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Section 6: Latest advancement in DLT technology

As  usual, but especially in this section on technical updates, it is assumed that the reader is up to speed with studies covered in previous reports. Past Blockchain Quarterly issues are available upon request.


INVESTMENT IN DLT TECHNOLOGIES

 

Investment in technology has now dwindled compared to the money being directed to application ventures. As more or less specialized investment funds continue to pour millions of their investors into cryptorelated endeavors, we observe that most are dealing with building businesses on top of platforms. A few native projects have been funded (e.g., Dfinity), but most of the technological research is currently being carried out thanks to the funding collected in 2016-2017.

 

CONSENSUS MODE – AND GOVERNANCE

[The consensus method on DLTs largely determines the scalability of the infrastructure, and in general scalability, features need to be governed carefully. Therefore, we discuss these topics mostly within the section on scalability.]

Technical developments on consensus modes

There is no shortage of progress on the proposal of alternative blockchains competing with Ethereum, EOS, Cardano, and others. Here are a few, and their broad terms:

 

  • Kadena: This interesting attempt was proposed by a team of former JP Morgan and SEC employees to “use Proof of Work in a scalable way”. We are referring here to a permissioned blockchain, Kadena (cadena means “chain” in Spanish) and its public implementation, Chainweb. The proposed trick is to use a Bitcoin-like Proof of Work mechanism, that is applied to several sidechains that refer to each other’s block headers, so that they do not diverge, and where the side-chains can communicate with each other. Miners try to mine on all chains simultaneously, and as the difficulty index is lower for each independent chain, the throughput rate increases.

  • Dexon: This is a specific implementation of dPoS, hence promising fast finality, low transaction fees, and high throughput with a governance council claiming no compromise on decentralization. They have highly ambitious intentions and are in frontal competition with Ethereum and others. They have also defined their language for smart-contracts, DexLang.

  • Avalanche: The claim is to reach finality in less than two seconds, for up to 10,000 tps. The protocol is leaderless Byzantine fault-tolerant, inspired by epidemic protocols and gossip networks added to the lessons learned from the classical PoW consensus mechanism of Satoshi Nakamoto. The concept relies a lot on metastability, that is, the system will converge towards a state, as opposed to being balanced.

 

In the challenge to transition from PoW to PoS (as Ethereum is trying to), one issue is to obtain true randomness for the base in several steps, especially the selection of validation nodes. If the system relies on pseudo-randomness only, it opens the door for an attacker to retroengineer it and be able to foresee the future seeds and identify when one will be chosen to validate a block. Even if some reasonably-complicated algorithms are devised to make it, in principle, out of reach, research continues to improve the situation.

Governance

It’s always Tezos that focuses attention on the deployment of onchain governance: they continue to roll out and test their infrastructure live, already with some feed-back analysis on the first on-chain vote implementation that occurred in June. Tezos developers appear to be satisfied with the representativity of the system, which in effect prevents large whales (owners of tokens in PoS) voting for upgrades, but also participants voting on behalf of a large number of people. This compares positively with MakerDAO’s implementation of voting, or Aragon, which is undermined by this phenomenon of plutocracy: governance by one whale. The feature that helps in Tezos is fundamentally the obligation of token holders to either vote themselves or delegate their vote. There is still quite a way to go for demonstration of on-chain governance though: Tezos users complain about too much friction to voting and people signaling their preferences. Inspiration might come from Cosmos, where a mechanism of overriding votes exists.

The vote on the EIP999 proposal on Ethereum is also instructive from a governance point of view. The debate is very controversial here, as it proposed unfreezing half a million Ether lost to about 600 wallets due to a Parity vulnerability in 2017. 55% of voters voted “no” to the proposal, but the polemics have not ended, because the vote was based on the amount of Ether owned. But this is in question because, for instance, another choice could have been to have one vote per participant. Then the keen interest of Ether holders is to vote against a decision that would somehow dilute them. Further, the Polkadot team is the most affected by the freeze, so the interests in presence are specific. A “yes” vote would have caused a hard fork, and consequently would have created a precedent for repairing faulty code, thus opening quite a Pandora’s box!


Hard forks

Hard forks are more common than perceived: but lately, they happen rather peacefully, with the pools of miners upgrading to the new code without the original chain continuing. This is the case on Ethereum and also on Beam, Monero, etc..

