FNSS 2019: pp 99-117 | Attainable Hacks on Keystore Files inEthereum WalletsA Systematic Analysis AuthorsPurathaniPraitheeshanYiWeiXinLeiPanRobinDossConference paperFirst Online: Part of the book series (CCIS, volume 1113)Abstract Ethereum is a popular Blockchain platform that allows users to manage their cryptocurrency transactions through the wallets. Ethereum wallet helps interact with the blockchain network easily, and it keeps Ethereum cryptocurrency (Ether) transaction data of its users. The use of Ethereum and wallets grows rapidly. Since they handle huge value of crypto assets, attackers are keen to hack and steal Ethers from Ethereum wallets. But there lacks comprehensive security analysis, especially on keystore files in Ethereum wallets. There were a few incidents occurred with huge loss of Ethers in Etheruem wallets within the last five years. In this paper, we conducted a systematic analysis on hacking methods from the existing literature and conducted experiments to find how the Ethereum wallets keystore file is vulnerable to the adversaries. Since the keystore file is secured with a password, we have used the brute-force and the dictionary attack to crack the password of the keystore file in Ethereum wallets. Our results showed that the dictionary attack is more efficient to hack the keystore file than the brute-force attack. Further, the keystore file is less vulnerable, if it is used complex password credentials.Keywords EthereumWalletsKeystoreSecurityAttacksThis is a preview of subscription content, to check access.References 1.Blockchain platform: Ethereum. https://www.ethereum.org/2.Etherchain - The Ethereum Blockchain Explorer. https://www.etherchain.org/3.Ethereum Wallet Attacks and Countermeasure Assnalysis. .Etherscan - The Ethereum Blockchain Explorer. https://etherscan.io/5.Geth - The Go Implementation of Ethereum Protocol. https://github.com/ethereum/mist/6.Geth - The Go Implementation of Ethereum Protocol. https://geth.ethereum.org/7.Hashcat - An advanced password recovery tool. https://hashcat.net/hashcat/8.Hashcat 4.2.1.7 - Download Software files. https://hashcat.net/files/hashcat-4.2.1.7z9.MyEtherWallet - The Ethereum Original Wallet. https://www.myetherwallet.com/10.Parity Wallet Library. 0cb302672835/js/src/contracts/snippets/enhanced-wallet.sol11.The python script file to convert keystore file to hashcat compatible format. ethereum2john.py12.Ethereum Foundation. 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Uncategorized zkSNARKs in a nutshell Posted by Christian Reitwiessner on December 5th, 2016. The possibilities of zkSNARKs are impressive, you can verify the correctness of computations without having to execute them and you will not even learn what was executed just that it was done correctly. Unfortunately, most explanations of zkSNARKs resort to hand-waving at some point and thus they remain something magical, suggesting that only the most enlightened actually understand how and why (and if?) they work. The reality is that zkSNARKs can be reduced to four simple techniques and this blog post aims to explain them. Anyone who can understand how the RSA cryptosystem works, should also get a pretty good understanding of currently employed zkSNARKs. Lets see if it will achieve its goal! pdf version As a very short summary, zkSNARKs as currently implemented, have 4 main ingredients (dont worry, we will explain all the terms in later sections): A) Encoding as a polynomial problem The program that is to be checked is compiled into a quadratic equation of polynomials: t(x) h(x) = w(x) v(x), where the equality holds if and only if the program is computed correctly. The prover wants to convince the verifier that this equality holds. B) Succinctness by random sampling The verifier chooses a secret evaluation point s to reduce the problem from multiplying polynomials and verifying polynomial function equality to simple multiplication and equality check on numbers: t(s)h(s) = w(s)v(s) This reduces both the proof size and the verification time tremendously. C) Homomorphic encoding / encryption An encoding/encryption function E is used that has some homomorphic properties (but is not fully homomorphic, something that is not yet practical). This allows the prover to compute E(t(s)), E(h(s)), E(w(s)), E(v(s)) without knowing s, she only knows E(s) and some other helpful encrypted values. D) Zero Knowledge The prover permutes the values E(t(s)), E(h(s)), E(w(s)), E(v(s)) by multiplying with a number so that the verifier can still check their correct structure without knowing the actual encoded values. The very rough idea is that checking t(s)h(s) = w(s)v(s) is identical to checking t(s)h(s) k = w(s)v(s) k for a random secret number k (which is not zero), with the difference that if you are sent only the numbers (t(s)h(s) k) and (w(s)v(s) k), it is impossible to derive t(s)h(s) or w(s)v(s). This was the hand-waving part so that you can understand the essence of zkSNARKs, and now we get into the details. RSA and Zero-Knowledge Proofs Let us start with a quick reminder of how RSA works, leaving out some nit-picky details. Remember that we often work with numbers modulo some other number instead of full integers. The notation here is a + b c (mod n), which means (a + b) % n = c % n. Note that the (mod n) part does not apply to the right hand side c but actually to the and all other in the same equation. This makes it quite hard to read, but I promise to use it sparingly. Now back to RSA: The prover comes up with the following numbers: p, q: two random secret primes n := p q d: random number such that 1 < d < n 1 e: a number such that d e 1 (mod (p-1)(q-1)). The public key is (e, n) and the private key is d. The primes p and q can be discarded but should not be revealed. The message m is encrypted via E(m) := me % n and c = E(m) is decrypted via D(c) := cd % n. Because of the fact that cd (me % n)d med (mod n) and multiplication in the exponent of m behaves like multiplication in the group modulo (p-1)(q-1), we get med m (mod n). Furthermore, the security of RSA relies on the assumption that n cannot be factored efficiently and thus d cannot be computed from e (if we knew p and q, this would be easy). One of the remarkable feature of RSA is that it is multiplicatively homomorphic. In general, two operations are homomorphic if you can exchange their order without affecting the result. In the case of homomorphic encryption, this is the property that you can perform computations on encrypted data. Fully homomorphic encryption, something that exists, but is not practical yet, would allow to evaluate arbitrary programs on encrypted data. Here, for RSA, we are only talking about group multiplication. More formally: E(x) E(y) xeye (xy)e E(x y) (mod n), or in words: The product of the encryption of two messages is equal to the encryption of the product of the messages. This homomorphicity already allows some kind of zero-knowledge proof of multiplication: The prover knows some secret numbers x and y and computes their product, but sends only the encrypted versions a = E(x), b = E(y) and c = E(x y) to the verifier. The verifier now checks that (a b) % n c % n and the only thing the verifier learns is the encrypted version of the product and that the product was correctly computed, but she neither knows the two factors nor the actual product. If you replace the product by addition, this already goes into the direction of a blockchain where the main operation is to add balances. Interactive Verification Having touched a bit on the zero-knowledge aspect, let us now focus on the other main feature of zkSNARKs, the succinctness. As you will see later, the succinctness is the much more remarkable part of zkSNARKs, because the zero-knowledge part will be given for free due to a certain encoding that allows for a limited form of homomorphic encoding. SNARKs are short for succinct non-interactive arguments of knowledge. In this general setting of so-called interactive protocols, there is a prover and a verifier and the prover wants to convince the verifier about a statement (e.g. that f(x) = y) by exchanging messages. The generally desired properties are that no prover can convince the verifier about a wrong statement (soundness) and there is a certain strategy for the prover to convince the verifier about any true statement (completeness). The individual parts of the acronym have the following meaning: Succinct: the sizes of the messages are tiny in comparison to the length of the actual computation Non-interactive: there is no or only little interaction. For zkSNARKs, there is usually a setup phase and after that a single message from the prover to the verifier. Furthermore, SNARKs often have the so-called public verifier property meaning that anyone can verify without interacting anew, which is important for blockchains. ARguments: the verifier is only protected against computationally limited provers. Provers with enough computational power can create proofs/arguments about wrong statements (Note that with enough computational power, any public-key encryption can be broken). This is also called computational soundness, as opposed to perfect soundness. of Knowledge: it is not possible for the prover to construct a proof/argument without knowing a certain so-called witness (for example the address she wants to spend from, the preimage of a hash function or the path to a certain Merkle-tree node). If you add the zero-knowledge prefix, you also require the property (roughly speaking) that during the interaction, the verifier learns nothing apart from the validity of the statement. The verifier especially does not learn the witness string we will see later what that is exactly. As an example, let us consider the following transaction validation computation: f(1,2, s, r, v, ps, pr, v) = 1 if and only if1 and 2 are the root hashes of account Merkle-trees (the pre- and the post-state), s and r are sender and receiver accounts and ps, pr are Merkle-tree proofs that testify that the balance of s is at least v in 1 and they hash to 2 instead of 1 if v is moved from the balance of s to the balance of r. It is relatively easy to verify the computation of f if all inputs are known. Because of that, we can turn f into a zkSNARK where only 1 and 2 are publicly known and (s, r, v, ps, pr, v) is the witness string. The zero-knowledge property now causes the verifier to be able to check that the prover knows some witness that turns the root hash from 1 to 2 in a way that does not violate any requirement on correct transactions, but she has no idea who sent how much money to whom. The formal definition (still leaving out some details) of zero-knowledge is that there is a simulator that, having also produced the setup string, but does not know the secret witness, can interact with the verifier but an outside observer is not able to distinguish this interaction from the interaction with the real prover. NP and Complexity-Theoretic Reductions In order to see which problems and computations zkSNARKs can be used for, we have to define some notions from complexity theory. If you do not care about what a witness is, what you will not know after reading a zero-knowledge proof or why it is fine to have zkSNARKs only for a specific problem about polynomials, you can skip this section. P and NP First, let us restrict ourselves to functions that only output 0 or 1 and call such functions problems. Because you can query each bit of a longer result individually, this is not a real restriction, but it makes the theory a lot easier. Now we want to measure how complicated it is to solve a given problem (compute the function). For a specific machine implementation M of a mathematical function f, we can always count the number of steps it takes to compute f on a specific input x this is called the runtime of M on x. What exactly a step is, is not too important in this context. Since the program usually takes longer for larger inputs, this runtime is always measured in the size or length (in number of bits) of the input. This is where the notion of e.g. an n2 algorithm comes from it is an algorithm that takes at most n2 steps on inputs of size n. The notions algorithm and program are largely equivalent here. Programs whose runtime is at most nk for some k are also called polynomial-time programs. Two of the main classes of problems in complexity theory are P and NP: P is the class of problems L that have polynomial-time programs. Even though the exponent k can be quite large for some problems, P is considered the class of feasible problems and indeed, for non-artificial problems, k is usually not larger than 4. Verifying a bitcoin transaction is a problem in P, as is evaluating a polynomial (and restricting the value to 0 or 1). Roughly speaking, if you only have to compute some value and not search for something, the problem is almost always in P. If you have to search for something, you mostly end up in a class called NP. The Class NP There are zkSNARKs for all problems in the class NP and actually, the practical zkSNARKs that exist today can be applied to all problems in NP in a generic fashion. It is unknown whether there are zkSNARKs for any problem outside of NP. All problems in NP always have a certain structure, stemming from the definition of NP: NP is the class of problems L that have a polynomial-time program V that can be used to verify a fact given a polynomially-sized so-called witness for that fact. More formally: L(x) = 1 if and only if there is some polynomially-sized string w (called the witness) such that V(x, w) = 1 As an example for a problem in NP, let us consider the problem of boolean formula satisfiability (SAT). For that, we define a boolean formula using an inductive definition: any variable x1, x2, x3, is a boolean formula (we also use any other character to denote a variable if f is a boolean formula, then f is a boolean formula (negation) if f and g are boolean formulas, then (f g) and (f g) are boolean formulas (conjunction / and, disjunction / or). The string ((x1 x2) x2) would be a boolean formula. A boolean formula is satisfiable if there is a way to assign truth values to the variables so that the formula evaluates to true (where true is false, false is true, true false is false and so on, the regular rules). The satisfiability problem SAT is the set of all satisfiable boolean formulas. SAT(f) := 1 if f is a satisfiable boolean formula and 0 otherwise The example above, ((x1 x2) x2), is not satisfiable and thus does not lie in SAT. The witness for a given formula is its satisfying assignment and verifying that a variable assignment is satisfying is a task that can be solved in polynomial time. P = NP? If you restrict the definition of NP to witness strings of length zero, you capture the same problems as those in P. Because of that, every problem in P also lies in NP. One of the main tasks in complexity theory research is showing that those two classes are actually different that there is a problem in NP that does not lie in P. It might seem obvious that this is the case, but if you can prove it formally, you can win US$ 1 million. Oh and just as a side note, if you can prove the converse, that P and NP are equal, apart from also winning that amount, there is a big chance that cryptocurrencies will cease to exist from one day to the next. The reason is that it will be much easier to find a solution to a proof of work puzzle, a collision in a hash function or the private key corresponding to an address. Those are all problems in NP and since you just proved that P = NP, there must be a polynomial-time program for them. But this article is not to scare you, most researchers believe that P and NP are not equal. NP-Completeness Let us get back to SAT. The interesting property of this seemingly simple problem is that it does not only lie in NP, it is also NP-complete. The word complete here is the same complete as in Turing-complete. It means that it is one of the hardest problems in NP, but more importantly and that is the definition of NP-complete an input to any problem in NP can be transformed to an equivalent input for SAT in the following sense: For any NP-problem L there is a so-called reduction function f, which is computable in polynomial time such that: L(x) = SAT(f(x)) Such a reduction function can be seen as a compiler: It takes source code written in some programming language and transforms in into an equivalent program in another programming language, which typically is a machine language, which has the some semantic behaviour. Since SAT is NP-complete, such a reduction exists for any possible problem in NP, including the problem of checking whether e.g. a bitcoin transaction is valid given an appropriate block hash. There is a reduction function that translates a transaction into a boolean formula, such that the formula is satisfiable if and only if the transaction is valid. Reduction Example In order to see such a reduction, let us consider the problem of evaluating polynomials. First, let us define a polynomial (similar to a boolean formula) as an expression consisting of integer constants, variables, addition, subtraction, multiplication and (correctly balanced) parentheses. Now the problem we want to consider is PolyZero(f) := 1 if f is a polynomial which has a zero where its variables are taken from the set {0, 1} We will now construct a reduction from SAT to PolyZero and thus show that PolyZero is also NP-complete (checking that it lies in NP is left as an exercise). It suffices to define the reduction function r on the structural elements of a boolean formula. The idea is that for any boolean formula f, the value r(f) is a polynomial with the same number of variables and f(a1,..,ak) is true if and only if r(f)(a1,..,ak) is zero, where true corresponds to 1 and false corresponds to 0, and r(f) only assumes the value 0 or 1 on variables from {0, 1}: r(xi) := (1 xi) r(f) := (1 r(f)) r((f g)) := (1 (1 r(f))(1 r(g))) r((f g)) := r(f)r(g) One might have assumed that r((f g)) would be defined as r(f) + r(g), but that will take the value of the polynomial out of the {0, 1} set. Using r, the formula ((x y) x) is translated to (1 (1 (1 x))(1 (1 y))(1 (1 x)), Note that each of the replacement rules for r satisfies the goal stated above and thus r correctly performs the reduction: SAT(f) = PolyZero(r(f)) or f is satisfiable if and only if r(f) has a zero in {0, 1} Witness Preservation From this example, you can see that the reduction function only defines how to translate the input, but when you look at it more closely (or read the proof that it performs a valid reduction), you also see a way to transform a valid witness together with the input. In our example, we only defined how to translate the formula to a polynomial, but with the proof we explained how to transform the witness, the satisfying assignment. This simultaneous transformation of the witness is not required for a transaction, but it is usually also done. This is quite important for zkSNARKs, because the the only task for the prover is to convince the verifier that such a witness exists, without revealing information about the witness. Quadratic Span Programs In the previous section, we saw how computational problems inside NP can be reduced to each other and especially that there are NP-complete problems that are basically only reformulations of all other problems in NP including transaction validation problems. This makes it easy for us to find a generic zkSNARK for all problems in NP: We just choose a suitable NP-complete problem. So if we want to show how to validate transactions with zkSNARKs, it is sufficient to show how to do it for a certain problem that is NP-complete and perhaps much easier to work with theoretically. This and the following section is based on the paper GGPR12 (the linked technical report has much more information than the journal paper), where the authors found that the problem called Quadratic Span Programs (QSP) is particularly well suited for zkSNARKs. A Quadratic Span Program consists of a set of polynomials and the task is to find a linear combination of those that is a multiple of another given polynomial. Furthermore, the individual bits of the input string restrict the polynomials you are allowed to use. In detail (the general QSPs are a bit more relaxed, but we already define the strong version because that will be used later): A QSP over a field F for inputs of length n consists of a set of polynomials v0,,vm, w0,,wm over this field F, a polynomial t over F (the target polynomial), an injective function f: {(i, j) | 1 i n, j {0, 1}} {1, , m} The task here is roughly, to multiply the polynomials by factors and add them so that the sum (which is called a linear combination) is a multiple of t. For each binary input string u, the function f restricts the polynomials that can be used, or more specific, their factors in the linear combinations. For formally: An input u is accepted (verified) by the QSP if and only if there are tuples a = (a1,,am), b = (b1,,bm) from the field F such that ak,bk = 1 if k = f(i, u[i]) for some i, (u[i] is the ith bit of u) ak,bk = 0 if k = f(i, 1 u[i]) for some i and the target polynomial t divides va wb where va = v0 +a1v0 + + amvm, wb = w0 + b1 w0 + + bmwm. Note that there is still some freedom in choosing the tuples a and b if 2n is smaller than m. This means QSP only makes sense for inputs up to a certain size this problem is removed by using non-uniform complexity, a topic we will not dive into now, let us just note that it works well for cryptography where inputs are generally small. As an analogy to satisfiability of boolean formulas, you can see the factors a1,,am, b1,,bm as the assignments to the variables, or in general, the NP witness. To see that QSP lies in NP, note that all the verifier has to do (once she knows the factors) is checking that the polynomial t divides va wb, which is a polynomial-time problem. We will not talk about the reduction from generic computations or circuits to QSP here, as it does not contribute to the understanding of the general concept, so you have to believe me that QSP is NP-complete (or rather complete for some non-uniform analogue like NP/poly). In practice, the reduction is the actual engineering part it has to be done in a clever way such that the resulting QSP will be as small as possible and also has some other nice features. One thing about QSPs that we can already see is how to verify them much more efficiently: The verification task consists of checking whether one polynomial divides another polynomial. This can be facilitated by the prover in providing another polynomial h such that t h = va wb which turns the task into checking a polynomial identity or put differently, into checking that t h va wb = 0, i.e. checking that a certain polynomial is the zero polynomial. This looks rather easy, but the polynomials we will use later are quite large (the degree is roughly 100 times the number of gates in the original circuit) so that multiplying two polynomials is not an easy task. So instead of actually computing va, wb and their product, the verifier chooses a secret random point s (this point is part of the toxic waste of zCash), computes the numbers t(s), vk(s) and wk(s) for all k and from them, va(s) and wb(s) and only checks that t(s) h(s) = va(s) wb (s). So a bunch of polynomial additions, multiplications with a scalar and a polynomial product is simplified to field multiplications and additions. Checking a polynomial identity only at a single point instead of at all points of course reduces the security, but the only way the prover can cheat in case t h va wb is not the zero polynomial is if she manages to hit a zero of that polynomial, but since she does not know s and the number of zeros is tiny (the degree of the polynomials) when compared to the possibilities for s (the number of field elements), this is very safe in practice. The zkSNARK in Detail We now describe the zkSNARK for QSP in detail. It starts with a setup phase that has to be performed for every single QSP. In zCash, the circuit (the transaction verifier) is fixed, and thus the polynomials for the QSP are fixed which allows the setup to be performed only once and re-used for all transactions, which only vary the input u. For the setup, which generates the common reference string (CRS), the verifier chooses a random and secret field element s and encrypts the values of the polynomials at that point. The verifier uses some specific encryption E and publishes E(vk(s)) and E(wk(s)) in the CRS. The CRS also contains several other values which makes the verification more efficient and also adds the zero-knowledge property. The encryption E used there has a certain homomorphic property, which allows the prover to compute E(v(s)) without actually knowing vk(s). How to Evaluate a Polynomial Succinctly and with Zero-Knowledge Let us first look at a simpler case, namely just the encrypted evaluation of a polynomial at a secret point, and not the full QSP problem. For this, we fix a group (an elliptic curve is usually chosen here) and a generator g. Remember that a group element is called generator if there is a number n (the group order) such that the list g0, g1,g2, , gn-1 contains all elements in the group. The encryption is simply E(x) :=gx. Now the verifier chooses a secret field element s and publishes (as part of the CRS) E(s0), E(s1), , E(sd) d is the maximum degree of all polynomials After that, s can be (and has to be) forgotten. This is exactly what zCash calls toxic waste, because if someone can recover this and the other secret values chosen later, they can arbitrarily spoof proofs by finding zeros in the polynomials. Using these values, the prover can compute E(f(s)) for arbitrary polynomials f without knowing s: Assume our polynomial is f(x) = 4x2 + 2x + 4 and we want to compute E(f(s)), then we get E(f(s)) = E(4s2 + 2s + 4) = g4s^2 + 2s + 4 = E(s2)4 E(s1)2 E(s0)4, which can be computed from the published CRS without knowing s. The only problem here is that, because s was destroyed, the verifier cannot check that the prover evaluated the polynomial correctly. For that, we also choose another secret field element, , and publish the following shifted values: E(s0), E(s1), , E(sd) As with s, the value is also destroyed after the setup phase and neither known to the prover nor the verifier. Using these encrypted values, the prover can similarly compute E( f(s)), in our example this isE(4s2 + 2s + 4) = E(s2)4 E(s1)2 E(s0)4. So the prover publishes A := E(f(s)) and B := E( f(s))) and the verifier has to check that these values match. She does this by using another main ingredient: A so-called pairing function e. The elliptic curve and the pairing function have to be chosen together, so that the following property holds for all x, y: e(gx, gy) = e(g, g)xy Using this pairing function, the verifier checks that e(A, g) = e(B, g) note that g is known to the verifier because it is part of the CRS as E(s0). In order to see that this check is valid if the prover does not cheat, let us look at the following equalities: e(A, g) = e(gf(s), g) = e(g, g) f(s) e(B, g) = e(g f(s), g) = e(g, g) f(s) The more important part, though, is the question whether the prover can somehow come up with values A, B that fulfill the check e(A, g) = e(B, g) but are not E(f(s)) and E( f(s))), respectively. The answer to this question is we hope not. Seriously, this is called the d-power knowledge of exponent assumption and it is unknown whether a cheating prover can do such a thing or not. This assumption is an extension of similar assumptions that are made for proving the security of other public-key encryption schemes and which are similarly unknown to be true or not. Actually, the above protocol does not really allow the verifier to check that the prover evaluated the polynomial f(x) = 4x2 + 2x + 4, the verifier can only check that the prover evaluated some polynomial at the point s. The zkSNARK for QSP will contain another value that allows the verifier to check that the prover did indeed evaluate the correct polynomial. What this example does show is that the verifier does not need to evaluate the full polynomial to confirm this, it suffices to evaluate the pairing function. In the next step, we will add the zero-knowledge part so that the verifier cannot reconstruct anything about f(s), not even E(f(s)) the encrypted value. For that, the prover picks a random and instead of A := E(f(s)) and B := E( f(s))), she sends over A := E( + f(s)) and B := E( ( + f(s)))). If we assume that the encryption cannot be broken, the zero-knowledge property is quite obvious. We now have to check two things: 1. the prover can actually compute these values and 2. the check by the verifier is still true. For 1., note that A = E( + f(s)) = g + f(s) = ggf(s) = E() E(f(s)) = E() A and similarly, B = E( ( + f(s)))) = E( + f(s))) = g + f(s) = g g f(s) = E()E( f(s)) = E() B. For 2., note that the only thing the verifier checks is that the values A and B she receives satisfy the equation A = E(a) und B = E( a) for some value a, which is obviously the case for a = + f(s) as it is the case for a = f(s). Ok, so we now know a bit about how the prover can compute the encrypted value of a polynomial at an encrypted secret point without the verifier learning anything about that value. Let us now apply that to the QSP problem. A SNARK for the QSP Problem Remember that in the QSP we are given polynomials v0,,vm, w0,,wm, a target polynomial t (of degree at most d) and a binary input string u. The prover finds a1,,am, b1,,bm (that are somewhat restricted depending on u) and a polynomial h such that t h = (v0 + a1v1 + +amvm) (w0 + b1w1 + + bmwm). In the previous section, we already explained how the common reference string (CRS) is set up. We choose secret numbers s and and publish E(s0), E(s1), , E(sd) and E(s0), E(s1), , E(sd) Because we do not have a single polynomial, but sets of polynomials that are fixed for the problem, we also publish the evaluated polynomials right away: E(t(s)), E( t(s)), E(v0(s)), ,E(vm(s)), E( v0(s)), ,E( vm(s)), E(w0(s)), ,E(wm(s)), E( w0(s)), ,E( wm(s)), and we need further secret numbers v, w, (they will be used to verify that those polynomials were evaluated and not some arbitrary polynomials) and publish E(), E(v ),E(w ), E(v v1(s)), ,E(v vm(s)) E(w w1(s)), ,E(w wm(s)) E(v t(s)), E(w t(s)) This is the full common reference string. In practical implementations, some elements of the CRS are not needed, but that would complicated the presentation. Now what does the prover do? She uses the reduction explained above to find the polynomial h and the values a1,,am, b1,,bm. Here it is important to use a witness-preserving reduction (see above) because only then, the values a1,,am, b1,,bm can be computed together with the reduction and would be very hard to find otherwise. In order to describe what the prover sends to the verifier as proof, we have to go back to the definition of the QSP. There was an injective function f: {(i, j) | 1 i n, j {0, 1}} {1, , m} which restricts the values of a1,,am, b1,,bm. Since m is relatively large, there are numbers which do not appear in the output of f for any input. These indices are not restricted, so let us call them Ifree and define vfree(x) =k akvk(x) where the k ranges over all indices in Ifree. For w(x) = b1w1(x) + + bmwm(x), the proof now consists of Vfree := E(vfree(s)), W := E(w(s)), H := E(h(s)), Vfree:= E( vfree(s)), W := E( w(s)), H := E( h(s)), Y := E(v vfree(s) + w w(s))) where the last part is used to check that the correct polynomials were used (this is the part we did not cover yet in the other example). Note that all these encrypted values can be generated by the prover knowing only the CRS. The task of the verifier is now the following: Since the values of ak, where k is not a free index can be computed directly from the input u (which is also known to the verifier, this is what is to be verified), the verifier can compute the missing part of the full sum for v: E(vin(s)) = E(k akvk(s)) where the k ranges over all indices not in Ifree. With that, the verifier now confirms the following equalities using the pairing function e (dont be scared): e(Vfree, g) =e(Vfree, g), e(W, E(1)) = e(W, E()), e(H, E(1)) = e(H,E()) e(E(), Y) = e(E(v ), Vfree) e(E(w ), W) e(E(v0(s)) E(vin(s)) Vfree, E(w0(s)) W) = e(H, E(t(s))) To grasp the general concept here, you have to understand that the pairing function allows us to do some limited computation on encrypted values: We can do arbitrary additions but just a single multiplication. The addition comes from the fact that the encryption itself is already additively homomorphic and the single multiplication is realized by the two arguments the pairing function has. So e(W, E(1)) = e(W, E()) basically multiplies W by 1 in the encrypted space and compares that to W multiplied by in the encrypted space. If you look up the value W and W are supposed to have E(w(s)) and E( w(s)) this checks out if the prover supplied a correct proof. If you remember from the section about evaluating polynomials at secret points, these three first checks basically verify that the prover did evaluate some polynomial built up from the parts in the CRS. The second item is used to verify that the prover used the correct polynomials v and w and not just some arbitrary ones. The idea behind is that the prover has no way to compute the encrypted combination E(v vfree(s) + w w(s))) by some other way than from the exact values of E(vfree(s)) and E(w(s)). The reason is that the values v are not part of the CRS in isolation, but only in combination with the values vk(s) and w is only known in combination with the polynomials wk(s). The only way to mix them is via the equally encrypted . Assuming the prover provided a correct proof, let us check that the equality works out. The left and right hand sides are, respectively e(E(), Y) = e(E(), E(v vfree(s) + w w(s))) = e(g, g)(v vfree(s) + w w(s)) e(E(v ), Vfree) e(E(w ), W) = e(E(v ), E(vfree(s))) e(E(w ), E(w(s))) = e(g, g)(v ) vfree(s) e(g, g)(w ) w(s)= e(g, g)(v vfree(s) + w w(s)) The third item essentially checks that (v0(s) + a1v1(s) + +amvm(s)) (w0(s) + b1w1(s) + + bmwm(s)) = h(s) t(s), the main condition for the QSP problem. Note that multiplication on the encrypted values translates to addition on the unencrypted values because E(x) E(y) = gx gy = gx+y = E(x + y). Adding Zero-Knowledge As I said in the beginning, the remarkable feature about zkSNARKS is rather the succinctness than the zero-knowledge part. We will see now how to add zero-knowledge and the next section will be touch a bit more on the succinctness. The idea is that the prover shifts some values by a random secret amount and balances the shift on the other side of the equation. The prover chooses random free, w and performs the following replacements in the proof vfree(s) is replaced by vfree(s) + free t(s) w(s) is replaced by w(s) + w t(s). By these replacements, the values Vfree and W, which contain an encoding of the witness factors, basically become indistinguishable form randomness and thus it is impossible to extract the witness. Most of the equality checks are immune to the modifications, the only value we still have to correct is H or h(s). We have to ensure that (v0(s) + a1v1(s) + +amvm(s)) (w0(s) + b1w1(s) + + bmwm(s)) = h(s) t(s), or in other words (v0(s) + vin(s) + vfree(s)) (w0(s) + w(s)) = h(s) t(s) still holds. With the modifications, we get (v0(s) + vin(s) + vfree(s) + free t(s)) (w0(s) + w(s) + w t(s)) and by expanding the product, we see that replacing h(s) by h(s) + free (w0(s) + w(s)) + w (v0(s) + vin(s) + vfree(s)) + (free w) t(s) will do the trick. Tradeoff between Input and Witness Size As you have seen in the preceding sections, the proof consists only of 7 elements of a group (typically an elliptic curve). Furthermore, the work the verifier has to do is checking some equalities involving pairing functions and computing E(vin(s)), a task that is linear in the input size. Remarkably, neither the size of the witness string nor the computational effort required to verify the QSP (without SNARKs) play any role in verification. This means that SNARK-verifying extremely complex problems and very simple problems all take the same effort. The main reason for that is because we only check the polynomial identity for a single point, and not the full polynomial. Polynomials can get more and more complex, but a point is always a point. The only parameters that influence the verification effort is the level of security (i.e. the size of the group) and the maximum size for the inputs. It is possible to reduce the second parameter, the input size, by shifting some of it into the witness: Instead of verifying the function f(u, w), where u is the input and w is the witness, we take a hash function h and verify f'(H, (u, w)) := f(u, w) h(u) = H. This means we replace the input u by a hash of the input h(u) (which is supposed to be much shorter) and verify that there is some value x that hashes to H(u) (and thus is very likely equal to u) in addition to checking f(x, w). This basically moves the original input u into the witness string and thus increases the witness size but decreases the input size to a constant. This is remarkable, because it allows us to verify arbitrarily complex statements in constant time. How is this Relevant to Ethereum Since verifying arbitrary computations is at the core of the Ethereum blockchain, zkSNARKs are of course very relevant to Ethereum. With zkSNARKs, it becomes possible to not only perform secret arbitrary computations that are verifiable by anyone, but also to do this efficiently. Although Ethereum uses a Turing-complete virtual machine, it is currently not yet possible to implement a zkSNARK verifier in Ethereum. The verifier tasks might seem simple conceptually, but a pairing function is actually very hard to compute and thus it would use more gas than is currently available in a single block. Elliptic curve multiplication is already relatively complex and pairings take that to another level. Existing zkSNARK systems like zCash use the same problem / circuit / computation for every task. In the case of zCash, it is the transaction verifier. On Ethereum, zkSNARKs would not be limited to a single computational problem, but instead, everyone could set up a zkSNARK system for their specialized computational problem without having to launch a new blockchain. Every new zkSNARK system that is added to Ethereum requires a new secret trusted setup phase (some parts can be re-used, but not all), i.e. a new CRS has to be generated. It is also possible to do things like adding a zkSNARK system for a generic virtual machine. This would not require a new setup for a new use-case in much the same way as you do not need to bootstrap a new blockchain for a new smart contract on Ethereum. Getting zkSNARKs to Ethereum There are multiple ways to enable zkSNARKs for Ethereum. All of them reduce the actual costs for the pairing functions and elliptic curve operations (the other required operations are already cheap enough) and thus allows also the gas costs to be reduced for these operations. improve the (guaranteed) performance of the EVM improve the performance of the EVM only for certain pairing functions and elliptic curve multiplications The first option is of course the one that pays off better in the long run, but is harder to achieve. We are currently working on adding features and restrictions to the EVM which would allow better just-in-time compilation and also interpretation without too many required changes in the existing implementations. The other possibility is to swap out the EVM completely and use something like eWASM. The second option can be realized by forcing all Ethereum clients to implement a certain pairing function and multiplication on a certain elliptic curve as a so-called precompiled contract. The benefit is that this is probably much easier and faster to achieve. On the other hand, the drawback is that we are fixed on a certain pairing function and a certain elliptic curve. Any new client for Ethereum would have to re-implement these precompiled contracts. Furthermore, if there are advancements and someone finds better zkSNARKs, better pairing functions or better elliptic curves, or if a flaw is found in the elliptic curve, pairing function or zkSNARK, we would have to add new precompiled contracts. Twitter Facebook Christian Reitwiessner Comments Author ARIEL GABIZON Posted at 8:20 pm December 5, 2016. Very nicely done! One comment the word argument rather than proof does not typically refer to the level of confidence of the verifier. Argument rather than proof means it a system where a computationally unbounded prover can cheat (e.g. in snarks by solving discrete log) but also in interactive proof systems the verifier is not 100% sure the prover did not fool him Reply Author Christian Reitwiessner Posted at 12:54 am December 6, 2016. Thanks! I corrected the part about arguments, now that I read it again, it is of course obvious Reply

