The Key Decision-Makers in Bitcoin

The Key Decision-Makers in Bitcoin

Over the past year, there have been intense debates about the future of the Bitcoin network. These discussions have mostly revolved around the topic of scaling Bitcoin, and several proposals have been put forward to address the question of how the Bitcoin network will scale to be used by the billions of people and machines we have on this planet. These scaling proposals are not all mutually exclusive, but nearly all of them involve a fundamental change to the Bitcoin protocol that would require what is called a “hard fork.” A hard fork is a change that would cause there to be multiple competingBitcoin networks, all but oneof which would die off as a majority of users decide to use the strongestnetwork.[1]

Because of the potential to split the network, such fundamental hard fork changes are not deployed often. Planned hard forks require an orchestrated software upgrade by multiple stakeholders in the Bitcoin network. Since Bitcoin is a decentralized system that is not controlled by any central authority, whether or not such an upgrade is deployed and adopted by the network is determined by several key decision-makers that must agree to the change: Bitcoin developers, economic Bitcoin nodes, bitcoin-holding users, and bitcoin miners.

Bitcoin Developers

Bitcoin developers are the first group that must be convinced that a hard fork change is necessary. If the maintainers of popular Bitcoin implementations do not accept a proposed change, the only remaining options are to fork an existing Bitcoin node software repository or start developing a new implementation from scratch. Convincing developers of an existing implementation can be politically challenging, and starting a new implementation from scratch is a herculean task. Forking an existing project is the easiest route, but still requires convincing a majority of the network to use the fork in order for the change to be adopted by all Bitcoin users.

Economic Bitcoin Nodes

Economic Bitcoin nodes arefull nodesthat accept Bitcoin in exchange for other forms of value and include Bitcoin exchanges, wallets, payment processors, and businesses that accept Bitcoin in exchange for goods, services, and othercurrencies. If economic nodes donot upgrade their full node software when a hard fork change is introduced, then blocks that are produced by miners who do choose to upgrade will not be considered valid bynodesthat have not upgraded and the blockchain will split. To everyone on the old chain, miners producing blocks with the newsoftware will lose the block reward to a competitor producing valid “old chain” blocks. Theeconomic majoritywill only choose to upgrade their software if they believe the change is a) beneficial for the long term value of Bitcoin and/or b) acceptable to most of their bitcoin-holding customers.

Bitcoin-Holding Users

Bitcoin-holding users that rely on the services of economic Bitcoin nodes have a choice of where to take their business. If an economic node such as an exchange, wallet, or merchant upgrades their Bitcoin node software to implement changes that their customers do not agree with, then those customers may choose to do business with another economic Bitcoin node instead. However, it is not always obvious what version of the Bitcoin software an economic Bitcoin node is running and so the best way for bitcoin-holding users to have influence over changes to the Bitcoin protocol is to run and rely on their own Bitcoin full node for block verification and transaction broadcasting. If a hard fork upgrade is proposed that a bitcoin-holding user does not want implemented, then they may voice their concern to the economic Bitcoin nodes they do business with in hopes of dissuading them from implementing the upgrade. Similarly, bitcoin-holding users can lobby the economic Bitcoin nodes they do business with to implement a hard fork change if that change is beneficial to them.

Bitcoin Miners

In the early days of Bitcoin, economic Bitcoin nodes were either nonexistent or not that important, and the roles of “full node” and “mining node” were largely bundled together. Bitcoin miners would use low-power laptop and desktop computers and did not have much of a reason to sell the bitcoin they mined to cover operational expenses. Since then, the price of bitcoin has risen dramatically and bitcoin mining has evolved to become a large-scale industrial operation. Bitcoin miners now rely on economic Bitcoin nodes to convert bitcoin into value that is then used to cover the costs of bitcoin mining. While a hard fork change will never be implemented if miners do not upgrade their software to support the change, miners will only upgrade their software if a majority of the economic Bitcoin nodes have also implemented the change.[2]

It is acommon misconceptionthat Bitcoin miners are the final decision-makers about what version of the Bitcoin software is the “dominant” version that drives consensus in the Bitcoin network. The realityis that Bitcoin miners are just one of many stakeholders which must be convinced to upgrade their software, and for game theoretical reasons are actually most likely to be the last to upgrade their software in the event of a hard fork change being introduced. Most Bitcoin miners operate on thin margins and are therefore very conscientious of their revenue and costs. They will only run software which produces blocks that are accepted by a majority of the economic nodes in Bitcoin, who in turn will only upgrade their software if the change supports the long-term value of Bitcoin and/or is acceptable to most of their bitcoin-holding customers. Coordination is therefore required among all of these stakeholders to debate the merits of proposed hard fork changes and make hard but necessary decisionsto ensure that the Bitcoin network continues to grow to support widespread usage.

