Category: Economic World News

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This week, Bitcoin mining equipment manufacturer and blockchain software firm Bitfury secured a valuation of $1 billion from billionaire investor Mike Novogratz and Korelya Capital’s $80 million investment in the firm.

The multi-million dollar funding round comes after the release of Bitfury Clarke, the firm’s new Bitcoin ASIC miner, designed to compete against Bitmain’s new equipment, the 7nm Antminer.

Valery Vavilov, the CEO of Bitfury, stated that the demand for the blockchain and crypto in general from companies and institutions had increased significantly over the past 11 months.

“We see a lot of demand from companies and public institutions to put their services or products in the blockchain — especially in emerging markets, where administrative systems can be very inefficient.”

Rising Activity in Mining and Blockchain

Throughout the past four months, despite the sideways market of Bitcoin (BTC) and the 70 percent correction experienced by the cryptocurrency market since January, the hash rate of the Bitcoin blockchain network has increased substantially from 15 million TH/s to over 50 million TH/s.

The increase in the hash rate of the Bitcoin network, which represents the strength of the blockchain’s computing power, led to a surge in the breakeven cost of crypto mining.

In July, cryptocurrency analyst Barclay James reported that the breakeven cost of mining Bitcoin is around $6,900, based on the hash rate of the Bitcoin network at the time which was 35 million TH/s.

According to Blockchain, the most popular cryptocurrency wallet platform in the sector, the hash rate of Bitcoin currently remains above 50 million TH/s, up 42 percent since July. Since the $6,900 breakeven cost of Bitcoin mining was calculated based on 35 million TH/s,  the breakeven cost of mining has well surpassed $7,500 even in regions with naturally cold climates and cheap electricity like China that reduces operational costs.

“China has some of the world’s cheapest electricity rates as well as average temperatures consistent with temperate regions. This is important as cooling is one of the largest overheads in mining. In addition, the country’s generally low operating costs also give it a competitive advantage,” James wrote.

Due to the rise in the breakeven cost of mining, miners are generating BTC at a fairly large loss. Until BTC breaks out of the $7,000 resistance level and to the high region of $7,800 to $8,000, miners will continue to mine BTC with a loss of around 20 to 30 percent.

Still, the hash rate of Bitcoin, Ethereum, and other major cryptocurrencies continues to surge, as does the demand for mining-focused ventures like Bitfury, Bitmain, and Samsung’s new foundry.

Lucrative Business Models of Mining Companies

Bitmain is finalizing a $15 billion IPO, and, earlier this year, Bloomberg reported that if Bitfury IPOs, it will target a valuation of $3 to $5 billion.

Mining companies and mining equipment manufacturers like TSMC and Samsung remain confident in the long-term development of the industry, and the investment of a major venture capital firm in Korelya is considered a confirmation of strength of the industry in a period of uncertainty and doubt.

Korelya is an investment firm financed by Naver, the largest search engine operator in South Korea that is more widely utilized than Google in the region. Bitfury is the first indirect investment in crypto from Naver.

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Calling it an “open invitation for the world to “rethink the existing economic framework,” eToro co-founder and CEO Yoni Assia today announced the launching of GoodDollar, a blockchain-powered, non-speculative crypto project which is geared towards a global distribution on the principles of the universal basic income. The launch has the backing and blessing of eToro, with $1 million in funding from the trading platform to start things off.

Using Blockchain to Distribute a Universal Basic Income

The universal basic income (UBI) is a concept that has been explored by blockchain enthusiasts and technologists for some years as the divide between the technorati and non-technological workers deepens. The advent of artificial intelligence has hastened concerns for displaced workers. Several UBI experiments have been conducted or are ongoing, with varying results. The concept of the UBI is simple: everyone in a given group is given a guaranteed subsidy with no strings attached. People are still free to work or pursue entrepreneurial goals.

In the case of GoodDollar, according to a press release, from eToro:

“The experiment will research implementing a cryptocurrency that pays social interest to those who have less, and is continuously distributed to any verified participant for free, creating a global, open, universal basic income (UBI).”