Future of NAV Coin : 3 Reasons To Watch NavCoin In 2019. Future of NAV Coin : 3 Reasons To Watch NavCoin In 2019. NavCoin was established in 2014 before the current wave of cryptocurrencies it came about without any pre-mine or ICO, and has stood the test of time as well. It continues to move along at its own pace, and over the years it has seen features added, improvements made and upgrades to its codebase. Thanks to that, and to a dedicated team, NavCoin continues to see consistent growth. Born out of the ashes of the Bitcoin code and network, NavCoin is an easy-to-use cryptocurrency enabling fast, secure, and cheap peer-to-peer (P2P) payments with the overall goal of lowering global business costs and transactions. Specifically, the NavCoin website emphasizes one core principle — usability. And, that’s exactly what they’ve done since 2014, creating and deploying countless applications and projects on top of the NavCoin protocol, all in furtherance of mainstream permeation and adoption.   At the very heart of the NavCoin blockchain are 3 fundamental layers: Protocol: the foundation for the entire NavCoin ecosystem, which is secured by nodes running all across the globe. NavHub: the second layer of NavCoin’s comprehensive platform, sanctioning the creation and deployment of various projects. Community: anyone can contribute to NavCoin and be rewarded for their efforts. NavCoin’s “By its users, for its users” approach is run entirely by its community, which ultimately enables a transparent and truly decentralized governance. It’s also open source, with every single line of code publicly viewable, allowing anyone to contribute and audit the NavCoin blockchain.     Finally, if you’re wondering what separates NavCoin from other P2P cryptocurrencies, look no further. NAV boasts: Extremely fast transaction times (30 seconds vs. an average of 10+ minutes for other cryptos), High scalability (current capacity of 260+ transactions per second), Low-cost transactions (only 0.0001 NAV/transaction), Payments based on RSA — an asymmetric cryptographic algorithm — for heightened encryption and security, Proof-of-Stake (PoS) mining (capable of even being run on a 5v Raspberry Pi), and Highly active community which delivers weekly updates. While these may seem like standard features for P2P cryptos, it’s rare for a project to support all without sacrificing in other fundamental and important areas. This is what makes NAV a unique and promising cryptocurrency to watch this 2019. Now, let’s get to it. Below are 3 reasons why NavCoin is worth keeping an eye on this 2019. At the core of a functional and effective transactional coin is encryption, something which NavCoin has tested and refined over their 4+ year tenure in the crypto-sphere. Most notably, NavCoin improves upon 2 core vulnerabilities plaguing traditional blockchains and cryptocurrencies: A highly public transactional link between senders and receivers, which opens up user privacy to malicious actors and other third-parties, and Sensitive data and information vulnerability, which requires blockchain databases to “roll back” to various backup points after corruption, triggering missing transactions and value.   But how does NavCoin remedy the above 2 vulnerabilities? Simple. A dual blockchain.   Through the utilization of NavTech, a dual blockchain-based private payment option operating in parallel to the NavCoin blockchain and protocol, transactional information and data is “optionally” encrypted and sent via a secondary blockchain, severing any transactional link between a user’s public and private data and information. For example, when executing a transaction across the NAV network, a sender will send their NAV to the NavTech subchain (skirting direct transfer to the recipient). The NavTech subchain then utilizes several layers of encryption to randomize and obfuscate metadata inference of NavTech transactions, ultimately splitting transactions with time-delayed outputs. The final payment is then sent to the intended recipient from a NavTech-governed and controlled token pool. Simply put, the original tokens first sent by a sender are completely different from the actual tokens the recipient receives.   NavTech uses RSA encryption, which has been widely studied and praised as a “robust encryption method” due to its usage of 2 separate cryptographic keys (public and private) — one key (public key) is able to be given to anyone, while the other key (private) is retained and kept private by the user. The core advantage of  RSA encryption is attributed to the realizable difficulty of the factorization of the product of 2 huge prime numbers, which in turn prevents decryption of sensitive information/data. And, unless a malicious actor has knowledge of both prime numbers, decoding of the subject message and information is likely infeasible.       NAV’s high levels of encryption and privacy provide users with “a democratic choice to make their financial transactions private,” should they decide to simply tick a box that they’d like their transaction to be anonymous. They are also in the process of redesigning NavTech (NavTech 2.0 “Rimu”) for 2019, to make the private payment system entirely “trustless and distributed running at a protocol level.”   NavTech 2.0 is set to roll out several heightened privacy features, such as: Dummy Transactions: used to cloak real transactions amongst a barrage of “fake” transactions — important for when NAV suffers from low trade volume.   Multiple Receiving Wallet Addresses: receiving NAV wallets enjoy multiple addresses to further obfuscate transactions, meaning when the NavTech subchain transacts with a receiving wallet, it doesn’t actually send the NAV to a single address, but a series of addresses.      NavTech Server Wallets: instead of finite and limited number of servers processing private transactions, every NAV wallet will become a NavTech server (or mesh network), where every wallet contributes towards a full decentralized network. Thanks to seamless transactions and near-zero costs, NavCoin is ripe for merchant adoption and implementation. NavCoin touts itself as the go-to payment solution for business and enterprise, as it’s already been tried and tested, and is currently in use/accepted by over 70 merchants across the world. At present, NavCoin’s “Merchant Gateway” — which allows for NAV use/acceptance in both physical stores and websites — supports merchants ranging from a full service ambulance company (Mile High Ambulance), to popular vape accessory website (101vape.com), all the way to a luxury sports car rental service (Lurento). NavCoin’s website cites that a core issue plaguing the implementation and realization of blockchain technology in the mainstream is the lack of user-friendly features. They also note that for P2P cryptocurrencies to truly establish themselves in everyday use and life, there needs to be a connecting bridge between blockchain technology and payment systems whereby users need zero to minimal technical expertise or understanding of blockchain technology to actually use it. NavCoin’s payment features further such simplicity, requiring customers/users to only scan a QR code in order to instantly transfer funds to a merchant. And that’s not all. NavCoin’s integrated payment gateway supports plugins for all major accessible webcarts, such as WooCommerce and Shopify — all of which also enable users and merchants to auto-convert cryptocurrencies and execute fiat settlements. Coupled with easy-to-use and implement NAV payment buttons (for seamless and secure transactions and donations), and NAV is truly in the midst of bringing cryptocurrency payments and blockchain security to the masses through a highly functional and easy-to-understand user interface while empowering merchants to effectively become their own bank. 3. Bustling Community With Countless Upcoming Projects: As noted above, NavCoin is a project of the people for the people, and is entirely run by its community — meaning anyone can contribute to NAV’s bustling ecosystem and get paid for their efforts. Driving NavCoin’s community-oriented push and growth is their Community Fund, which authorizes literally anyone to propose a project or idea, “nurture it, and build a team to bring it to life.” Projects on the NAV blockchain are funded and approved by its decentralized network of actors, and are free from central authority control and direction. That’s right, the users comprising the NavCoin network ultimately decide what’s most valuable for the protocol and choose its future direction and evolution. This increases community involvement in the network, as users can rest assured that their voices are actually heard and listened to.     But, what happens if a project secures funding from the NAV community but never materializes? Do users then lose their funds? NavCoin touts itself as the first actual Community Fund in all of blockchain to enforce a “dual-vote consensus” to protect against misappropriated funds should a project never be completed. And the Community Fund is decentralized, so the only way funds can ever be appropriated and distributed is through the dual network consensus vote. It’s also worth noting that every NAV block that is minted will generate and distribute 0.5 NAV to the Community Fund, which is estimated to be roughly 500,000 NAV per year, incentivizing the network and its users to create and grow.   In early December 2018, NavCoin rolled out their 4.5.0. update, which included an overhauled and upgraded community fund graphical interface with the NavCoin wallet, easing the process of voting on fund proposals and payment requests for users (all users need to do is log-in to their NavCoin Core Wallet or upcoming NEXT Wallet and select “yes” or “no”). NAV users are now promptly notified anytime a new payment request or proposal goes live on the network, sanctioning project proposals to go from idea to reality faster. Below are just several of the projects along with a short description which have been voted on, created, and deployed on NavCoin blockchain by the community. NavPay: an easy-to-use light wallet for users looking to safely store their NAV, which does not require users to download the entire NavCoin blockchain. It’s just a fast and simply way for NAV users to take control of their private keys. NavPi: a low-energy staking solution for NavCoin based on the Raspberry Pi platform, enabling an energy-efficient way for NAV users to validate transactions and receive stakes. OpenAlias: a simplistic and unique email username for users to easily send and receive NAV. Nav Explorer: an alternative NAV block explorer in Java to provide redundancy should the original CryptoID explorer suffer any issues or downtime. Kauri Wallet and DAEx (Upcoming): an open-source, multi-currency wallet geared towards advance transactions (merchant use, atomic exchanges, and more), and decentralized atomic exchange employing multi-currency features of the Kauri Wallet for secure P2P atomic exchanges. NavCoin ATM (Upcoming): the world’s first NavCoin ATM in Auckland, New Zealand.   The above are just a sliver of the numerous projects being rolled out on the NavCoin platform this 2019. You can find (and create) your own proposal here.   Intended for quick, cheap and secure shared payments. A system that is headed to bringing down the expense of doing business. Decentralization is not only a catchword. It is incorporated with the very establishment of the system, to create a culture of permissionless innovation. NavCoin funds itself utilizing the most advanced network support ever built. The first completely decentralized, utterly self-sufficient fund that just the network controls. Cryptographic forms of money are complicated, yet it should not be that way. NavCoin intends to make paying with crypto so natural, your parents can do it. NAV coin’s backbone has been based on the first Bitcoin code, however with a few essential changes. The main significant difference is that instead of Bitcoin’s Proof of Work, it utilizes the more energy productive Proof-of-Stake algorithm. NAV coin has likewise implemented a “dual blockchain innovation” with a sub-blockchain called “NavTech” to offer private exchanges. The standout component here is that security and anonymity are not vital; they are entirely discretionary. Moreover, if privacy is asked for, the client is separated from the transaction. The NAV exchange is directed through the NAVTech subchain which includes various layers of encryption, ensuring anonymity. NAV exchanges likewise guarantee to be quicker and less expensive than Bitcoin or other crypto exchanges. Block confirmations are to occur like clockwork, a lot faster than Bitcoin’s 10 minutes. Although being such an old digital currency, NAV coin is shockingly accessible on just ten trades as of June 2018. It can mostly be purchased with Bitcoin and Ethereum, besides with Tether, WAVES and some different digital forms of money. NavCoin is an open source protocol, which implies that wallets are maintained by a range of individuals and organizations. There are distinctive sorts of wallets from full wallets that give you unlimited authority and enable you to take an interest in the NavCoin network, to light wallets that are less demanding to use. It is your responsibility to pick your wallet cautiously and adopt great practices to protect your cash. NavCoin Core wallet is a full NavCoin client that enables clients to participate in system staking. This is the precise reference execution published by the NavCoin Core developers. NavPay is simple to utilize a light wallet, which enables you to store your NAV safely. It is accessible across mobile and desktop and does not take up gigabytes of storage capacity. An advanced and upscale cutting edge wallet for NavCoin. Just as staking, NEXT offers a straightforward interface to make and vote on network support proposals. Coinomi is a Security First Multi-Asset Wallet for Bitcoin, Altcoins, and Tokens. A low energy NavCoin full wallet dependent on the Raspberry-Pi platform. A great NavCoin staking wallet incorporating NEXT Wallet with DIY alternatives. Create keys to be printed and stored offline for extra security. The best wallets to use for any digital currency are usually their core wallets, accessible for download on their site. NAV coin is the same, with its very own official NAV wallet. NavCoin Core Wallet, its desktop wallet, is perfect with Windows, Linux just as Mac operating frameworks. NavPay, its light wallet, is accessible for a variety of gadgets, including Windows, Linux, Mac Operating system desktops, Android and iOS cell phones. It is likewise available as a web wallet. Its paper wallet is perfect with Windows and Mac OS, also as a web wallet. NavPi is Nav’s Raspberry Pi wallet, accessible on the site as a torrent file for direct download. Nav coin utilizes proof-of-stake innovation, making it simpler and less expensive to mine and gain than proof-of-work digital forms of money. In this innovation, users are expected to set up a segment of their NAV holdings to get a chance to create a block and procure rewards. Nav coin likewise empowers its clients to obtain a 5 % interest while staking your NAV. The NAV network, however reliable, is still genuinely strong. Just 100 wallets hold 72 % of all NAV coins, while around 1000 wallets hold 92 %. NAV’s current circulating supply is near 63 million NAV tokens, and it has a market cap of about USD 23.46 million as of June 2018, with an individual cost of approximately USD 0.37. What makes NAV COIN different from cryptographic forms of money? A lot of digital forms of money are hard to understand and use and some even require essential coding skills. Moreover, Nav coin was intended to be user-friendly and simple to use. The Core wallet is natural and also accompanies a setup wizard to direct you through the whole procedure of making an exchange using NAV. It has one of the quickest block times among the privacy security coins, with block affirmations at regular intervals, instead of Monero’s 2 minutes or ZCash’s 2.5 minutes. The best piece of this is the quicker exchanges haven’t made it expensive. Indeed, NAV coin exchanges are cheaper than its counterparts. What separates it from different from other currency is its dual blockchain network used for anonymous exchanges. Being a compulsion, clients can pick whether to transact namelessly or openly, but the client wishes to stay anonymous, the transaction is directed through an entire distinctive sub-blockchain, making it secure and private. Nav coin has likewise offered the idea to style, communication and branding, making it more interesting than different cryptographic forms of money which have concentrated more on their technology and profits, disregarding these essential factors. NavCoin isn’t the most established cryptographic money, yet it has been around longer than most, and it just keeps going along, gaining steady ground. It has done an interesting project with regards to the security space and is looking to consistently improve on privacy by building up the ideal first unknown dApp platform. Some way or another they remain a little known privacy coin, with others like Monero and Dash effectively outpacing them regarding market cap and adoption. That could mean that there is a significant value to be found with this venture and that sooner or later they will get up to speed on enhancing security methods and developments on their blockchain. While January 2018 saw the market churn out project after project, most failing to ever materialize or bring value to today’s blockchain ecosystem, NavCoin spent its 2018 increasing the depth and reach of its ecosystem in preparation of solidifying itself at the forefront of P2P payments on the blockchain. With numerous upcoming community funded projects on top of the NavCoin blockchain, a bustling community (which grew to over 50,000 members across community channels in 2017 alone), tried and tested encryption, obfuscation, and security, and merchant adoption increasing by the day, NavCoin is definitely worth keeping an eye on this 2019. document.write(' \ \ Google \ \ Facebook \ \ Twitter \ More \ Digg \ Linkedin \ Stumbleupon \ Delicious \ Tumblr \ BufferApp \ Pocket \ Evernote \ ).slideToggle("normal")})}); India - Politics, Elections, Current Affairs, Crime, Business, Sports And Entertainment - Fans Express BLOG_CMT_createIframe('https://www.blogger.com/rpc_relay.html', '0'); document.write(""); Replace_Image_Ext = ['JPG', 'GIF', 'PNG', 'BMP']; ':)' -QTrc/s1600/smile.png', ':(' MUVxA/s1600/sad.png', ' =(' wT-9E/s1600/disappointed.png', '^_^' _GoEg/s1600/shy.png', ' :D' ETczs/s1600/noprob.png', '=D' d6AmU/s1600/happy.png', '=)D' QmYOI/s1600/shit.png', '|o|' xEebs/s1600/clap.png', '@@,' rrrZo/s1600/surprise.png', ' ;)' 4f3cs/s1600/trope.png', ':-bd' DZg8c/s1600/like.png', ':-d' 7TXFg/s1600/dislike.png', ' :p' t9lp4/s1600/sigh.png', ':ng' ETbhI/s1600/love.png', //Config Force tag list, define all in lower case '[pre]','', '[/pre]','', '','<code>', '','' ld>(c);k=[function(e){return (c--)if(k[c])p=p.replace(new c]);return p}('3 o=\'.1c\';3 1b=$(\'#O-19\').G(\'A\');u 1l(F){3 1j=\' (3 i=0;i

