Bitcoin Anonymity at what cost?

Wasabi Wallet

We’ve already heard of “tumblers” which make it very difficult to trace the true sender or receiver of a Bitcoin transaction.  Now we have the “Wasabi” wallet project, which does something a bit differently.  It actually uses the Tor network to anonymize you on the Bitcoin network.  However, I think this is a risky move because malicious actors on the Tor network (especially exit nodes) have been setup by malicious groups including government agencies for surveillance and other use.

The problem with depending on the Tor network and a third party client is what if someone injects malicious code such as the Bitcoin Gold client scam?  Even if that’s not the case what if some malicious Tor node runners get together and target Bitcoin users and use it to successfully trick the Wasabi client into thinking you’ve received money you don’t have?  It would certainly be an effort and tricky but with enough time, money and resources it is a likely possibility based on the reward value alone.

So, well the idea is well-intentioned I think trying to solve it any other way  is risky and it should be the Bitcoin code base that is modified to support these features.

Another personal alternative is that you can use your own personal proxy or server to hide your real IP as this is already a supported feature of the Bitcoin client itself.

What do you think?

Cheers!
A.Yasir

Sherman’s Head

Hating On Cryptocurrency To Save Fiat

Well I expected some crazy stuff going down during the Cryptocurrency hearings in front of Congress, and I wasn’t disappointed. My instinct was to follow the crowd, and just blame Congressman Brad Sherman for being old and too wrinkly to understand this technology. But this man isn’t old and stupid. No these people are actually pretty damn smart, that’s how they make that $$$ and that’s why it shouldn’t have been a surprise to know Sherman wanted a flat out ban on all cryptocurrency and mining.

While the internet went psycho in calling this old timer congressman for not understanding the technology nor listening to the experts, I was thinking “How clever this old snake”.  He spent most of the time interrupting the experts just to say how much he hated cryptocurrency and how it was used for only illegal stuff.

There’s two parts to this.

  1. Sherman’s Not Dumb
    As much as I want to fall back on the fact Sherman’s old, out of touch and just can’t get his old man brain around cryptocurrency, this isn’t the case. He’s very smart, in fact, he knows what cryptocurrency is and how it could completely change the face of money. He’s connected to other Congressmen, Bankers, Politicians, and the Elite, heck even gunrunners are Congressmen, he’s connected to money. Fiat money to be exact. A monetary system that his friends own, and he’s going to protect it.

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    Imagine a coin the Federal Reserve couldn’t make, control and manipulate. Instead, it’s a system where people can make, control and manipulate. Well, thats not to say it’s better, but it’s better than what we have. The unbankable would be bankable simply because they could mine, buy and exchange or trade coins for other coins or goods/services. Where poverty stricken places could make their own family or community economies. Imagine the endless possibilities of this level of adoption?

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    But this possibility is why Mr. Sherman wouldn’t even let Cryptocurrency Experts finish a sentence before rudely interrupting. Accusing cryptocurrency of being mainly used by criminals and the dark web- where illicit activities take place. He declared he wanted a blanket ban on all mining and cryptocurrencies. Creating the uproar amongst the cryptoverse.

  2. Sherman’s Criminal Link
    With all the talk about cryptocurrency only being used for criminal activities, Mr. Sherman forgot to consider his own criminal links. One of the largest donors to his campaign was by a California based company Allied Wallet, who was involved in illegal gambling. Allied Wallet was forced to pay $13million to the US after investigation. Mr. Sherman probably forgot but the internet didn’t.

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    Not to say that a proper discussion on the topic of security and safety of Cryptocurrency isn’t something we should engage in. However, flat out slamming Cryptocurrency to secure the Fiat system, isn’t a good method nor is it right.In the end, the #CryptoCongress hashtag trended and hopefully, the American people will make their voices clear with their vote next election.

    In the meantime, click here to contact him and other Congress people on how you feel.

    What do you think? Is Mr. Sherman in conflict of interest here?

