Crypto-digest 26.04.18: The 17 millionth Bitcoin is about to be mined: what it means and why it matters, Crypto exchange gemini to monitor trading using Nasdaq Tech, Fitch Ratings: Blockchain is a potential ‘game-changer’ for insurers, Crypto exchanges pause services over contract bugs, Cisco claims new patent could apply to Bitcoin mining, Digital currency group adds Zcash offshoot ZenCash to crypto investment list.
The 17 millionth Bitcoin is about to be mined: what it means and why it matters?
Bitcoin’s limited supply is about to get a bit more limited.
Barring an unforeseen event, the 17 millionth bitcoin is likely to be mined in the coming day, data from Blockchain.info shows, a development that would mark yet another milestone for the world’s first cryptocurrency. That’s because as per bitcoin’s current rules, only 21 million bitcoin can ever be created.
Stepping back, the milestone, the first million-bitcoin marker to be crossed since mid-2016, is perhaps noteworthy as yet another reminder of the technology’s core computer science achievement – digital scarcity created and enabled by shared software.
In short, bitcoin’s code, since cloned and adapted by scores of other upstart cryptocurrencies, ensures that only a set number of new bitcoins are introduced to its economy at intervals. Miners, or those who operate the hardware necessary to track bitcoin’s transaction set, are rewarded with this scarce data every time they add new entries to the official record.
Still, there’s a lot of variability in the process.
Of note is that it can’t be precisely predicted when the 17 millionth bitcoin will be mined or who will mine it, due to the many minute variances that are created in keeping a common software in sync. That said, there’s a relative predictability. Each bitcoin block produces 12.5 new bitcoin, and as bitcoin blocks occur roughly every 10 minutes, about 1,800 new bitcoin are created each day.
As such, it’s perhaps best to view this event as a “psychological barrier,” Tetras Capital founding partner Alex Sunnarborg told CoinDesk, one that is interpreted differently by different communities.
Sunnarborg, for example, sought to stress that another way to interpret the result is that 80 percent of all the bitcoin that will be ever created have now been mined. In other words, only about one-fifth of the eventual supply remains for miners and future buyers.
Others see the milestone as one that’s ripe for appreciation of the technology and its achievements.
“I think it is awesome,” Tim Draper, the venture capitalist who bought millions of bitcoin seized by the U.S. government at auction in 2014, said of the coming milestone.
He told CoinDesk:
“I would bet the founders wouldn’t have imagined how important bitcoin would become in their wildest dreams.”
Crypto exchange gemini to monitor trading using Nasdaq Tech
Cryptocurrency exchange Gemini announced Wednesday that it is partnering with Nasdaq to monitor trading activities on its platform.
Gemini will use Nasdaq’s SMARTS Market Surveillance offering to automatically detect any possible price manipulation or other illicit activities, according to a Wednesday’s announcement.
Nasdaq currently uses this technology to monitor its marketplaces for abnormal activity. Part of the system compares historical trading data with real-time activity to look for “unusual trading patterns that could be potential breaches of exchange trading rules and practices,” as Nasdaq explains.
The cryptocurrency exchange will use it to monitor its major trading pairs for bitcoin and ether, particularly the crypto-to-crypto pairings and those involving the U.S. dollar. Additionally, any suspicious activities tied to bitcoin futures contracts will also be sought out.
Gemini chief executive Tyler Winklevoss said the move is part of the exchange’s efforts to maintain a fair market. He explained:
“Since launch, Gemini has aggressively pursued comprehensive compliance and surveillance programs, which we believe betters our exchange and the cryptocurrency industry as a whole … Our deployment of Nasdaq’s SMARTS Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants.”
Stepping back, Gemini has been making efforts in recent weeks to expand its exchange. In March, the company announced it may add additional cryptocurrencies – naming bitcoin cash and litecoin in particular – to its platform later this year.
Fitch Ratings: Blockchain is a potential ‘game-changer’ for insurers
One of the “Big Three” credit rating agencies thinks blockchain is a “game-changing technology.”
