) hard forked by increasing the block size limit to 8MB, along with some other changes.
Fast forward to December 2017 and Bitcoin was at its all time high of nearly $20,000. But fees were also astronomical and because of the 1MB block size limit, a huge backlog formed, and some people had to wait days or even weeks for their transaction to confirm. If anyone was trying to cash out into fiat and didn't want to pay a $100 transaction fee, by the time their transaction got confirmed the price had already crashed.
This event was largely responsible for the bear market of 2018. Everything that happened was predicted by those who knew what was going on.
A company called Blockstream had essentially wrestled control of Bitcoin from the original developers and shut them out or gained control over them, and started working on turning Bitcoin into a settlement layer for their product called Lightning Network.
LN is a complicated topic that I don't want to get into, but essentially it's a framework that recreates all the same problems inherent in the banking system that Bitcoin was meant to solve. Blockstream's goal is to profit from creating, and then "solving" those problems by charging users fees for all kinds of custodial services.
In my personal opinion, it's obvious that the original Bitcoin project has been hijacked and repurposed into a tool for the central banks. The propaganda is being pushed in some conspiracy circles that Bitcoin was created BY the central banks in order to discourage people from researching the true history. What is now commonly called "Bitcoin" is not the original project, but a Trojan horse.
The project that most closely follows the original design is Bitcoin Cash, and that is where almost all organic development is happening, and personally I feel that it's picking up steam lately as more people wake up to what's happening in the economy right now. Unfortunately most people are still unaware of how fundamentally broken BTC is now and so as new users run toward cryptocurrency to escape the dollar collapse, most will fall straight into the trap and be stuck with BTC that they won't be able to use without paying exorbitant fees and/or submitting to the very same tracking system they are trying to get away from.
This is a very deep rabbit hole but I think I've written enough for now. I hope this info helps people make sense of what's going on with Bitcoin. I know it's confusing enough even without so much deception taking place so hopefully this helps.
Read the Bitcoin FAQ over on /btc.
submitted by PM_ME_YOUR_ALTCOINS to conspiracy [link] [comments]

How To End The Cryptocurrency Exchange "Wild West" Without Crippling Innovation


In case you haven't noticed the consultation paper, staff notice, and report on Quadriga, regulators are now clamping down on Canadian cryptocurrency exchanges. The OSC and other regulatory bodies are still interested in industry feedback. They have not put forward any official regulation yet. Below are some ideas/insights and a proposed framework.



Many of you have limited time to read the full proposal, so here are the highlights:

Offline Multi-Signature

Effective standards to prevent both internal and external theft. Exchange operators are trained and certified, and have a legal responsibility to users.

Regular Transparent Audits

Provides visibility to Canadians that their funds are fully backed on the exchange, while protecting privacy and sensitive platform information.

Insurance Requirements

Establishment of basic insurance standards/strategy, to expand over time. Removing risk to exchange users of any hot wallet theft.


Background and Justifications


Cold Storage Custody/Management
After reviewing close to 100 cases, all thefts tend to break down into more or less the same set of problems:
• Funds stored online or in a smart contract,
• Access controlled by one person or one system,
• 51% attacks (rare),
• Funds sent to the wrong address (also rare), or
• Some combination of the above.
For the first two cases, practical solutions exist and are widely implemented on exchanges already. Offline multi-signature solutions are already industry standard. No cases studied found an external theft or exit scam involving an offline multi-signature wallet implementation. Security can be further improved through minimum numbers of signatories, background checks, providing autonomy and legal protections to each signatory, establishing best practices, and a training/certification program.
The last two transaction risks occur more rarely, and have never resulted in a loss affecting the actual users of the exchange. In all cases to date where operators made the mistake, they've been fully covered by the exchange platforms.
• 51% attacks generally only occur on blockchains with less security. The most prominent cases have been Bitcoin Gold and Ethereum Classic. The simple solution is to enforce deposit limits and block delays such that a 51% attack is not cost-effective.
• The risk of transactions to incorrect addresses can be eliminated by a simple test transaction policy on large transactions. By sending a small amount of funds prior to any large withdrawals/transfers as a standard practice, the accuracy of the wallet address can be validated.
The proposal covers all loss cases and goes beyond, while avoiding significant additional costs, risks, and limitations which may be associated with other frameworks like SOC II.

On The Subject of Third Party Custodians
Many Canadian platforms are currently experimenting with third party custody. From the standpoint of the exchange operator, they can liberate themselves from some responsibility of custody, passing that off to someone else. For regulators, it puts crypto in similar categorization to oil, gold, and other commodities, with some common standards. Platform users would likely feel greater confidence if the custodian was a brand they recognized. If the custodian was knowledgeable and had a decent team that employed multi-sig, they could keep assets safe from internal theft. With the right protections in place, this could be a great solution for many exchanges, particularly those that lack the relevant experience or human resources for their own custody systems.
However, this system is vulnerable to anyone able to impersonate the exchange operators. You may have a situation where different employees who don't know each other that well are interacting between different companies (both the custodian and all their customers which presumably isn't just one exchange). A case study of what can go wrong in this type of environment might be Bitpay, where the CEO was tricked out of 5000 bitcoins over 3 separate payments by a series of emails sent legitimately from a breached computer of another company CEO. It's also still vulnerable to the platform being compromised, as in the really large $70M Bitfinex hack, where the third party Bitgo held one key in a multi-sig wallet. The hacker simply authorized the withdrawal using the same credentials as Bitfinex (requesting Bitgo to sign multiple withdrawal transactions). This succeeded even with the use of multi-sig and two heavily security-focused companies, due to the lack of human oversight (basically, hot wallet). Of course, you can learn from these cases and improve the security, but so can hackers improve their deception and at the end of the day, both of these would have been stopped by the much simpler solution of a qualified team who knew each other and employed multi-sig with properly protected keys. It's pretty hard to beat a human being who knows the business and the typical customer behaviour (or even knows their customers personally) at spotting fraud, and the proposed multi-sig means any hacker has to get through the scrutiny of 3 (or more) separate people, all of whom would have proper training including historical case studies.
There are strong arguments both for and against using use of third party custodians. The proposal sets mandatory minimum custody standards would apply regardless if the cold wallet signatories are exchange operators, independent custodians, or a mix of both.