 

SCALABILITY

Scalability in terms of transactions per unit of time

More than ever, scaling blockchain throughput depends on some sort of sharding, side-chaining, or child-chaining. To an extent, it’s always the same story, deporting the throughput rate to parallel or attached chains.


Bitcoin SV has increased the block size from 128Mbites to 2Gbites, reaching a throughput rate of over 1000 TPS.

 

Lightning network for Bitcoin

On Bitcoin, as the adoption of the Lightning Network increases, so too, more micropayment channels will be added to the network. So, it is projected that ultimately, there will be millions of necessary on-chain transactions resulting from the opening and closing of channels, which will eventually again lead to congestion on the main Bitcoin chain, rendering the Lightning Network useless. Another issue is the locking in of funds by the two parties who want to cooperate in a channel. When both parties intend to transact more often, they will have to deal with rebalancing and refilling of channels regularly, which again increases interactions with the main chain. So, to try to solve this, developers have proposed a solution called “Scalable Funding of Bitcoin Micropayment Channel Networks” – a concept today commonly referred to as “Channel Factories”. The idea is to place a new layer between the main BTC chain and the Lightning Network, to enable the creation of payment channels without recording transactions on the Bitcoin blockchain. Each channel factory will consist of a network of individuals who can initiate a single transaction on the Bitcoin blockchain and have the funds committed to the whole network. The funds deposited and shared among this group of individuals is then known as a “hooked transaction”. Opening a channel factory is the same as opening payment channels in the Lightning Network. Once the factory is open, it can be used as a base from which many more channels are created. In other words, channel factories are payment channels that can be used to create more payment channels.


Ethereum

Here are a few updates, awaiting the October 8th11th DevCon in Osaka:

 

  • Ethereum’s implementation of PoS has been much anticipated. It had been planned to be finalized by the end of June 2019. To recap, two flagship components are to be implemented: Casper, which is the PoS algorithm to replace mining, and sharding.

  • The expectation is improved scalability by a factor of 1,000, but sharding is expected to be the last feature to be launched because the consensus mode modification will intervene first so that the main net becomes the “beacon chain”. What remains slightly unclear is whether, post-sharding, scalability in principle can be infinite, if we manage to have shards of shards not needing to communicate much with each other.

  • The developers have expressed their satisfaction that they seem to be able to contain the whole Ethereum 2.0 in 1000 lines of code.

  • Meanwhile, V. Buterin has admitted that the Ethereum blockchain is almost full, that is to say, right now, any significant throughput request augmentation would push users out.

IOTA

The Berlin-based IOTA team has unveiled what they consider a breakthrough in their direct acyclic graph solution. The solution’s name is Coordicide because it is killing the previously necessary ‘Coordinator’.

 

To recap, the “Coordinator” in IOTA was introduced in the infancy of the network to protect users’ funds. In a tangled network like IOTA, where there are few participants in the network (in its ‘infancy’), the problem indeed is that an attacker can try to create a vast number of nodes (a Sybil attack), so that it can take control of the validation of transactions. 

 

To prevent this from happening, a specialized node run by IOTA has been introduced in order to avoid this from happening again. For this reason, critics of IOTA that claimed it was not decentralized but under the control of its management to ensure transaction finality and prevent double-spends, were more than founded. IOTA has always claimed that they would shut down the Coordinator as soon as a sufficient number of transactions per second was reached in the live network, while also arguing that every node participating in the system could check that the Coordinator was indeed acting loyally. 

 

The claim here is that thanks to this new mechanism, IOTA is becoming the first scalable, fullydecentralized distributed ledger technology, and with fees still low thanks to the tangle approach. Their press release states that “at the heart of the Coordicide solution is a modular system that adds flexibility across all aspects of the IOTA protocol. This brings benefits of increased scalability, faster transaction finality, and easier node maintenance, as well as a variety of unusual use cases. Data streaming services and other real-time applications become a real possibility with IOTA; use cases that are not feasible in other DLTs”.

 

So, the Coordicide solution is to realize IOTA’s promise as a lightweight and feeless ledger, overcoming the trilemma of scalability, security, and decentralization, which continues to limit other DLTs and blockchains. How does it work, however? Several features have been introduced.