Making Progress

If the Bitcoin protocol does not evolve to accommodate growing demand and new use-cases, then growth could stall and the unmet demand will be serviced by another competing network instead, potentially harming the long-term value of bitcoin and bitcoin mining equipment. It is therefore in the best interest of Bitcoin developers, bitcoin miners, bitcoin holders, and economic Bitcoin nodes to implement changes that support the growth of the Bitcoin network while maintaining Bitcoin’skey innovationas a decentralized solution to the double-spending problem.

[1]The alternate networks maynot die off if the hard fork change proposed is a change to the mining algorithm itself. In this case, there is a possibility that the miners on the old chain will continue mining and serving the users who prefer the status quo to the new mining algorithm.

[2]A hard fork change could be implemented without miner support if the change is a change to the mining algorithm itself that renders the previous network of miners obsolete.

This post was originally published onlightco.in.

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Stegoseed: Hiding Bitcoin Seed Keys In Plain Sight

James Stanley, a Bristol-based software developer, has developed a tool that steganographically encodes Bitcoin wallet seeds. Stegoseed essentially gives Bitcoin users the ability to hide funds in plain sight.

Also read: The Joinmarket Community Wants to Improve Bitcoin’s Fungibility

Steganographically Concealing Bitcoin Seeds

Stegoseed: Hiding Bitcoin Seeds In Plain Sight
James Stanley creator of stegoseed.

Stanley’s stegoseed is a tool that enables Bitcoin users to encode and decode BIP39 seeds steganographically. Steganography is the art of concealing images, messages, files, or video within another one of these four mediums. The practice of obscuring messages in this fashion was first recorded in 440 BC.

Stegoseed allows users to hide a seed phrase in randomly-generated text, or hide the seed in an existing piece of text. The output stegoseed creates is a series of sentences containing the BIP39 words given by the user. The words are “in the correct order, and do not contain any other BIP39 words — We can simply remove all non-BIP39 words to retrieve the original seed,” details the platform’s developer. Stanley also provides an example of his work by re-wording an existing news article using a loaded BIP39 wallet seed.

“I manually removed all of the existing BIP39 words from the article, and then inserted the words corresponding to my own BIP39 wallet seed,” explains Stanley. “It contains some funds as a prize for whoever sweeps it first (update: this has been taken).”

Stegoseed: Hiding Bitcoin Seeds In Plain Sight

‘More Creative Ways of Safely Backing Up Wallets’

Bitcoin.com chatted with James Stanley, and he told us why he created a tool that conceals seeds and the possible benefits of utilizing this steganographic method.

“I love coming up with fun ways to hide wallet seeds,” Stanley tells Bitcoin.com. “We don’t need anything like this for traditional banking because the legal system pretty much guarantees that even if somebody gains access to your bank account, you’ll eventually get your money back. Bitcoin has no such guarantee, so as Bitcoin gains adoption I think we’ll see more creative ways of safely backing up wallets.”

Now Stanley does not suggest publicly uploading your seed online even if you use a steganographically encoded phrase. However, it may be a good method to store your keys at your house where a random thief will likely have no idea what it is, explained Stanley.

“I can see two classes of use cases for paper seeds in general: when you want to backup your wallet long-term, and when you need to travel somewhere where you can’t trust that your hardware wallet or other devices won’t be stolen or tampered with,” Stanley added.

In either case your adversary is a human who only has access to your stuff for a short period of time, and you only need your seed to stay secret for long enough that they don’t work out what it is. As long as they don’t take it with them, you’re home free. I think hiding the seed inside an innocuous block of text is a great way to help with that.

Stanley says he enjoys playing with Bitcoin, Tor, and cryptography in general. The software developer has also created SMS Privacy, a platform that allows users to buy mobile phone numbers anonymously for bitcoin. Stegoseed is another example of Stanley’s devotion to privacy and cryptographic methods using Bitcoin.

What do you think about Stegoseed? Let us know in the comments below.


Images courtesy of Pixabay and James Stanley.


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Tech Startup IOHK Initiates Cryptocurrency and Blockchain University Network

The blockchain research and development startup, IOHK, is building a network of university partnerships. So far, IOHK has partnered with the Scotland-based University of Edinburgh, as well as the Tokyo Institute of Technology, to bring together academics and students for cryptocurrency and distributed ledger studies.