On The Subject Of Insurance
ShakePay has taken the first steps into this new realm (congratulations). There is no question that crypto users could be better protected by the right insurance policies, and it certainly feels better to transact with insured platforms. The steps required to obtain insurance generally place attention in valuable security areas, and in this case included a review from CipherTrace. One of the key solutions in traditional finance comes from insurance from entities such as the CDIC.
However, historically, there wasn't found any actual insurance payout to any cryptocurrency exchange, and there are notable cases where insurance has not paid. With Bitpay, for example, the insurance agent refused because the issue happened to the third party CEO's computer instead of anything to do with Bitpay itself. With the Youbit exchange in South Korea, their insurance claim was denied, and the exchange ultimately ended up instead going bankrupt with all user's funds lost. To quote Matt Johnson in the original Lloyd's article: “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
ShakePay's insurance was only reported to cover their cold storage, and “physical theft of the media where the private keys are held”. Physical theft has never, in the history of cryptocurrency exchange cases reviewed, been reported as the cause of loss. From the limited information of the article, ShakePay made it clear their funds are in the hands of a single US custodian, and at least part of their security strategy is to "decline[] to confirm the custodian’s name on the record". While this prevents scrutiny of the custodian, it's pretty silly to speculate that a reasonably competent hacking group couldn't determine who the custodian is. A far more common infiltration strategy historically would be social engineering, which has succeeded repeatedly. A hacker could trick their way into ShakePay's systems and request a fraudulent withdrawal, impersonate ShakePay and request the custodian to move funds, or socially engineer their way into the custodian to initiate the withdrawal of multiple accounts (a payout much larger than ShakePay) exploiting the standard procedures (for example, fraudulently initiating or override the wallet addresses of a real transfer). In each case, nothing was physically stolen and the loss is therefore not covered by insurance.
In order for any insurance to be effective, clear policies have to be established about what needs to be covered. Anything short of that gives Canadians false confidence that they are protected when they aren't in any meaningful way. At this time, the third party insurance market does not appear to provide adequate options or coverage, and effort is necessary to standardize custody standards, which is a likely first step in ultimately setting up an insurance framework.
A better solution compared to third party insurance providers might be for Canadian exchange operators to create their own collective insurance fund, or a specific federal organization similar to the CDIC. Such an organization would have a greater interest or obligation in paying out actual cases, and that would be it's purpose rather than maximizing it's own profit. This would be similar to the SAFU which Binance has launched, except it would cover multiple exchanges. There is little question whether the SAFU would pay out given a breach of Binance, and a similar argument could be made for a insurance fund managed by a collective of exchange operators or a government organization. While a third party insurance provider has the strong market incentive to provide the absolute minimum coverage and no market incentive to payout, an entity managed by exchange operators would have incentive to protect the reputation of exchange operators/the industry, and the government should have the interest of protecting Canadians.

On The Subject of Fractional Reserve
There is a long history of fractional reserve failures, from the first banks in ancient times, through the great depression (where hundreds of fractional reserve banks failed), right through to the 2008 banking collapse referenced in the first bitcoin block. The fractional reserve system allows banks to multiply the money supply far beyond the actual cash (or other assets) in existence, backed only by a system of debt obligations of others. Safely supporting a fractional reserve system is a topic of far greater complexity than can be addressed by a simple policy, and when it comes to cryptocurrency, there is presently no entity reasonably able to bail anyone out in the event of failure. Therefore, this framework is addressed around entities that aim to maintain 100% backing of funds.
There may be some firms that desire but have failed to maintain 100% backing. In this case, there are multiple solutions, including outside investment, merging with other exchanges, or enforcing a gradual restoration plan. All of these solutions are typically far better than shutting down the exchange, and there are multiple cases where they've been used successfully in the past.

Proof of Reserves/Transparency/Accountability
Canadians need to have visibility into the backing on an ongoing basis.
The best solution for crypto-assets is a Proof of Reserve. Such ideas go back all the way to 2013, before even Mt. Gox. However, no Canadian exchange has yet implemented such a system, and only a few international exchanges (CoinFloor in the UK being an example) have. Many firms like Kraken, BitBuy, and now ShakePay use the Proof of Reserve term to refer to lesser proofs which do not actually cryptographically prove the full backing of all user assets on the blockchain. In order for a Proof of Reserve to be effective, it must actually be a complete proof, and it needs to be understood by the public that is expected to use it. Many firms have expressed reservations about the level of transparency required in a complete Proof of Reserve (for example Kraken here). While a complete Proof of Reserves should be encouraged, and there are some solutions in the works (ie TxQuick), this is unlikely to be suitable universally for all exchange operators and users.
Given the limitations, and that firms also manage fiat assets, a more traditional audit process makes more sense. Some Canadian exchanges (CoinSquare, CoinBerry) have already subjected themselves to annual audits. However, these results are not presently shared publicly, and there is no guarantee over the process including all user assets or the integrity and independence of the auditor. The auditor has been typically not known, and in some cases, the identity of the auditor is protected by a NDA. Only in one case (BitBuy) was an actual report generated and publicly shared. There has been no attempt made to validate that user accounts provided during these audits have been complete or accurate. A fraudulent fractional exchange, or one which had suffered a breach they were unwilling to publicly accept (see CoinBene), could easily maintain a second set of books for auditors or simply exclude key accounts to pass an individual audit.
The proposed solution would see a reporting standard which includes at a minimum - percentage of backing for each asset relative to account balances and the nature of how those assets are stored, with ownership proven by the auditor. The auditor would also publicly provide a "hash list", which they independently generate from the accounts provided by the exchange. Every exchange user can then check their information against this public "hash list". A hash is a one-way form of encryption, which fully protects the private information, yet allows anyone who knows that information already to validate that it was included. Less experienced users can take advantage of public tools to calculate the hash from their information (provided by the exchange), and thus have certainty that the auditor received their full balance information. Easy instructions can be provided.
Auditors should be impartial, their identities and process public, and they should be rotated so that the same auditor is never used twice in a row. Balancing the cost of auditing against the needs for regular updates, a 6 month cycle likely makes the most sense.

Hot Wallet Management
The best solution for hot wallets is not to use them. CoinBerry reportedly uses multi-sig on all withdrawals, and Bitmex is an international example known for their structure devoid of hot wallets.
However, many platforms and customers desire fast withdrawal processes, and human validation has a cost of time and delay in this process.
A model of self-insurance or separate funds for hot wallets may be used in these cases. Under this model, a platform still has 100% of their client balance in cold storage and holds additional funds in hot wallets for quick withdrawal. Thus, the risk of those hot wallets is 100% on exchange operators and not affecting the exchange users. Since most platforms typically only have 1%-5% in hot wallets at any given time, it shouldn't be unreasonable to build/maintain these additional reserves over time using exchange fees or additional investment. Larger withdrawals would still be handled at regular intervals from the cold storage.
Hot wallet risks have historically posed a large risk and there is no established standard to guarantee secure hot wallets. When the government of South Korea dispatched security inspections to multiple exchanges, the results were still that 3 of them got hacked after the inspections. If standards develop such that an organization in the market is willing to insure the hot wallets, this could provide an acceptable alternative. Another option may be for multiple exchange operators to pool funds aside for a hot wallet insurance fund. Comprehensive coverage standards must be established and maintained for all hot wallet balances to make sure Canadians are adequately protected.