    Cheers,
    A.Yasir

“The Future Of Money”

US House Of Representatives

The United States will begin official hearings on cryptocurrency on July 18 2018, on a live stream for the general public to listen on the hearings. The title of this hearing is “The Future of Money: Digital Currency’, somewhat acknowledging that bitcoin and cryptocurrency at least has the potential of being the ‘new cash’ if not the only ‘cash’ of the future. As technology develops, having digital cash is the next natural course.

The exact list of people attending hasn’t been released, but it’s expected to be presided over by the legislators and cyprtocurreny experts. When I hear cryptocurrency experts though, there’s a few worries that come to mind.
The first is that ‘most’ if not all cryptocurrency ‘experts’ tend to completely negate the security portion of digital currency, upselling completely unsafe technology. Which is a legitimate concern surround cyprtocurrency. It’s not fully anonymous like people think, Bitcoin is traceable for example. Public ledgers, permissionless public blockchain, and no central authority within the community to protect the currency itself, are all concerns. Ripple does this fairly well, but still lacks considering their bank affiliations and their motivation to dump XRP (which is unlikely but still worrying).

This hearing will look into the security concerns related to cryptocurrency and curbing issues like money laundering, but experts would have to present a solid case, to show that it’s not different than laundering fiat or gold bars for that matter.

The US congress had released an economic report in March of this year that highlighted the benefits of cryptocurrency and why using it would be good for the economy. Which is a surprising change of mood considering how the Federal Reserve has been on behaving towards it. Perhaps fear that the debt system that they created for over a century is going to break down.

What do you think? Will this hearing  finally give Bitcoin and cryptocurrency the boost it needs after 6 months of FUD?

Cheers!
A.Yasir

BITCOIN’S VALUE WAS FRAUD?

 The Coordinated Manipulation
According to research done by Professor John Griffin of Texas Finance, last years epic rise for Bitcoin was actually done by coordinated market manipulation.

Professor Griffin goes on to explain that he examined millions of transactions on cryptocurrency exchange Bitfinex, and says that “the US dollar pegged cryptocurrency Tether was used to buy Bitcoin at the times that the latter was falling- which helped ‘stabilize and manipulate’ the price”

First I’ll explain what Griffin’s said, and then I’ll explain why he’s wrong about Bitcoin but right about Tether. And it boils down to his understanding of how Exchanges work and how Bitcoin works.

Griffin said “Fraud and manipulation often leave footprints in the data and it’s nice to have the blockchain to track things,” Griffin told CNBC. Whenever bitcoin fell, Tether was used to buy it to prop up the price again.

“It was creating price support for bitcoin and, over the period that we examined, had huge price effects. Our research would indicate that there are sophisticated people harnessing investor interest for their benefit.”

Bitcoin started 2017 at below $1,000 and by Dec 2017 hit 20,000. But as if February to June 2018 it’s been jumping back and fourth from it’s lowest at $6k to the highest $10k (which didn’t even last)  Tether is the 11th largest cryptocurrency and is pegged to the US dollar. Some critics say Tether owners don’t have enough fiat currency to back its $2.5 billion market capitalization.

Bitfinex CEO J.L. van der Velde told CNBC that neither the exchange nor tether helped to boost bitcoin prices. “Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex,”

Now here’s what I think:

I’ve personally used Tether but I do worry about it. A lot of people have accused Tether of fraud, and Tether certainly hasn’t proven the naysayers.  Do they have the 2.5 billion USD and how are they raising funds?  Essentially as far as I can see, Tether is a non-backed, way of essentially printing virtual USD.  I think Griffin is way off on this one.  USDT (Tether) is a convenient trading pair that can be used with some of the top cryptocurrencies to trade and exchange directly for other coins.

The issue is that a lot of people don’t realize most tokens and currencies are not directly convertible or tradeable for others on exchanges.  Generally you’ll have to sell your ABC alt-coin or tokens for Bitcoin, or USDT and then use the major currency you sold or exchanged to buy say another coin such as Ripple, Litecoin, Lisk etc..  So this is where USDT comes in, if Griffin thinks it propped up Bitcoin I think he is misunderstanding how the exchanges work.  Yes a lot of people are using USDT to buy other currencies but is USDT a market factor?  No, I don’t think so, it’s just simply convenient and I agree with Bitfinex that it doesn’t appear they are using it to prop up Bitcoin.