The concept of social interest is explained a bit more in the primer. It is defined as “a monetary inflation mechanism designed to benefit the poor by allocating them most of the newly minted currencies.”

Yoni Assia has long been a proponent of acting in ways that have a positive impact on wealth disparities. He first described the Good Dollar nearly ten years ago in a blog post.

“Once all money is transparent, we believe that the invisible hand will become the visible hand, and the philanthropy bank could actually direct the economy to create more value. […]

“The most important intrinsic value are of individuals, since we believe that human life has value, meaning that individuals should get better interest rates than any other entities, hence a better world for all individuals. As for other entities, the value should be derived from their added value to the world in a democratic way. Academic institutions, for example, should have higher intrinsic value than corporations, and should receive higher interest rates. Culture and education have added more value to the world than can/should be derived as direct payment.

“Assuming that eventually all money is transparent and all his funds are in the system, an individual who has only $100 should receive higher interest rate since he needs more support to maintain his basic life necessities, while an individual that has $1M in deposit should receive a lower interest rate since he can add more value to the world through investments.”

The design of the GoodDollar system is such that simply amassing wealth does nothing to create more wealth, whereas using it to benefit those individuals perceived to need such investment will benefit both parties. (We suggest the reader check out the blog posts on the subject for a deeper understanding.)

GoodDollars will be available to anyone who undergoes social verification, and every person will, therefore, be assigned a value on the blockchain such that the algorithm will allocate them a share of the funds.

Interview: Yoni Assia on GoodDollar

We asked a few questions of Assia and garnered the following responses, which have been lightly edited for clarity.

 

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The Venezuelan government has recently launched a Petro savings plan that allows the country’s citizens to put their money into the oil-backed cryptocurrency and “save by means of a certificate.”

Venezuela Launches Petro Savings Plan for 18 Million Citizens

According to local news outlet Telesur, the savings plan is part of the “Comprehensive National Cryptoasset Plan,” and will in its initial phase “make available” 4 million petros, equivalent to 14,400 million sovereign bolivars, the country’s fiat currency. The amount equals $240 million.

The savings plan is set to be available on an online platform called the “Plataforma Patria,” which is reportedly accessible to 18 million Venezuelans with an identity card. To take advantage of the savings plan, Venezuelans will have to invest in sovereign bolivars.

Venezuela’s vice president of the economy, Tareck El Aissami, explained:

“The savings method includes quarterly amortizations and a final payment that can be executed between 90, 180 or up to 270 days, a scheme that allows to safeguard the value of the investment “

Per Aissami, there’s a formula that “will be applied so that the value of the bolivar in the present is equal or superior than at the moment that (the savers) withdraw their money.” The minimum amount of petros that can be purchased is 0.01, equivalent to nearly 39 sovereign bolivars.

As CCN reported, the Venezuelan government only announced the Petro was available for sale on November 5. It can currently be purchased with cryptocurrencies like bitcoin and ethereum.

Petro Adoption

The South American nation has notably been pushing the oil-backed cryptocurrency’s adoption, as the government has required Venezuelans to pay their passport fees in it and ordered the country’s banks to adopt it.

Its sovereign bolivar is pegged to the cryptocurrency, which seems to be a “blatant” copy of Dash after analyzing its whitepaper, as it has the same mining algorithm and has other suspiciously-similar features to it. Part of the Petro’s whitepaper, in fact, appears to have been lifted from that of Dash.

Before the Petro was publicly for sale, Venezuela claimed it could charge for exports in it. Its president, Nicolas Maduro, at the time ordered state-owned companies and airlines to accept the cryptocurrency.

The government itself has made plans to finance villas for the homeless using the controversial crypto token, and more recently the Supreme court ordered a national institute to pay indemnities to one of its employees in it, basing its ruling on a decree on “Cryptoassets and the Sovereign Cryptocurrency Petro.”

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Statcounter is one of the oldest third-party user tracking services on the web, having existed since 1999. Beginning as a simple statistics and visitor counting service, Statcounter over time grew into what it is today: a full-fledged, enterprise-quality analytics service.

