Crypto-digest for April 25: Ethereum’s top developers think a Blockchain split might be inevitable, Sequoia sues crypto exchange Binance after investment deal collapses, Blockchain insurance policy developed for hurricane-prone Puerto Rico, Iceland’s ‘Big Bitcoin Heist’ suspect has been arrested, $150K stolen from MyEtherWallet users in DNS server hijacking, China’s official government auditor is looking at Blockchain solutions, 20% of financial institutions could begin cryptocurrency trading in 2018: survey.
Ethereum’s top developers think a Blockchain split might be inevitable
Ethereum may be on the brink of a blockchain split.
At least, that was the mood at a meeting of top ethereum developers late last week where a discussion on a controversial code proposal called EIP 999 led some to speculate the scenario is now a possibility. Indeed, it’s now believed the proposal, which which seeks a technical fix that would return $264 million in lost funds, is so contentious, some users may chose to defect to a new version of the code.
Those in favor of the proposal point to the frequent losses of ether due to buggy contracts, arguing that the platform should ensure against such avoidable mistakes. But on the other side, many warn that editing code after deployment could damage not only the security but also the integrity of the platform.
“It’s clear no matter where you stand that the issue is contentious enough that if [EIP 999] goes forward and implements then it will generate a contentious hard fork,” developer of ethereum’s Mist browser Alex Van de Sande, said during the dev meeting on April 20.
“It’s unavoidable that it will create a split,”
Still, it’s important to note the size and influence of its backers. Spearheading the code change, for instance, is Parity Technologies, the ethereum software company behind the wallet that was impacted by the fund freeze.
Founded by ethereum co-founder Dr. Gavin Wood in 2015, Parity is the second most popular ethereum software, used by almost one-third of the network.
Speaking at the meeting, two representatives from Parity, communications officer Afri Schoedon and co-founder and CEO of the company Jutta Steiner, urged client developers to move forward with versions of the software equipped with the EIP 999 change.
“For me, the most logical step to take is just implement EIP 999, and I don’t see what waiting another four weeks to conclude would benefit,”
Steiner echoed this, emphasizing that implementing the code doesn’t necessitate a split.
However, there was notable disagreement on the assertion. Péter Szilágyi, the lead developer of Geth, the Ethereum Foundation-led ethereum software which serves the majority of users, disagreed, stating that if the code is made available it is likely to create a contentious split.
“We’re talking about exactly the same networks and we’re basically starting a tribalism war. I don’t think we’ll reach a consensus.”
Geth versus Parity
And the discussion, while informal, shows ethereum’s two biggest competing softwares are willing to go head-to-head on the issue, a development that could prove notable going forward.
Stepping back, though, it’s important to understand how Parity and Geth work together. Each software communicates directly with the ethereum virtual machine – which takes smart contract language and translates it into more general code – but Parity and Geth do so in different computer programming languages.
By keeping up with each other’s development, both softwares remain in sync and on the same blockchain not only with each other but also with ethereum more broadly.
As such, it is critical that Geth and Parity contain the same code.
If, for instance, one team implements EIP 999 and the other does not, the blockchain could fracture into two divergent groups – two ethereums.
And just as the developers of the software implementations are split, so are ethereum users. An ether vote recently showed that a majority of people were opposed to the code change, but that voting method has come under much criticism. Other developers are looking to social media to help them gauge community consensus, but so far, it remains inconclusive.
As such, Parity’s Steiner said that the company “had not decided yet” whether to implement the change. But representatives from the company told CoinDesk that it would be publishing a statement in the coming days.
What is known, though, is that without Parity, ethereum would lose quite a bit.
Not only does the company provide a significant portion of the mining power that secures transactions on the network, but it also represents a large portion of ethereum’s developer community.
Speaking to this and Parity’s drive to hard fork so they retrieve user funds, Van de Sande told CoinDesk:
“Parity is a valuable team of developers, and they have a very large incentive to create a fork and support it.”
But even with an incentive to move forward with implementation, there are plenty of disincentives.