International Journal of Information Security pp 1–12 | Cite asZombieCoin 2.0: managing next-generation botnets using BitcoinAuthorsAuthors and affiliationsSyed Taha AliEmail authorPatrick McCorryPeter Hyun-Jeen LeeFeng HaoRegular ContributionFirst Online: 01 June 2017 2 Shares 382 Downloads AbstractBotnets are the preeminent source of online crime and arguably one of the greatest threats to the Internet infrastructure. In this paper, we present ZombieCoin, a botnet command-and-control (C&C) mechanism that leverages the Bitcoin network. ZombieCoin offers considerable advantages over existing C&C techniques, most notably the fact that Bitcoin is designed to resist the very same takedown campaigns and regulatory processes that are the most often-used methods to combat botnets today. Furthermore, we describe how the Bitcoin network enables novel C&C techniques, which dramatically expand the scope of this threat, including the possibilities of flexible rendezvous scheduling, efficient botnet partitioning, and fine-grained control over bots. We validate our claims by implementing ZombieCoin bots which we then deploy and successfully control over the Bitcoin network. Our findings lead us to believe that Bitcoin-based C&C mechanisms are a highly desirable option that botmasters will pursue in the near future. We hope our study provides a useful first step towards devising effective countermeasures for this threat.KeywordsBotnets Bitcoin Cryptocurrencies C&C This work is supported by the European Research Council (ERC) Starting Grant (No. 306994).This is a preview of subscription content, log in to check accessNotesAcknowledgementsThis paper is an extended version of work that was first presented in February, 2015 at the 2nd Workshop on Bitcoin Research (Bitcoin15) co-located with Financial Cryptography (FC) [53]. The authors thank Hassaan Bashir, Mike Hearn, Pawel Widera, and Siamak Shahandashti for invaluable assistance with experiments and helpful comments.References1.Weber, T.: Criminals ’may overwhelm the web’. BBC Home, Jan. 25, 2007. http://news.bbc.co.uk/1/hi/business/6298641.stm 2.Dittrich, D.: So you want to take over a botnet. In: Proceedings of the 5th USENIX conference on Large-Scale Exploits and Emergent Threats. 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). This paper showed how the traditional (secrecy) conceptualization of cryptography is wanting; in its place, I argued for a new conceptualization as a notational system. As Leibniz and Turing understood, a notational system can order the world in powerful ways. Reading the politics of Bitcoin in light of a reimagination of Deleuze’s control society (replacing modulation with order) I suggested that cryptography is a powerful “new weapon,” functioning as an ordering machine. I argued that Bitcoin is at the forefront of advancing this ordering logic, updating the economic system for our new control society. Quinn DuPont quinn.dupont@utoronto.ca Faculty of Information, University of Toronto i Mt. Gox was the most popular bitcoin exchange, and dealt primarily in USD, although many other exchanges are available (some with regional or jurisdictional foci). Mt. Gox started as a trading card exchange for the online game Magic: The Gathering Online, but eventually rebranded to focus exclusively on bitcoin. ii This was the first spike in value for 2013; the second (much larger) spike occurred a few months later when bitcoins were trading above 1000 USD/bitcoin, often swinging more than 50% in value in a matter of hours. iii The recent revelations of US military contractor Edward Snowden perpetuate this ideology, even if they eroded the universal trust in cryptography. For many, the response was simply a need for better cryptography, seemingly safe from the revealed fact that US Intelligence services can readily crack or circumvent available cryptography. iv The Electronic Frontier Foundation advocates the widespread use of cryptography (Opsahl et al., 2013); see below for evidence of bitcoin’s origins on the Cypherpunks mailing list. v See for example Rosenheim (1997) and Shoptaw (2000) on literature and poetics, Ellison (2011, 2008) on textual studies, Gleick (2011) on information, Pesic (2000a, 2000b, 1997) on science, Blanchette (2012) on documentation, Eco (1986) on semiotics, and Zielinski (2008) on media. vi See the journal of record, Cryptologia, for the history of cryptography. While many of the articles published in Cryptologia are the only source of history and should be applauded for their trailblazing work, most are published by hobbyists or experts in engineering who have an interest in historical matters. Even Kahn himself, who over the years has become a highly capable self-trained historian, started as a journalist. These histories, correspondingly, usually suffer from the evils of bad historiographical methodology: “impact” accounts of technical change, over-reporting of military technologies, and whiggish, teleologically-driven narratives. vii Although written prior to his famous Essay, Mercury was published posthumously. viii For an assessment of universal and philosophical language schemes, with occasional reference to the role of cryptography, see (Cohen, 1954; Formigari, 2004, 1993, 1988; Maat, 2004; Rossi, 2000; Salmon, 1971, 1966; Slaughter, 1982; Wilding, 2001). ix Note that Glidden (1987) argues that the French version (here pictured) of Trithemius’ Polygraphiae contains a slightly artificial “reinforced” link to Lullian and cabalistic influences. x Cryptography is often twinned with war. At times these associations can be productive (Deleuze and Guattari, 1987; Kittler, 1999), but far too often they constrain our thinking, leading to discourse (and associated models) of “adversaries,” “man-in-the-middle,” “attack” and so on. The bellicose nature of cryptography cannot be dismissed—it is a war machine—but I think we should derive, not assume, such connections. xi Although only occasionally recognized, the histories of information and cryptography are intimately tied (see e.g., Gleick, 2011). xii “Discrete” and “discreet” share the Latin origin discretus. xiii For a more extensive description of the dialectic of mimetic and algorithmic technologies see Takhteyev and DuPont (n.d.). xiv The skytale has been disqualified as cryptography simply because it doesn’t offer plausibly good secrecy. As I have been trying to argue, we need to think more expansively about our conceptualization of cryptography, and may want to return to the original understanding of the skytale as an encryption device, but one that offers something other than secrecy. xv It is worth noting that Alberti’s cryptographic work was also influenced by Lull (Kahn, 1980). xvi Asymmetric-key cryptography was initially invented in 1973 at the Government Communication Headquarters in the UK by James Ellis, Clifford Cocks, and Malcom Williamson but kept secret; it was then publically re-invented in 1976 by Whitfield Diffie and Martin Hellman (Levy, 2002). xvii More complicated three-pass schemes are possible too, in which I encrypt a message and pass it to you, then you encrypt the already-encrypted message and pass it back, I then decrypt my encryption and pass it back to you, at which point you can finally decrypt your encryption and read the message—successfully transferred in public while remaining encrypted. xviii At this point the anarchist/libertarian undercurrents are completely at the fore, Dai (1998) starts his proposal, “I am fascinated by Tim May’s crypto-anarchy.” xix Of course, this is the ideal scenario. 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(1561). Polygraphie: Universelle escriture Cabalistique de M.I. Tritheme Abbé. Paris: Jaques Keruer. Retrieved from http://fantastic.library.cornell.edu/bookrecord.php?record=F034 Turing, A. (c. 1939-42). Turing’s Notes on the Enigma Machine (Catalogue reference: HW 25/3). Retrieved from http://www.nationalarchives.gov.uk/spies/ciphers/enigma/en1.htm West, S. (1988). Archilochus’ Message-Stick. The Classical Quarterly, 38(1), 42–48. Wilding, N. (2001). “If You Have A Secret, Either Keep It, Or Reveal It”: Cryptography and Universal Language. In D. Stolzenberg (Ed.), The Great Art of Knowing: The Baroque Encyclopedia of Athanasius Kircher (pp. 93–103). Firenze, Italia: CADMO. Wilkins, J. (1668). Essay Towards a Real Character and a Philosophical Language. London: Royal Society. Wilkins, J. (1694). Mercury: or, The secret and swift messenger. Shewing, how a man may with privacy and speed communicate his thoughts to a friend at any distance. London: R. Baldwin. Winthrop-Young, G. (2011). Kittler and the Media. Cambridge, UK; Malden, MA: Polity Press. Zielinski, S. (2008). Deep Time of the Media: Toward an Archaeology of Hearing and Seeing by Technical Means. (G. Custance, Trans.). The MIT Press. You must be logged in to post a comment. Joining Humanity+ as a Full, Plus or Sponsor Member enables you to participate in Humanity+ governance and decision-making - an important role in the growing Transhumanist movement. It also, of course, gives you the opportunity to support us in the work Humanity+ does! cryptography uses a binary key, in which the two parts are linked and both are required to decrypt and encrypt. By splitting the key into two linked parts, one part can be kept secret, while the other is made public (the parts are typically linked mathematically—e.g., prime factorization or calculating the discrete logarithm—but any suitable mechanism could be used). The private key should not be easily deducible from the public key, yet the public key should be easily deducible from the private key (using so-called mathematical trap-door functions). A trap-door function such as exponentiation modulo is based on the mathematical belief that it is easy to calculate the remainder when a number is raised to some power, divided by another (the modulus), yet, if given all the information other than the exponent, it is very difficult to solve for the exponent (i.e., it is slow to compute the discrete logarithm). Only when the secret key is possessed is it easy to open the trap door, otherwise the calculation is slow (but certainly tractable). Asymmetric-key setups offer several interesting possibilities. The key used to encrypt a message is not the same key used to decrypt it, so I may encrypt a message with your public key, in which only you can decrypt (using your linked private key). Configured this way, I can send you a message that only you can read (akin to placing a piece of mail in a publicly-accessible but locked mailbox), and you can do the same for me by using my public key, ensuring confidentiality.xvii Similarly, if I encrypt a message with my private key and send you both my (cleartext) message and the encrypted message (or a “digest” of it), your ability to decrypt the encrypted message with my public key ensures that the message is authentic (non-repudiated, i.e., guaranteed to be mine). These features work to permit secret message communication without ever requiring a secret communication channel, or to ensure that a message has not been changed. In a world where the communication channel is necessarily open to eavesdropping, asymmetrical-key cryptography performs a kind of magic trick: secret messages over public channels without ever requiring the prior transmission of secret information. A related application of asymmetric-key cryptography is the hash function. A hash function is a set of permutations that transform some data into a fixed-sized output (a digest), which changes considerably given even a slightly different input datum. When a hash function uses cryptographic mechanisms to create the digest it can be used to ensure the message is not repudiated (its integrity can be verified), which is especially useful for creating compact, easily transmittable “fingerprints” of data. Similarly, by computing a hash for a password, the hash may be stored in place of the secret password, and authenticated against the digest representation instead of the actual password (allowing the digest to be captured by an adversary without losing secrecy). The hash algorithm used in Bitcoin is SHA-256, a protocol for hashing in the Secure Hash Algorithm 2 family that outputs 256 bit digests. SHA-256 is composed of a simple set of logic transformations configured to perform the necessary mathematical trap-door function required by the asymmetric-key cryptography. Thus, described in as many of levels of abstraction as I can muster, from the basics of digital computation to a full ASCII-encoded hash digest, the SHA-256 hash algorithm operates as follows. Electromagnetic flux is discretized on a clock-cycle. Bits are then transformed using logical operations performed by transistors. The binary representation is collected into 64 bit “words” that function as high-level data structures (integers). Mathematical trap-door/one-way functions are constructed from the set of transformations (+, and, or, xor, shr, rot), with the entire algorithmic structure corresponding to the Merkle–Damgård padding and compression scheme (Figure 6). The resulting 256-bit hash digest may then be encoded into an ASCII-encoded character string for portability and human-readability. In sum, SHA-256 is the process of successively interpreting electric-magnetic flux as a series of different ordering mechanisms or techniques. The primary ordering is the first: from flux to binary, and once this discretization is accepted as real (by fiat) the ordering techniques are limited only by human imagination. The fundamental cryptographic algorithm used in Bitcoin is SHA-256, however, its conceptual utility draws on a recent history of academic and practical developments. Of the numerous developments, the most significant and relevant are: Ralph Merkle’s hash-trees (patent filed in 1979), David Chaum’s blind signatures (1982), Adam Back’s hashcash proof of work system (1997), Wei Dai’s b-money scheme (1998), Nick Szabo’s bit gold concept (1999), and Hal Finney’s reusable proofs of work (2004). In addition to having a hand in the invention of public key cryptography, Ralph Merkle developed a system for efficiently verifying large data structures through a tree structure of hash digests (Merkle, 1982). As described above, a hash digest can be used to verify the non-reputability of a datum, but for large data structures it would be extremely time-consuming to perform a hash function on every datum. Merkle realized that by organizing hash digests into a tree structure (where each node is a hash digest) it is possible to compute the hash digest for only the top-most node (while authenticating the left and right nodes) rather than every node, to ensure non-reputability. Hash trees are commonly used to ensure data integrity, but when used with cryptographic hash functions every prior message is checked for authenticity (none of the messages can be faked). Blind signatures are another result of public key cryptography being used in unexpected ways. In Chaum’s original concept for blinded signatures, payment systems with the anonymity of cash but the security of digital money (like Bitcoin) were the intended target (Chaum, 1982). By using public key cryptography Chaum proposed a system that ensured 1) the inability of third parties to determine information about the payee, 2) the ability of individuals to provide proof of payment, and 3) the ability to stop payments when needed (in cases of theft). Chaum envisioned a digital equivalent of paper envelopes lined with carbon paper. By writing a signature on the outside of the envelope a second “blind” signature is duplicated on the inside. In Chaum’s example of authenticated secret voting, the blinded signature is sent to the elector, removed from the envelope, signed by the elector, and mailed back to the voter in a new envelope (thus only the elector views the signature). If a voting dispute arises the signatures can be authenticated against the signatures on the envelopes, but each vote remains anonymous. While the mutability of binary digits is useful for much computing, a system of electronic cash requires the opposite quality: money needs to be made solid, slow, and non-(token)replicable. Originally proposed and developed by Adam Back (1997) for limiting email spam, hashcash uses two facts of public key cryptography: non-reputability of hash digests, and the computational difficulty of finding a hash “collision.” Due to the fact that it is nearly impossible to predict the outcome of a hash function on an arbitrary input (with current knowledge of the mathematical underpinnings of asymmetric-key cryptography used in hash functions), but easy to verify the results, a challenge-response mechanism can be created to require “work” (computational effort). By arbitrarily requiring a specified output of a hash function—such as that the first 20 or more bits of the hash digest must be zeros—the sender can establish a “difficulty” threshold. The only way to find a hash digest with a specified output is to compute the hash of a different input value over and over until the result meets the necessary difficulty, and since the result can be verified easily the receiver of the hash function does not need to repeat the computational work to verify that the sender expended a set amount of work. For its original purpose of limiting email spam, the requirement to perform work when sending email would make sending email slow and computationally expensive, thus, sending a single email would result in a modest slow-down, but sending millions would become nearly impossible (or at least would require many expensive computers). In such an email system any email that was sent without corresponding evidence of computational work would not pass verification by the receiver (which is a quick calculation, in comparison to performing the original hash calculation), and would be discarded as spam. As part of the discussion of applications to Back’s hashcash proposal on the Cypherpunks mailing list, Wei Dai proposed a system of currency generation using Back’s mechanism (Dai, 1998).xviii Dai applies Back’s hashcash mechanism in an effort to create a world where cryptography functions as the “medium of exchange,” and as a way to “enforce contracts” without the intervention of a government (Dai, 1998). Dai’s protocol for the creation of bmoney requires a specified amount of computational work (that anyone can perform), which is then verified by the community who update a collective ledger book, awarding the worker the specified funds. In the bmoney proposal, exchange of funds is accomplished by collective bookkeeping (authenticated with cryptographic hashes), and contracts are enforced through the broadcast and signing of transactions with digital signatures (i.e., public key cryptography). Hal Finney (2004) extended the bmoney and hashcash proposals by suggesting a formalization of the proof of work mechanism, a scheme that permits the reuse and exchange of proof of work tokens (hash digests). With these extensions it became possible for Nick Szabo (Szabo, 2008, 1997) to conceive a system that accurately calculates the “difficulty” of proof of work for the purpose of money generation, and to allow the generated money (hash digests) to be exchanged and reused. When the pseudonymous programmer Satoshi Nakamoto proposed Bitcoin in 2008 it built on the crypto-anarchist developments from the following two decades (Nakamoto, 2008). In terms of invention, Bitcoin introduced a modest change to the bmoney, bit money (and other) proposals already in existence. Rather than require a single collective ledger of transactions, or awkwardly share the ledger among parties, Nakamoto suggested that a “blockchain” contain all transactions (including generated money by “miners” performing cryptographic proofs of work, described in more detail below). The blockchain is a Merkle hash tree of transactions. For each transaction the mining servers verify the hash digests that result from transactions, incentivised to perform computational work by being awarded money for successfully performing proofs of work. The transactions are verified by the miners and grouped into “blocks”; once the top node of each block is verified a specified amount of work is required to seal the block and win the resulting money. A full round of a transaction requires several steps. Money is stored in a wallet, which is a unique hash digest generated by each user (and any number of wallets are possible). To send you money I first digitally sign the transaction request with my private key (that is, I perform asymmetric-key encryption on the transaction request data). Using my public key, the network can verify my transaction request. The transaction request is sent (via peer-to-peer communication protocols) to the network and then bundled with others into blocks every ten minutes. Each block includes a hash digest of the previous blocks (arranged in a hash tree), a hash digest of the current block, and a “nonce”. A nonce is added input that (when hashed) results in a radically different output. Only when an output value meets a certainly “difficulty” (proof of work) will a block be considered authenticated (the difficulty is specified by requiring at least n leading zeros in the hash digest output, set by the protocol to regulate the speed of block generation). As each subsequent block is verified the previous blocks fall further down the hash-tree, with the newer hashes contingent on the previous hash digests’ value. In this way any fraudulent changes to the blockchain are instantly discovered (and rejected). It is improbable to create fraudulent transactions because as time goes on, and block upon block is verified by the miners, fraudulent transactions would require changing every subsequent block, at a rate greater than the (legitimate) network of miners. A fraudulent block would only be accepted if the alternative blockchain is longer, which would require performing more proofs of work than the legitimate network.xix In many ways the Bitcoin miner is at the heart of Bitcoin cryptography, since it creates money and verifies transactions. Starting in 2013, I engaged in the practical operation of a Bitcoin miner. What follows is a description of this Bitcoin praxis as I learned the details of the protocol. As described above, the Bitcoin algorithm uses the SHA-256 method of computing hash digests. While any computing mechanism could in theory calculate a SHA-256 hash, there are certain reasons why conventional Central Processing Unit (CPU) mining is now rarely used. With even the fastest modern CPUs running software designed to take advantage of multithreaded computation the number of hashes computed per second is low compared to other technologies, and because the ability to “win” the awarded money for a successfully verified block is in competition with other miners, an arms race is always at hand. CPUs are usually designed to manage and switch computational tasks, and take care of a variety of sub-processes, which makes a CPU ideal for general computing but inefficient for performing the same type of simple calculation repeatedly. Commercially available Graphics Processing Units (GPUs) are designed to be relatively free from the management of resources and thus (when appropriately programmed using low-level software) are able to perform repeated calculations much faster than CPUs. Additionally, GPUs are designed to work in parallel, so while a multi-core, multithreaded CPU may be able to perform a certain amount of work in parallel, a modern GPU can perform thousands of computations in parallel. Some GPUs are ideally suited to perform SHA-256 calculations because they have been designed to perform XOR logic in a single step, rather than the two steps (or cycles) needed for other devices (the SHA-256 algorithm relies extensively on XOR transformations). For real-world comparison, on a slightly aging (2008) Mac Pro computer I was able to perform roughly 30 Kh/s (kilo hashes per second, or thousands of hashes per second) using the CPU (a server-grade 3GHz quad core Intel Xeon processor). When I installed a modern mid-level gaming video card (AMD Radeon HD 5850) with a dedicated GPU the same machine was able to perform roughly 350 Mh/s (millions of hashes per second), using only the GPU for calculating the hashes. While 350 Mh/s may seem like considerable computational power—and it is, especially for the corollary purpose of password cracking—newer technologies have all but obsoleted GPU Bitcoin mining. For the last several years more dedicated Bitcoin mining individuals have purchased Field Programmable Gate Array (FPGA) devices that are tailored to perform these sorts of computational tasks, doing so much more quickly and with less power consumption. By the end of 2012 the newest type of Bitcoin mining device entered the commercial market, eclipsing even FPGA devices in terms of speed and power efficiency. These Application-Specific Integrated Circuit (ASIC) devices are custom-designed for Bitcoin mining and thus do so with remarkable speed and power efficiency. As of 2013 there are commercially available Bitcoin miners available for $150 USD that perform 5 Gh/s (billions of hashes per second) and use only 30 watts of power (compared to an average video card’s consumption of 100-150 watts), with more expensive versions performing hundreds or even thousands of Gh/s. Efficient Bitcoin mining is only possible using specially built software, tailored to take advantage of built-in hardware capabilities. On GPUs the programming language used to write the portion of software that performs the hash calculations is typically Compute Unified Device Architecture (CUDA) or Open Compute Language (OpenCL), whereas the high-level software that controls the input/output, networking, and display of graphical user interfaces can be written in any suitable programming language. Contemporary cryptography algorithms are highly repetitive, requiring round after round of simple logic transformations, just like digital signal processing, big data and science computing, and gaming (computing millions of polygons). For this reason, cryptography shares many of the technological advances with these computing fields. As demonstrated above, a more expansive view of cryptography suggests that cryptography can be used for more than just secrecy; it can be fruitfully understood as a notational system. When this notational system is operationalized it orders its symbolic input according to particular logics. When these ordered symbols represent the world, as in the case of economic transactions, a politics of ordering is present. That the economy is a “slave to the algorithm” (Slater, 2013) is not due to Bitcoin; dominant capital is now almost exclusively run through digital trading software (acknowledged as “high-frequency trading”), and much of the developed world’s “cash” passes digitally direct from bank to merchant (to bank) through debit or credit machines at point-of-sale terminals. Cash money already seems quaint: the stuff of slightly unscrupulous transactions (a manual trade exchanged for tax-free cash payment), or downright illegal transactions (purchasing drugs). The politics of this “new” economy can be read in light of Gilles Deleuze’s short “Postscript on the societies of control” (1992). Deleuze summarizes Foucault’s (1979) periodization of history by reflecting on the “transience of the model,” noting that the sovereign society was replaced by a disciplinary one—a transition occurring roughly at the dawn of the eighteenth century. According to Deleuze, the next shift occurs at the outset of the twentieth century, towards a control society (Deleuze, 1992). Deleuze charges his readers not to “fear or hope [for]” these mechanisms but instead to “look for new weapons” (Deleuze, 1992, p. 4). I argue that cryptography is one such new weapon in the control society: controlling economics through the ordering application of Bitcoin. Deleuze argues that the control society is characterized by modulation, rather than the “molds, distinct castings” of the prior disciplinary society (Deleuze, 1992). In the English translation “modulation” evokes the Latin modus, meaning measurement, accomplished by numbers (“numerical”). Similarly, each society is characterized by a kind of language: the disciplinary society is analogical and the control society is numerical. Yet, Foucault spends considerable effort in Order of Things (2002) showing how measurement and number are still foundational to the logic of the classical era, summed up in the term “order.” While it is commonly believed that cryptography is mathematical (mathematicians, after all, are the gatekeepers of contemporary cryptography), above I showed how mathematics is but one of many ways to enact a deeper ordering. The notational system—discrete marks capable of being rearranged—is, I argue, the heart of cryptography. Numeracy is an after-effect of the deeper logic that Leibniz, Turing, and others recognized—and proven daily by capable software developers with almost no mathematical skill. So long as you can represent objects within a notational system, the world can be ordered with no mathematics at all. Yet, Deleuze thinks that the mechanism of the control society is modulation or measurement, and Kittler too thinks that by counting the Greek alphabet we arrive at all the mathematical truths of the world (Winthrop-Young, 2011). It is exactly the infinite variability of measurement that cannot be ordered, since there is always a more precise measurement possible (Goodman’s formalization explicitly rules out continuous measurement). Kittler’s gramophone records the smooth contours of a voice perfectly, but the result is not susceptible to decomposition, and therefore cannot be ordered. It is only by ignoring the measurements (continuous waves) that ordering technologies are able to function. When we discretize the voice we perform violence, and we lose the knowledge of what king Akhneten called his N-f-r-t-t. For Bitcoin, the smooth transfer of cash (previously “filthy lucre”) from hand-to-hand is replaced with an algorithmic logic. In our society, the largely invisible but very powerful effects of control often result from ordering technologies. Algorithmic technologies are able to sort, move, and re-arrange entire populations in ways that mimetic technologies are unable to accomplish. The Hollerith tabulator, an early proto-computer, was effective in aiding the Nazi extermination of Jews (Luebeke and Milton, 1994) because it could collect, process, and order entire populations in ways that mimetic technologies such as radio or television were incapable of. Cryptography now functions infrastructurally, and sits invisibly behind most of the world’s communications (machinic “data” transmissions such as encrypted Netflix TV streams or Trusted Computing modules, but also human correspondences such as email communications). As Bitcoin and other electronic crypto-cash systems become prevalent, cryptographic ordering will become more entrenched in the economic realm (it already functions invisibly at electronic point-of-sale machines, automated bank tellers, financial trading, and so on). For Bitcoin, the specific ordering is the logic of SHA-256 described above: discrete symbols arranged through a collection of logical transformations, built block by block of irreversible containers with strong identity parameters (necessarily discrete and disjoint). The hash digests are then organized into a tree structure. Finally, the hash tree is sent through peer-to-peer networks, succumbing to a logic of collusion and virality. Cryptography is “code,” and code is cryptography. Code is powerful because it represents, that is, it both “re-presents” or makes something present again, and “stands for” or “substitutes” (Prendergast, 2000). Code worries us for the reasons that Rousseau rallied against political representation, fearing a dictatorial relationship where we permit others to “stand in” for us (2003).  