Fitch Ratings touted the potential uses for blockchain within the insurance industry in a report published Wednesday, saying “insurance is fertile ground for blockchain’s capabilities.”
In particular, the company sees blockchain as a tool for streamlining the transactions companies conduct while simultaneously reducing instances of fraud, according to a press release posted alongside the report, which wasn’t publicly available as of press time.
Those benefits are likely to be felt in the long-term – sometime in the next three to five years – whereas the short-term implications are likely to be minimal. As well, the tech is unlikely to impact the credit ratings of affected firms before that time, according to Fitch.
As Fitch explained:
“Efficiencies and cost reductions could be achieved by reducing the need for reconciliation and audits, automating certain processes and improving access to data. Estimates of the potential savings for the global (re)insurance industry from Pricewaterhouse Coopers and B3i, an insurance industry trade group focusing on blockchain, range from 15 percent to 30 percent of annual current expenses.”
That being said, the company also noted that “the uncertainties around this nascent technology remain pronounced.” In particular, it is unclear how widely blockchain technology will be adopted, and whether the pay-offs of using a platform built around the tech will outweigh the initial investment.
“There are numerous legal, regulatory and security issues that need to be addressed to facilitate wide-scale adoption,” Fitch wrote, adding that: “…the ultimate viability of the technology for the insurance industry will depend on a select group of industry leaders adopting blockchain to gain competitive advantages.”
Crypto exchanges pause services over contract bugs
As many as a dozen or more ethereum-based ERC-20 smart contracts have been found to contain bugs that let attackers create as many tokens as they want.
While the bugs – first identified on April 22 and April 24, respectively, in a pair of posts published by blockchain security firm PeckShield – aren’t tied to the ERC-20 standard itself, the issues prompted a number of exchanges to suspend ERC-20 tokens as they investigate. Those exchanges included OKEx, Poloniex, Changelly, Quoine and HitBTC.
Huobi.Pro separately announced on April 25 that it had suspended all coins, but has since limited that to ERC-20-based tokens. As of press time, Poloniex has moved to reinstate services for ERC-20 tokens.
In one example, an attacker transferred a whopping 57.9 * 10^57 BeautyChain Tokens – as shown by transaction data on Etherscan – on April 22, a development that prompted the initial investigation into the issue.
“Our study shows that such transfer comes from an ‘in-the-wild’ attack that exploits a previously unknown vulnerability in the contract. For elaboration, we call this particular vulnerability batchOverflow,” PeckShield’s post on the 22nd explained. “We point out that batchOverflow is essentially a classic integer overflow issue.”
The batchOverflow post outlines how the batchTransfer function in a contract has a maximum number of tokens that can be sent in a transaction, adding that the value of the tokens being transferred must be less than the total number of tokens that were generated. However, the “_value” parameter – one of the two that determine the total number of tokens – can be manipulated, which would then change another variable, resulting in an attacker being able to create as many tokens as they’d like.
Further, the attacker can bypass the barriers in the contract which would normally ensure that a reasonable number of tokens are being transferred.
“With amount zeroed, an attacker can then pass the sanity checks in lines 258-259 and make the subtraction in line 261 irrelevant,” the post explained, noting:
“Finally, here comes the interesting part: as shown in lines 262-265, the balance of the two receivers would be added by the extremely large _value without costing a dime in the the attacker’s pocket!”
While initial reports indicated all ERC-20 tokens may be impacted, the “batchTransfer” function is not part of the token standard.
The Medium post did not list the vulnerable projects, though it did note that the BeautyChain was the first project they discovered. In a sign of the seriousness of that bug, OKEx said on April 24 that it was rolling back trades on the BeautyChain Token.
The exchange also announced around that time that in light of the bugs, it was suspending desposits and withdrawals a project called SmartMesh trading due to “abnormal trading activities.” PeckShield noted that this was possibly due to the proxyOverflow bug, which, like batchOverflow, is a classic integer overflow problem. Certain variables can be manipulated to spontaneously generate large amounts of tokens.