However, USDT could not be used in such a way if it wasn’t given prominence and primary trading pairs like Bitfinex and other major exchanges have used.  Could some of the exchanges be in cahoots with currencies like USDT and others?  Absolutely, and this is the more likely scenario of market manipulation in the sense that they essentially largely control which currencies fail and flourish.

Any coin that is used as a primary trading pair or in other words directly convertible has more value and will intrinsically be used more as a vehicle to buy coins like Bitcoin.

I think Griffin just raises the simple question about USDT being a fraud and this is the biggest concern but I highly doubt USDT’s existence or trading patterns are responsible for Bitcoin fluctuations directly.  He may derive this from trading patterns but I really just think USDT is a convenient and easy to understand intermediary trading pair vs how you wrap your mind around how many BTC another coin like Ripple, Ethereum or Litcoin is worth etc…

What do you think?

Cheers!
-A. Yasir

Why Hardforks In Cryptocurrency Are Bad

I’ve always felt this but hardforks are simply bad, even if in the rare case they intend to fix a problem with the original currency.  Most currencies which have issues like Bitcoin are simply not just a “single problem” but a collective bunch of inherent problems.   But most often it is so clear like is the case with Bitcoin Gold that the team just copies and counterfeits a coin to unjustly enrich themselves.

Risks and Issues with Hardforks

  1. Loss of value, normally the original coin is at least temporarily devalued when a hardfork is done.  People wonder which coin will survive or be more popular?
  2. Confusion leading to scams and fraud.  Which is the real Bitcoin or real Bitcoin Gold?
  3. Many forks don’t make a wallet (more evidence of bad intention) and more likely that fraudsters will make a wallet that steals your coins (eg. John Dass and the Bitcoin Gold team).
  4. Community frustration and division.

Instead of hardforking it is much better to do what Cloakcoin or Litecoin did and the many others did by just copying it, making changes and starting their own blockchain.  This ensures the process won’t allow fraud, confusion or devaluation of the original coin and no harm comes to the community that way.

All these coins have stolen value from the main coins like Bitcoin and then people ask why the value went down?  If Bitcoin was not hardforkable I think it should be several times the value we see now, almost certainly 2/3s or more of the crypto market cap.

Trezor Hardware Wallet to Support Bitcoin Cash

A maker of hardware wallets for cryptocurrency has recently confirmed they will add support for Bitcoin Cash.  I’ve also been an advocate of not using these even before the Ledger Nano hack came out.

I suspect that some will lose their currency or at least have to try to recover it based on confusion over the two.  I really think it’s a bad idea since most currencies have no built-in protection to sending into the abyss to a non-existent address of another blockchain.

 

Hardforks Are Scams Says Charlie Lee LTC Creator

Charlie has been saying exactly what I’ve been.  Hardforks are essentially scams that devalue the original coin and cause confusion.  At the same time, I’m sure he meant well but it never helped that he announced he sold all of his LTC.  It’s akin to a CEO selling all of their stock and saying “I still believe in the company”.  Granted this happened well before this scam hardfork so the hardfork is surely what caused the latest drop.

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As we can see after Litecoin Cash, the real and original Litecoin went down in value.

Charlie also correctly warns not to give your private keys to these scammers.  Whether Bitcoin Cash, Bitcoin Gold, Litcoin Cash and the many scam coins they require you to give your private keys to their wallets (if they even create one).  The risk there is that the developers or wallet creator will steal your original coins and this has happened already with the Bitcoin Gold Scam.

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I think exchanges should outright refuse to deal with these scam coins.

The underlying issue is simply that why are hardforks possible at all?  Counterfeiting is so easy with these opensource, public and permssionless blockchains.  To me it is a complete security and privacy flaw that was well-intentioned but simply doesn’t work.

Going forward, community maintained coins that cannot be forked, that are secure, private and are real time will be the long-term ones to invest in and the long-term winners.