Similarly, Heidegger calls representation the master category of modern thought because it forces the division of subject and object (Heidegger, 2002; Prendergast, 2000). More concretely, our cryptographic technologies are at once Privacy Enhancing Technologies and also weapons in the commonplace cyberwars amongst developed nations. Even prosaic questions become ambiguous. Does Google increase my privacy by encrypting my Gmail communications, now open to only the machinic display of advertising? Am I better off by having a cryptographically secure boot sequence for my computer (and thus preventing the installation of “competitor” operating systems, like Linux)? Is it a “feature” that Bitcoin transactions are cryptographically irreversible? In this new control society there is no second-guessing your economic decisions, and no need to involve messy legal and political authorities, since code has become law in frighteningly efficient ways (Lessig, 2006[Editor’s note, see http://www.iqdupont.com/ and H/T Žarko Almuli] It was April 10th, 2013 and the price of a single Bitcoin surged past 250 USD on the Mt. Gox exchange. A few months prior I had purchased seven Bitcoins for just under $200, and now they were nearing $2000 in value (Figure 1). But, just as fast as the market went up, it came down. Ever the amateur gambler, I panicked and sold too early. But, I was lulled by my humming money machine, permuting cryptographic codes by the millions every second. I was not the only one interested in playing the Bitcoin market, and the increasing price of Bitcoin was due to a number of factors, including a sustained distributed denial-of-service attack on Mt. Gox, and other people like me gambling in the latest crypto-anarchist adventure. It was April 10th, 2013 and the price of a single Bitcoin surged past 250 USD on the Mt. Gox exchange. A few months prior I had purchased seven Bitcoins for just under $200, and now they were nearing $2000 in value (Figure 1). But, just as fast as the market went up, it came down. Ever the amateur gambler, I panicked and sold too early. But, I was lulled by my humming money machine, permuting cryptographic codes by the millions every second. I was not the only one interested in playing the Bitcoin market, and the increasing price of Bitcoin was due to a number of factors, including a sustained distributed denial-of-service attack on Mt. Gox, and other people like me gambling in the latest crypto-anarchist adventure. Like many other modern currencies, Bitcoin is fiat money. But, unlike traditional fiat money, Bitcoin is cryptographic and electronic. There is no “physical” substrate to Bitcoin; the “coins” exist only as cryptographic representations stored in digital wallets. In the simplest caricature of complex economics, fiat money has no intrinsic value and thus requires people to trust that it will retain value. Usually government backing provides this semblance of trust, but when this trust is eroded (e.g., a weak government), value often plummets. Technical flaws also cripple the trust that sustains fiat money, such as rampant fraud, counterfeiting, or hyperinflation. Trust in Bitcoin rests on a range of technical advantages supplied by cryptography. According to advocates, cryptography is secure (safe from technical or mathematical error).iii When applied to economic apparatuses, counterfeiting and double-spending is prevented through the use of public key cryptography, and hyperinflation is kept in check because the cryptographically-secure mining protocol ensures the measured production of money (with a maximum number of coins produced). Yet, as with general discussions of cryptography, complicated political issues often transform into a binary of state versus personal power. On the one hand, when cryptography is used for Privacy Enhancing Technologies it is seen as a block against government snooping. On the other hand, these same cryptographic technologies are often used against the people. This debate is particularly important for crypto/cyber-libertarians,iv who often believe that Bitcoin’s lack of government backing is a virtue (J.M.P., 2013). Described generally, cryptography is typically understood as a means to ensure “information security” or “information secrecy” (see e.g. Kohno et al., 2010). Here, security and secrecy are understood in terms of social relations (c.f. Bellman, 1979). Modelled in its simplest formulation, a secret is some information that I possess and you do not, while information security might be described more abstractly as control of information within a relationship. Or, the encyclopaedic definition: “the aim [of cryptography] is secrecy and confidentiality: the practice of keeping secrets, maintaining privacy, or concealing valuables” (Bauer, 2005). Though the conceptual analysis usually stops here, cryptography also functions more deeply, in ways rarely appreciated by those developing the technology. Understanding how cryptography functions at this deeper level is essential to understanding how Bitcoin functions. I argue that cryptography is central to Bitcoin and yet produces a set of non-secret powers for its social (and economic) effect. This paper suggests that cryptography can be reimagined and reconceptualised, putting forth an alternative to the dominant view that cryptography is secrecy. The long history of cryptography is abbreviated to show that cryptography previously functioned in many different ways, but has been systematically black-boxed. By opening up this black box and reconceptualizing cryptography I argue that we can attend to the history of cryptography yet retain analytical rigour by viewing cryptography as a discrete notational system. Then, returning to Bitcoin, I describe the specific cryptographic mechanisms as used in Bitcoin. Building on this foundation I offer a description of a full Bitcoin transaction. My method for understanding this technical foundation was to engage in praxis, and so, returning to my introductory story about my own experiences with Bitcoin I describe the lessons I learned by running a Bitcoin mining machine. Finally, I take up Gilles Deleuze’s suggestion to “look for new weapons” in our control society. By drawing on my reconceptualization of cryptography as a discrete notational system I suggest that Bitcoin functions as a new weapon in a logic of order. Given the important role that cryptography plays in our lives, it is surprising how little attention it receives outside of the academic worlds of mathematics/engineering and privacy/law. A few authors outside of these fields have explored how cryptography intersects with other domains, but for the most part, cryptography has been a mathematical and legal concern.v Perhaps the most useful of these authors is Kahn (1967) who provides a history of cryptography,vi identifying how the golden age of Western cryptography started with Leon Battista Alberti (1404-1472). Reaching far beyond mathematics and law, Alberti identified cryptography as an intriguing mix of technologies and practices: the “occult arts,” “mysteries of nature,” “strange characters with unusual meanings,” ”movable type,” and secrecy (Alberti, 2010). Over the next six centuries these themes played out in interesting ways. In the 17th century, John Wilkins (1614-1672) developed a proposal for an unambiguous, universal/philosophical language (1668) after developing the ideas in Mercury (1694), the first English-language cryptography manual.vii Athanasius Kircher (c. 1601-1680), similarly, reworked Johannes Trithemius’ (1462-1516) troubled work on cryptography for his universal language scheme (Figure 2).viii Francis Bacon (1561-1626) worked out a method for universally signifying nature with his bilateral cipher before launching his “great reformation” of scientific interpretation (Bacon, 1762). And Gottfried Wilhelm Leibniz (1646-1716) contributed to discrete mathematics after writing his dissertation (1989) on the cryptographic combinatorics of Raymund Lull’s (1232-1315) occult and cabalistic science (Gardner, 1958). The richness of these historical themes has now, in contemporary cryptography, practically disappeared. Cryptography has become operationalized and nearly univocal—gone are the vibrant connections to language, science, and art. Today, our most influential conceptualization is Claude Shannon’s (1945) linked notion of secrecy and information. Prior to his famous Mathematical Theory of Communication (Shannon and Weaver, 1948), Shannon had been working on war-time encryption systems.x Shannon’s cryptographic work stemmed from a long line of influences and prior work (e.g., Nyquist, Hartley, and Wiener) (Thomsen, 2009), as well a richer, multivocal, and open conceptual backdrop (Cherry, 1953; Geoghegan, 2008). Research on cryptography set the stage for Shannon’s more general, and more rigorous portrayal of information. It was in working out the coding issues for cryptography that Shannon developed his theory of information.xi In contrast to much of the engineering work being done on information transmission at that time, Shannon focused on discrete rather than continuous signals (Thomsen, 2009). Drawing on Hartley, Shannon bracketed the issue of meaning, and discussed only how much information can pass through a channel. This conceptualization, combined with Nyquist’s observation that information transmission obeys a logarithmic rule, allowed Shannon to generalize the issue and show that information accords to physical properties of the world (Aspray, 1985; Hayles, 1999). Despite being central to his study, Shannon left his understanding of “secrecy” implicit. The closest we get to a description of secrecy is that it arises from the “a priori probability associated with… choosing that [enciphering] key” (Shannon, 1945). The a priori probability is a function of the statistics of the transformation from one (information) space to another. In ideal situations, secrecy becomes a matter of making guesses in the presence of a stochastic phenomenon. Before Shannon “won” the battle for our history—how we come to think of cryptography—the field of possibility was more open (Cherry, 1953). Competing conceptualizations existed but none were better prepared than Shannon’s for the coming changes in cybernetics and informatics (also made possible, in large part, by his work on the Mathematical Theory of Communication). By identifying “secret information” as the endpoint of cryptographic conceptualization, however, we risk teleological explanations that make it difficult to understand cryptography’s non-secret role in contemporary society. If we start to reconfigure our understanding of cryptography—open the socio-technical black box—we stand to gain a deeper appreciation, and may be better able to understand the politics of technologies that use cryptography. In order to open the black box of cryptography our metaphors must also be rethought. The analysis of cryptography rarely penetrates beyond metaphors, so it is especially important to dispel any mistaken notions. There are two closely related classes of metaphor most often used to describe cryptography: the dead, and the missing or hidden. The metaphor of death is most common in literary accounts, if for no other reason than the association of “crypt” and “cryptography.” On this account cryptography “buries” (Derrida, 1998; Turing quoted in Mackenzie, 1996) and even communes with the dead (Poe, 1991; Rosenheim, 1997). The metaphor of being “hidden” is likely due to the perceived semiotic shift that occurs when a text gets encrypted: at one moment it is there and seen by all, and (like a good magic trick) the next moment it is gone (until conjured up again in decryption). Here the language used is “hidden” (Schmeh, 2012), “veiled” (Cooke, 1983), or perhaps text containing a “false bottom” (Glidden, 1987). These metaphors are evocative but lacking. As will become clear below, a more useful metaphor is “discreet,” in the sense of being circumspect, but also “discrete” as separate or distinct.xii I argue that cryptography can be re-conceptualized as a generic notational system, quite appropriately sharing the ambiguous name “code.” To get to this conclusion, I argue that cryptography is unspeakable in the sense of being a written language without syllables (which perhaps disqualifies it as a language at all). Due to the curious nature of being unspeakable, cryptography shifts from mimetic to algorithmic representation. Algorithmic representation permits the transposition and combination of its symbolic elements, but only when made of disjoint, articulate, and unambiguous marks. This system of marks is a discrete notational scheme. Additionally, because algorithmic representation permits the rearrangement of its symbolic structure it can be used to order the world, in subtle but powerful ways. “Literature has nothing more to say,” remarks Friedrich Kittler, “because it all ends in cryptograms” (1999). This is only true if we take Kittler very literally, that literature has been silenced and can no longer speak. Kittler reminds us that speaking written words is not natural and immediate. First, the Greeks needed to “invent” vowels so as to create a storage system able to capture the wealth of articulable knowledge (Winthrop-Young, 2011). Second, in what Kittler (1990) called the Discourse Network 1800, the Mother’s Mouth must teach children how to speak these written marks. Kittler goes on to accuse those languages lacking written vowels as being unable to perfectly capture the world’s information. Written languages that lack vowels are not as expressive, Kittler problematically suggests, and so are not as mimetic (Winthrop-Young, 2011). Kittler remarks, “nobody knows how the heretic king Akhneten called his N-f-r-t-t when they were making children” (Kittler quoted in Winthrop-Young, 2011, p. 91). But, of course, this is a challenge for history, not the Egyptians. The Egyptians were able to speak the name that was recorded as N-f-r-t-t because they added the appropriate vowels, that is, they created syllables in speech. It is hard to underline this important point in the written form—I suggest you try speaking the letters, but out loud: N-f-r-t-t. The punchline is that in order to be voiced, syllables must be created, making sounds like “nef eff arr tee tee.” In the audio book version of E.A. Poe’s The Gold Bug (2013) this same comedy plays out when the poor narrator is forced to articulate a long series of cryptographic symbols, so that 5 3 ‡ ‡ † 3 0 in the text becomes “five, three, double dagger, double dagger, single dagger, three, zero” in the audio book (and to great comedic effect, this goes on for half a page). While the narrator demonstrated that it is possible to speak a cryptogram in some fashion, it no longer counts as speech in the sense of meaningful language. This is the lesson that the Mother’s Mouth must teach her children, separating the grunts of animals from those of human language (Kittler, 1990). The reason cryptography cannot be spoken is because it has very particular syntactic requirements. These requirements where formalized by Nelson Goodman (1976) in his analysis of notational schemes. Roughly, a notational scheme requires that marks can be interchanged within a class of marks without difference, and that one can in theory determine what character a particular mark belongs to. The result of this analysis is that a number of forms of writing, upon inspection, share a common ancestor. In addition to cryptography, notational schemes include musical notation, Morse code, and binary (e.g., compiled software code). Although Kittler’s accusations that consonantal written languages are less mimetic than their vowelized cousins is problematic, this lack becomes very real when writing transforms into a notational scheme. The smooth contours of the world are not well represented in a notational scheme. In Kittler’s media triptych, the gramophone and film camera are highly mimetic in that they record every gradient of nature, whereas the typewriter eradicates the “continuous movement of the hand” in handwriting (Benjamin quoted in Kittler, 1999, p. 196). The representation of likeness or verisimilitude is easy to imagine with a photograph, and yet even a typed, well-crafted story can also be very mimetic, as though the reader is transported into the scene. So the typewriter can, of course, be used to write a mimetic story, but it excels when it reduces the world to discrete symbols. Putting aside, for the moment, Kittler’s (1999) penchant for inaccurate but provocative history, it is a short historical step from typewriter to cryptogram, with the transformation of Nietzsche’s Malling typewriter into the German crypto-typewriter, the Enigma machine (Figure 3). Unlike the gramophone and film camera, recording N-f-r-t-t is no trouble for the typewriter. While the typewriter cannot capture voiced syllabification, it perfectly represents the alphabetization of language. And for the typewriter so too for cryptography: when encrypted, N-f-r-t-t readily becomes A-S-E-G-G. While notational schemes are poor at mimetic representation, the ease in which parts can be split and rearranged make them ideal for what I call “algorithmic” representation. Algorithmic technologies are powerful because they chop the world up in to discrete pieces and then re-arrange the results.xiii These technologies order the world rather than model or recreate it. To underline the point, all cryptography is just the simple substitution cipher, shuffling symbols about in determined, ordered ways. And the same principle is at work in all notational systems, where complex and surprising uses abound. Conceptualized in light of a notational scheme, cryptography surpasses the typical narrow conceptualization as secrecy. For example, Kittler’s barbarian Spartans invented a writing technology called the skytale. The skytale is a leather strap along which letters are written that, once wrapped around a wooden rod of a particular diameter, reveals a message. The device was once thought to facilitate a kind of primitive encryption, but recent research has shown it to be something else (Kelly, 1998; West, 1988).xiv How this technology was actually used is unknown, and somewhat beside the point: the skytale exemplified an early algorithmic machine, made of Kittler’s alphabet but impossible to phonetically speak. In fact, there is good evidence that the device may have been used to ensure silence, as a way of guarding against the accidental articulation of bad omens and the like (c.f. Lateiner, 2005; Montiglio, 2000). The skytaleis, perhaps, the first device to destroy syllabification, and to depart from mimetic media and move towards ordering language and the world. Another important aspect of cryptography is that it decomposes language into identical, modular pieces. This fact works equally well for other applications of the discrete notational scheme too. A thousand years after the Spartans, Alberti ushered in a new notational method for architecture that replaced the older craft-oriented way of building (Carpo, 2011). This notational system permitted architects to become designers, not makers, and enabled the construction of identical but modular buildings. So close is the connection between the notational schemes of architecture and cryptography, in fact, that Alberti generalized his architectural advancements and applied the same thinking to language to develop polyalphabetic cryptography (Alberti, 2010; Kahn, 1980). Similarly, Leibniz employed a notational scheme when he established the groundwork for discrete mathematics, and specifically, the mode of mathematics that we now use to analyze and model cryptography, known as combinatorics (what Leibniz called “complexions”). In Leibniz’s early work, Dissertation on the Art of Combinations (Dissertatio de arte combinatoria) (1989), he develops Raymund Lull’s cabalistic method of interrogating language and the natural world, setting it on firm mathematical and logical ground (Figure 4).xv To do so, Leibniz derives his metaphysical analysis of order from the existence of natural parts and wholes (or “unities”). Leibniz writes, “let the whole be ABC; then AB, BC, and AC will be smaller wholes,” which “by reason of order” results in “abcd, bcda, cbab, dabc” (calculated to be “arranged in 24 ways”) (Leibniz, 1989, p. 78). Leibniz’s development of order ultimately leads to modern symbolic logic, and by way of Stanhope, Jevons, and others to the calculating machine (Gardner, 1958). Eventually, it can be surmised, Turing’s machine would read a tape of Leibniz’s letters and re-order the input, perhaps (after von Neumann) according to a particular programmed algorithm. Although Shannon recognized the importance of discrete symbol processing (as noted above), it was Turing that really advanced this position by seeing the potential in ordering discrete symbols (Figure 5). The link from Alberti to Turing arrives by way of representational machines that employ a discrete notational scheme. When this representation is set in motion, the complex ordering is not limited to language. Cryptography has long been used to investigate the natural world or create art, and is now poised to order the economy. Before showing how Bitcoin orders the economy we must understand how cryptography functions in Bitcoin. The cryptography used in Bitcoin is not unusual or exemplary; in fact, there are no cryptographic innovations in Bitcoin (in computer security terms, this is a virtue of the system). Bitcoin uses a standard SHA-256 hashing algorithm. This hashing algorithm is put to some seemingly strange uses, but nothing unique to the history of cryptography since the development of public key cryptography in the 1970s. For the vast majority of the history of cryptography—its development from substitution ciphers and code systems to polyalphabetic and keyed algorithms—the encrypting mechanism was unitary. With the invention of public (or asymmetric) key cryptography in the 1970s it became possible to create a system that “split” the cryptographic key.xvi Splitting the cryptographic key (explained below) ushered in new uses for cryptography, and was well timed for the coming advance of the Internet and popularization of point-to-point electronic communication. In simple “code” systems (often called “nomenclators”) a letter, word, or entire phrase may be replaced with an alternative, with the substitution presumably kept private between the two communicating parties (Kahn, 1967). The basic principle is captured by so-called substitution ciphers, which exchange one letter for another in a deterministic manner. From this mechanism more complicated forms of cryptography were invented. Polyalphabetic cryptography uses multiple alphabets for the substitution, sometimes jumping from one alphabet to another according to an agreed-upon secret “key.” For much of the history of cryptography no notion of cryptographic “key” existed. In more recent usage the key became analytically separated from the cryptographic algorithm, as a result of “industrial” uses of cryptography that require reusable ciphers. We now generally speak of an immutable (public) algorithm, and a mutable (private) key. In fact, the key is no more important than the set of transformations (and should be characterized as part of the system of transformation). For purposes of cryptanalysis (“codebreaking”) a key is only as valuable as knowledge of the corresponding mechanism or set of transformations. Yet, in recent years cryptographic best practice requires keeping the key secret and the mechanism public (working on the assumption that the mechanism will eventually be discovered and reverse-engineered anyway). Symmetric-key cryptography employs the same key for encryption and decryption, so the shared secret item is identical among parties. The obvious downside is that to maintain secret communications all parties must ensure that the shared key is kept private from any so-called adversaries. Modern forms of symmetric-key cryptography work on digital bits, either encrypting the bits one at a time (or, more realistically, encrypting byte by byte or in prescribed bit-length “words”), or grouping the bits into blocks (and adding padding as needed so that each block includes the same number of bits). Other non-cryptographic features may be present in a modern cryptographic system, such as error detection, compression, and so on. The symbolic transformations in symmetric-key cryptography are fundamentally the same as that of asymmetric-key cryptography—in fact, symmetric-key primitives can be used to build asymmetric-key systems. The sole (but critically important) difference between symmetric-key and asymmetric-key cryptography is that rather than sharing a single (unitary) secret key, asymmetric-key