Also read: University Business School ESMT Berlin Now Accepting Bitcoin

IOHK Aims to Tether Academic Research with Emerging Technologies Like Bitcoin

Tech Startup Initiates Cryptocurrency and Blockchain University Network IOHK is a technology company that specializes in blockchain and cryptocurrency development for academic institutions, government entities, and corporations. The startup was founded last year by Hoskinson, an original co-founder of Ethereum, and Jeremy Wood. The IOHK team partnered in February with two leading universities to promote the education and development of the emerging cryptocurrency ecosystem.

The University of Edinburgh will launch a Blockchain Technology Laboratory in its School of Informatics. The lab will enable students to collaborate on cryptocurrency and blockchain research and development. Additionally, the Tokyo Institute of Technology partnership will provide a similar center dedicated to cryptocurrency and blockchain innovation in the academic space. IOHK says the research lab at the University of Edinburgh will serve as the network of universities’ headquarters. The company also expects to create university-based research labs in the U.S. and Greece later this year.

“IOHK’s partnership with the University of Edinburgh provides unique opportunities for current students to become the next generation of blockchain and cryptography leaders,” explained Wood. “As a headquarter for IOHK’s international academic research community, we expect to see the university facilitate innovative projects that drive how businesses and governments approach blockchain and cryptocurrencies.”

Pioneering Research Among Educational Institutions

Tech Startup Initiates Cryptocurrency and Blockchain University Network The University of Edinburgh’s Professor Kiayias, and the school’s Principal Sir Timothy O’Shea, are excited to collaborate on cryptocurrency and blockchain projects in the School of Informatics lab. Furthermore, Tokyo Tech’s initiative will create a “Collaborative Chair”, where researchers and students will produce seminars, academic papers, open courses, lectures and more. Essentially, “pioneering this research area among educational institutions in Japan,” explains IOHK.

“This agreement is important because Tokyo Tech is seeking to enhance the collaboration with industries and universities in Japan and abroad by producing groundbreaking results in research and engineering which will be published in internationally renowned scientific journals and conferences,” detailed Tokyo Tech President Yoshinao Mishima.

Tech Startup Initiates Cryptocurrency and Blockchain University Network Hoskinson explains his company is pleased to partner with these academic institutions to further promote these technologies. “These partnerships will develop IOHK’s core business area, cryptocurrencies, and blockchain related technologies, and nurture and develop the global talent in these areas in the United Kingdom and Japan,” said Hoskinson.

Growing List of Universities Dedicated to Researching Subjects Like Bitcoin

The schools in Tokyo and the UK will join a growing list of universities dedicated to researching subjects like bitcoin and its underlying technology, blockchain. Universities such as Princeton, The International Business School ESMT Berlin, the University of Nicosia, Frankfurt School of Finance & Management, Massachusetts Institute of Technology (MIT) and many others have created blockchain research initiatives and cryptocurrency courses.

What do you think about the startup IOHK building a university network focused on digital currencies and blockchain? Let us know in the comments below.


Images courtesy of The University of Edinburgh, Tokyo Tech, and IOHK’s website. 


Bitcoin.com is ramping up our tools section with a variety of useful Bitcoin-related applications. There’s a price converter, paper wallet generator, a faucet, and a verifier to validate messages using the Bitcoin blockchain. We’re pretty excited to introduce these new widgets and tools, so our visitors have the best resources to navigate the Bitcoin landscape.

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Rental Marketplace Portion Uses Bitcoin and Smart Assets

Portion is an upcoming decentralized marketplace built on Bitcoin’s blockchain. Using Portion’s smart asset tags, users will be able to earn bitcoins by renting out anything to other users. Bitcoin.com caught up with CEO Jason Rosenstein to learn more about his new venture.

Also Read: Bitcoin Freelance Marketplace Rein Launches in Beta 

The New York-based 11-man team behind Portion is currently finalizing their angel funding and product development, including an iOS app. The company has launched a new website and is currently looking for beta testers for their upcoming product launch in April.

Renting With Smart Tags

Renting out unused goods, everything from an old toy to a new moving truck, can be tricky on a website such as Craigslist because items are not well tracked and ownership is not assured. Portion uses adhesive “holographic smart-tags” to represent a physical item as a Rental Marketplace Portion Uses Bitcoin and Smart Assetsvirtual asset on the blockchain, which can then be used to prove the authenticity of the physical item as well as its custody. “Smart-tags are fraud resistant and leave a watermark if removed”, Portion website says.

To put an item up for rent using Portion, a user “simply tags that item thereby making it ‘smart-property’”, Rosenstein explained to Bitcoin.com.

“Once tagged, the individual will upload product details, images, rental period, and all other details to the marketplace”, he conveyed. When another user wants to rent that item at an agreed upon price and duration, the item will be delivered to the renter, he detailed.

Beta testers will be using the ‘freemium’ model which will allow them to lend assets within their groups of friends. “This ‘closed network’ approach will allow users to tag, loan, and track goods to those they know at no fee. This will provide Portion with the insights and customer feedback we need to continue to be successful”, the CEO described.

