Crypto-digest 05.01 — Ethereum’s dialogue divide Is slowing answers to its toughest questions; Circle adds Zcash to Crypto Investment App; Buffett: Bitcoin is more gamble than investment; UNICEF is mining crypto to raise funds for children; ANZ and IBM build blockchain solution for insurance; SEC official: ICO market shows need for securities regulation.
Ethereum’s dialogue divide Is slowing answers to its toughest questions
As ethereum, now the world’s second most valuable blockchain, grows larger and more diverse, it’s becoming clear its mechanisms for getting input from its constituency are proving problematic.
Indeed, a series of proposals targeted at controversial topics – lost fund recovery, the ether supply rate and the emergence of new mining hardware – have sparked questions within its developer ranks of late about how to coordinate messaging and find consensus among the often conflicting attitudes about the protocol’s roadmap.
Most recently, several developers even went so far as to worry such divisions could have broader repercussions after a new proposal, EIP 999, was introduced that some feared could lead to the creation of two incompatible blockchains.
And while many prominent developers, including software creator Vitalik Buterin, are pushing back on the idea that a split is probable, it remains a technical possibility, both because of the extent of the disagreement and the fact that anyone who runs the code is capable of choosing to fork off the network to take advantage of it at any time.
What’s more, understanding just how probable such an event could be is becoming a technical challenge of its own.
Not only are developers divided, but the wider community also seemed splintered on the subject, with a “coin-voting” website – a web page that enables ethereum users to vote on topics based on the number of ether coins they have – showing a nearly even distribution of those for and against.
Infighting on social media displays much the same sentiment.
“Right now, we are all working off signaling, which is a really imperfect way to determine the needs of the community,” Ashley Tyson of the Web3 Foundation, which lost $210 million in the Parity fund freeze, told CoinDesk. “You can monitor Reddit or Twitter, [but that doesn’t] necessarily provide an accurate reflection of the community,” she said.
However, the problem isn’t unique to ethereum.
Indeed, bitcoin developers, miners, startups and users have aired competing views at various times in the cryptocurrency’s history, most notably during the scaling debate (which in August last year, came to a head with some members of the community breaking off the main chain to form a competing cryptocurrency).
The issue seems to stem from developer conversations often occurring on platforms like GitHub and within channels and meetings where technical discussions take place. As such, it can be challenging for a non-technical audience to keep up, prompting concerns more novice users haven’t yet been properly represented.
And while not all software changes have a direct impact on the average user – they’re often just simple optimizations to improve the platform in discrete ways – some notable voices believe it’s important for a variety of stakeholders to have a say when it comes to more contentious changes, generally those that could have an impact on the core values of the system.
“You can’t create a governance process without actively involving all participants,” Péter Szilágyi, an ethereum core developer, told CoinDesk.
And speaking to the process of architecting systems in a way that everyone’s happy, he continued:
“As long as people feel something is being forced on them, they will fight it. Build something together that’s beneficial to both sides, and everyone will consider it an upgrade.”
If it’s not obvious from the fierce debates and vitriol spewed throughout the crypto community over the past few years, that’s easier said than done.
And currently, the only way to measure community sentiment to get that done is through social media channels and coin-voting sites.
While the chatter on social media can serve as a useful metric for gauging how the community feels about a particular topic, there are issues with this method as well. Trolls run rampant and fake accounts spam and manipulate, each spurred by possible financial gain or a simple willingness to escalate controversy.
Because of this, at a developer meeting last week, Jutta Steiner, CEO of Parity Technologies, which supports the proposal that last week so divided users, warned that social media could give the wrong impression of how deep the controversy over these topics actually runs, potentially adding fire to sensitive issues.
Speaking on EIP 999, Steiner said, “I’m not convinced that [EIP 999] is as contentious as it sometimes seems on social media.”
“I think it’s a pretty important point actually because often at the moment conclusions are drawn based on social media and it’s not the only space.”
While the mob mentality that proliferates on social media can be an effective way of getting your voice heard, it tends to silence subtler arguments and it’s unclear whether these mobs are even ethereum users, much less real people.
“Who knows how many multiple usernames one party is using,” Tyson told CoinDesk, asking, “and does that person even represent an ethereum community member?”
Used to try and clear some of the opaqueness up, coin-voting has become another way of measuring ethereum community sentiment. This method was first used heavily after The DAO hack, in an effort to get consensus on whether users wanted to hard fork the blockchain to get victims ether back.
At that time, many criticized the mechanism, saying that the poll was poorly communicated and wasn’t open long enough for ether holders to properly respond. Plus, because the weighting of a particular vote is relative to how much stake – or quantity of ether – a user holds, some argue it puts too much control in the hands of the ether rich.