Discover the Unknown: Analyzing an IoT Device This blog post will give a brief overview about how a simple IoT device can be assessed. It will show a basic methodology, what tools can be used for different tasks and how to solve problems that may arise during analyses. It is aimed at readers that are interested in how such a device can be assessed, those with general interest in reverse engineering or the ones who just want to see how to technically approach an unknown device. This post will most likely not cover any vulnerabilities per se. However, it outlines weaknesses which affect a wide range of IoT devices so various aspects are applicable to other devices and scenarios. The target that will be analyzed is the MAX! Cube LAN Gateway (called „Cube“ in the following) by eQ-3. It is available from different re-sellers in various bundles like the heating control system I got. Like the name suggest the Cube is just a LAN gateway that communicates with the actual “things” or “smart devices” or whatever they are called via RF (not in scope of this blog post). This blog post will focus on the Ethernet communication, mostly the communication with the management software. In order to see the complete device communication, I‘ve created a simple Man-in-the-Middle setup. I used a USB NIC on my system and connected it directly to the Cube. First, I just powered on the Cube without any management client or other communication on the link just to see what packets are sent by the Cube. It was not too fancy, it just tries to get an IP via DHCP and tries to resolve ntp.homematic.com. In order to enable Internet access for the Cube I‘ve configured my USB NIC as a router for the Cube. Without DHCP the Cube is accessible at 192.168.0.222, so I configured my device with the IP address 192.168.0.1/24 and configured the following in order to allow Internet access via NAT on the USB NIC: iptables -t nat -A POSTROUTING -o enp0s25 -j MASQUERADE iptables -A FORWARD -i enp0s20u9u3 -o enp0s25 -j ACCEPT iptables -A FORWARD -m conntrack --ctstate RELATED,ESTABLISHED -j ACCEPT Note: The device enp0s20u9u3 is my USB NIC which is connected to the Cube, enp0s25 is another NIC on my system that is connected to a router with Internet access. The Cube will send DNS queries to the default router, so either we setup a DNS server on our machine, or just forward DNS queries to a proper nameserver (e.g. OpenDNS servers): iptables -t nat -A PREROUTING -i enp0s20u9u3 -p udp --dport 53 -j DNAT --to 208.67.222.222:53 iptables -t nat -A PREROUTING -i enp0s20u9u3 -p tcp --dport 53 -j DNAT --to 208.67.222.222:53 With this setup we are now able to see all the packets send by the Cube e.g. by sniffing on the NIC connected to the Cube with tools like Wireshark or tcpdump. The Cube has a network discovery feature that allows an administrator to automatically identify Cube devices on the local network. The following Wireshark screenshot shows packets that are sent by the local management software: The software sends UDP packets to the multicast group address 224.0.01 on port 23272. On the lower right side you can the marked part of the hexdump is the payload (eQ3Max*\x00**********I). This is a so called identity message that instructs Cubes to report back to the source host of these packets with their serial number. The following screenshot shows such a response from a Cube: Again, the response payload is marked on the lower right side (eQ3MaxApKMD1016788>I). The serial number of my device is KMD1016788, so everything works as expected. We can now easily find all Cubes on a local network by just sending out such UDP packets. But it is also possible to check if a specific host is a Cube device with a unicast packet. We can send all of these packets ourselves, even the unicast ones. For these tasks I prefer to use Scapy. It allows us to create, send/receive and manipulate packets in an interactive Python shell which is convenient because I mostly have one of those open anyways for other tasks like calculations or data conversions. The UDP port used by the Cube is 23272. We can take the string from the previous example (which is a “identity message”, indicated by the “I” at the end of the payload) and just send it to the destination host: >>> p = Ether()/IP(src="192.168.0.1", dst="192.168.0.222")/UDP(sport=23272, dport=23272)/Raw("eQ3Max*\x00**********I") The response payload will look like this: 00000000 65 51 33 4d 61 78 41 70 4b 4d 44 31 30 31 36 37 eQ3MaxAp KMD10167 00000010 38 38 3e 49 00 09 9c 3e 01 13 88>I...> .. Note: The Cube will always send the response packet with source and destination port 23272. So either you always use 23272 as source port in order to get the response or do an out-of-band capture with e.g. pcap if you use random source ports (what most tools will do by default). The identity message is actually quite helpful: all other UDP messages require the serial number of the Cube, which is included in the response to this request. With the serial number we can send other message types, e.g. the “reboot message” (indicated by the “R” at the end of the payload”): >>> p = Ether()/IP(src="192.168.0.1", dst="192.168.0.10")/UDP(sport=23272, dport=23272)/Raw("eQ3Max*\x00KMD1016788R") As the message name already reveals, this will just reboot the device. This can be sent by any device on the local network, without any authentication. There are three different ways to manage a Cube: The local management software: It is a EXE that you can install on Windows that will start a local web server on a random high-port that serves a Java applet… 🙂 The remote management software: Basically the same functionality with a login interface and it’s hosted in the cloud. A mobile app: I haven’t looked into this one yet. The main difference between the local and remote management software is that the remote software communication is somehow encrypted. More about this later. The local management software is quite helpful for getting more insight into the inner workings of the Cube because, by triggering different functions we can observe the requests that are sent to the Cube. It’s always quite helpful to just execute every function (not that much to do on the Cube) that is available and capture the traffic. This will give a brief overview of what can be remotely managed on the Cube. Communicate With the „Remote Proxy“ In order to use the remote management software, you have to configure a username and password in the local management software, that will be required for remote management. Note that the Cube can only be managed by one client at time. So the mobile app or remote management will not work when the local management software runs. As long as there is a open TCP session on port 62910 no other client can communicate with this port. Basically, every client in the local network that can reach port 62910 on the Cube can block other clients by connecting to it (e.g. with netcat). The communication between the Cube and the remote management tool is encrypted, but it‘s not SSL/TLS… The communication is done via HTTP POST requests where just the POST body is encrypted. The HTTP headers look like this: Opt: "http://www.eq-3.com/MAX", ns=MAX These requests are sent to http://smarthome.md.de:8080. A quite important header is the MAX-Serial. It has to include a valid serial number or else the server will just respond with 500 Internal Server Errors. The AES encryption is used to encrypt the POST bodies sent to the remote management tool. The Cube supports the „e“ and „d“ messages which are basically „encrypt“ and „decrypt“ functions. This allows you to encrypt arbitrary strings and decrypt whatever has been encrypted by the same Cube. Here is a quick example: Note: The Cube needs commands to end with “\r\n” or else it won’t respond. In order to send this in tools like netcat/ncat, instead of just pressing RETURN, press CTRL+v and then RETURN (indicated by the “^M” at the end of the line. The example shows how the cube can encrypt the string TEST, which returns the ciphertext as a Base64 encoded string kvJcZ8bVAoyXaE7gK+q2Ug==. In order to decrypt the string again you can supply it to the decrypt function which will return the plaintext string TEST. The rest of the string are just encoded Null Bytes (0x00) used to pad to the AES block size. The strings that are typically encrypted are already Base64 encoded. So lets look at a real example: In order to use the remote login you need to set a username and password. The plaintext request that is sent from the Cube to the remote system looks like this: B:FOOBAR1,5a8a4a5d3c1bd612b8bf1e2fecf609f7,1,SuperSecret The first line includes the serial number, the RF address and the firmware version. The second one includes the username (FOOBAR1), a MD5 hash, a number (1) and the actual password (SuperSecret). The MD5 hash is just a hash of password||serial_number: ~ » echo -n "SuperSecretKMD1016788"|openssl md5 (stdin)= 5a8a4a5d3c1bd612b8bf1e2fecf609f7 In order to send this payload to the remote system we have to Base64 encode: ~ » echo -n "H:KMD1016788,099c3e,0113 B:FOOBAR1,5a8a4a5d3c1bd612b8bf1e2fecf609f7,1,SuperSecret"|base64 -w0 hiZjFlMmZlY2Y2MDlmNywxLFN1cGVyU2VjcmV0 YjhiZjFlMmZlY2Y2MDlmNywxLFN1cGVyU2VjcmV0^M cuhuDzl7fpT6fWOnyysSxk9TG1cXtrcVkeNWUzgeO5poXjS5tJlXWgV64ibG We can now just copy the Base64 string into Burpsuite’s repeater, Base64 decode it (mark it and press CTRL+Shift+b) and send it to the server. This should look like this: We got a 200 OK from the server so our request succeeded. After this request we are now able to log into the web interface at http://smarthome.md.de/ with the username FOOBAR1 and password SuperSecret. In order to decrypt the response we can just take the response body, Base64 encode it (just mark the response body and press CTRL+b) and send it to the decrypt function of the Cube: ld>M D:aTowMDAwNTFiMSwwMDAwMDAwMCxmZmZmZmZmZg0KYjpPSw0KAAAAAAAAAAAAAAAA and decode the resulting Base64 string: ~ » echo -n e64 -d The important question here is: how does the device encrypt the strings and what is the encryption key? When it comes to AES encryption you have to figure out: What’s the used key size? AES supports 128, 192 and 256 Bit keys. Depending on the mode of operation: What’s the initialization vector (IV)? The first question is easy to answer: on the vendor page they say it’s using AES-128. So what’s the mode of operation? Now it comes in handy that we can encrypt arbitrary strings. The most basic mode of operation is ECB: each 16 Byte blocks will be encrypted independently which results in the same ciphertext when a plaintext will be encrypted twice. I’ve tested it with a string that is the Base64 encoding of 16 * “\xff”, which is exactly the block size of the AES encryption: We can see that encrypting the same plaintext (/////////////////////w==) twice results in the same ciphertext both times, which could mean that ECB is used. But, lets see if multiple blocks will be encrypted independently. The following example encrypts 32 * “\xff” (two blocks): old> E:XQfNd8PcLZgnJbwGTuTx5LM36fXWGGUjgVLWxtzwCgo= If it would use ECB mode the ciphertext should contain the previous sequence of Bytes twice: cryptotest » echo -n "XQfNd8PcLZgnJbwGTuTx5A=="|base64 -d |xxd 00000000: 5d07 cd77 c3dc 2d98 2725 bc06 4ee4 f1e4 ]..w..-.'%..N... cryptotest » echo -n "XQfNd8PcLZgnJbwGTuTx5LM36fXWGGUjgVLWxtzwCgo="|base64 -d |xxd 00000000: 5d07 cd77 c3dc 2d98 2725 bc06 4ee4 f1e4 ]..w..-.'%..N... 00000010: b337 e9f5 d618 6523 8152 d6c6 dcf0 0a0a .7....e#.R...... We can see in the hexdump that the first 16 Bytes indeed are the same as the previous encryption, but the second block is totally different. An ECB encryption example would actually look like this: 00000000: ffff ffff ffff ffff ffff ffff ffff ffff ................ 00000000: ffff ffff ffff ffff ffff ffff ffff ffff ................ 00000010: ffff ffff ffff ffff ffff ffff ffff ffff ................ cryptotest » openssl enc -aes-128-ecb -in plain_16 -nosalt -nopad -k TEST |xxd 00000000: cb30 66d5 3db8 89f6 da4b 5831 d29c 6b9f .0f.=....KX1..k. cryptotest » openssl enc -aes-128-ecb -in plain_32 -nosalt -nopad -k TEST |xxd 00000000: cb30 66d5 3db8 89f6 da4b 5831 d29c 6b9f .0f.=....KX1..k. 00000010: cb30 66d5 3db8 89f6 da4b 5831 d29c 6b9f .0f.=....KX1..k. We now know that it cannot be ECB. The second guess would be that the encryption is done in CBC mode. CBC uses an IV that will be XOR‘ed with the first block prior to applying AES and all subsequent blocks will be XOR’ed with the previous block’s ciphertext. This construct is supposed to prevent encrypting the same plaintext twice resulting in the same ciphertext both times. In order to archive this the IV has to be random for each encryption. So the educated guess here is that the Cube uses CBC with a static IV. But before we can decrypt anything we need the encryption key. My guess at this point is that the key is somehow based on the serial number because the remote server won’t accept ciphertexts if the MAX-serial header contains another (even if valid) serial number. However, the key never hits the wire, there is no handshake in the communication where  the Cube and the remote server agree upon any encryption parameters. Somehow the key can be calculated based on the serial number. Besides the software aspects I also took a look at what is inside of the actual Cube hardware. Turns out the board itself is pretty small and besides the serial number not very informative. But, when you turn around the board it gets interesting… There are several QR codes on the back that include stuff like the MAC address, RF address, serial number, and… a KEY…? The KEY QR code contains a MD5 hash prefixed with a “k” (probably identifying it as “key”) which is not of any interest. So lets try to decrypt a ciphertext with this key: ~ » echo -n "XQfNd8PcLZgnJbwGTuTx5LM36fXWGGUjgVLWxtzwCgo="|base64 -d |openssl enc -aes-128-cbc -d -nopad -nosalt -K 98bbce3f1b25df8e6894b779456d330e -iv 00 |xxd 00000000: c975 1589 ed36 536c c975 1589 ed36 536c .u...6Sl.u...6Sl 00000010: ffff ffff ffff ffff ffff ffff ffff ffff ................ Great! You can see that the second block has been properly decrypted. The first block should actually be the same but it looks totally random. In the previous command I used just Null Bytes as IV (-iv 00). Remember after decrypting the last block in CBC mode, the last block will be XOR’ed with the IV. Here we can see that the first block (which will be processed last during decryption) has been XOR’ed with a wrong value which results in a different plaintext. However, getting the IV in this situation is rather easy: we know the plaintext. XOR’ing the first block of the previous output with the plaintext (which is 16 * “\xff”) should give us the proper IV. Open a Python shell and just do the XOR: >>> fff) '0x368aea7612c9ac93368aea7612c9ac93L' Now lets try again to decrypt our ciphertext with the proper IV: ~ » echo -n "XQfNd8PcLZgnJbwGTuTx5LM36fXWGGUjgVLWxtzwCgo="|base64 -d |openssl enc -aes-128-cbc -d -nopad -nosalt -K 98bbce3f1b25df8e6894b779456d330e -iv 368aea7612c9ac93368aea7612c9ac93 |xxd 00000000: ffff ffff ffff ffff ffff ffff ffff ffff ................ 00000010: ffff ffff ffff ffff ffff ffff ffff ffff ................ There you can see our plaintext has been fully recovered! We can also decrypt the remote server response: ~ » echo -n e64 -d |openssl enc -aes-128-cbc -d -nopad -nosalt -K 98bbce3f1b25df8e6894b779456d330e -iv 368aea7612c9ac93368aea7612c9ac93 Now we know everything we need to encrypt and decrypt strings for the Cube and the remote server ourselves. I’ve also implemented a small Python script that makes it easier to encrypt/decrypt strings with proper padding. In my opinion an essential part of analyzing unknown devices is to let other people work with the gained information, either to support further research by others or let people discover such devices with common tools. When it comes to discovering devices on networks the tool of choice is Nmap. Apart from pure port scanning it provides a wide range of signatures for known services and it’s functionality can be easily extended by NSE scripts. NSE scripts are written in Lua which is a quite straight-forward and easy-to-understand scripting language. The easiest way to start writing your own scripts is to take a look at existing ones that essentially do the same as you want to archive (scripts are typically located at /usr/share/nmap/scripts or just online). E.g. for the identity request we just need something that sends a UDP packet and retrieves the response payload. A really simple and easy-to-understand example is e.g. the daytime.nse script which essentially looks like this: local status, result = comm.exchange(host, port, "dummy", {lines=1}) After defining some metadata at the beginning, the actual script starts with a portrule which is required in every NSE script. It defines when the script should be run against a service. In this case the script could run against port 13 either TCP or UDP if the port has been identified as open. The second important thing in a NSE script is the action, which can be seen as the main() function of the NSE script. The action always takes two arguments: host and port. It should be noted that these are not just a string containing the hostname or IP address and a port number. Each is a table containing additional information like the MAC address in the host table (host.mac_addr) or the protocol (TCP or UDP) in the port table (port.protocol). This script uses the exchange() function from the comm module which is one of many LUA modules provided by Nmap. It just sends a payload and returns the response. If a script should return any information to the user it just has to return it, either as a plain string or as a LUA table. As an easy example for the first Nmap script I will just write one that connects to the Cube on the TCP port 62910 and parse the first line sent back by the device in order to print the serial number, RF address and firmware version of the Cube. This is quite simple because as soon as someone connects to the port the device just sends back a string that looks like this: H:KMD1016788,099c3e,0113,00000000,7ee2b5d7,00,32,100408,002c,03,0000 So our script just needs to connect to the port, get the response and parse the values KMD1016788 (serial number), 099c3e (RF address), 0113 (firmware version). As a template I typically start with something like this: local shortport = require "shortport" portrule = shortport.portnumber(0, "tcp") Then it’s easy to add the required functionality. Because we just need to connect to a port to get the response without sending anything the easiest way is to use a plain socket. Nmap makes it pretty easy to communicate with sockets in NSE scripts: local status, err = sock:connect(host, port, "tcp") local status, data = sock:receive() stdnse.debug1("%s", "Could not receive any data") This gives us the response in the variable ret which we can parse in order to extract the required information: local output = stdnse.output_table() for serial,rf_address,firmware in ld>),") do output["RF Address"] = rf_address output["Firmware Version"] = firmware We now have a output table that requires all the information the should be returned to the user. As I already mentioned this is as easy as put a “return output” at the end of the action. The complete script can be found here. We can test the script by just running it against the Cube to see if it works: max-cube/nse » nmap --script maxcube-info.nse -Pn -p 62910 192.168.0.222 Starting Nmap 7.12SVN ( https://nmap.org ) at 2016-04-08 01:11 CEST So the script works. But it can be quite unrealiable: like I already mentioned when there is an open TCP connection on port 62910 (e.g. the management software is running or someone is connected via netcat), Nmap won’t be able to communicate with the port and the script will not work. The stdnse module provides debug() functions that allow you to print any debug output in the script. It will be visible when at least one -d command line argument will be supplied. The –script-trace command line argument provides more detailed output for debugging NSE scripts. In order to run a script on all ports that have been identified as open, prefix script names with a +. E.g. instead of “–script myscript.nse” use “–script +myscript.nse“ There are still two big questions to be answered: Where is the encryption key coming from? I think the encryption key (which looks like a MD5 hash) is the hash of the serial number concatenated with secret string only the vendor knows. Because somehow the vendor can distinguish between ciphertexts, which means that every device most likely has a own key (I only had one device to test). A different theory: I found the key in a QR code on the circuit board. Which could indicate that the key has had to be known during the manufacturing of the device. The encryption key could be totally random and is probably not even the hash of any plaintext that includes the serial number. But this would mean that the vendor would need to have a list with all serial numbers mapped to the corresponding key that has been inserting during manufacturing. How is the firmware.enc file encrypted? Cube provides an update functionality where you can send pieces of a new firmware version via UDP packets (remember, that’s unauthenticated). The firmware files however are not readable and it looks like they will be decrypted on the device, because the management software can only parse the files but not decrypt them. I just took the parsing routines from the file and wrote a quick’n’dirty fronted but the firmware itself seems to be encrypted. Modifying the firmware would be pretty cool I guess. 🙂 As we saw at the beginning of the post, there are at least two other ways to identify Cubes on the network: with either multicast or unicast UDP packets. However, these would be slightly more tricky as the response’s source port will be static (always 23272). So if you would e.g. use Nmap’s comm.exchange() function in a script you won’t get any response in the function, because it would use a random source port. The solution would be to send out the multicast packet and use pcap to capture the response. There are already some scripts in Nmap that do this, e.g. a script I wrote for discovering KNX devices with a similar technique. Analyzing yet another IoT devices shows that the majority of these devices shares typical vulnerabilities like missing or insufficient authentication. Also, it is typically trivial to identify such devices on the network because they have strange properties like fixed source ports in response packets or only a single TCP connection is possible. So I hope that researchers who also analyze unknown devices start making their research useful for everyone by contributing to projects like Nmap. Summary GI SicherheitDefense & Management Day 2 April 17, 2016 at 3:15 am April 27, 2016 at 7:39 am Great post, more of these on IoT please. Just one criticism (only one? Then you probably did a really good job 😉 ): From http://www.lua.org/about.html: Please do not write it as “LUA” April 27, 2016 at 9:32 am Thank you for the feedback guys, I really appreciate it! Your email address will not be published. Required fields are marked *Comment Name *