Using Bitcoin’s Blockchain

Rosenstein said that “payments supported will be bitcoin & USD”, adding that:

We are using Bitcoin’s Blockchain to track assets.

Specifically, “We will be using Counterparty to create assets”, he further described, noting that “This will all be obfuscated to the end user, who is simply somebody wishing to put a good on the market”.

“Smart contracts are utilized to facilitate the marketplace, payments, security, and other crucial logistics”, he expressed. Using an example of a person loaning out a camera lens, he said the lens “becomes smart-property after it has been tagged with a Portion tag”. The cryptographic asset representing the lens is sent between smartphone apps.

Rates and Fees

Rental rates are set by the user for each item. “Users can charge whatever they want”, Rosenstein said.Rental Marketplace Portion Uses Bitcoin and Smart Assets

For Portion’s fee, the company is still “exploring algorithms to calculate fees” but the CEO believes that “it is generally accepted in the rental space to charge between 10% – 20%”, so future fees in that range may apply.

However, Portion plans to provide smart-tags for free at first. “Each individual will be able to procure 5 smart tags at no cost. From there, we will send more at no cost if they become a power user”, Rosenstein revealed. “This will ensure we continue to grow and nurture our advocates and give them everything they need to make our marketplace as liquid as possible”.

What do you think of Portion? Let us know in the comments section below.


Images courtesy of Shutterstock and Portion


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How One of the Original Cypherpunks Recalls Bitcoin’s Inception

In the early nineties, a group of cryptography experts called ‘cypherpunks’ gave life to ideas like digital currency and promoting freedom through the use of technology. Timothy C. May was one of these visionaries, and he predicted the rise of encrypted messaging, cryptocurrencies, and electronic contracts.

Also read: Europe Lays Out Roadmap to Restrict Payments in Cash and Cryptocurrencies

Timothy May Explains the Origins of the Cypherpunk Movement  

One of the Original Cypherpunks Recalls Bitcoin's InceptionJust recently the hacker house Paralelní Polis in Prague released a keynote talk by May. His speech, called “Thirty Years of Crypto Anarchy”, saw the former Intel engineer describe the early days of the cypherpunk movement. The group of privacy advocates and May started organizing in Silicon Valley, as well as online, using the cypherpunk electronic mailing list. Cypherpunks from San Francisco include Eric Hughes, John Gilmore, St. Jude and others.

May, being one of the most vocal of this crew, wrote many crypto-anarchy themed pieces throughout the 1990s and into the early 2000s. Many of May’s essays foretold the coming of technologies that would undermine perceived tyranny and surveillance of nation-states. One of these essays, written in 1988, was called the “Crypto-Anarchist Manifesto”. It envisioned the use of decentralized technologies like Bitcoin to ultimately disrupt the operations of corporations and governments.

Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions.

Noticing Satoshi’s White Paper on the Cryptography Mailing List

Following May’s recollection of the origins of the cypherpunk movement, the former engineer spoke about Bitcoin, Ethereum, and the infamous DAO debacle last summer. After distancing himself from the cypherpunk mailing list, May discovered an online character calling himself Satoshi who was distributing information on a new digital currency.

One of the Original Cypherpunks Recalls Bitcoin's Inception
Timothy C. May discussing the cypherpunk movement and bitcoin at the last Paralelní Polis Hackers Conference.

“In the mid-2000s, around 2006-2007, a lot of people began revisiting digital currency,” May explains to the crowd at Paralelní Polis. “In 2008-2009 through the ‘cryptography mailing list’, the successor to the ‘cypherpunk’s mailing list,’ a person going by the name of Satoshi issued a white paper proposing a system which solved the Byzantine consensus problem in a novel way using Proof-of-Work.”

Concerning Ethereum and the DAO

One of the Original Cypherpunks Recalls Bitcoin's InceptionMay details throughout his story how Bitcoin was a technology that did not ask for permission from government agencies. “[Bitcoin] is yet another example of something thrust out there into the world and was in widespread use before there was any time to stop it,” May states.

The cypherpunk movement’s founder then goes on to explain his opinion of Ethereum and the recent DAO incident. May explains that the hacker legitimately got away with the theft of Ether because of the way the code was written.

May explains that the “killer app for Ethereum has not yet appeared.” Ethereum is more general purpose than Bitcoin, but it is not yet clear what the killer app for that is going to be. May follows cryptocurrency news on Reddit and believes the many blockchains, announced daily, will most likely fall by the wayside.

May wrote about cryptocurrencies many years before bitcoin was conceived. During the end of May’s discussion, he detailed that the prospects of the original cypherpunk movement are still bright.