For one, if a split on ethereum occurs, it won’t merely impact transactions, but also the thousands of tokens and businesses built on top of the blockchain, Van de Sande said in a blog post.
Following a split, each ethereum contract will simultaneously exist on both chains, or as Van de Sande described, “If you own rare online cats, now every one of them will have an evil twin in a parallel universe.”
Speaking to CoinDesk, Van de Sande elaborated, saying, “The best case scenario for a split is one in which the minority fork is a very small community and most apps know which way to move forward, but it still might create an adversarial community.”
However, there is hope for disincentivizing Parity from going forward without full consensus, he said.
If a split occurs, it is likely that both ethereum blockchains will lose value as the community splits into two groups. This means that the money lost as a result of the Parity fund freeze will decrease in value.
“Since there is so much locked ether, that can amount to millions of dollars,” Van de Sande said. “Then they might not be so incentivized to fork it.”
Yet, that still doesn’t eliminate the issue that hundreds of millions of dollars of ether are locked up whereby users (including some high-profile ICO issuers) can use them.
As such, Van de Sande is working on a method to refund the Parity losses with the same amount of value as was lost in the fund freeze, although he wouldn’t go into much detail.
Instead, he told CoinDesk:
“The question is how to give value to those tokens, and that’s something I, and I hope others, will probably be writing more about.”
Sequoia sues crypto exchange Binance after investment deal collapses
The founder of one of the world’s largest cryptocurrency exchanges is being sued by a big-name venture capital firm for allegedly breaching an exclusivity agreement.
According to a report by Bloomberg published Wednesday, Binance’s Zhao Changpeng is currently facing a lawsuit brought to the high court in Hong Kong by California-based venture capital firm Sequoia Capital.
Citing court documents dated Tuesday and March 26, the news source said the issue stems from a discussion of an injection of capital from Sequoia to Binance that started in August of last year when the platform was first launched.
As the talk continued, Zhao reportedly told Sequoia in mid-December – when the price of bitcoin has surged to a record high of nearly $20,000 – that a proposed valuation of $80 million for an 11 percent stake in the firm would not match the expectations of the firm’s shareholders.
However, as the deal fell through, the report said Zhao was also in talks with another potential investor IDG Capital, which expressed interest in investing in Binance over two funding rounds and evaluated the firm at $400 million and $1 billion, respectively. As such, Sequoia is accusing Zhao for breaching the claimed exclusivity agreement.
Bloomberg states that, although the firms planned to settle the matter in arbitration, Sequoia turned to the court to prevent Binance talking to other potential investors.
The court in Hong Kong has reportedly ordered Zhao not to talk to other investors until a hearing can be held to rule whether Zhao is liable over the allegations.
Binance has not responded to CoinDesk requests for comments at press time.
Blockchain insurance policy developed for hurricane-prone Puerto Rico
The firm behind a blockchain protocol tailor-made for the insurance industry has designed a decentralized policy to cover natural disasters in hurricane-prone Puerto Rico.
According to an announcement Tuesday, Etherisc was approached by two local ethereum developers to develop a policy that specifically provides hurricane damage cover for the Caribbean island’s residents.
The need for the policy arose from the many small businesses and low-income households that were hit by Hurricane Maria and later faced delayed claims and refusals to pay out on policies from traditional insurers, according to the startup.
Hosted on its distributed platform, Etherisc said the new policy will cut premium costs by eliminating the middle-men in the insurance claims process, as well as providing more transparency, with every transaction visible for both insurers and residents.
Making use of embedded smart contracts, the decentralized policy would trigger automated insurance payouts based on predetermined weather parameters, the team said.
Commenting on the upcoming launch, co-founder Stephan Karpischek said:
“The hurricane insurance is the first use case that embodies our belief in what insurance should achieve – helping people solve real problems and manage risks in their communities.”
The new policy marks Etherisc’s latest exploration into using blockchain technology to improve efficiency and customer satisfaction within the insurance industry.
