Bitcoin

Here’s how we start to stabilize Bitcoin, Ethereum

News of Bitcoin and Ethereum is everywhere these days. The two cryptocurrencies have had returns over the past year that make a big-time hedge fund manager look like he’s running a lemonade stand in front of his parents house.

Since last year, Bitcoin is up (at the time of this writing) 390.55 percent and Ethereum’s currency, Ether, is up a mind-blowing 1,896.13 percent.

New money is pouring into the cryptocurrency space, with one investment fund announcing a raise of $400 million dollars. Though talk of the inevitable Tulip mania and Internet 1.0 bubble burst abounds (and has for years), it does not feel a burst is likely anytime soon. (Note: not investment advice.) And that is actually kind of a problem.

If you go back to the Bitcoin whitepaper (everyone should read it, it’s fairly consumable), the title is very clear about its intent: “A Peer-to-Peer Electronic Cash System.”

Bitcoin, Ether and a host of other currencies are faced with hourly and daily price volatility (in relation to the US dollar). It is not uncommon to see drops of $50-$100 in Bitcoin and $30-$50 in Ether in a day, even if the overall trend line is up. On multiple occasions, we have seen drops of 10 and 20 percent in one day.

What this means in practice (and I know from firsthand experience) is that the earrings I bought for my wife with Bitcoin that cost $13 at the time of purchase were worth $16 a few hours later and today are the equivalent of $28. My wife is worth it, of course, but such volatility can wreak havoc on people. Even more so on companies, which desire stability for financial planning purposes.

The Bitcoin believer’s mantra of “HODL” or “Hold On For Dear Life” is precisely the opposite of what you want in a system designed to encourage people to treat digital currency like cash.

The need for crypto-stability

True believers in blockchain and decentralization recognize that these new technologies and monetary systems will never achieve mass mainstream adoption with these kinds of violent swings.

Ethereum’s creator, Vitalik Buterin, identified this challenge back in November, 2014 in his post “The Search for a Stable Cryptocurrency.” It’s a very long and complex read (as are many of his writings), but he ends it with a fairly prescient prediction:

“There would then be multiple separate classes of cryptoassets: stable assets for trading, speculative assets for investment, and Bitcoin itself may well serve as a unique Schelling point for a universal fallback asset, similar to the current and historical functioning of gold.”

The groundwork for this environment is being laid right now, as the number of new crypto-tokens continues to grow into the thousands. The second part, however, the “universal fallback asset” has not materialized fully. The SchellingCoin is the search for the stability.

Many of the advanced financial instruments that Wall Street uses and that are familiar to many of us through the 2008 housing crisis and the book/movie The Big Short have achieved some degree of notoriety. Still, we don’t want to throw the baby out with the proverbial bathwater.

Vitalik further wrote that “One of the main applications of Ethereum that people have been interested in is financial contracts and derivatives … [and] the underlying concept in fact has a number of legitimate uses, some of which actually help people protect themselves against the volatility of financial markets.”

A new crop of startups is emerging to do just that with “smart contracts.”

Smart contracts: The foundation of stability

In simplified terms, the smart contract takes the “if/then” statements that form the basis of legal and business rules and puts them into computer code. Then, with the security of the blockchain behind it, the contract is executed automatically without any human interference or risk of tampering.

Ethereum was built to support smart contracts in a way that Bitcoin was not (though a recent release by Rootstock is seeking to make it easier to run smart contracts on the Bitcoin blockchain). This fact explains why almost every new crypto-token being issued today happens in the ERC20 format, which is designed specifically for the Ethereum blockchain. It may also be a core driver of the huge Ethereum price run-up.

By relying on smart contracts, in theory, we have the ability to remove centralized systems (like banks), which introduce risk and lack transparency, and lower fees significantly. Venture capitalist and thought leader Vinay Gupta highlights that smart contracts can reduce “the 7 percent margins taken by all manner of middlemen to a more realistic 0.07 percent margin.”

If you can reduce the cost of executing contracts by 99 percent AND do it with increased confidence that the assets are not going to be highly volatile, that would be fairly appealing to an extremely large number of people.

The goal of each of these smart-contract-driven projects is to bring some degree of financial stability to the crypto-asset market.

Maker, MKR, and SAI: Stability through programmatic collateral

The first effort I’ve come across of a crypto-native solution to volatility came from an organization called MakerDAO. In its original white paper, it introduced a very complex concept known as a DAI, that would derive its value (and stability) from a simple centralized collateral custodian model.

However, in a sign of how quickly things change in this industry, MakerDAO has already abandoned that pursuit because, in the company’s own words, “an individual custodian takes on some level of risk, and no one enthusiastically stepped up to take this risk on.”

But don’t confuse the company’s change in focus as a lack of intellectual rigor. On the contrary, there is some heavy thinking in its latest effort, known as a SAI (or Simple DAI). A SAI is designed to be the stable coin that people need to make long-term investments. It is backed by collateral (at this time, only Ether, aka ETH) through a mechanism known as a collaterized debt position (CDP). The total number of SAI available is limited by a debt ceiling, and SAIs are created and destroyed (through the power of smart contracts) as…

Why Ethereum is outpacing Bitcoin

Image Credit: Wit Olszewski / Shutterstock

While Bitcoin is currently trading at close to its all-time high, its dominance in terms of proportion of total cryptocurrency market cap is rapidly decreasing — ground largely given up to Ethereum.