 

  • First, all nodes are identified thanks to a unique identifier, and a reputation system is used; each time a node makes a correct transaction, he gains ‘mana’, but this reputation is slashed if it intends to act in a malicious way (double spend).

  • Another module is secure auto-peering, as peers are ultimately the only source of information. Here the mechanism is designed to make the peering of a given participant both local and unpredictable (in particular preventing an ‘eclipse’ attack; that is, isolating a node to attack it).

  • Spam protection moves from a small, undistinguished PoW base to an ‘adaptive rate control’. The difficulty of the puzzle for accepting a transaction depends on the mana and on the rate of transactions submitted to the network per amount of time.

  • The choice of previous transactions on which a new transaction is pointing (or relying upon), that is, ‘tips’, is modified. It passes from a biased random walk to a voting layer to identify the appropriate parts of the tangle to attach transactions. Importantly, this evolution is supposed to solve the big problem that some healthy transactions could be left behind.

  • But the core of Coordicide is a new voting module that works to reach consensus thanks to enhanced “proactive” communication between the nodes within the network (“shimmer”). The introduction of a voting mechanism brings the following benefits: instead of waiting until the situation resolves itself with more and more accepted transactions, the nodes are talking to each other and resolve the situation proactively; a node’s vote is weighted according to its reputation (good actors have a more significant influence).

 

Cardano

A new release (1.6) is imminent. Details about staking are more precise: there will be two separate keys for spending and staking. If one decides to stake their ADA tokens, the tokens will never leave the wallet. Cardano will not require tokens to be locked in for a term – one can stake tokens at any time. This flexibility currently sets Cardano apart.

Others

  • IOST voices its specific “proof of believability” (PoB) approach. Let’s take a brief look at it: they have implemented a reputation mechanism (Servi points, which are non-tradeable) in which the probability of a node being chosen to validate a transaction is proportional to its IOST stake, its Servi earned, and its transaction and action history. 

  • Alephium is a project aiming to scale to tens of thousands of transactions per second in an open, permissionless network. Its core algorithm, called BlockFlow, claims to combine sharding technology with DAG and utilizing a scalable UTXO (Unspent Transaction Output) model to resolve the inefficiency of sharding performance during cross-shard transactions. By breaking down smart contracts into token protocols and data protocols, Alephium intends to “allow developers to build dApps that support high concurrency scenarios while maintaining the Turing-complete functionality of smart contracts”.

  • Harmony, which IEOed on Binance, implements a Fast Byzantine Fault Tolerant protocol, claimed to be ~100 times faster than Practical-BFT. Harmony also relies on a version of sharding similar to Zilliqa’s but also includes state sharding.

  • Conflux: Founded by individuals initially working on scaling the Bitcoin protocol to thousands of transactions per second.

 

Scalability in terms of ledger sizes

Cardano is advancing research with the motto that “not everyone needs data”. The study is focused on exploring pruning, subscriptions, compression, partitioning, sidechains, and sharding.

 

INTEROPERABILITY

The European Union is fostering research on interoperability; one of the initiatives pushed is led by SIAchain and Quant Network, trying to link using Corda and Ethereum.

 

Various initiatives pop up now and then to bridge blockchains, please refer to earlier issues of Blockchain Quarterly for relevant technical mechanisms.

 

CONFIRMATION TIME: FINALIZATION

MECHANISMS

[Nothing new to report in this section this quarter.]

 

LEDGER DATA STORAGE SOLUTIONS

[Nothing new to report in this section this quarter.]

 

PRIVACY – CONFIDENTIALITY

Mixing

Some "mixing" services have appeared to explore the possibility of grouping transactions with multiple inputs and outputs (such as Bitcoin), to obfuscate where the money is going.

 

The “fun” part is that regulators have immediately started to clamp down on these services! For instance, Bestmixer.io has been shut down by the Dutch regulator. This all too illustrates where the next crypto battle is being waged, as expected! By all means, states are not going to let go of their control over financial flows.

 

The actions of these official bodies are regarded as very serious by crypto communities. The controversial McAfee has stated: “Bitcoin mixers are now being targeted. Anonymity itself is slowly being considered a crime. The word ‘Privacy’ will soon mean ‘Criminal Intent’.” Vitalik even pressed for the creation of on-chain mixers in response to off-chain actions by regulators.