One Twitter user noted that an attacker created $5 octodecillion in SmartMesh tokens.
As one of the posts noted, the danger exists that someone can use a vulnerable cryptocurrency to manipulate prices in their favor by trading with bitcoin, ether or another trading pair.
Representatives for the BeautyChain and SmartMesh projects did not immediately respond to requests for comment. However, a statement on BeautyChain’s website acknowledges the bug and states that trading will resume at an undetermined point in the future.
Similarly, SmartMesh announced that it would take steps to prevent price manipulation, saying:
“The SmartMesh Foundation will take the equivalent amount of SMT to the counterfeit amount and destroy it to make up for the losses caused, and keep the total supply of SMT at the value of 3,141,592,653.”
Fabian Vogelsteller, the developer who first proposed the ERC-20 standard, told CoinDesk that the bugs “just show that we need better best practices and tools to detect those mistakes.”
Cisco claims new patent could apply to Bitcoin mining
Network tech giant Cisco won a patent on Tuesday that could be applied to the bitcoin mining process.
Cisco submitted a patent application back in September 2015 for a “Crowd-sourced cloud computing” system, according to information from the U.S. Patent and Trademark Office (USPTO). The patent outlines how computer owners may be able to offer up their unused processing power for certain processes – including the energy-intensive mining process.
The filing describes how a user could partition their resources to create dedicated computing power for a cloud application. The cloud application would then be used for various purposes, Cisco notes, going on to explain:
“This model is suitable for, among other things, offering distributed processing and services that can be optimized for speed, volume, scale and resiliency, cost, and regulatory compliance–for example, distributed neighborhood theft protection systems, or cluster, city or municipality county relevant services… One such case involves bitcoin mining, which may be very computational intensive and is typically more convenient for every participant when done in ‘mining pools.'”
Cisco touts the benefits of distributed processing in the filing, noting that its system could be easily scaled and would be resilient against certain forms of attack. Further, “the service provider can use geographic distribution to offload or optimize network loading, as well as to resell large-scale, low-cost computing and storage capacity,” the company notes.
As previously reported, Cisco is one of a number of enterprise technology firms researching applications of blockchain, particularly in the area of connected devices or the Internet of Things.
The firm has also sought patents for other uses of blockchain, including one that would leverage the tech in order to track data for group chats.
Digital currency group adds Zcash offshoot ZenCash to crypto investment list
Digital Currency Group has added ZenCash, a little-known, privacy-focused coin, to its “conviction list” of cryptocurrencies. The other coins on the list are bitcoin, ethereum classic, zcash and Decentraland.
Speaking at the Stocktoberfest East conference in New York City, Digital Currency Group founder and CEO Barry Silbert asked audience members to raise their hands if they owned offshore bank accounts.
“There is approximately 10 percent of the world’s wealth held in offshore bank accounts,” he said after some of the audience members raised their hands, adding:
“I believe that financial privacy is going to become a really, really important thing not just in emerging markets, but in the U.S. as well.”
For this reason, Silbert said, privacy coins were one of Digital Currency Group’s primary focuses. That category includes the relatively prominent zcash, of which the lesser-known ZenCash is a fork of a fork – via ZClassic.
“I love the team,” Silbert said of ZenCash Wednesday, “I love the vision, and the community that we’ve gotten to know is incredibly passionate.”
He explained that the privacy coin is “broader” than its grandparent zcash, referring to its support for messaging and media applications.
Silbert said that ZenCash formed part of Digital Currency Group’s “conviction list,” meaning that the firm has “meaningful dollars in a token.”
Despite his enthusiasm for certain digital assets, however, Silbert made it clear that the space as a whole is rife with soon-to-be flops.
“Most of the tokens are going to zero,” he said.
Editor’s note: An earlier version of this article stated Grayscale Investments, a Digital Currency Group subsidiary, was investing in ZenCash.