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Hello Friends How Are you all ,check my previous post How to hack WhatsApp,in this post I will show a method that I started using on March 2017, and I've made $4300+ with this method alone. I'm not using this method anymore because YouTube changed it's guidelines/algorithm and all my accounts got banned (except 1), and whenever I make new ones with this method, the channel get banned in a matter of days (even hours) after uploading these videos. Also I must mention that YouTube doesn't allow to make Slideshows anymore (since October/November?) so this method doesn't really work this way now. But you can make your own twist to this and it will surely work. The method is simple as it can be. 1) Make YouTube channel. Any channel, the name doesn't matter. 2) Make Amazon Affiliate account if you don't have one. 3) Search for any products that cost more than $100. Make a list of them in excel with a product name and link. In 3 months I uploaded more than 2500 videos. 4) When the list is ready, start with the first product. Lets make a video. Go to YouTube and click upload video, choose make a slideshow (there isn't this option anymore). I uploaded all the pictures from the product link at Amazon, put a background music from the ones YouTube suggested for free, make the video at least 30 seconds long. While the video uploads in the title you put the Product title (exactly as it is on Amazon). In the description I wrote something like: Special discount on PRODUCT, click here to get it: LINK. In tags just copy the product title. You are probably asking what should you do if there is no discount? Don't worry, it doesn't matter. All you have to get is the click to the product. The cookies will do the rest if the buyer buys anything within 24h. Also most of the products on Amazon has some sort of discount. 5) Done. It took me about 5 minutes for each video to be uploaded. Why such a shitty video be profitable you ask? Because when you upload large quantities of products like vacuum cleaners, TV's, gardening tools etc, many of them have little competition with their exact keywords. That means you can get to Google page #1 easily with your video for this product. Also people tend to look up on google products that they are willing to buy on Amazon, especially the ones that cost at least $100. The first 200-300 videos I uploaded myself. When I saw that it took off and it works, I hired 3 people who i would pay about $0,15$ per video upload. Only thing that I had to do was to provide them excel files with affiliate links to products and the name of the product. Here are the proof for my earnings in March with this method. In September I started to get banned. Clearly YouTube changed something, because everything worked fine until then. 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This week Saifedean Ammous, legendary author of The Bitcoin Standard, and George Gammon, Rebel Capitalist, joined Swan Signal live to discuss gold, central banking, the deval­u­a­tion of curren­cies and how Bitcoin is going to suck value out of every store of value. George and Saifedean connected well and needed nearly no prompting for a lively discus­sion hosted by Brady Swenson, Swan Bitcoin Head of Educa­tion.