Current Draft Proposal

(1) Proper multi-signature cold wallet storage.
(a) Each private key is the personal and legal responsibility of one person - the “signatory”. Signatories have special rights and responsibilities to protect user assets. Signatories are trained and certified through a course covering (1) past hacking and fraud cases, (2) proper and secure key generation, and (3) proper safekeeping of private keys. All private keys must be generated and stored 100% offline by the signatory. If even one private keys is ever breached or suspected to be breached, the wallet must be regenerated and all funds relocated to a new wallet.
(b) All signatories must be separate background-checked individuals free of past criminal conviction. Canadians should have a right to know who holds their funds. All signing of transactions must take place with all signatories on Canadian soil or on the soil of a country with a solid legal system which agrees to uphold and support these rules (from an established white-list of countries which expands over time).
(c) 3-5 independent signatures are required for any withdrawal. There must be 1-3 spare signatories, and a maximum of 7 total signatories. The following are all valid combinations: 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7.
(d) A security audit should be conducted to validate the cold wallet is set up correctly and provide any additional pertinent information. The primary purpose is to ensure that all signatories are acting independently and using best practices for private key storage. A report summarizing all steps taken and who did the audit will be made public. Canadians must be able to validate the right measures are in place to protect their funds.
(e) There is a simple approval process if signatories wish to visit any country outside Canada, with a potential whitelist of exempt countries. At most 2 signatories can be outside of aligned jurisdiction at any given time. All exchanges would be required to keep a compliant cold wallet for Canadian funds and have a Canadian office if they wish to serve Canadian customers.
(2) Regular and transparent solvency audits.
(a) An audit must be conducted at founding, after 3 months of operation, and at least once every 6 months to compare customer balances against all stored cryptocurrency and fiat balances. The auditor must be known, independent, and never the same twice in a row.
(b) An audit report will be published featuring the steps conducted in a readable format. This should be made available to all Canadians on the exchange website and on a government website. The report must include what percentage of each customer asset is backed on the exchange, and how those funds are stored.
(c) The auditor will independently produce a hash of each customer's identifying information and balance as they perform the audit. This will be made publicly available on the exchange and government website, along with simplified instructions that each customer can use to verify that their balance was included in the audit process.
(d) The audit needs to include a proof of ownership for any cryptocurrency wallets included. A satoshi test (spending a small amount) or partially signed transaction both qualify.
(e) Any platform without 100% reserves should be assessed on a regular basis by a government or industry watchdog. This entity should work to prevent any further drop, support any private investor to come in, or facilitate a merger so that 100% backing can be obtained as soon as possible.
(3) Protections for hot wallets and transactions.
(a) A standardized list of approved coins and procedures will be established to constitute valid cold storage wallets. Where a multi-sig process is not natively available, efforts will be undertaken to establish a suitable and stable smart contract standard. This list will be expanded and improved over time. Coins and procedures not on the list are considered hot wallets.
(b) Hot wallets can be backed by additional funds in cold storage or an acceptable third-party insurance provider with a comprehensive coverage policy.
(c) Exchanges are required to cover the full balance of all user funds as denominated in the same currency, or double the balance as denominated in bitcoin or CAD using an established trading rate. If the balance is ever insufficient due to market movements, the firm must rectify this within 24 hours by moving assets to cold storage or increasing insurance coverage.
(d) Any large transactions (above a set threshold) from cold storage to any new wallet addresses (not previously transacted with) must be tested with a smaller transaction first. Deposits of cryptocurrency must be limited to prevent economic 51% attacks. Any issues are to be covered by the exchange.
(e) Exchange platforms must provide suitable authentication for users, including making available approved forms of two-factor authentication. SMS-based authentication is not to be supported. Withdrawals must be blocked for 48 hours in the event of any account password change. Disputes on the negligence of exchanges should be governed by case law.

Steps Forward

Continued review of existing OSC feedback is still underway. More feedback and opinions on the framework and ideas as presented here are extremely valuable. The above is a draft and not finalized.
The process of further developing and bringing a suitable framework to protect Canadians will require the support of exchange operators, legal experts, and many others in the community. The costs of not doing such are tremendous. A large and convoluted framework, one based on flawed ideas or implementation, or one which fails to properly safeguard Canadians is not just extremely expensive and risky for all Canadians, severely limiting to the credibility and reputation of the industry, but an existential risk to many exchanges.
The responsibility falls to all of us to provide our insight and make our opinions heard on this critical matter. Please take the time to give your thoughts.
submitted by azoundria2 to QuadrigaInitiative [link] [comments]

Why UMI Will Not Fall Victim to Inflation: Dispelling Myths of “Deadly Issue”

Why UMI Will Not Fall Victim to Inflation: Dispelling Myths of “Deadly Issue”
https://preview.redd.it/lr1w0ukh2ik51.jpg?width=1024&format=pjpg&auto=webp&s=b413e6e6b2e94d2e9522571040151826b7874e77
With UMI staking, anyone anywhere in the world can generate new coins at the rate of up to 40 % a month, or up to 5,669 % a year, with no risk of falling victim to fraudsters. It means new opportunities for humanity which never existed before. However, many people who are used to miserable interests on bank deposits and financial pyramids that last a few months at most cannot understand what makes this possible. How can you safely earn up to 40 % a month with no risk of losing it all?
Sceptics cannot wrap their minds around this which makes them suspect there’s a catch to it. Therefore, it should come as no surprise that you can find various myths about UMI's “deadly issue” on forums and social networks. The most popular among them say that you simply cannot ensure long-term operation with this kind of “super-high income” and no one has any idea what will happen to this cryptocurrency in 10 or more years. Here's a forecast from sceptics, briefly: “deposits” with this percentage are simply impossible, it will inevitably cause hyperinflation, UMI cryptocurrency will devalue, and will share the fate of currencies in some of the less fortunate countries, such as Zimbabwe or Venezuela.
To counter these allegations, we've prepared a detailed article with arguments dispelling all these myths, nullifying all “forecasts” and putting the lid on this issue. Here we go!
What's the value behind the forecasts?
First of all, 10 or more years is too much of a long term, and forecasting so far in advance is simply impossible. Don't take us wrong here: it's not just about cryptocurrencies; it's about anything in the world. There was a time when people thought pagers, faxes, and landline phones had cheerful prospects, but look at what happened to them. They have been replaced by smartphones and the Internet accessible to all which no one believed was possible in the first place. New technologies emerge out of the blue and transform the world beyond recognition. The old — something everyone is used to — is replaced with something new and more
convenient. Something better.
10 years ago people believed in developing bank technologies, but then, all of a sudden, Bitcoin was created and transformed people's understanding of financial payments. It turned out anyone in the world can make payments with no intermediaries and generate new digital money. It's true that Bitcoin is not perfect, but millions use it all over the world. This number is also growing fast with each passing day.
Do you remember forecasts made for Bitcoin when it first appeared? Both ordinary people and respected world-class experts predicted it would soon die. No one believed it could last for even 10 years.

https://preview.redd.it/q1kzcxfw2ik51.png?width=800&format=png&auto=webp&s=17a12d73b9046a357cf6ecd77253472215c8bb24
Typical article predicting the end of Bitcoin from respected mass media. Source.

Here're some graphic examples from the leading world-class mass media:
“That's the End of Bitcoin.” Forbes, 2011, BTC price — $15.
“Bitcoin is headed to the ash heap.” USA Today, 2015, BTC price — $208.
“R.I.P., Bitcoin. It’s time to move on.” The Washington Post, 2016, BTC price — $382.
“Stay away from bitcoin and ethereum — they are complete garbage.” This is garbage." MarketWatch, 2017, BTC price — $2,345.
“Is Bitcoin Going To Zero?” Forbes, 2018, BTC price — $3,432.
In 2020, the BTC price is almost $12,000. The respected mass media have “declared Bitcoin dead” over 400 times (!!!) referring to its lack of backing, high issue rate, super-high price growth, and the like — just like the skeptics “declaring UMI dead” right now. However, despite all the discouraging forecasts, Bitcoin continues to successfully grow and rapidly gain in popularity.

https://preview.redd.it/6z60xwd13ik51.png?width=791&format=png&auto=webp&s=25a6799fe551c6e7f91aa016907e95ce032d7e5e
Over 12 years, Bitcoin has been declared dead 381 times, but it only grows stronger with each passing year. Source.

All of the above is proof that you shouldn't put blind trust in various forecasts, even coming from respected sources. Forecasts are mere opinions and arguments, but no one can know for
sure what will happen in 10, 100, or 1,000 years. No expert can know that. Similarly, no one knows what will happen to UMI many years from now.
UMI can solve any issues on the fly
We cannot know the future, but we did all we could to make our coin last forever. Most existing cryptocurrencies have a very important problem — they cannot support high-quality growth and rapidly become obsolete.
To explain this, we'd like to quote our Whitepaper:
"Despite the apparition of new technology solutions, the Bitcoin blockchain still holds only about 2,000 transactions, and it takes about 10 minutes to create a block. In 11 years, developers still did not manage to come to an agreement and implement a solution that would allow scaling the system and upgrade performance.
Most other cryptocurrencies face a similar problem. They are launched and keep operating in an almost initial state even after numerous innovative solutions become available. For example, the Ethereum network has been attempting to switch to the PoS algorithm for over two years now, but due to code complexity, security threats, and issues of reaching consensus, this causes great inconvenience."
https://preview.redd.it/ezxzrpx43ik51.png?width=800&format=png&auto=webp&s=207f8a27a59fac760fc541dae6abd30d148296f5
Screenshot of a page in the UMI Whitepaper. Have you read it? It answers a lot of questions. Link.