MimbleWimble

  • Grin has received an anonymous donation of 50 BTC. That may help speed-up whatever the community would like!

  • Beam has successfully conducted a hard fork in mid-August.

  • The market capitalization of MW tokens is still very low, with a considerable potential to increase.

 

Zero-Knowledge Proof

ZKP is increasingly being integrated into new chain proposals and distributed applications.

 

IDENTITY & PERSONAL DATA MANAGEMENT

Identity and personal data management are becoming a big topic, one that justifies a specific technical section. As we have not yet delved into this topic, we’ll do so now.


Let us first recap what identity management is, in a classical sense.

 

  • First, what is identity? Let’s say it is a set of metadata that is associated with a human being, e.g., name, sex, date/place of birth, address, etc.; some of these are assumed to be fixed, and some can change over time. By extension, personal data are an extended set of data that relate to a specific individual, with particular outreach (scholar, medical, etc.).

  • Then, the way the identity data is stored or accessed is very diverse: it can be an official document; it can be self-declared information associated with an online account in a merchant’s database (paper or electronic); it can be recorded in churches that attest to births and marriages. In principle, all these records could be cross-compared, and the aggregated data should indicate the same thing for the same characteristic recorded.

  • Finally, whenever there is a need for authentication, the way identity is proven is also diverse, and depends on the available means of verifying identity. When and why do we need to verify identity in the first place? Usually, when an individual is attempting to gain access to something or obtain a service they are entitled to, but one that would be denied if the person is not authorized. And as human beings always try to cheat established contracts, a valid identification of the requesting individual is necessary. The verifier is going to check a claim of an individual against, say, a reference view of the data. Apparently, biometric authentication enables official passport documents to be tested; the monkey standing there is the same as the monkey that went to the official administration to establish the record, and recognizing that the passport is a document that is very difficult to counterfeit, the probability that the rest of the information is accurate is reasonably high. When attempting to access a secure website, a password is required that matches the one specified at the time of registration, and with 2-factor authentication, again, only the person who set up the account is supposed to have access. But in every case, the verifier needs some grounds on which to acknowledge the claimed identity. So, in this context, what is blockchain offering when the proposal is made to manage identities and private data with it? First, let us summarize the current initiatives in the domain. We will discuss the following “services”, “functionalities,” and “use cases”:

  • Providing an official on-chain identity; that is, with cryptographic proof that it has been established thanks to an official check and commitment to the data.

  • Providing third-party insurance on the personal data of individuals; the most interesting application is to provide a KYC service.

  • I am proposing that users take back control of their data, in the sense that they should own it and give access to entities that request it, potentially for remuneration — consequently, the decentralization of the storage of user data.

  • They are proving one’s legitimacy without even disclosing the information itself, e.g., a night club being able to confirm that a person is above the minimum age without having access to the person’s actual age. The implementation of this relies on Zero-Knowledge Proof algorithms. It can be seen as an additional layer able to be implemented once the digital identity has been added to the blockchain.

 

Data protection regulations are a running concern in the blockchain arena. Intuitively, blockchain is not a right candidate to deal with identity and private data, because what gets written to a public blockchain is accessible to everyone, and remains so forever. The mere fact that an entry exists in a register is considered private data under GDPR law.


So let’s consider an interesting and concrete example of how some propose to make it function – a trial conducted by the city of Zug, Switzerland, where the government is considering providing citizens with a “digital, decentralized identity” thanks to a system based on Ethereum called uPort and developed by Consensys. The objective is that, for any situation where identity verification is required, the verifier would scan a QR code provided by the prover. Three features were targeted for the development of the service: digital (all automated), decentralized (no third-party database), and sovereign (that is, “Your identity is under your control and not under the government’s control, and it is all in your phone”). To establish this official on-chain identity, the following occurs:

 

  • The individual first gets the uPort app. The next step consists of creating then managing a private key for the individual on the Ethereum blockchain, as any wallet would do.