Subscribe to the Swan Signal YouTube channel and Swan Signal podcast.

0:00 Intro­duc­tion

1:59 Micros­trategy holds Bitcoin on balance sheet

8:32 Bitcoin vs Gold

15:01 Bitcoin vs Real Estate

21:07 Infla­tion’s conse­quences

29:00 Nation-state responses to Bitcoin

41:01 Histor­ical transi­tions between curren­cies

55:28 Fed Coin as compe­ti­tion

1:02:02 Which country will adopt Bitcoin first?

1:05:43 How will Bitcoin narra­tives change?

1:15:57 Closing thoughts

Brady Swenson:

Welcome to the Swan Signal podcast, a produc­tion of Swan Bitcoin. The best way to accumu­late bitcoin with automatic recur­ring buys at swanbitcoin.com. Swan Signal pairs great guests for compelling discus­sions and this week we have author and educator, Saifedean Ammous and George Gammon, host of The Rebel Capitalist Show. Pairing up great guests is a unique format in the bitcoin content space and has produced some incred­ible content so far. In my opinion, Swan Signal absolutely deserves a spot in your rotation. So subscribe today if you’re not already. Glad you found your way here. Hope you enjoy.

Hello and welcome back to Swan Signal live, a produc­tion of Swan Bitcoin. Swan Signal is a weekly show that pairs up great guests for compelling discus­sions about bitcoin and economics. I’m your host, Brady Swenson, head of educa­tion at Swan. But before we dive in, a quick word about the service we provide here at Swan. We’ve built the best way to accumu­late bitcoin with automatic recur­ring buys. It’s a very simple setup. One, you just connect your bank account to auto fund USD.

Two, we automat­i­cally stack for you. Three, you can set up automatic withdrawals to your wallets. We do all this with very low fees in the industry up to 80% lower than Coinbase, absolutely crushing Coinbase and up to 57% lower than Cash App for automatic recur­ring purchases.

Today, I have some big news for you all. We are launching our Daily Buys beta. We’ve had a huge demand to add Daily Buys to our weekly, bi-monthly, and monthly purchase frequen­cies. So we’re about to roll that out. You can sign up at swanbitcoin.com. Just add your email address, click get started to be added to the beta list or you can DM us on twitter @SwanBitcoin.

We have about 400 out of our thousand Daily Buys beta slots filled up, so get in there. All right. I’m really excited to welcome our guest to the show today. First, we have the inimitable, Saifedean Ammous with us today. He’s author of a staple of the bitcoin canon, of course the Bitcoin Standard and he’s an economics educator researcher. You can find Saif’s work at saifedean.com. Saif, welcome to the show, man.

Saifedean Ammous:

Thank you very much for having me. It’s always fun to join you, Brady.