Gate.io, a more recent entrant in the bitcoin exchange space, used Statcounter to track user traffic until this week when a security researcher named Matthieu Faou discovered a breach in the Statcounter JavaScript file which was specifically targeted at Gate, capturing and hijacking bitcoin transactions made through the Gate interface.

Faou works for ESET, a security firm on the order of MalwareBytes or Norton, which provides consumer and enterprise security products and necessarily conducts research and penetration tests. He says the compromise was designed to replace bitcoin withdrawal addresses on the Gate.io platform with addresses belonging to the attacker.

Primary Script Was Compromised, But Only Gate.io Was Targeted

The attack was more sophisticated than some previous attacks of the same nature, such as malicious malvertising based attacks which installed themselves and did the same thing across websites, living in the browser rather than a piece of code on a single site. More sophisticated because the attackers generated a new address for each attack, making it extremely difficult to track the destination of the stolen funds.

It’s thus difficult to determine exactly how many users were affected. It’s also unknown how the breach went down in the first place via Statcounter.

The malicious code specifically targeted a relevant sector of the Gate.io code – namely, its withdrawal interface – and to Faou’s knowledge, the part of the script dedicated to stealing funds would not have worked on any other site because other sites are designed differently.

In response to the attack, Gate.io has removed the Statcounter script from their site.

Gate.io Says No Damages

According to a blog post by Gate.io, nothing actually happened as a result of the attack. This can only mean a couple things.

One, the script was poorly written and failed to actually do its job.

Two, ESET and Faou discovered the attack before anyone made a withdrawal on which the JavaScript would fire.

“On Nov. 6, 2018, we got the notice from ESET researcher’s report and the “ESET Internet Security” product that there’s a suspicious behavior in Statcounter’s traffic stats service. We immediately scanned it on Virustotal in 56 antivirus products. No one reported any suspicious behavior at that time [ …] However, we still immediately removed the Statcounter’s service. After that, we didn’t find any other suspicious behaviors. The users’ funds are safe. To have the maximum security, please make sure you have two-factor authentication (Google OTP or SMS) and two-step login protected.”

If it is indeed the case that no user transactions were compromised, then this was a narrow miss. All the same, the fact that the attackers went to the trouble of compromising a stalwart piece of web software in order to get at one single exchange demonstrates the need for constant awareness in cryptocurrency dealings. Do you trust the tools you’re using?

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A prominent bitcoin cash startup has launched a mining pool designed to attack altcoins and BCH forks that it does not believe fulfill Satoshi Nakamoto’s original vision for the cryptocurrency.

SharkPool: Supporting Bitcoin Cash by Attacking other Networks

Dubbed “SharkPool,” the service aims to conduct a two-pronged attack on other cryptocurrency networks, exclusively mining empty blocks and then selling the profits for bitcoin cash (BCH).

In the announcement, the group said that it believes all cryptocurrencies except for its preferred version of bitcoin cash are “acts of war against Bitcoin” and that BCH supporters should attack them back.

“All alts, including forks and splits are acts of war against Bitcoin and are going to be treated as such. Shark Pool miner will exclusively mine empty blocks on alts and sell the profits for Bitcoin (BCH). We are looking for capable generals to hunt alts down at 0% poolfee!”

Shark Pool miners will exclusively mine empty blocks on alts and sell the profits for Bitcoin (BCH).

Sign up pre-release and get 100% of the blockrewards for a year! https://t.co/iNVI9qENx3 #EmptyYourBlocks

— SharkPool (@SharkPoolCash) November 6, 2018

SharkPool is operated by CashPay Solutions, the parent company of several bitcoin cash services including e-commerce platform Cryptonize.It, decentralized crowdfunding application Lighthouse, and the eponymous CashPay wallet.

Promoting the new mining pool, CashPay co-founder Ari Kuqi boasted that he planned to make good on his long-standing promise to “hunt down alts, ICO’s and shitcoins and burry [sic] them.”

“If you don’t have a seat at this table, you’re dinner,” he added.

I’ve been saying for a year I will hunt down alts, ICO’s and shitcoins and burry them. It’s time to deliver on that promise.

If you don’t have a seat at this table, you’re dinner.