  • Then two smart-contracts are created by the app on the blockchain: a “Controller contract” that itself is controlling a contract where the identity data is accessible. This complication has been imagined for several reasons: (i) to enable recovery of the identity in case the smartphone wallet is lost, (ii) to allow for transfer of the ownership of the identity, and (iii) to prevent an identity from being totally and definitively open should the private key be disclosed. The controller smart-contract contains, in addition to access control logic, an access key to the identity smart-contract. So, it is replaceable as soon as one can create a new controller smartcontract that is fed with the access key again, thanks to a seed that is the real ultimate password controlled by the smart-phone application, and that the user has to keep safe. But either way, this is not central – the main idea is that an Ethereum address would represent identity.

  • Users then create their data/identity information record by entering the data using the application, which in turn, just creates a JSON profile object which it uploads to IPFS. And then it creates an entry in a specific and unique smart-contract, the uPort registry smart-contract. There, the hash of the identity is recorded. So, the data is stored offchain, but the hash is on-chain, ensuring that the information is not tampered with.

  • Importantly, the permanent identity smartcontract does not contain data, it is dedicated to being the signing authority when the individual in control of it wants to prove their identity. This smartcontract can then delegate the signature if it’s in a smartphone wallet.

  • It is also important to point out that in this process, the identity data is not encrypted; the main concern is to address the need for individuals to be able to prove they have sole control of that identity. We can, of course, think of a way to achieve this thanks to encryption of the data in IPFS.

  • At this point, users have a uPort identity and need to connect to Zug’s public administration webpage where they are provided with a QR Code that is scanned with the uPort application. This triggers the sending of the identity data to the administration, i.e., a civil officer of Zug, authenticated on the blockchain as such. The official checks that the data proposed are by the off-chain Zug public registers, and if so, at the time validates the physical visit of the requester. What happens is that the personal identification data of the citizen is combined with the QR code, hashed, and sent to the Ethereum’s smart-contract, where it is available for the officer to see and compare with the administration’s version of the data, combined and hashed.

  • Then, when this is done, for a routine identity control, the user would scan a QR code provided by the verification entity, which is a package of data containing their address/identification on the blockchain, and the request for the required information. The user can then provide the required information through a display interface that does not stay in memory, and by combining it with the initial hash publicly available, it can be checked that it is the same information that has been validated by the civil authority.

  • In effect, proving your identity narrows down to the same thing as knowing a private key (equivalent to a password) or owning a device that holds it. So, where is the real innovation? It’s quite different, in essence. For example, you could have one or a limited number of verified identification providers for the services where identification matters. So clearly, it is crucial to have an efficient way to keep the key (or password) safe, with potentially a high cost if it is lost.

  • Using blockchain for personal data management increases the security of authentication concerning the classic login/password process.

  • Note that, in turn, this can lead to some issues,because, if several terminals are holding this identity, then several individuals may be able to claim this identity unduly.

 

CRYPTOGRAPHIC ROBUSTNESS – QUANTUM COMPUTING EVOLUTIONS

Without revisiting the functioning and potential impact of quantum computing, let us state here that there is no shortage of frenzied press releases and technical development claims from firms involved in making this a reality. So, the inception of quantum computing is just a matter of time, which may be shorter than expected.


VOLATILITY

Analysis of volatility

Volatility was down throughout the bear market, and resumed with very violent moves, especially the price of Bitcoin, on June 25-26. Observers who were starting to comment that cryptocurrencies were finally starting to behave a bit more calmly, on their way to becoming suitable exchange and a store of value, are reconsidering their views.

Stablecoins
The thrilling Tether saga continued spectacularly – we have repeatedly observed the doubtfulness of Tether’s management in these columns. On April 25th, the New York Attorney General’s office said the team behind the crypto exchange, Bitfinex, which shares a parent company with Tether (iFinex), used funds from Tether to hide up to $850 million in (alleged) losses. While this is not the same as a hack, the effect would be the same if this money is lost.

BitFinex has claimed that it was due to some funds being seized in the UK, the US, Poland and Portugal (fun fact! these countries follow each other in alphabetical order, 2 by 2 – but let’s not assume that they have been picked non-randomly), hence the exchange was unable to allow for funds to be withdrawn by users. To solve the issue, an agreement was reached between the two sister companies so that Tether would send money to BitFinex. Just like that – merely an accounting operation.