This shift is probably being driven by a few factors. Despite its recent appreciation in value, as a technology, Bitcoin has stagnated over the last three years. Two rival factions have emerged with violently opposing views on what should be done to allow the Bitcoin network to handle more transactions than it can right now. While Bitcoin has been paralysed by indecision, Ethereum has raced ahead with technology that not only does everything Bitcoin can do faster, in higher volume, and at lower cost — it does a lot more besides.

As a “hard fork” looms, which looks set to split Bitcoin into two separate currencies that will have to fight for custody of the Bitcoin moniker, anxious Bitcoin holders are increasingly divesting themselves of Bitcoin to acquire Ether — the cryptocurrency that fuels the Ethereum network.

The other side of it is that Bitcoin is really only useful as a store of value. Even then, its usefulness for actually transacting value is limited. In a world where people are used to online payments being confirmed instantly, Bitcoin transactions can take anywhere from tens of minutes to several hours, depending on how busy the network is. It’s also expensive — especially if you’re only sending small amounts. The average transaction currently costs about $1.50.

Ethereum, on the other hand, was never intended as a Bitcoin competitor. Ethereum is actually a platform for new kinds of decentralized (often financial) applications (dApps) that run on a peer-to-peer network of computers. These dApps are designed to disintermediate the…

AMD’s Radeon GPUs are rare because they’re good at mining bitcoin copycats

Bitcoin and other cryptocurrencies may enable online threats like ransomware to spread, but they are also fueling demand for powerful and efficient new graphics cards.

It’s difficult to find an RX 500-series Radeon graphics card at retail or online right now in part because people are seeking them out to mine certain bitcoin-like cryptocurrencies, chip manufacturer AMD explained to CNBC. In April, AMD released its latest round of Polaris-powered GPUs which can render graphically intensive scenes without drawing excessive amounts of power. That combination of number-crunching capabilities and energy efficiency has attracted consumers who want to “mine” altcoin cryptocurrencies, which are alternatives to bitcoin.

“The gaming market…

This website displays the ever-fluctuating value of Bitcoin in real-time

bitcoin

The value of Bitcoin has been soaring uncontrollably over the last few months, especially during last week. But given the notorious volatility of cryptocurrencies, this glorious run might be close to an end any moment now – and this handy tool lets you spot this in real-time.

Designed by developer Johan Nordberg, Realtime Bitcoin conveniently displays the constantly fluctuating exchange rate of the popular e-currency as it happens.

In addition to the current value of Bitcoin, the website also pulls up the total ‘estimated’ amount of money sent, the total worth of coins in circulation as well as the net power consumption…

It’s time to take your medicine and stop WannaCry ransomware in its tracks

There is a way to stop WannaCry.
There is a way to stop WannaCry.

Hackers attacked a hospital system with ransomware and demanded $17,000 in bitcoin payment.

This was not part of the potentially deadly Global WannaCry Ransomware attack that slammed Britain’s National Health Services (NHS) on Friday. It took place over a year ago, and the target was Hollywood Presbyterian Medical Center in Los Angeles.

Like the NHS, Hollywood Presbyterian chose to pay the ransom so they could quickly regain control of their antiquated systems.

Ransomware attacks have been on the rise for more than a year and, according to Jonathan Penn, Avast Security’s director of strategy, WannaCry could be “just one wave in a very long series.”

So far, Avast, a security solutions company, has detected and prevented almost a quarter of a million WannaCry ransomware attacks around the world.

If companies, people and governmental agencies like the NHS knew that ransomware was exploding last year, why weren’t they preparing themselves? It’s like the ground floor of a 28-story high-rise is on fire and, instead of putting out the flames, we just keep taking the elevator up to another unaffected floor.

There are many excuses businesses and government agencies use to avoid upgrading their software. But the dramatic rise of ransomware attacks means it’s time for them to take their medicine and figure out a way to get it done. Otherwise, these attacks will just keep spreading with organizations paying ransoms that are cheaper than upgrades, until they’re not.

Microsoft and most security experts will tell you that the surest way to prevent a ransomware attack is to keep your Windows system up-to-date and fully patched, run security software, and avoid opening email from unknown parties and opening unknown links.

Those running Windows 10 can’t even avoid updates (they can postpone for a week or so, but that’s it). However, most people and businesses aren’t running Windows 10. They’re on older platforms like Windows 7, which Microsoft will only patch through 2020.

A shocking 7% are still on Windows XP, a 16-year-old operating system Microsoft stopped supporting years ago (but patched just for this attack). Anecdotal information indicates that businesses and governmental agencies around the world are the primary culprits here. Late last year, Citrix reported that the majority of NHS hospitals were…

Microsoft says WannaCry ransomware attack is a wake-up call for governments

A programmer shows a sample of a ransomware cyberattack on a laptop in Taipei on May 13.
A programmer shows a sample of a ransomware cyberattack on a laptop in Taipei on May 13.