Watch Timothy May’s entire discussion on Bitcoin and the cypherpunk movement here

What do you think about Timothy May and the cypherpunk movement? Let us know in the comments below.


Images via Shutterstock, Pixabay, and Hackers Congress Paralelní Polis.


Do you want to vote on important Bitcoin issues? Bitcoin.com has acquired Bitcoinocracy, and rebranded the project to Vote.bitcoin.com. Users simply sign a statement with a non-empty Bitcoin address and express their opinions. The project focuses on determining truth backed by monetary value and transparency.

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The Butterfly Effect of Chinese Bitcoin Regulations

Over the past few weeks, China has implemented regulations across all bitcoin exchange operations within the country. This, in turn, has caused a significant drop in trading volumes within the region. Some people speculate that Chinese bitcoin traders are now going abroad finding friendlier overseas entrances to bitcoin exchanges.

Also read: An Alliance Forms Under China’s New Bitcoin Regulations

Some View China’s New Bitcoin Regulations as Friendly, While Others Say the Rules Severely Limit Chinese Markets

The Butterfly Effect of Chinese Bitcoin RegulationsAccording to reports, the People’s Bank of China’s (PBOC) new regulatory policies are affecting Chinese bitcoin traders. The decision to cease margin lending, add fees to every trade and pausing withdrawals has led to Japan taking the lead in global bitcoin trading volume. However Chinese bitcoin trader Lin Qi (pseudonym) tells the China Business Journal (CB) he is optimistic and traders should maintain their holdings rather than sell. To outsiders, Lin Qi says the situation looks dismal, but to him, the PBOC’s attitude toward bitcoin is still friendly.  

Moreover, a veteran bitcoin business owner in China, Li Qian (pseudonym), told CB that bitcoin turnover rate in China used to be high but now due to regulations things have changed a great deal.

“You should view the impact of this regulation storm from both the upstream and downstream directions of the business,” explains Li Qian. “For the those at the upstream direction, i.e. the bitcoin miners, they are not affected. Chinese miners continue to mine as usual. Our electricity and labor cost are always cheap. The most affected is the trading aspect of Bitcoin (exchanges). Currently, the impact of the Chinese market in the world has declined a lot, especially after charging fees, our turnover rate is now severely limited.”

Japan Takes The Lead

The Butterfly Effect of Chinese Bitcoin RegulationsOver the past few months, Japan has become a big player within the bitcoin economy. According to an employee from one of the top Chinese bitcoin exchanges, the upcoming Japanese regulations will encourage Japan’s trading volume lead. Japan’s bitcoin regulations are also viewed by regional exchanges as progressive and will help maintain Japan’s position in the cryptocurrency economy.

“The Japanese Yen market is now adopting zero fee policies, and became the new leader,” a Chinese bitcoin exchange employee tells CB. “Compared with other countries, Japan seems more friendly to digital currency. Also, the new regulation methods will be effective; Bitcoin will be a legal way of payment.”

Over the past few months, Japanese exchanges like Coincheck, Bitflyer, and Zaif have had a significant influx of bitcoin traders. Furthermore, the Japanese-based GMO Internet group plans to create an exchange as well adding to the growing list of bitcoin exchanges within the region.

What’s In Store for the Future of Cryptocurrencies In China?  

People are also speculating another reason the PBOC may be regulating bitcoin more strictly. According to a recent report by Bloomberg, some think the new policies may correlate with an upcoming PBOC cryptocurrency. In January 2016, China’s central bank detailed it was working on a prototype of its own and will have a developed virtual currency in the near future. The Bloomberg report details the central bank cryptocurrency is being advocated by senior officials in the region such as the PBOC deputy governor Fan Yifei.

Many people wonder what will happen to the bitcoin industry after all of these new regulations, inspections, formed alliances and closed door meetings. Li Wei, a researcher at 21st Century Research Institute, explains to CB that Chinese regulators are not encouraging bitcoin adoption, but are also not forbidding it. Wei believes the technology itself is beyond country borders and in the long run, it will be difficult for the nation state’s regulators to effectively manage it.

What do you think about the future will be for bitcoin in China? Let us know in the comments below.


Images courtesy of Shutterstock, Bitcoin.com, and Pixabay. 


Do you want to vote on important Bitcoin issues? Bitcoin.com has acquired Bitcoinocracy, and rebranded the project to Vote.bitcoin.com. Users simply sign a statement with a non-empty Bitcoin address and express their opinions. The project focuses on determining truth backed by monetary value and transparency.