At an event last Friday, co-founder Christoph Mussenbrock spoke of another product developed by the firm that automates insurance payouts when flights are delayed based on data transacted over the ethereum blockchain.
Iceland’s ‘Big Bitcoin Heist’ suspect has been arrested
Iceland’s now-infamous bitcoin miner thief has reportedly been arrested.
A Dutch police spokesperson confirmed that Sindri Thor Stefansson – who is accused of masterminding the theft of $2 million worth of mining hardware in what’s being called the “Big Bitcoin Heist” – was arrested in the Amsterdam on Sunday night.
Prosecutors are now looking to extradite him back to Iceland, the News Observer reported.
Stefansson walked out of a low-security prison and traveled to Sweden last week, as previously reported. In a letter sent to Icelandic news organization Frettabladid, he claimed he was held “for two and a half months … without evidence,” and kept in isolation during his imprisonment. After his order of detention expired, he left the prison and took a taxi to the airport.
“I simply refuse to be in prison of my own will, especially when the police threatens to arrest me without explanation,”
He wrote to the newspaper.
Stefansson did say he wanted to return to Iceland and claimed that he had been negotiating with police to arrange his return. He also threatened to use a fake identification to stay hidden from authorities.
In his letter, Stefansson did not address the 600 computers he was accused of stealing, nor have police given any indication that they have located the missing machines. The owner of the bitcoin mining hardware has offered a $60,000 reward.
The computers were stolen across four separate thefts in what is Iceland’s largest crime to date. Last month, police officials said that “everything points to this being a highly organized crime.”
$150K stolen from MyEtherWallet users in DNS server hijacking
Users of MyEtherWallet, a web app for storing and sending ether and ethereum-based tokens, experienced an attack Tuesday that saw users of the service lose around $152,000 worth of ether.
The company was quick to alert users to the danger, tweeting a warning at 7:29 a.m. EDT, within 15 minutes of when the hack began:
Even so, users took to social media to report that they were losing funds.
“Went on to myetherwallet and saw that myetherwallet had [an] invalid connection certificate in the corner,” rotistain posted to the wallet’s subreddit around 8:30 a.m. EDT, adding:
“As soon as I logged in, there was a countdown for about 10 seconds and A tx was made sending the available money I had on the wallet to another wallet ‘0x1d50588C0aa11959A5c28831ce3DC5F1D3120d29.’ I have no idea what happened.”
Micky Socaci, lead developer at BlockBits.io, explained the attack in a post to the ethereum subreddit.
“Do not use myetherwallet.com if you’re using Google Public DNS (184.108.40.206 / 220.127.116.11) at this moment. It seems these DNS servers are resolving the domain to a bad server that CAN steal your keys!”
His explanation fits with MyEtherWallet’s assertion that the attack was not on their side. Domain Name System (DNS) servers resolve website URLs to the appropriate IP addresses.
China’s official government auditor is looking at Blockchain solutions
China’s government auditor thinks blockchain can “open up a window” to more streamlined data storage.
In an article published Tuesday on its website, the National Audit Office of the People’s Republic of China discussed using blockchain to alleviate the bottleneck caused by its current data storage infrastructure. At present, the office is responsible for a massive amount of data, which it believes can be stored more efficiently on a decentralized ledger.
The National Audit Office, as one of the 29 cabinet-level departments in China’s State Council, examines all government-related financial transactions, ranging from administration expenses to individual public programs. It also supervises provincial and municipal level auditing bureaus that have their own designated commissioners.
Envisioning a decentralized system that would have every local office and accredited auditor as an individual node, the article states that a blockchain can reduce the central government’s workload while ensuring a traceable ledger that timestamps every transaction at all levels.
While still theoretical, the article offers a window into the thinking of a state-level government body in China regarding blockchain technology. It remains to be seen whether any work will actually go into developing this theoretical system.
According to the article, the need for decentralization stems from the existing operational model adopted by the central office, which is the only department that stores every piece of data reported by its commissioners at the provincial and municipal levels.