Bitcoin itself is technically obsolete. This is besides the fact that it has a load of other problems. For instance, BTC is supposed to completely stop coin mining in 2140, meaning miners will lose motivation to support the network. What happens then? The hope is that the main source of income for miners will be transfer fees, but will they want to maintain powerful equipment for a reward in the form of small fees? If fees are big, will people want to pay those? Will they find a different solution? Will users just leave the Bitcoin ecosystem and join more high-tech cryptocurrencies like UMI?
When we designed UMI, we accounted for all these issues and launched a promising project with a conveniently scalable ecosystem. Even if UMI faces some challenges in the future, we will make amendments as the network grows. We will act as appropriate judging from the project's current status. They will be based on the situation and the current state of the project.
It's true that upgrade decisions have been and are being made by all leading crypto projects, including Bitcoin and Ethereum, but UMI supports really safe and rapid innovation. The network can be easily modified and scaled with cutting edge technology solutions. While other cryptocurrencies simply become obsolete, we can handle all kinds of challenges on the fly. The UMI network will grow and improve to be always up to date, keep up with the times, and prevent problems in 10, 100, or 1,000 years.
At this point, the UMI network is in excellent shape, and the smart contract offers you relevant and actionable staking opportunities. We've thought out every detail, and the brisk growth of our community proves it best of all.
There is no "deadly inflation"
And, lastly, let's bring an issue with supposedly too-high emission to a close. UMI is typically accused of paying a too high reward for staking — as much as 40% a month, or 5,669% a year — which no one and nothing else in this world can pay. Eventually, it might end up with inflation as it happened in Zimbabwe and Venezuela, etc.,
Let us look at real facts. Those who consider a 40% monthly growth impossible should look at bitcoin again as the most outstanding example which has proven that nothing is impossible. Imagine how many times your deposit would have grown if 10 years ago you had bought bitcoins or inexpensive mining equipment producing a reward of 50 BTC several times a day.
Please consider the following:
In March 2010, BitcoinMarket.com started operating as the first bitcoin exchange, and 1 BTC cost a lot less than a cent — $0.003.
At the time of writing this article, the price for 1BTC was about $12,000.
It means those who bought bitcoins 10 years ago have increased their "deposit" by nearly 400,000,000% (!!!). Four hundred million percent in ten years! This is a real fact.
Those who bought bitcoins when the price was a few cents or dollars also achieved the perfect result by increasing their "deposit" by thousand or million times.
Well, now the percentage in UMI staking doesn't seem so crazy, does it? The only difference
is that BTC "deposit" grows in line with the BTC price while UMI deposit growth is ensured the growth of the number of UMI coins, which in turn doesn't prevent the price from surging. In fact, both cases demonstrate a multiple growth of the "deposit".
All of the above is proof that the reason for inflation in Zimbabwe, Venezuela, etc is a bad economy, not a high emission. In late March. roughly speaking, in one day, the FED (U.S. Federal Reserve System) released 2.2 trillion dollars to support the economy during the coronavirus pandemic. Similar financial injections are regular in the USA, the country which is the most advanced world's economy.
These facts indicate that UMI has no "deadly issue" at all and, unlike the USA, it doesn't "print" anything.
Here is bare statistics form the UMI blockchain:
The UMI cryptocurrency was launched on June 1. Since the launch, it's been 3 months.
18,000,000 UMI coins were initially issued.
In total, there are now about 18,800,000 UMI coins.
In other words, in three months, the total number of UMI coins increased by only 4.4%. Does it look like "deadly inflation"?

https://preview.redd.it/gsdjbwp83ik51.png?width=800&format=png&auto=webp&s=8d4591a24b3ddc63f8501f1b7fe7a4c02b7da89c
In 3 months, the number of UMI coins has shown a few percent increase. Source.

Let's move on:
We'd like to reiterate that the total number of UMI coins is almost 18,800,000.
There are about 14,500,000 coins on the genesis address today.
Almost 4,000,000 coins are involved in staking.
Thus, only 300,000 UMI (!)are freely circulated on the market. The remaining 18,500,000 coins are either used in staking or have not yet been released to the market.
https://preview.redd.it/f7b28jid3ik51.png?width=800&format=png&auto=webp&s=5ff8338121ebfe398cfb498a0cfcc00446ea6225
The number of coins stored on the genesis address at the time of writing the article. Source.

In real fact, UMI has no super-high emission. This fact has been proven. For a three-month period, which is a quarter of a year, the number of UMI has hardly changed and equals about 1.5% of the total number of coins on the market.
The truth is that UMI economy depends on a lot of factors. For example, burning 50,000 coins to create a structure. However, from a more general point of view, the UMI economic model itself is designed to encourage people to "save" rather than sell UMI coins. This is a crucial point that allows us to make progress, even with a high emission.
Moreover, it will take a billion-dollar staking structure that will be able to provide the highest possible emission on the UMI network a lot of years to appear. While it doesn't happen, all these forecasts can be regarded as irrelevant for today. Keep in mind that a 40% monthly profit will be available to the most successful structures and only after many years of development. To have your coins increased by 40% per month, your structure must have over 50 (!) times more coins than the number of coins initially generated by the network. And since this structure will do everything possible for the benefit of the UMI cryptocurrency, even 40% per month will not pose a risk to UMI's sustainable development.
Conclusions are as follows:
UMI offers no kind of "killing sky-high returns". Please don't take this myth seriously. UMI is growing. The current smart contract offers reasonable and up-to-date opportunities for UMI staking and poses no problem. If, however, a problem arises — we have all the tools to find an immediate solution. All these negative forecasts are not worth a brass farthing. They always have been and always will be. At all times and in all places. But they are highly unlikely to come true. Bitcoin outsmarted the most reputable and shrewd financial analysts. Why don't UMI, which is a lot more advanced than bitcoin, try to do the same?
UMI is a decentralized, strong, and high-tech network. It can exist the way it is now forever. But as it grows, it will improve to be always up to date, keep up with the times and prevent any problems. We are contributing to a great thing — we're creating a free economic system that will profitable for the entire human family. This is an opportunity to overcome social inequality and make regular people financially independent. So let's make every effort to make things go well. Ignore all evil-wishers and their predictions. Just join other users and go towards your dream. Then we will certainly succeed in it all.
Sincerely yours, UMI team
submitted by UMITop to u/UMITop [link] [comments]

Is The U.S. Better Off With Or Without Its Central Bank, The Federal Reserve

Adam Kokesh, a Libertarian Party member, has promised that he would abolish the Fed on the first day he is elected.
The LP has accused that the Fed has failed its intended mission, citing examples such as the 2008 Financial Crash, a low value of the Dollar and other monterary units, and lambasted the cost of bank bailouts on American people.
They also say that the Federal Reserve increases the incentive for high risk in the financial sector, that the Fed takes away financial power from Congress - which they say is unconstitutional, and the independance of the agency, mixed with the control over financial systems, makes it undemocratic and dangerous.
The LP and many Libertarians have proposed replacing the Fed with an asset based system, pointing out successes of decentralised systems such as blockchain currency and the effects the gold standard had during the Industrial Revolution.
However, supporters of the Federal Reserve have pointed out that the bank bailouts of 2008 have been paid back in full, and that the stimulus and stability provided by the Fed prevented the 2008 recession from getting to levels seen during the Great Depression, and provides stability and insurance in the financial markets.
Throughout U.S. history, it has had 5 periods with different banking history - three with central banking, and two without. How has the system fared, comparatively, with and without central banking, and does this lead to an indicator of pros and cons of these systems?
Is the U.S. better off with or without a central banking system?
Have there been any examples of other countries not having a central banking system? What happened?
submitted by Totes_Police to NeutralPolitics [link] [comments]