A global ransomware attack hit thousands of Windows-based computers late last week, locking users’ files and demanding Bitcoin payment to unlock them.

The attack, called WannaCry (or WannaCrypt), is a lesson to both the IT industry and consumers, Microsoft’s President and Chief Legal Officer Brad Smith argued in a blog post Sunday. But most of all, it is a wake-up call for governments, whose stockpiling of software vulnerabilities can be as dangerous as getting their missiles stolen.

According to Smith, all Windows computers that are fully updated are safe from the attack, and Microsoft has been “working around the clock since Friday to help all our customers who have been affected by this incident.”

And while the attack shows how important it is for users and companies to keep their computers updated — as well as tech companies such as Microsoft to promptly release security updates and make sure their…

Ransomware attacks on hospitals could eventually kill someone

According to a statement by Britain's National Health Service, several hospitals across England have been hit by a large-scale ransomware cyber attack, causing failures to computer systems.
According to a statement by Britain’s National Health Service, several hospitals across England have been hit by a large-scale ransomware cyber attack, causing failures to computer systems.

The ransomware attacks spreading across at least 99 countries on Friday are the type of attack that could one day kill someone.

That sounds like hyperbole, but this attack froze and disrupted computers inside many National Health Service hospitals in the United Kingdom, and it’s not hard to see how an attack on hospital computer systems affects patient care or, at the very least, forces patients in need to find help elsewhere as hospital staff scramble to get vital systems back online. That type of disruption, combined with a person faced with a life-threatening condition, has the potential to result in the loss of life.

Cybersecurity experts have long used the phrase “where bits and bytes meet flesh and blood,” which signifies a cyberattack in which someone is physically harmed.

There’s no indication that someone was harmed on Friday as a result of this particular attack. But UK hospitals were forced to redirect patients from affected hospitals after a ransomeware virus spread through hospital computers, locking them down and demanding bitcoin payment in exchange for the return of the information contained in those computers.

Staff also asked that patients not come in unless they were experiencing an emergency. Some hospital staff couldn’t access patient records, and others had to…

Bitcoin hits all-time high of more than $1,700

(Reuters) — Digital currency bitcoin hit a record high on Tuesday as demand for crypto-assets soared with the creation of new tokens to raise funding for start-ups using blockchain technology.

Blockchain, the underlying technology behind bitcoin, is a financial ledger maintained by a network of computers that can track the movement of any asset without the need for a central regulator

Bitcoin hit a record $1,760.40 on the BitStamp platform and was last at $1,747.89, up 6 percent on the day. So far this year, bitcoin has surged nearly 80 percent. Bitcoin’s market capitalization on Tuesday soared to $52.5 billion, according to data from coinmarketcap.com.

Aside from being an asset that can be traded on exchanges like stocks and bonds, bitcoin has become a mode of payment for some retailers, such as Overstock.com, and a way to transfer funds without the need for a third party.

“We have an influx of new capital in the space and that capital goes back and forth among crypto-assets and bitcoin,”…

Can Blockchain, A Swiftly Evolving Technology, Be Controlled?

Blockchain is an exciting technology, but for it to go mainstream governments must be able to regulate it.

The headlong pace of technological change produces giant leaps forward in knowledge, innovation, new possibilities and, almost inevitably, legal problems. That’s now the case with blockchain, today’s buzziest new tech tool.

Introduced in 2008 as the technology underpinning Bitcoin, a digital currency that is created and held electronically without any central authority, blockchain is a secure digital ledger for any kind of data. It simplifies record keeping and reduces transaction costs.

Its range of applications in commerce, finance and potentially politics continues to widen, and that has triggered a debate around how to regulate the tool.

Because it does not require a centralised authority to verify and validate transactions, blockchain enables people who may not trust each other to interact and coordinate directly.

With blockchain, there is no middleman in peer-to-peer exchanges; instead, users rely on a decentralised network of computers that interact through a cryptographic, secure protocol.

Blockchain has the ability to “codify” transactions by deploying small snippets of code directly onto the blockchain. This code, generally referred to as a “smart contract”, executes automatically when certain conditions are met.

An early example of smart contracts are the corporate-oriented digital rights management (DRM) systems limiting uses of digital files. Having DRM on your ebook may restrict access to copying, editing, and printing content.

With blockchain, smart contracts have become more complex and, arguably, more secure. In theory, they will always be executed exactly as planned, since no one party has the power to alter the code binding a given transaction.

In practice, however, eliminating trusted brokers from a transaction can create some kinks.

One high-profile smart-contract failure happened to the DAO, a decentralised autonomous organisation for venture capital funding.

Launched in April 2016, the DAO quickly raised over US$150 million via crowdfunding. Three weeks later, someone managed to exploit a vulnerability in the DAO’s code, draining approximately US$50 million worth of digital currency from the fund.

The security problem originated not in the blockchain itself but rather from issues with the smart-contract code used to administer the DAO.

The DAO’s crowd-funding page in May 2016.

Questions arose about the legality of the act, with some people arguing that since the hack was actually permitted by the smart-contract code, it was a perfectly legitimate action. After all, in cyberspace, “code…