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Bitcoin is the currency of choice on the multiple darknet markets. These are hidden sites mainly used for drugs and other contraband. Bitcoin’s psuedo-anonymity and decentralized nature make it appealing for online transactions of this nature. Bitcoin has been used extensively on the darknet since Silk Road launched in 2011.

A lot has changed since Silk Road. Cryptocurrencies have gotten more complex and improved on Bitcoin’s innovative design. In particular, cryptocurrencies Monero and Zcash both have built in privacy protection and absolute transaction anonymity that Bitcoin doesn’t have. Bitcoin has also recently had problems with high transaction fees and slow confirmation times, so these other coins will likely be able to handle more transactions simultaneously. AlphaBay, the leading darknet market, began accepting Monero in August 2016, and you can see the effect on the price in the chart:

monero_price

While users like the privacy features, the lower fees, and faster transaction times, they complain that the existing tools for Monero, like wallets, are hard to use and they have concerns about price volatility. As developers improve on these problems and the ecosystem evolves further, it’s not hard to foresee Monero getting more mileage. AlphaBay also recently began supporting Zcash.

Bitcoin still has some advantages at the moment. It was the first mover and first to achieve widespread adoption by users and marketplaces, thus every market accepts it. With adoption comes a community with tools and support. For example, while Bitcoin does not have the built in privacy features of Monero or Zcash, there are multiple coin tumblers or coin mixers that make it more difficult to track transactions (though these methods have their drawbacks). Bitcoin is also the easiest to exchange for cash using sites like Local Bitcoins. This means someone selling drugs would first have to exchange their Monero for Bitcoin in order to turn their profits in to cash.

The online drug marketplace was an early, substantial business use case for Bitcoin and what happens there may be a precursor for other markets. The darknet is a also big business, with some estimates that Silk Road alone pulled revenues of over $100 million per year. Right now, some competing currencies offer technical advantages over Bitcoin. Will users move to using these competing currencies or will Bitcoin maintain dominance?

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What is Augur and why is it cool?

Augur is a decentralized prediction market built on Ethereum. Think of it like a market place where you can bet on future events, like the outcome of the 2020 US Presidential Election. The benefits of this are 2 fold. First, Augur is a peer-to-peer prediction market place with all the benefits of a decentralized system, such as censorship resistance, lower fees, reduced trust reliance on a third party, and more. The second benefit is a little more technical.

Continue reading dApp Spotlight: Augur

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One thing on the horizon that will fundamental change the nature of computing and security is quantum computing. Google (arguably) has one, and it’s not crazy to think the NSA has an even better one. Given that a quantum computer could possibly crack all existing encryption methods, and cracking Bitcoin’s or Ethereum’s encryption would mean an attacker could determine your private key and get access to your wallet, this poses the natural question: could the NSA crack Bitcoin or Ethereum right now if they wanted to?

The answer is that they possibly could, but they definitely won’t. The reason is that you would never blow the lid off of your quantum computer project for such small peanuts. As Andreas Antonopoulos puts it, “The last thing they’re going to use that on is Bitcoin, because the moment you use it on Bitcoin and you announce to the world we have quantum cryptography that can build elliptic curves, guess what happens?” Your rivals try to implement quantum resistance. “You just blew all of your advancements in that technology.”

There is historical precedent for this. In WW2, British Intelligence cracked the Enigma machine, allowing them to decode German communications. They started becoming aware of German movements, including imminent attacks on vulnerable targets. However, they could not act on every bit of intelligence without alerting the Germans that they had cracked the Enigma machine. Ultimately, boats were sunk and people died because British Intelligence had to keep their discovery secret.

If you’re still paranoid, I recommend generating a new address every time you do a transaction in tokens on the blockchain and don’t leave any tokens left over when you’re done. An attacker can only attack addresses that are known by the network (i.e., has been involved in a transaction), and by the time your address is known you will have already sent all the tokens out of it. This method should let you sleep at night until the underlying protocol is updated to be quantum resistant.

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I’ve never heard of anything like this before. MelonPort just had it’s ICO sell out within the first 5 minutes of opening, raising $25 million. That’s over 1000 Ether per second. This incredible movement of money shows how powerful the ICO model can be for blockchain companies.