The Intellectual Foundation of Bitcoin比特幣的智識基礎. By Chapman Chen, HKBNews

The Intellectual Foundation of Bitcoin比特幣的智識基礎. By Chapman Chen, HKBNews

https://preview.redd.it/w6v3l8n3zxu41.jpg?width=2551&format=pjpg&auto=webp&s=fb0338a36a1a321d3781f43ff5eb6929d8b92edc
Summary: Bitcoin was invented by the anonymous Satoshi Nakamoto as recently as 2008, but it is backed up by a rich intellectual foundation. For instance, The 1776 First Amendment separates church and state, and contemporary American liberation psychologist Nozomi Hayase (2020) argues that money and state should similarly be separated. Just as Isaac Newton’s study of alchemy gave rise to the international gold standard, so has the anonymous creator Satoshi Nakamoto's desire for a “modernized gold standard” given rise to Bitcoin. Indeed, Bloomberg's 2020 report confirms Bitcoin to be gold 2.0. Montesquieu (1774) asserted that laws that secure inalienable rights can only be found in Nature, and the natural laws employed in Bitcoin include its consensus algorithm and the three natural laws of economics (self-interest, competition, and supply and demand). J.S. Mill (1859) preferred free markets to those controlled by governments. Ludwig von Mises (1951) argued against the hazards of fiat currency, urging for a return to the gold standard. Friedrich Hayek (1984) suggested people to invent a sly way to take money back from the hands of the government. Milton Friedman (1994) called for FED to be replaced by an automatic system and predicted the coming of a reliable e-cash. James Buchanan (1988) advocated a monetary constitution to constrain the governmental power of money creation. Tim May (1997) the cypherpunk proclaimed that restricting digital cash impinges on free speech, and envisioned a stateless digital form of money that is uncensorable. The Tofflers (2006) pictured a non-monetary economy. In 2016, UCLA Professor of Finance Bhagwan Chowdhry even nominated Satoshi for a Nobel Prize.
Full Text:
Separation between money and state
The 1791 First Amendment to the U.S. Constitution enshrines free speech and separates church and state, but not money and state. "Under the First Amendment, individuals’ right to create, choose their own money and transact freely was not recognized as a part of freedom of expression that needs to be protected," Japanese-American liberation psychologist Nozomi Hayase (2020) points out (1).
The government, banks and corporations collude together to encroach upon people's liberties by metamorphosing their inalienable rights into a permissioned from of legal rights. Fiat currencies function as a medium of manipulation, indulging big business to generate market monopolies. "Freedom of expression has become further stifled through economic censorship and financial blockage enacted by payment processing companies like Visa and MasterCard," to borrow Hayase's (2020) words.
Satoshi is a Modern Newton
Although most famous for discovering the law of gravity, Isaac Newton was also a practising alchemist. He never managed to turn lead into gold, but he did find a way to transmute silver into gold. In 1717, Newton announced in a report that, based on his studies, one gold guinea coin weighed 21 shillings. Just as Isaac Newton’s study of alchemy gave rise to the international gold standard, so has the desire for a “modernized gold standard” given rise to Bitcoin. "In a way, Satoshi is a modern Newton. They both believed trust is best placed in the unchangeable facets of our economy. Beneath this belief is the assumption that each individual is their own best master," as put by Jon Creasy (2019) (2).
J.S. Mill: free markets preferable to those controlled by governments
John Stuart Mill (1806-1873) the great English philosopher would be a Bitcoiner were he still around today. In On Liberty (1859), Mill concludes that free markets are preferable to those controlled by governments. He argues that economies function best when left to their own devices. Therefore, government intervention, though theoretically permissible, would be counterproductive. Bitcoin is precisely decentralized or uncontrolled by the government, unconfiscatable, permissonless, and disinflationary. Bitcoin regulates itself spontaneously via the ordinary operations of the system. "Rules are enforced without applying any external pressure," in Hayase's (2020) words.
Ludwig von Mises (1958): Liberty is always Freedom from the Government
In The Free Market and its Enemies, theoretical Austrian School economist Ludwig von Mises (1951) argues against the hazards of fiat currency, urging for a return to the gold standard. “A fiat money system cannot go on forever and must one day come to an end,” Von Mises states. The solution is a return to the gold standard, "the only standard which makes the determination of the purchasing power of money independent of the changing ideas of political parties, governments, and pressure groups" under present conditions. Interestingly, this is also one of the key structural attributes of Bitcoin, the world’s first, global, peer-to-peer, decentralized value transfer network.
Actually, Bloomberg's 2020 report on Bitcoin confirms that it is gold 2.0. (3)
Von Mises prefers the price of gold to be determined according to the contemporaneous market conditions. The bitcoin price is, of course, determined across the various global online exchanges, in real-time. There is no central authority setting a spot price for gold after the which the market value is settled on among the traders during the day.
Hayek: Monopoly on Currency should End
Austrian-British Nobel laureate Friedrich Hayek’s theory in his 1976 work, Denationalization of Money, was that not only would the currency monopoly be taken away from the government, but that the monopoly on currency itself should end with multiple alternative currencies competing for acceptance by consumers, in order "to prevent the bouts of acute inflation and deflation which have played the world for the past 60 years." He forcefully argues that if there is no free competition between different currencies within any nation, then there will be no free market. Bitcoin is, again, decentralized, and many other cryptocurrencies have tried to compete with it, though in vain.
In a recently rediscovered video clip from 1984, Hayek actually suggested people to invent a cunning way to take money out of the hands of the government:- “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something they can’t stop” (4). Reviewing those words 36 years hence and it is difficult not to interpret them in the light of Bitcoin.
Milton Friedman Called for FED to be Replaced by an Automatic System
Nobel laureate economist Milton Friedman (1994) was critical of the Federal Reserve due to its poor performance and felt it should be abolished (5). Friedman (1999) believed that the Federal Reserve System should ultimately be replaced with a computer program, which makes us think of the computer code governing Bitcoin (6).[\](https://en.wikipedia.org/wiki/Criticism_of_the_Federal_Reserve#cite_note-:2-12) He (1970) favored a system that would automatically buy and sell securities in response to changes in the money supply. This, he argued, would put a lid on inflation, setting spending and investment decisions on a surer footing (7). Bitcoin is exactly disflationary as its maximum possible supply is 21 million and its block reward or production rate is halved every four years.
Friedman passed away before the coming of bitcoin, but he lived long enough to see the Internet’s spectacular rise throughout the 1990s. “I think that the Internet is going to be one of the major forces for reducing the role of government," said Friedman in a 1999 interview with NTU/F. On the same occasion, he sort of predicted the emergence of Bitcoin, "The one thing that’s missing, but that will soon be developed, is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B, without A knowing B or B knowing A." (8)
