At TILTing 2019 the Lab presented a study on the legal instruments that are, as of today, applicable to blockchain-based digital assets under European law, and the relative enforcement challenges. The broader question to be tackled is whether and how regulators deal with such challenges, and what are the interests at stake. http://ipkitten.blogspot.com/2019/05/tilting-perspectives-2019-report-2.html
When Satoshi Nakamoto designed the Bitcoin protocol, he had the insight to include the notion of transaction fees. These fees incentivized miners to include transactions into blocks. But initially, Bitcoin did not have, in any meaningful sense, a fee market.A large portion of early Bitcoin transactions were completely free up until 2013 (blue in the above chart). Wallet developers eventually hard-coded tiny fixed fees into their clients, thought of as donations to miners. At first these fees defaulted to 0.1 BTC, but they were driven down as the Bitcoin price rose.
“If you bribe 51 percent of the miners, they will change the ledger for you. [This] tells you just how little irreversibility there is in PoW coins,” tweeted Cornell University professor and researcher in blockchain consensus protocols Emin Gün Sirer.A 51% attack on the blockchain network is not a new attack vector for PoW blockchains. However, as highlighted by Gün Sirer, it’s also not really an attack vector. On very special instances, the majority of self-interested miners on PoW blockchains have voluntarily agreed to alter a transaction history to undo critical situations.While the situation isn’t entirely the same, in the past, blockchain networks have seen their histories altered in the wake of critical moments. This happened on the ethereum blockchain back in 2016 when over $60 million worth of coins were siphoned off from the now-defunct smart contract The DAO. It also happened on the vericoin blockchain back in 2014 after $8 million worth of coins were hacked.While controversial, both decisions were supported by the primary developer community who launched system-wide upgrades or hard forks to enable otherwise infeasible amendments to the blockchain transaction history.Yet those choices weren’t without their repercussions; the resulting ethereum fork resulted in two distinct chains, ethereum and ethereum classic, respectively.A resounding noStill, many in the bitcoin community took to social media to deride the idea as both infeasible as well against the philosophical underpinnings of the technology.In Binance’s particular case, prominent members of the bitcoin community point out that bitcoin being the world’s largest blockchain is a particularly unique case with a reputation to uphold.“Talk of forking or reorganizing the blockchain is close to heresy,” tweeted billionaire bitcoin investor Michael Novogratz. “When the ethereum community did it the project was like 5 months old. A baby. Bitcoin now has $100bn market cap and is a legitimate store of wealth.”It would also be unfair according to Adam Back – CEO of bitcoin development startup Blockstream – given that the latest Binance hack is nowhere near as severe as previous hacks suffered on the bitcoin blockchain.“A Bitcoin reorg is just not happening, and I doubt any Bitcoin industry, miners nor developers considered it either. Recall 2014 $473mil, 2016 bitfinex hack $72mil, 2019 binance $40mil etc. #NotHappening,” tweeted Back.
An ethereum protocol for programmatic lending, MakerDAO emerged as a clear market leader in part for its rock-bottom interest rates of 0.5 percent.But the code behind MakerDAO requires interest rates to do more than extract business from borrowers, it’s a technological necessity for keeping its DAI stablecoin worth $1.With interest rates rising to 19.5 percent, and DAI still worth below $1, some early borrowers are angry, feeling as though they were misled.Describing the project’s marketing tactics as akin to digital “loan sharks,” they argue their experience with decentralized finance has been worse than with traditional banking.
If Facebook’s pivot from town square to private living room wasn’t laden with enough irony, here’s a new twist: Big business, it appears, has been invited to join us by the fireplace.
Gregory Barber covers cryptocurrency, blockchain, and artificial intelligence for WIRED.
On Thursday, The Wall Street Journal reported new potential details about Facebook’s long-awaited cryptocurrency plans. The company is reportedly seeking dozens of business partners, including online merchants and financial firms, in an effort to extend the reach of its blockchain-based marketplace. Facebook’s would-be partners are being asked to pitch into an investment fund, valued at $1 billion or more, that would serve as backing for Facebook’s coin and mitigate the wild speculative swings that make cryptocurrencies like bitcoin hard to spend. The pitch, according to the Journal, involves offering merchants lower fees than credit cards.
Some were quick to note that this would reduce Facebook’s ability to make money from payments in the short term. But that may not matter much—if, in the end, Facebook’s crypto effort is really all about getting you to spend more time glued to Facebook.
Facebook appears to be already building out the plumbing to make its marketplace a reality. At its F8 developer conference this week, the word “blockchain” was notably absent. But even as Zuckerberg emphasized the company’s plan to reorganize your Facebook experience around intimate relationships, his update included plenty of ways money would be involved. “I believe that it should be as easy to send money to someone as it is to send a photo,” he said, alluding to “simple and secure payments” as a core feature of his privacy-forward vision. That apparently extends beyond the peer-to-peer payments available on Venmo and Facebook’s own Messenger app. In a series of keynotes, Facebook execs touted a litany of commerce-focused improvements: better checkout for Instagram’s digital mall, donation stickers, and a new tool for small business owners to list items on WhatsApp.
Indeed, WhatsApp appears to sit at the center of Facebook’s commerce efforts—at least to start. At F8, Facebook said WhatsApp Pay, currently on limited trial in India, would expand to additional, unnamed countries later this year. The platform isn’t blockchain-based (for now) and is designed for peer-to-peer payments. But with 80 percent of small businesses in India using WhatsApp to market their goods, some form of payments processing is a natural evolution. In December, Bloomberg reported that the first tests of the crypto coin may occur in India, initially as a way for workers to send money home from overseas.