Coin-voting mechanisms deal with the same criticisms today.
“Minority voices, no matter how valid they may be, are never heard,” Afri Schoedon, a communication officer at Parity, told CoinDesk, adding:
“The more money you have the more you can control the result.”
And there’s no easy solution at hand, although several developers and groups are trying.
For instance, as detailed by CoinDesk, several developers have started a working group named the Fellowship of Ethereum Magicians that relies both on a dedicated forum and in-person meetups to coordinate changes to the platform. Yet while the group strikes a median between the core developer community and other interested parties, it still doesn’t fully encompass the broader community.
That said, several ethereum members are knuckling down.
For one, ethereum communication officer Hudson Jameson has migrated the ethereum GitHub repository onto a dedicated webpage that highlights the various code proposals in a more accessible manner.
Member of the ethereum magicians Lane Rettig has also expressed his commitment to better communicating the processes of ethereum governance in a blog post, stating that his vision of ethereum is as ruled by “rational, constructive, well-intentioned, economically incentivized human beings brought together by selfish and selfless inclinations alike.”
As such, at the ethereum educational conference EDCON this week, Rettig has organized a workshop where he hopes to break down the network’s governance basics and the philosophical assumptions behind these mechanisms.
And still, there might be even more creative solutions on the horizon.
For instance, core developer Alex Van de Sande proposed a code change that he believes might solve all the contentious topics – fund recovery, ether issuance and ASIC mining – that are being debated right now.
Because ethereum developers are looking to change the consensus mechanism of the protocol to proof-of-stake, eliminating proof-of-work mining, Van de Sande suggests sending all future ether issuance to a smart contract, which acts as a kind of insurance policy for the community. In the event of lost ether, the pool can be used to make users that lost whole again.
About the proposal, Van de Sande writes, “It should be seen as a platform to settle disputes to avoid the implementation of contentious hard forks, not as a means to remove the power of users and developers to execute them.”
Still, the proposal has not been broadly accepted.
As such, Web3’s Tyson concluded:
“We don’t have the answers to these questions. But I hope that as a community we can begin to understand the questions and define the answers.”
Circle adds Zcash to Crypto Investment App
Circle is adding the privacy-focused cryptocurrency zcash to its list of offerings for its investment app, the startup announced Monday.
Users of the company’s Circle Invest platform can now purchase and invest the cryptocurrency, the company explained in a new blog post. The token joins bitcoin, bitcoin cash, ethereum, ethereum classic and litecoin as available currencies through the app.
“Our mission for Circle Invest is to democratize access to investing in crypto assets for every consumer. Making the wider breadth of assets available on Circle Invest will continue to be a part of this mission, and of course doing our best to ensure that we bring the crypto without the cryptic to everyone, anywhere,” the startup wrote.
The investment app was first unveiled last year and debuted in March, as CoinDesk reported at the time. While it was initially excluded, residents of the U.S. state of New York can now access the app, according to the company. The other states – Minnesota, Wyoming and Hawaii – remain unavailable, according to Circle Invest senior product manager Rachel Mayer.
She told CoinDesk that “Circle has an established working group dedicated to finding the best crypto assets for our customers,” but declined to say why zcash specifically was chosen.
However, tokens on the platform must be “consistent with our regulatory licensure,” she explained.
Buffett: Bitcoin is more gamble than investment
“Oracle of Omaha” Warren Buffett, whose aphorisms and advice many investors take as gospel, has laid into bitcoin, saying it’s a gamble, not an investment.
The Berkshire Hathaway chairman and CEO – and the world’s third-wealthiest person, according to Forbes – has long been skeptical of bitcoin. In his latest comments on the subject, he told Yahoo Finance on Saturday, “If you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more.”
“There’s nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”
Buffett bought Berkshire Hathaway, a struggling textile mill, in the early 1960s and turned it into one of the world’s most successful investment vehicles. According to his most recent letter to shareholders, the firm’s share price has increased by 2.4 million percent since the takeover, compared to 15,500 percent for the broad stock market.
That success has been attributed to a strategy of buying strong firms with business models that are simple to understand and difficult to disrupt. That philosophy has led Buffet to be skeptical of the technology sector and of bitcoin in particular, which he called a “mirage” in March 2014.
Bitcoin was trading at around $600 when Buffett made that comment. In January, when the price was around $14,000, Buffett doubled down, saying cryptocurrencies “will come to a bad ending.” The cryptocurrency’s price is close to $9,300 at the time of writing.
One of Buffett’s most famous quotes is “our ideal holding period is forever.” In Saturday’s comments, he further criticized bitcoin, arguing its value is too dependent on trading.