So today, assuming that Tether was previously fully backed (which nobody can confirm), US$850 million of the treasure is missing. Compared to a market cap of US$2.7 billion, this is still a ~70% backing, so it is not too bad, after all. Somehow, if it were all logical after the market integrated the news, one USDT should trade at US$0.70. But this is not the case: it has generally maintained 1:1, so far. The question is, why?

Maybe Cardano’s Hoskinson gives us the key here, stating: “Well, at least Tether has more backing than my bank account.” It cannot be disputed that commercial banks have had almost non-existent obligations in terms of collateral at hand since the end of Bretton Woods, not to mention the situation of central banks. So, the backing is not such a problem, as long as users keep using it as a reference standard, and there is sufficient margin so that people who wish to exit can do so at the nominal rate. Is the situation dangerous? At some point, indeed. Is it new? Not at all. Should it be changed? Each will have an opinion. This debate of fractional reserves is poised to be starteded again, raising full concern.

 

Okay, with that said, are we sure that the situation is sorted out? Honestly, we are quite doubtful. Given the track record of the unreliableness of BitFinex and Tether’s management, it would be surprising for them to be out of the woods “so easily”. The parent company of both even made a move to issue their token…

 

Finally, let’s consider: what does this Tether situation imply? Today, it is still widely used in trading, so much so that 80% of Bitcoin trading is funded using USDT, on platforms that do not support fiat at all. The convenience of Tether is huge and desperately needed. So far, no other stablecoin has managed to challenge its position. Tether’s market cap is still about 10 times that of TrueUSD and USD Coin, and DAI is less than USD$100 million. What would happen if USDT collapsed? Well, those holding it would have worthless tokens, or worth the collateral that a liquidator will have at hand to distribute to them. Today, USDT is 1.5% of the total coin market cap, which fluctuates much more in a single day, so it would, in effect, mostly be unnoticed if it were wiped out. Of course, the turmoil would impact markets. But then auditable stablecoins would benefit from the space left (they have been prepared, for some time, to do so), and everything would resume peacefully – most probably.

 

Apart from Tether, a few other stablecoins appear on the market now and then, backed by various fiats, such as the Brazilian real and British pound, 
etc.

 

Also, a stablecoin backed by XRP is being developed by Kava Labs. USDX, its intended name, will be implemented as a Cosmos Zone designed to peg XRP and issue the XRP-collateralized token.

 

STANDARDIZATION

We observe repeated calls to standardize DLTbased infrastructures for given sectors, with power generation being one of the most prominent due to the complexity of the supply chains, as they currently exist, and due to the new functionalities that are feasible, thanks to the use of DLTs. But other sectors, such as the shipping industry, are actively discussing standardization.

 

MALICIOUS ACTIVITIES

Double spending – 51% attack

In the corporate world, blockchain experts are increasingly voicing their concerns that the risk associated with malicious actor taking control of a public blockchain on which their business would be running is simply not an acceptable situation, a risk that just cannot be considered when choosing the infrastructure on which to build their economic ecosystem with other stakeholders. In this sense, the 51% attack threat is quite a motivator for the establishment of consortiums governing permissioned blockchains.

 

Market manipulations

Crypto markets are still mainly as wild and unregulated as they have always been, and KYC has not changed the behavior of traders that would be punishable on regular stock exchanges. The question of whether it is legitimate for regulators to intervene in a space where people are playing one against the other is a philosophical one, but we believe that regulation is required when we observe people losing their money purely due to the efforts of some individuals, whose actions are designed and undertaken to achieve precisely that.

 

As the police saying goes, “investigate those who profit from crime”. One emblematic example of this is the alleged behavior of BitMEX, a platform that offers futures contracts. It generates much traffic and is very profitable. The platform takes its index prices from other exchanges (Bitstamp, Kraken, Coinbase), so a price shock on Bitstamp can result in many contracts being liquidated if traders can not honor the resulting margin calls. It is suspected that BitMEX plays on this by taking the opposite positions to its clients and acting deliberately on the reference crypto exchanges to create the event.

 

In general, when one observes unusual price volatility in the markets, it is hard not to think many actors are trying to influence the crowd with technical analysis signals that traders look for, such as trend line breaks, and moving average crossovers. They probably succeed occasionally.