Of course, Friedman didnt predict the block chain, summed up American libertarian economist Jeffery Tucker (2014). “But he was hoping for a trustless system. He saw the need. (9).
Bitcoin Computer Code as Constitution in the Buchananian Sense
American economist cum Nobel laureate James Buchanan (1988) advocates constitutional constraints on the governmental power to create money (10). Buchanan distinguishes a managed monetary system—a system “that embodies the instrumental use of price-level predictability as a norm of policy”—from an automatic monetary system, “which does not, at any stage, involve the absolute price level” (Buchanan 1962, 164–65). Leaning toward the latter, Buchanan argues that automatic systems are characterized by an organization “of the institutions of private decision-making in such a way that the desired monetary predictability will emerge spontaneously from the ordinary operations of the system” (Buchanan 1962, 164). Again, "Bitcoin regulates itself through the spontaneous force of nature, flourishing healthy price discovery and competition in the best interest of everyone" (Hayase 2020).
Shruti Rajagopalan (2018) argues that the computer code governing how the sundry nodes/computers within the Bitcoin network interact with one another is a kind of monetary constitution in the Buchananian sense. One of Buchanan's greatest inputs is to differentiate the choice of rules from the choice within rule (Buchanan 1990). One may regard the Bitcoin code as a sort of constitution and "the Bitcoin network engaging in both the choice of rules and choice within rules" (Rajagopalan 2018) (11).
Tim May: Restricting Digital Cash may Impinge on Free Speech
Cypherpunks are activists who since the 1980s have advocated global use of strong cryptography and privacy-enhancing technologies as a route to social and political liberation. Tim May (Timothy C. May [1951-2018]), one of the influential cypherpunks published The Crypto Anarchist Manifesto in September 1992, which foretold the coming of Bitcoin (12). Cypherpunks began envisioning a stateless digital form of money that cannot be censored and their collaborative pursuit created a movement akin to the 18th Enlightenment.
At The 7th Conference on Computers, Freedom, and Privacy, Burlingame, CA. in 1997, Tim May equated money with speech, and argued that restricting digital cash may impinge on free speech, for spending money is often a matter of communicating orders to others, to transfer funds, to release funds, etc. In fact, most financial instruments are contracts or orders, instead of physical specie or banknotes (13).
Montesquieu: Laws that secure inalienable rights can only be found in Nature
In his influential work The Spirit of Laws (1748), Montesquieu wrote, “Laws ... are derived from the nature of things … Law, like mathematics, has its objective structure, which no arbitrary whim can alter". Similarly, once a block is added to the end of the Bitcoin blockchain, it is almost impossible to go back and alter the contents of the block, unless every single block after it on the blockchain is altered, too.
Cypherpunks knew that whereas alienable rights that are bestowed by law can be deprived by legislation, inalienable rights are not to be created but can be discovered by reason. Thus, laws that secure inalienable rights cannot be created by humankind but can be found in nature.
The natural laws employed in Bitcoin to enshrine the inalienable monetary right of every human being include its consensus algorithm, and the three natural laws of economics (self-interest, competition, and supply and demand) as identified by Adam Smith, father of modern economics.
Regarding mathematics, bitcoin mining is performed by high-powered computers that solve complex computational math problems. When computers solve these complex math problems on the Bitcoin network, they produce new bitcoin. And by solving computational math problems, bitcoin miners make the Bitcoin payment network trustworthy and secure, by verifying its transaction information.
Regarding economic laws, in accordance with the principle of game theory to generate fairness, miners take part in an open competition. Lining up self-interests of all in a network, with a vigilant balance of risk and rewards, rules are put in force sans the application of any exterior pressure. "Bitcoin regulates itself through the spontaneous force of nature, flourishing healthy price discovery and competition in the best interest of everyone," to borrow the words of Hayase (2020).
A Non-monetary Economy as Visualized by the Tofflers
In their book, Revolutionary Wealth (2006), futurists Alvin Toffler and his wife Heidi Toffler toy with the concept of a world sans money, raising a third kind of economic transaction that is neither one-on-one barter nor monetary exchange. In the end, they settle on the idea that the newer non-monetary economy will exist shoulder-to-shoulder with the monetary sector in the short term, although the latter may eventually be eclipsed by the former in the long run. What both the Tofflers' The Third Wave (1980) and Revolutionary Wealth bring into question is the very premise of monetary exchange. The vacuum left over by cash in such a non-monetary economy may be filled up by Bitcoin as a cryptocurrency.
Satoshi Nakamoto Nominated for Nobel Prize by UCLA Finance Prof.
UCLA Anderson School Professor of Finance Bhagwan Chowdhry nominated Satoshi Nakamoto for the 2016 Nobel Prize in Economics on the following grounds:-
It is secure, relying on almost unbreakable cryptographic code, can be divided into millions of smaller sub-units, and can be transferred securely and nearly instantaneously from one person to any other person in the world with access to internet bypassing governments, central banks and financial intermediaries such as Visa, Mastercard, Paypal or commercial banks eliminating time delays and transactions costs.... Satoshi Nakamoto’s Bitcoin Protocol has spawned exciting innovations in the FinTech space by showing how many financial contracts — not just currencies — can be digitized, securely verified and stored, and transferred instantaneously from one party to another (14).
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Web link: https://www.hkbnews.net/post/the-intellectual-foundation-of-bitcoin%E6%AF%94%E7%89%B9%E5%B9%A3%E7%9A%84%E6%99%BA%E8%AD%98%E5%9F%BA%E7%A4%8E-by-chapman-chen-hkbnews
Disclaimer: This article is neither an advertisement nor professional financial advice.
End-notes
  1. https://bitcoinmagazine.com/articles/bitcoin-is-the-technology-of-dissent-that-secures-individual-liberties
  2. https://medium.com/hackernoon/why-sir-isaac-newton-was-the-first-bitcoin-maximalist-195a17cb6c34
  3. https://data.bloomberglp.com/professional/sites/10/Bloomberg-Crypto-Outlook-April-2020.pdf
  4. https://www.youtube.com/watch?v=EYhEDxFwFRU&t=1161s
  5. https://www.youtube.com/watch?v=m6fkdagNrjI
  6. http://youtu.be/mlwxdyLnMXM
  7. https://miltonfriedman.hoover.org/friedman_images/Collections/2016c21/IEA_1970.pdf
  8. https://www.youtube.com/watch?v=6MnQJFEVY7s
  9. https://www.coindesk.com/economist-milton-friedman-predicted-bitcoin
  10. https://www.aier.org/research/prospects-for-a-monetary-constitution/
  11. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3238472
  12. https://www.activism.net/cypherpunk/crypto-anarchy.html
  13. http://osaka.law.miami.edu/~froomkin/articles/tcmay.htm
  14. https://www.huffpost.com/entry/i-shall-happily-accept-th_b_8462028
Pic credit: Framingbitcoin
#bitcoin #bitcoinhalving #jamesBuchanan #MiltonFriedman #AlvinToffler #FirstAmendment #LudwigVonMises #TimMay #freeMarket # SatoshiNakamoto #FriedrichHayek #Cypherpunk #Cryptocurrency #GoldStandard #IsaacNewton
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Can Any Current Crypto Commodity Ever Be Used As A General Currency?