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What to Expect From Ledgerx’s ‘Physically-Settled’ Bitcoin Options

Institutional trading and clearing platform Ledgerx is preparing to offer ‘physically-settled’ bitcoin options. The company is currently waiting for full regulatory approval from the U.S. Commodity Futures Trading Commission (CFTC) to trade and clear bitcoin options. Bitcoin.com caught up with CEO Paul Chou to find out more about their upcoming bitcoin derivatives products.

Also read: EU Parliament Report Recognizes the Bitcoin Blockchain’s ‘Dominance’ 

Ledgerx has two registration applications pending with the CFTC. The first is as a swap execution facility (SEF), for which it received a temporary registration approval from the Commission in September 2015. The other is as a derivatives clearing organization What to Expect of LedgerX's 'Physically-Settled’ Bitcoin Options(DCO), which any clearinghouse must register as before providing clearing services with respect to futures contracts, options on futures contracts and swaps.

“If approved, Ledgerx would be the first federally regulated bitcoin options exchange and clearinghouse to list and clear fully-collateralized, physically-settled bitcoin options for the institutional market”, the company’s website claims.

In December, Miami International Holdings (MIH) announced the completion of an investment in Ledgerx’s parent company, Ledger Holdings. Early investors of the company include Google Ventures and Lightspeed Venture Partners, a venture capital firm out of Menlo Park, California. The latest investment provides Ledgerx with “the capital that is critical to help us meet the minimum financial requirements necessary to be approved as a DCO and SEF by the CFTC”, Chou remarked at the time.

While pending CFTC’s approval, the company is “restricted from any live trading or clearing activities”, Chou told Bitcoin.com.

What Products Will Be Offered?

Bitcoin.com (BC): What and how many products will Ledgerx offer?

Paul Chou (PC): Ledgerx will initially list vanilla puts and calls on bitcoin with What to Expect of LedgerX's 'Physically-Settled’ Bitcoin Optionsstandardized strikes and expirations. Strikes will be in a range around the current spot price and expirations will be from one-to-six months in tenor.

BC: Where will these products be listed?

PC: The products will be listed on the Ledgerx SEF (Swap Exchange Facility) and cleared by the LedgerX DCO (Derivatives Clearing Organization). We’re an integrated exchange and clearing operation so all parts of the transaction lifecycle from contract listing, trade matching, to final settlement are handled by us.

‘Physically-Settled’ Instead of ‘Cash-Settled’

BC: Can you explain what “fully-collateralized, physically-settled bitcoin options” mean?

PC: Ledgerx’s focus is on physically-settled options. This means that the long holder of the option has the right to purchase, in the case of a call, or sell, in the case of a put, actual bitcoin. This is in contrast to derivatives that are cash-settled, where the holder receives fiat.

Many of our customers transact in bitcoin in the course of their business, so physically-settled options that deliver bitcoin are more useful to them.

BC: What is the benefit?

PC: Accepting bitcoin as collateral at the clearinghouse enables us to fully-collateralize physically-settled positions such as short call options, ensuring that the clearinghouse holds the full deliverable for all trades.

This model reduces risk for participants and enables comfort around clearing a new, volatile asset class. A long option holder will never have to worry about taking a forced haircut on his expected bitcoin deliverable.

Potential Customers

BC: Who can buy/trade Ledgerx products?

PC: Any participant who is an Eligible Contract Participant (as defined by the Commodities Exchange Act) may participate in trading on the Ledgerx SEF. Under this definition, retail would not qualify, but a range of hedgers and professional investors would be eligible.

BC: How much interest do you expect these products to garner?

PC:

We have significant demand from companies within the Bitcoin ecosystem, such as natural hedgers, as well as trading firms that are interested in the opportunity presented by a new options market.

BC: What is Ledgerx spending its time on while waiting for the CFTC’s approval?

PC: In addition to continuing various tests of the platform, we’ve been working on product development for other derivatives we can list down the line. We expect to have a range of interesting digital currency-related products that will suit both hedgers and investors / speculators; these products will look nothing like traditional financial derivatives and we aim to introduce them later this year.

What do you think of Ledgerx’s physically-settled derivatives products? Let us know in the comments section below.


Images courtesy of Shutterstock, Ledgerx, and CFTC


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The Practice of Predicting the Price of Bitcoin

“The hereditary gift of prophecy will go to the grave with me,” the infamous ‘super forecaster,’ Nostradamus, said in the year 1555. Indeed, there have been many investors and economists who tried to predict bitcoin’s price value over the years. Some of them have been significantly on point with their predictions, while others have been way off target.

For instance, Yves Lamoureux, president and chief behavioral strategist of macroeconomic research firm Lamoureux & Co., recently predicted that bitcoin will “eventually catapult” to at least US$25,000 or more.