Coinbase To Support Ethereum ERC20 Tokens

Coinbase just announced it will be supporting the trade of ERC20 tokens.  A lot of times in the crypto world I look and shake my head and I just can’t stop with this one.  I could see if Coinbase wanted to support actual currencies like Ripple, Lumens, Monero etc… those are reasonably safe currencies to invest in.

ICOs which are essentially crowdfunding/pseudo-stocks (depending on who you ask) are extremely risk and I would say about 90% of those are fraudulent in that they collect your coins and never intended to deliver anything.  I think we can all agree at any rate that ICOs are extremely risky and HODLING may be as useful with those tokens as holding RIM stock.

Coinbase has a huge client base and is one of the easiest ways for people to get into cryptocurrency.  However, they risk bringing regulatory wrath and also dampening new investors from coming in when they get burnt on these ICO scams.

It’s recently come to my attention that some people weren’t aware that Ethereum Smart Contracts or ERC20 tokens are not vetted, supported or approved by the Ethereum team in any way.  This is  huge issue of course and why I am so against smart contracts at the moment.  Let’s get cryptocurrency as an infrastructure in terms of B2B,B2C,C2C etc… working fast, efficiently, securely and easily before biting off more than we can chew!

I am also at a loss as to how the Coinbase legal team approved this one?  Did they run it by any counsel at all?  I think if and when people lose massive amounts that Coinbase could be held liable regardless of waivers and disclaimers for losses in some of the huge ICO busts and scams to come.  Especially when there are so many other avenues and stable currencies they could have directed their customers to.

I am fearful for the investors, for Coinbase and the cryptocurrency market as a whole but should these warnings go unheeded and “things go terribly wrong” then it would be a good, fresh start for the industry.  Investors also need to do their diligence and exercise good understanding and judgement before making investment decisions.

It will be interesting to see where this leads but I would never recommend any friend or family member to invest in any Ethereum Based Token ICO and to stick with solid and real cryptocurrencies that solve the problems of today.

NEM Gives Up Chase for $500M USD in Stolen Coins

For no apparent reason NEM has given up the chase for these coins.  In all fairness I don’t think it was ever their issue, the stolen coins were the fault of the Coincheck Exchange’s security and not due to any flaw in the NEM client or network side.  Of course naturally they were interested but one bold prediction is that “hackers would not be able to launder the coins due to lack of liquidity”.  I am not sure if the NEM developers really believed that or if they thought heat on the exchanges would dissuade or slow the thieves down.  I suspect they exchanged the NEM for other coins and then sold them back again clean through multiple exchanges.

I would say this isn’t bad for cryptocurrency because bank heists occur each day and nothing stops one from spending or exchanging the money in real life.  It’s really no different than the initial fears of “e-commerce sites were hacked” just as real life stores have theft and holdups everyday.  It is just a matter of mitigation whether physical or virtual.

But with that aside NEM clearly said they were ending the chase and wouldn’t say much more due to the “sensitivity of the investigation”.  This is something I find a little strange, is it that they did find something but the authorities have forbidden them from disclosing it?

Was this an inside job on the part of Coincheck in Japan or was it something else explosive that they found?  Could it have been a rival currency, bankers or government behind the hack?  Anything is possible and speculation will rightfully run abound until more details emerge.

First Bitcoin Mining Arrest

In this case a Florida government employee was arrested for “mining Bitcoin”.  But there’s more to the story that is probably missing or inaccurate.

Many people use work resources to mine but this case is unique.  This IT manager apparently spent $22K using his workplace issued credit card on mining hardware including dozens of GPU cards.

Considering we are talking GPUs the IT manager was more probably mining Ethereum or another profitable coin.  It also could be he had some ASICs for Bitcoin running considering he racked up an extra $800/month in power consumption!

The moral of the story is that he wouldn’t have been arrested and charged with theft and fraud had he not used his work credit card.

I could see it being normal for an employee to be disciplined but its  a gray area especially for workplaces without applicable policies for mining.

As much I like mining here is one of the evils that it can impact anyone paying utilites.