“Now if you ban trading in farms, you can still buy farms and have a perfectly decent investment,” he said, but if trading in bitcoin was banned, people would have no reason to invest.
He did not address the bitcoin “hodler” movement, whose advocates urge investors never to sell.
UNICEF is mining crypto to raise funds for children
The United Nations Children’s Fund (UNICEF) is seeking to harness supporters’ computers to raise donations via cryptocurrency mining.
To that end, the organization has launched “The Hope Page” – a website that mines cryptocurrency with the help of visitors’ computer processing power. The non-profit described in a statement that site will “allow Australians to provide help and hope to vulnerable children by simply opening the page while they are online”, ITnews Australia stated.
According to the website, The Hope Page allows visitors to select how much processing power they want to contribute to the mining process. The longer they stay on the site, the more cryptocurrency is mined.
“Mining is perfectly safe for your computer. If you’re ever worried about power consumption, turn down the amount of processing power you’re donating.”
Any cryptocurrency mined is turned into fiat currency and donated to UNICEF Australia to be used for help vulnerable children worldwide with life-saving supplies such as safe drinking water, food and vaccines.
The browser miner is powered by an opt-in version of the Coinhive API, AuthedMine, and mines the monero cryptocurrency.
According to Jennifer Tierney, director of fundraising and communications for UNICEF Australia, the organization had been seeking to use emerging technologies to raise awareness about current humanitarian crises and collect donations to support affected children.
At press time, over 1,600 people were seen donating computer power to aid the organization.
ANZ and IBM build blockchain solution for insurance
The Australia and New Zealand Banking Group (ANZ) has announced a blockchain solution aimed to improve efficiency in the insurance industry.
Working with tech giant IBM and financial services firm Suncorp New Zealand, ANZ is building a blockchain-based platform aimed to ease the transfer of data and premium payments between brokers and insurers, ultimately making processes faster and more transparent, a press release published Monday states.
According to Paul Goodwin, ANZ’s managing director institutional for New Zealand:
“This technology will work with existing industry solutions to capture relevant information; ensuring payments can be forecast and made without the need for reconciliation.”
Reconciling policy information and payments between broker and insurer is a “slow and painful process,” that can be addressed by the “efficient, single source of truth” blockchain solution, Goodwin added.
The planned solution stems from a proof-of-concept (PoC) that demonstrated blockchain’s potential in solving inefficiencies in the reconciliation of “bordereau” statements – lists of premiums payable prepared by a broker for an insurer, an ANZ white paper notes.
The PoC was built with Fabric, a blockchain-based platform developed by the Linux Foundation-backed Hyperledger consortium.
“We’re always looking at ways to generate operational efficiencies and the proof-of-concept was an exciting way to test whether a technology solution can speed up the reconciliation process for insurance premium payments, while at the same time improving the customer experience for policyholders and our business partners,” Tim Buckett, chief financial officer at Suncorp New Zealand stated.
“With this [blockchain solution], a future ecosystem with multiple insurers and multiple brokers is a viable outcome,” the white paper says, envisioning that that platform would improve the proposition for the insured parties in the future.
ANZ has been involving in number of blockchain projects, including the completion of a trial effort in June 2017, aimed at digitizing the bank guarantee process for commercial property leasing. The trial saw participation from IBM, Westpac and shopping center operator Scentre Group.
The banking group also took part in completing a blockchain prototype, in 2016, along with Wells Fargo and Swift, that allows banks to reconcile payments sent via Swift using a distributed ledger.
SEC official: ICO market shows need for securities regulation
The initial coin offering (ICO) ecosystem is what the wider securities marketplace would look like without regulation, a Securities and Exchange Commission (SEC) commissioner said Monday.
Speaking to CNBC, commissioner Robert Jackson made the comparison when talking about the agency’s role in regulating cryptocurrencies and ICO-derived tokens – and the prospect of tighter controls in the market.
“If you want to know what our markets would look like with no securities regulation, what it would look like if the SEC didn’t do its job? The answer is the ICO market,” he told the network.
Jackson notably remarked that “what I’ll say about bitcoin, in general, is that space has been full of troubling developments,” going on to say:
“Investors are having a hard time telling the difference between investments and fraud.”
Like SEC chairman Jay Clayton, Jackson said he has not yet seen an ICO token which does not look like a security.
Later in the interview, Jackson said that while the SEC is largely limiting itself to seeking enforcement actions against illegal activities in the market at present, the agency might step up its regulation of the space more broadly in the future.
“We are right now focused on protecting investors who are getting hurt in this market and down the road, we will be thinking about, I think we should be thinking about ways to make those investments work with our securities laws,” he said.