“In the long run, we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again.” - John Maynard Keynes

Cryptocurrency Supply Algorithms And The Equation Of Exchange

Although I am a proponent for Bitcoin and view it as a good store-of-value, my belief is that all of the algorithms for cryptocurrency supply models that I have seen to date are not amenable to creating a cryptocurrency useful as a general currency. That is as a means for exchange-of-value as opposed to store-of-value. The following is my brief description of the models that I am aware of, followed by an explanation of why I believe they are not useful for as general currencies. At the bottom, I make a concluding remark on what I believe is a missing feature needed to realize a general currency.

Coin Supply Algorithms

N+1
In an N+1 algorithm, each time a block is produced, a constant incentive reward is added to the supply of coins. This means explicitly that the size of the coin supply will grow forever, unlimited. This sounds pretty good on the surface. If you are a miner, you are guaranteed that there will always be an incentive reward available for mining.
If we look at this from a total coin supply viewpoint, and a little high school math, the normalized change in supply is:
N+1/N
We then want to ask the question, how fast is the coin supply changing, as N goes to infinity since we are assuming that blocks are produced forever. This is:
Lim N->∞ N+1/N
Where N is the number of blocks produced. By L’Hôpital’s rule for those that remember a little highschool calculus (I had to look it up), we can take the derivatives of the numerator and denominator which results in 1/1 = 1. In the limit at infinity, the coin supply is a constant value, even though theoretically it grows forever.
Since infinity is only theoretical, what does this look like for blockchain use cases:
To give a feel for it, imagine that we are at the following 4 stages: 10 blocks have been produced; 100 blocks have been produced; 1000 blocks have been produced, and 10000 blocks have been produced. Adding one reward at each stage gives the following percent change in coin supply:
1 — (10 + 1)/10 = 10%
1 — (100+1)/100 = 1%
1 — (1000+1)/1000 = .1%
1 — (10000+1)/10000 = .01%
This demonstrates that the change in coin supply quickly dwindles to an insignificant amount, even though it continues to grow forever. To put this another way, the addition of each new incentive reward quickly becomes a very small fraction of the total coin supply. The coin supply can be thought of as relatively constant.
N + M*N/2T or N(1+M/2T)
T is units of time in discrete steps, and M is the number of blocks produced at each step. This is essentially the Bitcoin model. To make this clearer let’s assume that there is only 1 block produced at each step. This becomes N + N/2T or N(1+1/2T).
If we replace 2T with a new variable K, then this becomes:
N(1+1/K)
Where K increases forever. The summation of 1/K is the harmonic series and increases forever. Therefore, just like N+1 above, N(1+1/K) or N+N/K also increases forever. As with N+1, the rate of increase of the coin supply is then:
(N(1+1/K))/N
This is more simply 1 + 1/K. Thus, as K grows, we can see that the rate of increase tends towards zero as well. Further, since 1/K becomes a smaller and smaller fraction, eventually representing this as a value in a computer becomes impossible. For example, Bitcoin’s smallest fraction is 1 satoshi. When 1/K becomes smaller than 1 satoshi it will no longer be possible to have an incentive reward for a single block produced.
Given that both coin supply algorithms tend towards a relatively constant supply, in terms of use as a currency, we can view both as essentially equivalent. The only difference is how fast the supply tends towards a constant value, where the Bitcoin model is faster.
N
A third coin supply algorithm is a simple constant amount created in the genesis block. The coins are usually distributed using an airdrop or similar model. Since coins are not being created, the coin supply is by definition constant. If the distribution model used is an incentive reward model to distribute from the pool of coins, it is indistinguishable from one of the above 2 models. If the distribution model is a one-time event, such that all the coins are distributed then there is no incentive reward model.
From a viewpoint of use of currency all 3 models described above can be thought of as equivalent, given enough blocks have been produced for the first 2 models.

Marked To External Asset

There is the fourth model for coin supply which is intended to mark the value of the coin to an external index of some kind. This may be a physical asset like an ounce of gold, or another commodity. In this model, the coin can explicitly represent a unit of the external asset such as an ounce of gold. Regardless of whether the coin can be exchanged for the underlying asset or not, given that supply of commodities such as gold are constantly following the same mining algorithms as above, the marked to asset model is a constant coin supply model. If the distribution model used is an incentive reward model, then it is similar to the third model.

Marked To Value Of External Asset

There is a fifth model for coin supply where the value of the coin is marked to the value of an external asset like the USD, instead of the supply of the external asset, as was the case for marking to a commodity. In this model, the coin supply is changed to reflect the exchange rate of the coin against the value of the external asset. The objective is to keep the exchange rate constant on average over time. For example: assuming the objective is a 1-to-1 exchange between the coin and the USD, then if the coin’s value increases above the objective, more coins are printed, and vice-versa. That is, if the value of the coin decreases, given some means (i.e. burning), the coin supply is decreased to bring the exchange rate towards the objective.
In this model, the coin supply is not fixed but varies with the exchange rate. To the extent that the value of the external asset is relatively constant, and the value of the coin is relatively constant the coin supply will be relatively constant.
Although marking to the USD would seem to be a good idea, given that it is called a “reserve currency”, the USD is intentionally subject to inflation, theoretically, the coin to USD exchange will continue to decrease, requiring the coin supply to be decreased to maintain the objective of a constant exchange rate. Over time, this model can be viewed as decreasing the coin supply if marked to the inflationary external asset value.

Comparing Coin Supply Models

In summary, of the five models described above, four of them are essentially variations on a constant coin supply using various means to distribute the coin, while the fifth tries to keep the value of the coin constant against an external asset value, by managing the supply of the coin.
The equation of exchange: M * V = P * Y[1] tells us that if the amount of money supply, M, (i.e. the coin supply) is constant, and the velocity of money is relatively constant, then an increase in demands for goods (Y), will cause a decrease in the price (P), price deflation. That is, with a fixed coin supply the price of goods is expected to drop, thus increasing the value of the coin. Bitcoin’s increase in value is an example of this. (The Bitcoin ledger does not have the means to determine either prices (P) or goods (Y). Instead, I am inferring from the increase in the value of bitcoins that an increase in demand for Y is occurring. There are possible other explanations.)
However, it should be noted that in order for the equation of exchange to be valid, the assumption of the velocity of money is relatively constant must hold. If holders of the coin stop using it as a currency for the exchange of value, then the M * V = M * 0 = 0. There is no price in that coin for any goods or services. That is, the value of the coin collapses.
Conversely, if the velocity of the coin were to increase significantly, then this creates effectively more available coin, resulting in the price (P) of the goods and services (Y) to increase. This causes price inflation, which encourages coin holders to spend their coin as fast as possible to avoid losing value in the coin. As the price of goods becomes excessive, people shift from the coin to other forms of currency. As this happens, once more a collapse happens.
At an equilibrium point, the coin supply is constant, the velocity is constant, the demand for goods and services is constant, and therefore the price would be constant. At such an equilibrium point, a constant coin supply would be ideal. However, we can observe throughout history that such an equilibrium point is never reached.
Given any sort of constant coin supply, the value of the coin is expected to vary unpredictably and often wildly. Of the 5 models, the first 4 will always be subject to this. Although this may be interesting for speculators, usefulness for general currency is questionable.
The fifth model is to manage the coin supply against an external asset value. In essence, this is a substitution of the coin for the asset. Provided that the coin supply can be managed to reflect the objective exchange rate, the value of the coin should be stable relative to the stability of the external asset value.
However, in my opinion, this marking of value does not take into account exchanges that are wholly internal to the coin and its blockchain. The transfer of a coin balance from one account to another implies an exchange of value, thus the equation of exchange applies internally to the blockchain. This exchange of value is independent of the exchange rate of the coin value versus the external asset value. Thus, the coin supply can be seen as independent of the exchange of value on the blockchain.
Given this assumption, we can make the simplifying assumption that the coin supply is relatively constant with respect to the exchange of value on the blockchain. As a result, one would expect that even though the coin supply is managed against the exchange rate with an external asset, its value can still fluctuate wildly, beyond the ability of coin supply management to compensate. This, in turn, will impact the exchange rate, destroying the intended objective.
As a natural consequence, even with the approach of marking the value of the coin to external asset value, such as the USD, the expected volatility limits the usefulness of the coin as a currency.