 

Thefts, hacks, frauds, and scams

It has been Binance’s turn to be hacked: €35M were stolen, or 7000 Bitcoin. The security breach allowed attackers to access the credentials of users, including their two-factor identification codes. The most interesting part of the story was the idea (proposed by the Bitcoin community) to try to convince the majority of mining pools to roll back the ledger, that is, to re-write the chain discarding the theft transaction. However, Binance’s CEO decided not to go that way for the sake of maintaining the credibility of Bitcoin. Some observers also commented that the Binance hack might have been self-inflicted, as they were able to correct the breach very quickly, and it was a manipulation to cause the price of BNB, which had been rising too sharply, to fall before resuming the uptrend…

 

In Poland, the Coinroom crypto exchange shut down, and management escaped with customers’ funds. An e-mail had been sent to clients urging them to withdraw funds urgently, as their contract was being terminated.

 

RemixPoint, a Japanese exchange, also lost almost €30M in a hack at the end of July.

 

The Criminal Investigation Department in Gujarat, India, has exposed a former promoter of the BitConnect scam, which collapsed in January 2018. The scammer was luring people to invest in “Regal Coin,” promising unrealistic returns as high as 5000%. The estimated amount of the scam is hundreds of thousands of euros. It looks like authorities are now faster at recognizing Ponzis…

 

Otherwise, we have not yet mentioned it, but cryptocurrencies have indeed transformed the kidnapping/ransoming business, as it has become much easier to ask for funds to be sent to an anonymous crypto address, Monero or ZCash for example.

 

More generally, if we are always holding our private keys to a portion of our wealth, this can be seen as a return to the Middle Ages when it was not safe to travel by road, because thieves could easily threaten a person, and steal their gold. So too today, you could be in a similar situation of having to transfer crypto money fast and anonymously to an offender immediately.

Mining malware

More sophisticated mining malware continues to spread on the internet. To deal with this, Firefox now provides an add-on option to block crypto-mining scripts automatically.

 

Pump and dumps

As we previously explained, a pump and dump entails the following: a group of (anonymous) individuals creates social media channels, mostly on Telegram, and gathers as many followers as possible. This crowd is then told the precise moment when a pump is scheduled and is given an expected return – but, the identity of the target token is not disclosed yet. At the expected pump time, the target token is revealed, and the pump starts. Usually, it’s a meaningless shitcoin with low but sufficient volume. Typically, the price goes up in minutes, before going down a bit slower, in tens of minutes, back to more or less the initial level. The instigators of the pump and dump make money because they buy the chosen coin before they launch the pump; they then sell (dump) at a higher price, while the slowest followers are trapped and are the ones losing money (or are stuck with the token).


Some researchers have studied several hundred pump and dumps that have occurred during recent years. They then trained a robot to try to detect these maneuvers upfront. After testing a resulting strategy, they claim that they can generate a return of 80% in only three weeks. It is not clear why they are publishing this research, though, instead of just exploiting it…

 

SYNERGIES WITH OTHER TECHNOLOGIES

IoT synergy

Not surprisingly, much attention is being given to companies that specialize in deploying IoT sensors and actuators that are authenticated on the blockchain. A German company, Slock.it, is one of them. It was acquired in June by Blockchains, LLC, a Nevada company with a project to build a blockchain-enabled smart city in Nevada.

 

Artificial intelligence

Blockchain and AI are separable, as we have previously mentioned, however, in some industries, they are increasingly being perceived as complementary, which is good.


MOMENTUM GAINED BY DLT ALTERNATIVES TO BLOCKCHAIN

Direct Acyclic Graph (=Tangle)

The progress published by IOTA is earning the project some momentum in the fight towards reaching mainstream adoption.

 

Corda, Hyperledger & other permissioned non-blockchain DLTs

The flow of projects announced that use Hyperledger and Corda is continuing at a reasonable pace.

 

CONCLUSION OF THE TECHNICAL DEVELOPMENTS
As time elapses since the inception of the technology, new DLT innovations are, of course, becoming more challenging to find. However, as more intelligent researchers and relentless developers have been attracted in the domain, the amount of expended effort has dramatically increased as well, which, up to now, has enabled technical progress to keep a reasonable pace. This is illustrated this quarter by the progress made by IOTA and channel factories.