Join @SharkPoolCash at https://t.co/qcZfcM9NdT

— Ari Kuqi (@ari_cryptonized) November 7, 2018

SharkPool is attracting miners with hardware compatible with a wide variety of different hashing algorithms, and it has not announced which cryptocurrency network(s) it will turn its attention to first. However, CashPay and Kuqi been outspoken about their views on the looming Bitcoin Cash civil war. In particular, they are vocal supporters of Bitcoin SV, the BCH implementation promoted by Craig Wright, Calvin Ayre, and their respective blockchain firms. By extension, they are fervent critics of Bitcoin ABC and the technical upgrades that ABC’s BCH clients will activate when the network hard forks on Nov. 15. Consequently, it seems that BCH — that is, the version supported by Bitcoin ABC — would be a likely initial target.

CCN has reached out to CashPay Solutions for comment and will update this article upon receiving a reply.

Breaking Down SharkPool’s Attack Plan

As outlined above, SharkPool plans to exclusively mine empty blocks and then sell the proceeds for bitcoin cash.

The second prong in that attack is simple enough. By converting all proceeds to bitcoin cash, SharkPool will concurrently provide BCH with consistent buy pressure while placing downward pressure on the prices of any other networks that it mines. However, the other component of SharkPool’s strategy requires a bit more explanation.

Why Miners Produce Empty Blocks

In Proof-of-Work (PoW) crypto networks, miners earn rewards for producing blocks and adding valid transactions to the blockchain’s public ledger. As long as new coins continue to enter circulation, the rewards come in two forms: coinbase rewards (i.e., the new coins generated in the block) and miner fees from the transactions included in the block.

Occasionally, a miner produces an empty block, which includes no transactions except for the coinbase transaction that distributes the block reward to the miner. That may seem counterintuitive since, assuming there are transactions in the memory pool (mempool), miners would be willingly forfeiting potential revenue.

However, as Bitcoin Unlimited developer Andrew Stone explained in a research paper on the subject, the economics and technical practicalities of cryptocurrency mining make the matter substantially more complex.

On the technical side, there are several time-consuming steps miners must perform before they can mine on top of a block produced by another miner. One of these steps involves downloading all the transactions from the previous block and removing them from their copy of the mempool. This prevents the miner from producing a block that includes transactions that were already in the previous block, which would render the new block invalid.

Hashing an empty block candidate gives the miner a head start since they would not need to wait to download the transactions from the previous block or update their mempool before they can begin searching for a new block. Consequently, when block rewards are high and transaction fees are low, miners are incentivized to mine empty blocks.

As Stone explained:

“Since mining pools maximize profit by maximizing the time their ASICs are hashing blocks likely to be added to the chain, some pools use this technique to construct a single-transaction block candidate to mine while they are waiting to fully receive and validate the newly found block. When the block is validated, mining pools typically use the available transactions to construct a block candidate that maximizes profitability and then switch their ASICs to mine that candidate.”

How SharkPool Will Use Empty Blocks to Attack other Crypto Networks

Though not a violation of the network’s rules, mining a high rate of empty blocks is frowned upon, especially when network activity is high and the number of unconfirmed transactions is growing.

On the Bitcoin network, more than 18 percent of all blocks mined have been empty, though this percentage has dropped dramatically over the years due to increased network activity and transaction fees, as well as the activation of upgrades that remove incentives to mine empty blocks. According to BTC.com, just 0.86 percent of blocks mined over the past year have been empty, though Bitmain-operated AntPool has an empty block rate as high as 2.12 percent.

By exclusively mining empty blocks, SharkPool aims not only to accrue block rewards that can be converted into BCH but also make it difficult for affected networks to process transactions. If the pool attracts enough hashpower, it could cause severe network disruptions by causing the number of unconfirmed transactions to pile up, which would, in turn, lengthen confirmation times and increase transaction fees. Such an attack would be especially potent if paired with a spam attack designed to clog the mempool further.

Moreover, depending on the size of SharkPool’s hashpower as well as the cumulative hashpower of the networks on which the pool is mining, it’s possible that the attack could grind smaller blockchains to a crawl if SharkPool waits until the network difficulty goes up and then redirects the attack to a new victim.

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