Also read: An Alliance Forms Under China’s New Bitcoin Regulations

Macroeconomic Researcher Thinks Bitcoin Price Will Hit $25K  

The Practice of Predicting the Price of Bitcoin
Economist Yves Lamoureux believes bitcoin will bubble to $25,000.

According to economist Yves Lamoureux, bitcoin is on a course to blast off into bubble territory. Lamoureux states that he predicts an “end target of $25,000 or more” in regards to bitcoin’s price value. The president of Lamoureux & Co thinks that people are starting to look at cryptocurrency for the same reasons people buy gold.

“One of the reasons people buy gold is to avoid the dilution of fiat money,” explains Lamoureux. “This is why we are convinced that digital money or cryptocurrencies will eventually find its appeal with hard asset investors.”

Lamoureux details that, back when gold was trading at $300, proponents “fought tooth and nail” to get media coverage. He says that the gold market played out across many decades, in many cycles.

“And as blockchain becomes more ubiquitous, it lends credibility to the technology behind bitcoin. We feel that digital currencies, such as bitcoin, have now entered a similar cycle,” Lamoureux adds.

Other Predictions in the Past

The Practice of Predicting the Price of Bitcoin
South African entrepreneur Vinny Lingham’s bitcoin price predictions have come true.

Many others have tried to forecast bitcoin’s value. Just last week the firm Emerita Capital suggested bitcoin’s price may rise to over $3,600 if a bitcoin ETF is approved by the SEC.

Back in December, the South African entrepreneur Vinny Lingham predicted that the price of bitcoin would blow by the $800s and enter the $900s rather quickly. Lingham’s prediction came true, as many of his forecasts have.

 

Another notable past prediction was Tim Draper’s 2018 price forecast. A venture capitalist and strong bitcoin supporter, Draper said in a 2014 interview that bitcoin would hit $10,000 by 2018.

Many bitcoin experts tried to predict the cryptocurrency’s price in February 2014, and many of them were way off the radar. For instance, Alan Silbert, the CEO of Bitpremier, said, “It should be a year of big name business adoption. $2,000.” Even Ethereum’s inventor Vitalik Buterin revealed his bitcoin price prediction, stating:

 

Low thousands seems reasonable. It will never again grow as fast as it did in 2013, but I think there is still quite a bit of progress to go.

According to the Harvard Business Review, forecasting takes practice. “The top-performing ‘super forecasters’ were consistently more accurate, and only became more so over time,” explains the Review. “A big part of that seems to be that they practiced more, making more predictions.”

Predictions will always be a favorite pastime for humans to enjoy. It is no different when discussing the value of bitcoin in the years to come. Many will also try to forecast bitcoin’s death, as they have in the past…over and over again.

What do you think bitcoin’s price will be in 2018? Let us know in the comments below.


Images courtesy of Shutterstock, Pixabay, Yahoo Finance, and Twitter. 


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Analyst: Bitcoin’s Market Cap Could Grow ‘Well Beyond $100 Billion’

On Thursday, former Needham analyst Spencer Bogart, famed for predicting the sub-25 percent chance of the U.S Securities and Exchange Commission (SEC) approving a Bitcoin ETF, published a blog post estimating that bitcoin’s market cap could reach “well-beyond $100 billion”.

Also read: Needham: Probability of Approval for a Bitcoin ETF ‘Very Low’ 

Bogart has recently left his position as Vice President of Equity Research at Needham where he published many investment reports focusing on Bitcoin, including coverage of Analyst: Bitcoin's Market Cap Could Grow ‘Well Beyond $100 Billion’Barry Silbert’s Bitcoin Investment Trust. He has joined Blockchain Capital as managing director and head of research.

Launched in the fall of 2013, Blockchain Capital is a startup by Brock Pierce and co-founders Bart Stephens and Brad Stephens. The venture capital firm has invested in 42 companies including Abra, Alphapoint, Bitaccess, Bitfury, Bitgo, Bitpesa, BTCC, Chain, Civic, Coinbase, Gem, itbit, Kraken, Ledgerx, Stampery, Terion, Wave, and Xapo.

Tremendous Growth by All Stats

Bogart describes Bitcoin as “a quintessential disruptive technology that is moving from smaller and harder to serve markets toward more mainstream, high-value markets”, adding that:

Time and time again, Bitcoin has proven itself useful within market segments that are otherwise difficult or impossible to serve.

In addition, he observes that “Over the past few years, bitcoin has also grown tremendously by nearly all measurable stats”. He named two of his favorite indicators.

The first is the ‘estimated USD transaction volume’ which he said is “a reasonable proxy for economic activity of the Bitcoin network”, and its daily economic activity has more than Analyst: Bitcoin's Market Cap Could Grow ‘Well Beyond $100 Billion’quadrupled (CAGR 160%+) over the past 18 months. “Simply stated, Bitcoin has gained significant economic momentum”, he wrote.