MelonPort is seeking to build an open protocol for asset management on the blockchain. They have an impressive team and set of advisors, including CEO Mona El Isa, previous VP at Goldman Sachs. They believe MelonPort will be a paradigm shift for asset management backed with the security and scalability of the Ethereum blockchain.

Read the round up in their own words here.

https://medium.com/@melonproject/melonport-contribution-round-up-c83926721bad#.9oooaxq4a

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According to their website, Matchpool is “a decentralized matchmaking protocol which uses group dynamics to help participants match with each other”. The idea is that anyone can create and cultivate their own matchmaking community and make money doing so. Picture Meetup with a romantic angle and mix in a sharing economy. The online dating space is a billion dollar industry and Matchpool would be the first to be built on the blockchain.

Community building is emerging as a fantastic use case for blockchain technology. Contrary to centralized systems that provide the platform and extract value created from the users of the platform, the blockchain enables decentralized systems where participants in the network create value and also receive value in return. This is the sharing economy in its most basic form and it encourages voluntary, reputation driven communities and group participation.

Matchpool is still in development and they plan on doing a crowdsale in March. Check out their whitepaper here for more details.

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Brian Schneider, Secretary of the Illinois Department of Financial and Professional Regulation (IDFPR), has requested public comments on Digital Currency Regulatory Guidance. Comments are due by January 18, 5:00PM CST. Comments can be submitted electronically here.

In the most simple of terms, the IDFPR is looking for commentary and guidance on the fundamental questions around how virtual currency business should be regulated and taxed in Illinois. Virtual currencies do not fit under the current statues, and the IDFPR would like guidance on how the current statutes, such as TOMA, should apply to virtual currencies.

Submit comments here
Digital Currency Regulatory Guidance

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Coinbase just announced that it has received the BitLicense from the State of New York. The BitLicense is a special business license governing activities associated with virtual currencies which officially authorizes Coinbase to continue to operate in New York. This appears to be a validation by the New York State government that they are willing to license and regulate cryptocurrency companies.

The intersection of Blockchain technology and government regulation is still developing. Blockchain technology enables unprecedented individual freedom, as President Obama said “everybody is walking around with a Swiss Bank account in their pocket.”. Governments have an interest in regulating virtual currencies, but do not want to discourage innovation or deny economic opportunities created by Blockchain transactions and companies.

We need to come up with a governance model that makes sense in the decentralized economy and it’s up to us to determine the nature of the relationship between government and the Blockchain.

Coinbase announcement on Medium

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The Rudimental is a project that takes the ICO model and applies it to video content creators. The way it works is that you create a project and you can trade shares in your project on an open exchange. This provides a mechanism for alternative funding opportunities and allows users to be compensated for finding a diamond in the rough. Imagine if you could have invested in Justin Bieber when he was just a no-name kid putting music on YouTube? This is the new paradigm that the blockchain enables.

Another interesting aspect of this project is it’s integration with other blockchain projects such as Gnosis (prediction market platform) and Boardroom (blockchain governance suite). This will further these tools and the ecosystem as a whole by providing a real use case that people can learn and build upon for future projects.

The Rudimental will only focus on video media at this time but hopes to expand to additional media types. They also claim full SEC compliance for anyone concerned about the legality of exchanging equity tokens in this way. This project is nearing release and is promising to release some new information to the community very soon, and we will provide updates as that happens.

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The short answer: Game Theory.

Consensus networks like the Ethereum blockchain that record data and transactions as a single source of truth seems like it would be a great fit for multiplayer games. A natural suggestion would be putting games involving chance, such as poker, backed by the block chain and guaranteed to be fair by the blockchain network and cryptographic hashes. Why hasn’t the blockchain disrupted online poker and similar games?

The reason is not a technical problem, but more of a game theory problem. Due to the pseudo-anonymous nature of the blockchain, it is impossible to perfectly know the identity of each user and prevent collusion among participants. To put it another way, if you were to join an online poker table, it would be impossible to know whether the other players were other individuals, or if it was one guy with a dozen accounts. The fact that someone could create multiple identities and use that to his or her advantage is a difficult problem to solve.

People are working on solutions to this. Anyone dealing with any kind of financial regulation typically must comply with Know Your Customer (KYC) laws. While KYC compliance is not new, the tradeoff is that these processes are expensive and time consuming to implement. There are blockchain systems being developed that will rely on KYC to operate fairly, such as with FirstBlood, and it will be interesting to see what solutions they come up with.

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