Towards A General Currency

As stated in the introduction, I believe that none of the cryptocurrency models described are viable for use as general currencies. In my opinion, my brief non-rigorous analysis above demonstrates this likely to be true. The question remains, what else is needed to create a cryptocurrency that is viable as a general currency.
The equation of exchange shows us what is missing directly: In the equation M * V = P * Y, we can say that on every blockchain we can know the values of M and V directly. The account ledger explicitly shows us this, (ignoring encrypted exchanges). What we do not know is the other side of the equation. We do not know either price (P) or goods and services (Y) for any exchanges that are internal to the blockchain, that is between accounts on the blockchain.
If we compare cryptocurrencies with national fiat currencies, and cryptocurrency exchanges with foreign exchanges, we can see that the foreign exchanges relate the difference in prices in related economies. In comparison, the cryptocurrency exchanges appear to only relate the difference in demand for the cryptocurrencies themselves. This demand only manifests itself during the exchange of cryptocurrencies for each other and between fiat and cryptocurrencies and vice-versa.
It is my position that because the internal use of cryptocurrencies on their own blockchains is currently hidden, none of the above coin supply models will create a currency stable enough to be useful as a general currency. If/when a cryptocurrency model is created that takes into account the currently hidden internal exchange of value, then we will have realized a general currency.
[1] https://en.wikipedia.org/wiki/Equation_of_exchange
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Ripple Subreddit Rules, Helpful Links & Answers to Common Questions - READ BEFORE POSTING

You must read our rules before participating in Ripple
Helpful links and answers to common questions will be updated frequently so check back often
 
 
Ripple Subreddit Rules
https://www.reddit.com/Ripple/wiki/rules
 
Helpful Links
Ripple Insights - Top 9 Frequently Asked Questions About Ripple and XRP (Jan 18, 2018)
Ripple’s Ultimate Strategy; why XRP will increase in value
Removing inefficiency of international payments with XRP
Reasons to expect XRP to be the most popular bridge asset
"XRP is competitive now in the USD/MXN corridor"
Ripple's Decentralization Strategy Update
XRP Market Performance
List of Ripple Partnerships and RippleNet Implementations
 
People to Follow
Ripple on Twitter
Brad Garlinghouse, Chief Executive Officer at Ripple
Yoshitaka Kitao, executive chairman, CEO and president of SBI Holdings, Inc.
David Schwartz, Chief Cryptographer at Ripple | aka u/sjoelkatz
Stefan Thomas, Former CTO at Ripple, Co-creator of Interledger. Founder at Coil
Patrick Griffin, Senior Vice President of Business Development at Ripple
Miguel Vias, Head of XRP Markets at Ripple
Warren Paul Anderson, Product Manager, xRapid/XRP at Ripple
 
Hodor's XRP Blog
TplusZero - research & analysis on #XRP
 
Most Discussed Topics and Answers
● The Case Against BankCoin - Banks need an independent digital asset to enable truly efficient settlement
● Ripple Technology → Fast Payments → XRP → Fast Settlement
● Solving the chicken and egg problem - FI's bridging payments with XRP & companies saving money by holding XRP
● Banks hold XRP under a contractual agreement | Build liquidity to bridge payments to raise the demand for XRP
● How the global adoption of xRapid (XRP liquidity tool) would affect the value of XRP
● Besides instant cross-border payment settlement, XRP can capture other use cases, value that doesn't yet exist
● XRP Ledger has numerous technological advantages over blockchain systems that use proof of work
● Ripple is committed to making the XRP Ledger as decentralized as they possibly can
● Quantum-resistant signature schemes - Adding a new scheme is easy and fast
 
XRP Wallets
You need 20 XRP to activate a XRP wallet. Fees can be changed by the validators through the voting process.
The reserve requirement protects the XRP Ledger from spam or malicious usage.
 
When you are sending XRP to an exchange, destination tag is very important.
Destination tag is not needed when you transfer XRP to your own wallet address.
 
● XUMM by XRPL Labs | Developers
XUMM is a free app (iOS and Android) that makes sending, receiving and interacting with the XRP ledger easy & secure.
 
● Ledger Nano S | Tutorial | FAQ | Buy Online | Ripple Recovery Tool
Cryptocurrency Hardware Wallet
When you get your Ledger wallet, you must reset it and get a new set of 24 words seed before using it.
 
● The World Exchange | How to Create a Cold Wallet for Ripple
A free user-friendly and purely client-side wallet
 
● GateHub | Support | Network Statistics
GateHub XRP Web Wallet
 
Tools
Check XRP wallet balance - Bithomp | Graph | Transactions
Print raw information about an account, a transaction or a ledger - RPC Tool
 
Exchanges
The best way to support XRP is to buy/sell XRP directly with your local currency, not with USDT, ETH, LTC, or BTC.
Available XRP pairs - AUD, BRL, CAD, CNY, EUR, GBP, IDR, INR, JPY, KRW, MXN, PHP, RUB, THB, TRY, UAH, USD, ZAR.
You can find the complete list of XRP exchanges and supported XRP/fiat pairs Here.
 
USD - US Dollar
Kraken | Bitstamp | Bitfinex | CEX.IO | Gatehub |
Exrates | Exmo | Mr. Exchange | Bitsane | Sistemkoin | BitBay | Quoine
 
EUR - Euro
Kraken | Bitstamp | Gatehub | CEX.IO | LiteBit.eu | Anycoin Direct
The Rock Trading | Bitsane | BitBay | BitFlip | Bitlish | Quoine
 
KRW - South Korean Won
Bithumb | Upbit | Coinone | Korbit | GOPAX | Coinrail
 
JPY - Japanese Yen
Kraken | Bitbank | Quoine | Mr. Exchange
 
CNY - Chinese Yuan
RippleFox | Ripple China | Fatbtc
 
TRY - Turkish Lira
Vebitcoin | BTCTurk | Koineks | Sistemkoin | Ovis
 
INR - Indian Rupee
Zebpay | Koinex | Unocoin | Bitbns | BuyBitcoin | BuyUcoin
 
AUD - Australian Dollar
BTC Markets
 
THB - Thai Baht
BX Thailand
 
MXN - Mexican Peso
Bitso
 
IDR - Indonesian Rupiah
Indodax | Quoine
 
RUB - Russian Ruble
Exmo | BitFlip
 
ZAR - South African Rend
Altcoin Trader
 
CAD - Canadian Dollar
Kraken
 
UAH - Ukrainian Hryvnia
Kuna | BTC Trade UA | BitFlip
 
GBP - British Pound
Cryptomate
 
BRL - Brazilian Real
Braziliex
 
SGD - Singapore Dollar
Quoine
 
AED - United Arab Emirates Dirham
BitOasis
 
PHP - Philippine peso
CX | Exchange
 
USDT - Tether
Poloniex | Bittrex | Huobi | OKEx | CoinBene | Upbit | HitBTC |
ZB.com | Gate.io | Sistemkoin
 
ETH - Ethereum
Binance | Bittrex | Gatehub | OKEx | OTCBTC | Upbit | HitBTC |
Bitsane | Mr. Exchange | CoinFalcon
 
LTC - Litecoin
Bitsane | Mr. Exchange
 
BTC - Bitcoin
Kraken | Bitstamp | Bitfinex | CEX.IO | Gatehub | Binance | Poloniex | Bittrex |
HitBTC | OKEx | Upbit | Huobi | BTCTurk | BTC Markets | CoinEgg | Exmo |
ZB.com | OTCBTC | Coinrail | Bits Blockchain | Triple Dice Exchange | Indodax |
Exrates | Qryptos | Gate.io | Bitsane | Bitso | Ovis | BCEX | BitBay |
Mr. Exchange | Orionx | CoinFalcon | Abucoins | BitFlip | LakeBTC | Coinbe
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