“Since bureaus at these levels do not keep the data, the National Audit Office runs into the situation where we have to expand our software and hardware capacity indefinitely – which is a ‘vicious circle,'” the Office wrote, concluding:
“The concept of blockchain and technology will offer us a window into solving [the] basket of problems mentioned above.”
20% of financial institutions could begin cryptocurrency trading in 2018: survey
The cryptocurrency market could get a lot more crowded this year.
According to a survey by Thomson Reuters, approximately 20% of financial institutions could get off the fence and begin cryptocurrency trading in 2018 over different time durations.
Most of the firms that expect to launch cryptocurrency trading this year, or 70%, are keen to do so in the next three-to-six months, according to the survey. Meanwhile, 22% provided a longer-term time horizon of the next six-to-12 months. Thomson Reuters polled more than 400 clients across its trading solutions Eikon, REDI and FX platforms.
Sam Chadwick, director of strategy and innovation at Thomson Reuters, specializes in the blockchain and took some time to talk with CCN from Zurich, Switzerland.
In 2015, Chadwick was doing his postgraduate Masters at Oxford University. While searching for a dissertation topic, Vitalik Buterin’s paper on Ethereum just happened to come out. He read it and decided to write on the impact of the blockchain on financial services. As fate would have it, Vitalik was only a kilometer away in Switzerland, so Chadwick emailed him and they met up for a coffee at Starbucks. Chadwick says:
“We had a chat for my dissertation on how Thomson Reuters would be impacted by the blockchain and smart contracts. [Buterin] said there would be some disruption of the client base you serve today if it pans out the way we think it will. But smart contracts needed some mechanism of getting off-chain data, like weather, temperature, interest rates and prices of other world assets. That became my thesis.”
Chadwick continues to lead blockchain and cryptocurrency innovation for Thomson Reuters from Zurich. The year after he joined, Thomson Reuters launched BlockOne IQ, which incidentally provides data for JPMorgan and National Bank of Canada’s debt issuance on Quorum.
In January 2017, prior to the more recent formal survey, Thomson Reuters’ Chadwick anecdotally polled the firm’s institutional clients about bitcoin and other cryptocurrencies, in response to which Chadwick said he was met with “blank stares.” By year-end 2017, however, when “bitcoin fever” hit, the tide turned. For instance, Thomson Reuters added bitcoin to its desktop platform Eikon as well as on its premium data feed for price discovery.
“That was one year ago. And then coming into the end of last year into Q4, prices of cryptocurrency assets went bananas. Bitcoin started soaring. That landing page we created for bitcoin inside Eikon moved up to be No. 2 of all the FX landing pages after the euro,” explained Chadwick.
While there’s speculation that Goldman Sachs is launching a cryptocurrency trading desk, Chadwick wouldn’t comment on them or the clients that were surveyed given the sensitiveity of the topic, except to say: “It was a combination of the large buy-side organizations — asset managers and hedge funds — as well as some of the bank trading desks.”
He also described the number of ways in which financial institutions more broadly could potentially begin cryptocurrency trading. “Whether they invest in the capabilities, form partnerships or quietly white-label, we don’t know. But there are different ways they .. new product without too much heavy lifting,” said Chadwick.
Chadwick went on to describe the appetite among Thomson Reuters’ clients for cryptocurrencies, which interestingly extends beyond just the top 10 digital currencies.
“One of the questions on our survey was if we were to cover cryptocurrency pricing and trading, which ones would you be interested in? The big ones were named, but then it was interesting to see some of the altcoins that people picked. It drew me to think about whether players are thinking about creating fund offerings in which you’re not 100% to bitcoin or 50/50 bitcoin/Ethereum. But you could actually hold a portfolio of 10-20 coins that would diversify your risk given the fact that these are startups,”
The financial institutions that were polled seemed less interested in the privacy coins like Zcash or Monero, which might not pass KYC checks, he explained. But they did request that Thomson Reuters cover ICOs.