An added twist from the Journal’s report is the possibility that the coin will be integrated into Facebook’s lucrative ads ecosystem. The scheme, reportedly still under debate within Facebook, would potentially work on both sides of the ads equation: Merchants could use the coins to pay for ads, and users would be rewarded in coins for viewing or interacting with them. That reflects a growing perception—seen recently in efforts like the Brave browser, which compensates users through a token for clicking on ads—that people should get paid for their attention, not simply help internet giants make money. For Facebook, it also presents a vision of how its ads and eyeballs-driven business could continue in the company’s supposedly privacy-first era. The idea is to keep Facebook’s coins—and therefore users—tightly enmeshed in the platform.
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“I don’t believe they’re doing anything that isn’t in the service of increasing interactions on their platforms,” says Joshua Gans, a professor at the University of Toronto. Sending money to businesses presents a challenge, he notes. Compared with friends and family, businesses are more likely to dump their Facebook coins at the end of the month in favor of real money. Gans is skeptical that Facebook would pay users for viewing ads—an immensely tricky system to create—unless it involved something like a rebate for buying a product through a Facebook advertisement. On the merchant side, encouraging businesses to pay for ads and services on Facebook with the coin could be one way of staunching the flow of money out of the system.
As the Journal notes, Facebook’s foray into blockchain could look a bit like a loyalty-points system—tokens that can be earned through and spent on Facebook services, or cashed out elsewhere though partner merchants. That’s not without precedent among technology companies: Uber, for example, has Uber Cash, which rewards users for purchases both in and out of Uber with app-specific money. Gans notes offerings like the Apple Card hold a similar purpose: It’s a service that, for all the talk of disrupting the credit card industry, is mostly a shiny, heavy way to buy more of Apple’s apps and products.
A Facebook spokesperson reiterated an earlier comment: “Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications.”
Facebook still faces many challenges, from sorting out how it will oversee the system to assuaging the privacy concerns of users to determining how to funnel money in and out of its currency—a process that, for other cryptocurrencies, is typically handled by exchanges. It also has to contend with the realities of the global economic system, which runs on euros and yen as well as dollars. Even if it backs the currency with a basket of currencies, as reported, it “can’t be stable with every currency in the world,” says Gans. “That’s not how the world works.” Hence the need to enlist financial partners to smooth transactions in and out of Facebook’s system.
Bottom line: It’s very unclear how this will work in practice. “There are a lot of moving parts. Facebook doesn’t always do what we expect,” says Gans.
Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.To get around this problem, a recent IMF staff study shows how central banks can set up a system that would make deeply negative interest rates a feasible option.
Replacing cash with digital tokens of some kind would be relatively simple. It would mainly raise questions about the degree of anonymity of such replacements. Far more potentially revolutionary and destabilising possibilities would arise if the public at large were able to switch from deposits at commercial banks to absolutely safe accounts at the central bank. This radical idea has obvious attractions since it would remove the privileged access of one class of businesses, banks, to the monetary services of the state’s bank. But it would also transform (and surely destabilise) today’s monetary system, in which the state seeks to guarantee and regulate a money supply largely created by private banks and backed by private debts. Yet the revolutionary fact is that it would now be easy for everybody to hold an account at the central bank. Technology is eliminating the historic difficulties over such access.As everywhere else, innovation is transforming monetary possibilities. But not all changes are for the better. Some seem clearly for the worse. The right way forward is to reject libertarian fantasy, but not change itself: our monetary system is far too defective for that. We should adapt. But, history reminds us, we must do so carefully.
Professors from seven U.S. colleges including the Massachusetts Institute of Technology, Stanford University and University of California, Berkeley have teamed up to create a digital currency that they hope can achieve speeds Bitcoin users can only dream of without compromising on its core tenant of decentralization. The Unit-e, as the virtual currency is called, is the first initiative of Distributed Technology Research, a non-profit foundation formed by the academics with backing from hedge fund Pantera Capital Management LP to develop decentralized technologies.
All of this is a sign of a micro-economy in trouble, as Muhammad Salman Anjum, an investor who eats dinner alone by himself in the buffet hall each night, explains. He has a pragmatic take on all these beautiful young women having blockchain exhaustively explained to them by schlubby-looking guys who can’t believe their luck. ”One of the elements in blockchain is about fundraising the ICOs. So you can guess why they are here—to pamper the investors. Because it’s tough now.”In 2017, Salman says, it was relatively easy to raise funds for a nine-figure ICO. Now that crypto prices have crashed, demand on “the supply side of the ICOs is booming, and the demand for the investors is shrinking.” Since the actual mood at this moment is conservative-going-on-terrified, these glamorous models seem to have been hired to give the ship—and the passengers’ selfies—the glitzy appearance of the boom times of 2017.One of the ways men bond is by demonstrating collective power over women. This is why business deals are still done in strip clubs, even in Silicon Valley, and why tech conferences are famous for their “booth babes.” It creates an atmosphere of complicity and privilege. It makes rich men partners in crime. This is useful if you plan to get ethically imaginative with your investments. Hence the half-naked models, who are all working a lot harder than any of the guys in shirtsleeves.The cruise’s panelists all tout decentralization’s promises of shared responsibility, community, and freedom, but the version I see here means that nobody knows precisely who is responsible for all of this. It’s nobody’s specific fault that we’re trapped on a floating live-action walkthrough of how un-trammelled free-market capitalism can be bad for women, given that money and power are things women tend to have less of.
A new study that was undertaken by Queen Mary University of London and the University of Cambridge, UK, came to some interesting conclusions about how blockchain could fit into the EU’s complex regulatory structure.