The second of his favorite indicators is the ‘Bitcoin network hash rate’, which measures the computing power that is securing the Bitcoin network. “As is readily observed, this metric has increased five-fold since the beginning of 2016 (300% CAGR)”, he revealed, citing that “this amount of computing power is thousands of times more powerful than the world’s top-500 supercomputers combined”. While not a direct comparison, it indicates that the amount of computing power helping to secure the Bitcoin network is immense, Bogart conveyed.

Potential Market Cap of $100B+

While bitcoin has a market capitalization of over $18 billion at press time, Bogart wrote that “Unless trends reverse drastically, bitcoin is on its way to becoming a $100B+ market over the next few years”. In addition, he noted that :

There are many tailwinds pushing Bitcoin toward an adoption tipping point that I think will drive bitcoin’s market cap well-beyond $100B.

These tailwinds consist of Analyst: Bitcoin's Market Cap Could Grow ‘Well Beyond $100 Billion’factors that can be grouped into ‘internal’ and ‘external’ factors of Bitcoin and its ecosystem.

Internal factors include Bitcoin’s endemic features like multisignature protection and time-locked transactions, apps that require bitcoin to use, and maturing market fundamentals such as liquidity and stability. The external factors he cited are national policies and financial crises. National policies can be for or against Bitcoin such as Switzerland’s pro-Bitcoin stance or China’s capital outflow restrictions.

What do you think of the $100B+ market cap estimate? Let us know in the comments section below.


Images courtesy of Shutterstock and Blockchain Capital


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The Recently Discovered Cloudflare Bug Could Affect Bitcoin Users

On February 17 an individual had discovered a bug with the Cloudflare infrastructure, a company that many bitcoin companies use for DoS protection and other services. The severity of the bug is considered very bad, and security credentials for many bitcoin accounts should be changed.

Also read: The Bitcoin Exchange Thefts You May Have Forgotten

Cloudbleed Vulnerability May Affect Bitcoin Users

The Recently Discovered Cloudbleed Could Affect Bitcoin UsersThe Cloudflare system has reportedly been leaking significant amounts of uninitialized memory which could contain sensitive data, including two-factor authentication (2FA) secrets and passwords.  According to many reports including the person who found the bug, this may have been happening for months, and the data may have been spraying onto the open web.

The leak could possibly lead to people’s accounts being compromised on many bitcoin websites and services. Bitcoin websites that could be affected include Coinbase, Localbitcoins, Poloniex, Kraken, Bitfinex, Bittrex, Bitstamp, Reddit, and many more. Many people in the bitcoin community are warning others to reset their 2FAs and change passwords immediately. Alongside this, bitcoin companies who may have been affected are also warning customers to take the necessary precautions.

“A bug was recently discovered with Cloudflare, which Kraken and many other websites use for DoS protection and other services,” states the San Francisco-based bitcoin exchange Kraken. “Due to the nature of the bug, we recommend as a precaution that you change your Kraken security credentials: Change your password, Change your two-factor authentication (remove and re-enable it), Clients who use API keys should generate a new set of keys. You should similarly change your security credentials for other websites that use Cloudflare.”

The Extent of the Damage Could be Severe

The Cloudflare issue is very reminiscent of the Linode attacks in 2012 and the Heartbleed vulnerability back in the spring of 2014. However whether or not Cloudflare’s leak got into malicious hands is undetermined, but Bitcoiners on forums are shaken up. The uninitialized memory held by the Cloudflare service includes data such as cookies, HTTP content, passwords, and TLS certificates. The person who discovered the bug, Taviso says, “Cloudflare reverse proxies are dumping uninitialized memory.” Furthermore, Taviso also details “It took every ounce of strength not to call this issue ‘Cloudbleed’”

“I don’t know if this issue was noticed and exploited, but I’m sure other crawlers have collected data and that users have saved or cached content and don’t realize what they have, etc.,” explains Taviso’s opinion concerning the extent of the damage. “We’ve discovered (and purged) cached pages that contain private messages from well-known services, PII from major sites that use cloudflare, and even plaintext API requests from a popular password manager that were sent over https (!!).”

To stay precautious Bitcoin users should take a few minutes to change their passwords and reset their 2FA’s on certain accounts. A full list of password managers, 2FA services, and bitcoin companies that may have been affected can be found here.

What do you think about Cloudbleed? Let us know in the comments below.


Images courtesy of Shutterstock, and Pixabay. 


What’s the quickest way to see the current bitcoin price in your local currency? Click here for an instant quote.

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