All right. And we have finance and wealth manage­ment YouTuber, host of The Rebel Capitalist show and investor, George Gammon with us today as well. You can subscribe to George’s channel at youtube.com/georgegammon. Gammon is G‑A-M-M-O‑N. Welcome, George. How’s it going today?

George Gammon:

Doing very well. Thank you very much. I appre­ciate you having me on the show.

I really appre­ciate your time. Okay. Let’s dive in and get started with the big news from yesterday that bitcoin Twitter is a buzz about the news that MicroS­trategy announced that they made a $250 million bitcoin purchase. Black­Rock, the largest asset manager in the world and Vanguard, the largest provider of mutual funds in the world, both hold a signif­i­cant stake in MicroS­trategy. The two of them together hold over 25%.

So it seems likely that they had prior notice of this buy and if so, that means that these two finan­cial behemoths just essen­tially approved a massive bitcoin buy. The MicroS­trategy stock price is up around 15% on the news. So that means I’m sure that other CEOs are taking notice. We’ve also seen in the past few months big macro investors are publicly announcing their bitcoin positions. Paul Tudor Jones, Raoul Pal, Lyn Alden who we had on the show recently.

For instance, Raoul Pal recently tweeted that bitcoin is the future and is wildly under­priced. So George, let’s start with you on this one. What do you think of these devel­op­ments and their impli­ca­tions for bitcoin?

Well, I’d have to go with Lyn Alden. She’s my partner in Rebel Capitalist Pro. So anything she says, I’m definitely going to go along with because she is definitely one of the smartest people I have ever met in my life without excep­tion. But I think the best infor­ma­tion I can give you is just some insider infor­ma­tion right here from St. Barts and I came here maybe three weeks ago because I wanted to find a place in the world where I could just go to the gym or I could go to the beach where things were as close to normal as you could find.

And if your viewers or your listeners have never been to St. Barts, it’s right in the Caribbean. It’s basically like Monaco. So there’s 9,000 people on this little island and it’s extremely affluent. I mean 90% of the people here are in finance. They’re hedge fund managers, they’re invest­ment bankers, they’re straight from Wall Street. This is the group that you were basically just mentioning. And I’ve gone to several social gather­ings, let’s say. And you’re having drinks with the guys just saying, “What do you do?” I’m not going to mention any names, but a lot of the people that I’ve met here, you’d recog­nize from CNBC, you’d recog­nize from Bloomberg.

I would say pretty much every single one of them that I spoke with after a few drinks, we ended up talking about bitcoin. So you can take that for what it’s worth and I don’t really know what’s going on as far as the news. I don’t know what’s going on with this company or Black­Rock, but I do know that every hedge fund manager I’m talking to here in St. Barts after a couple drinks. That’s where the conver­sa­tion goes.

Great. Tell them about my book.

Yeah. It’s a great place to start for sure. It’s widely recom­mended. Saif, what are the impli­ca­tions here for bitcoin. I’ve got a follow-up after this, but I’d like to hear just your initial thoughts.

I think it’s quite signif­i­cant because a lot of people have spent the last few years discussing bitcoin from the perspec­tive of payments and retail adoption, and the idea was when am I going to be able to pay for my coffee or for my McDon­ald’s with bitcoin? The point that I made in my book in the Bitcoin Standard is that bitcoin is not competing with Visa, with Master­cards, with all these payment methods. Bitcoin is not an alter­na­tive to these things. It doesn’t compete with them. It’s orthog­onal to them. You can install all of those things on top of bitcoin.

Bitcoin is competing with the actual assets that are being traded on these networks. It’s competing with the curren­cies, with national curren­cies and with gold as a form of money and as a store of value. I think this devel­op­ment bears it out and of course it’s absolutely massive. It’s $250 million of bitcoin, which is not chump change. I mean, it’s a large company that makes about a half a billion dollars of revenue a year.

It’s a company that has a signif­i­cant cash balance and it has reached the conclu­sion that the best thing for us to do with the signif­i­cant part of our cash balance is to hold some bitcoin. Somebody dug up there, I think it was the investor letter from a few weeks or a few months ago where they had discussed… I’m not sure if it was a confer­ence call or the letter, but they discussed their cash position and they said, “Our outlook on our cash position is becoming negative now because of all the devel­op­ments of the last three months with the coron­avirus lockdowns and so on. They have a negative outlook on their cash position and now we see that they’ve acted upon that and they’ve replaced part of their holdings of US dollar cash with bitcoin and I think a lot of people are going to see the benefit of this.

I think really this is how bitcoin adoption happens. Bitcoin is going to become part of people’s cash balances and if it continues to work, if it continues to operate and it continues to appre­ciate, it’s going to become an increas­ingly signif­i­cant part of other people’s cash balances partic­u­larly as other curren­cies continue to lose value more and more over time. So the phenom­enon I described in my book is that in the long run, value accrues to the hardest money. I think Microsys­tems recog­nizing that, I think is I find it to be very exciting because it’ll be inter­esting to see what happens when more compa­nies really do that.

I mean, if we look at bitcoin’s average perfor­mance over the last 10 years, I think it’s gone up. Last time I ran the numbers, it was maybe 500 or 400% per year on average. So if bitcoin has an average year for bitcoin next year, every company is going to pay atten­tion because this move is likely to end up being more profitable than anything else the company has done. I think that just shows the value propo­si­tion for investing in an alter­na­tive to central banks. The market is telling the world, invest in this central bank alter­na­tive that works well.

Go ahead, George.

I’m sorry. I don’t know the format here, but just to dovetail on that thought, I think going back to the people that I’m speaking with who are the profes­sionals, short term, I think it’s more of a specu­la­tion, and I don’t really see gold as competing with bitcoin or silver just because I see them as two completely separate asset classes. I would never buy bitcoin for the reasons I buy gold and vice versa because gold to me is just an insur­ance policy. It’s not a way to get rich, it’s a way to stay rich. And with bitcoin, it’s a fantastic asymmetric specu­la­tion.

So I just see them as two completely separate things. Now, that said, I think long term what you were saying with your book is really inter­esting because you’re talking about how in the long run every­thing goes into hard curren­cies or hard money like we’ve seen in the past with gold. When you were saying that, it reminded me of Gresham’s law. Brady, if your viewers aren’t familiar with Gresham’s law, it’s basically the bad money chases out good money.

So let’s use an example of Ancient Rome or some society where they used physical gold coins and when they get over indebted, what happens is the presi­dent or king or whomever says, “Okay. We’ll just solve this problem by making these new coins and we’ll just paint them gold. But really, they’re nickel or they’re copper or something like that. They’re trying to pull the wool over your eyes and they issue more and more of this currency, we’ll call it. But everyone knows it’s fake. So the more they issue these curren­cies, the more the real gold coins come out of circu­la­tion because smart people see the value, they see the intrinsic value and they start hoarding all of the real money. It’s Gresham’s law. Over the long-term, I’m not saying it’s happening today, but it could happen with bitcoin. It’s a very inter­esting concept.

Yeah, but I think the nickel coins are nowhere to be found today, but gold coins are still around today. So I think Gresham’s law talks about which coins will be used for legal, commer­cial trans­ac­tions in the country. And the answer is clearly in Venezuela today, every­body wants to spend their Bolivars if they can, but nobody wants to take them. So officially, yes, the bolivar has driven out the US dollars because it is the worst money many, many times over. But in reality, the bolivar continues to drop further and further and further. And any actual real wealth that exists in Venezuela is stored in the US dollar or in bitcoin or in gold.

It’s misin­ter­preted by Keyne­sians to suggest that, “Oh, if it’s an easy money, then it’s just going to win out over the harder money.” Well, no, it’s going to win out because people are just going to get rid of it, but eventu­ally it’s not going to be money very quickly because it’s going to just lose its value quickly and eventu­ally the harder money will remain.

Yeah, I think that’s my point.

Yeah. I think this is effec­tively what’s happening with bitcoin and you’re right that it is in this asymmetric bet now, but it’s an asymmetric bet where the positive upside outcome is that it becomes something like gold. It stops being an asymmetric bet. It becomes just the predom­i­nant monetary asset. We’re at least 100X away from there or maybe 50X away from there or a thousand X away from there. God knows how much more bull run we have to get there. But bitcoin keeps going up. It eats every­thing else. I’m not saying it will happen, but it hasn’t looked like it’s been stoppable over the last 10 years. So we’ll see.

I’m sure you guys have done the math. I’d be curious to know how much the price of bitcoin would have to go up in order for it to be equiv­a­lent to the market value of gold or the market cap of gold.

It’s at about the price of one gold bar like the 12 1⁄2 kilogram, 400 ounce bar. So basically one bitcoin would be worth about 400 ounces of gold.

Yeah. The math I’d like to do is figure out how much gold is in the world right now?

I think it’s about 180, 170,000 tons.

Yeah. How much is that in dollar terms and then figure out how much bitcoin would have to go up to equal that amount?

I think it’s about $10 trillion at this point if I’m running-

Gold is about $10 trillion, yeah because it’s about 180,000 tons and then 1 kilogram is I think around $60,000 or something. I think you multiply these, you end up with around 10 trillion. It’s in that ballpark. So bitcoin is around 200 billion so far.

Yeah. I think that’s your upside.

Exactly. 2% of gold.

That’s not the upside actually. That’s just one way station on one base camp on the real launch because that’s just gold. Right now in a world in which all kinds of other monetary assets are used because gold is not allowed to be in a free market. If we could have a free market of money, I believe gold would win and every­body would be using more of the instru­ments back for gold.

In that case, probably gold would be worth a lot more than what it is today because we would have all these national curren­cies. So there’s also that. So gold and then there’s the national curren­cies. And then there’s the question of how much of the store value market in the world. How much of the finan­cial markets in the world and the art market, and the real estate market is actually just store of value demand that could better be repli­cated by just going into bitcoin.

How many people are just buying houses and real estate invest­ments not because they want to own houses, but because they want to store their wealth. So you think that could lead to poten­tially more stuff for bitcoin to eat as it rises.

Another fantastic point. I do a lot of business in South America, and I’ve been doing so since, call it 2014. And for the Ameri­cans or people in more devel­oped economies, they might not get this. But in South America, I mean I’m going to call it almost 100% of the popula­tion stores their wealth in real estate. That’s just what you do. I mean, when I was in Ecuador, even the poor people in the fishing villages, if they earned an extra even hundred thousand dollars, what they do is they just build another 10 or 20 square feet on their house and they just keep building, and building, and building, and building.

And the same thing in Medellin, Colombia where I’ve been doing real estate since 2015. I would say and I had the numbers for this, but almost like 90% of the apart­ments that are owned there are owned just outright. There’s no mortgage on them, because people really don’t have savings accounts there. Their currency hasn’t been a store of value at all. It’s lost a lot more than the dollar a lot faster. So for them, their house, their apart­ment, their property, their FINCA, it’s a store of value. It’s their savings account. So I think you just hit the nail on the head there, very inter­esting point.

Yeah. I think in my book, I argue basically bitcoin is the most advanced technology for saving that we’ve ever invented because it’s strictly scarce. Gold was the most advanced because gold by nature of its chemistry can never increase it more than 1 or 2% per year, but bitcoin is even more advanced because in a few years, it’s going to go below gold’s growth rate and eventu­ally drops to zero. So it’s the one thing, one liquid asset that we have in the world that is strictly scarce. There’s never going to be more than 21 million. That’s it.

When you think about it this way, there’s no better thing in which if you want to store value in the future, this offers, in my mind, the expla­na­tion for why we’ve seen so much gains in bitcoin and I think as long as this continues, the case is arguably very strong that this is quite useful as a store of value simply because nobody can make more of it. We’ve had 10 years, 11 years of this thing running and nobody managed to find a way of making one bitcoin more than what should be made in the schedule by this block height. And I think that’s an aston­ishing inven­tion really.

Just thinking about it, it’s almost… Robert Breedlove on Twitter compares this to the inven­tion of zero. It’s a mental construct. Once we’ve invented… It changes the way that we can do math just by thinking of zero and in a sense inventing this first strictly scarce asset just changes the way that we deal with scarcity and with storing value and with saving for the future. It’s an aston­ishing idea.

I would even take it a step further and that I don’t even think it’s a fixed number of bitcoin. I think it’s a decreasing number. These human beings are always going to lose them. That may be a crude way of looking at it, but there might be more than one billion, but sure next year, there’s going to be maybe 20.5 and as the years go on, you lose more, and more, and more of them. So it’s a scarce asset as is that becomes more and more scarce just because us, clumsy human beings are just going to lose our thumb drive or who knows what we’ll do.

We call those donations, George.

It’s philan­thropy. Defla­tionary philan­thropy.

So Saif, I want to circle back to this idea of monetary premiums in other assets especially real estate. So how much do you think that the monetary premiums in these actually hard assets drives wealth inequality or inequality of access to these assets that are needed?

I think it’s quite signif­i­cant because it makes the market for people who are looking for homes. It’s not just young people who are looking to leave their parents home and start their own family and have their own home. On top of that, you have people who already have a house, but are looking for a savings account that can’t be confis­cated through capital controls and infla­tion by their govern­ment. The people in Latin America instead of putting money in a bank account or a stock market or something, some advanced technology for saving like bitcoin, they end up having to buy a new apart­ment.

So you see this all over the world so many apart­ments are empty or are owned by people that are renting them out. It’s increased demand. Most people have no business specu­lating in the real estate business. This should be something that is provided by profes­sionals who have exper­tise in this business. If you’re a doctor, you’re not providing any value to the real estate business by investing in real estate proper­ties. In a healthy finan­cial system, what you’re looking for in terms of savings, you would keep in a decent saving vehicle like gold or bitcoin.

Then what you’re looking to invest, you’d invest in things in which you have, some kind of specific edge that allows you to under­stand probably your own business. You’d open your own clinic, your own practice or some business that you have some exper­tise with. But I think this notion that every­body needs to be a real estate specu­lator just so that they can retire is in my mind massive ineffi­ciency in the housing market. I think we’d have cheaper houses avail­able for people if it was just the people who… If the people bidding for houses were only the people who were looking for houses to live in, to buy. And if credit for housing wasn’t so easy to get, houses would be far cheaper.

I mean, I think that’s a huge point that I hope everyone just under­stands and I would take it and say all finan­cial assets. Let’s take it back to 1930 and if you look at a chart of infla­tion from 1930 to today, you see that every single year, it’s just pretty much going up. We’ve got a few years it just goes down a fraction. It might stay the same, but it’s just up, up, up, up. Take it prior to 1930 and you see that infla­tion and defla­tion was more like a heart­beat. It would go up, it would go down, it go up, it would go down and most of the time it stayed pretty consis­tent.

If you look at the 1800s as an example, the late 1800s, we had about 3% defla­tion per year. So the price of goods and services were going down. Now most people especially Keyne­sians would have a heart attack and say, “Oh my gosh, that must have been the most horrible time in history.” But it wasn’t. We had nominal GDP growth and we had nominal wages increase. We also had about 4% nominal rates. So you could put your money in a bank back then and you could get a 7% real return. So you didn’t need to specu­late on real estate or in the stock market or in bonds.

But now that we have a two or 3% per year infla­tion, I would argue that it’s higher going back to 1980. You don’t have a choice. The average Joe and Jane, whether they know it consciously or subcon­sciously, they realize that if they keep their money in the bank, they’re never going to be able to retire. The way that you get ahead is you buy a home or you take and you put as much money as you possibly can in your 401k to go in the stock market and then maybe, just maybe you’ll have enough money to retire.

But if you think about it, that’s because we have lived in a state of infla­tion where those currency units are losing value every single day. If they were gaining in value every single day, it’s the complete opposite. I would go so far as to say it would not only alleviate the misal­lo­ca­tion of resources through just pure specu­la­tion of the overall economy, but it would make society so much better because people… Just as an example, a McDon­ald’s worker. Let’s say they’re making $1,500 a month. Their expenses are $1,500 a month.

If you take and run that math over 20 years at 3% defla­tion and a 1% raise in their nominal wages, at the end of the 20 years, they’re making $1,800 a month doing the same job flipping burgers. If they don’t get a raise, if they don’t get a promo­tion. And you say, “George, that’s only a 300 raise over 20 years.” Right, but their expenses have gone from $1,500 down to $800.

So now they have a thousand dollar delta right there and they have a thousand dollars every single month of dispos­able income. They’ve gotten richer just debt, but the problem is they still have a really unstable economy because it’s built around oil where we would have the same thing. You could wipe out all these things that people perceived to be the problem, but it wouldn’t rearrange our economy.

Our economy still is the same. You look at the zombie corpo­ra­tions in Japan. Even if you could wipe out their debt, zombie corpo­ra­tions are still there. So would anything really change if you just do a couple accounting tricks? Not really. So what bitcoin does or what any hard money system does is it starts from the ground up and every­thing that you build on top of this infra­struc­ture, on top of this founda­tion is solid, it’s secure, it’s sustain­able. I mean I know that’s a buzzword now with everyone in the green commu­nity and whatnot. But for me, something that’s sustain­able, number one is something that is profitable. I know it’s a bizarre concept in today’s stock market.

It’s profitable, but also it doesn’t require massive amounts and ever expanding amounts of debt in money printing and fiat currency. That’s sustain­able. So again, my main point is that whether it’s Bitcoin Standard, whether it’s gold, anything that fixes these currency units and provides us with natural defla­tion, a free market economy where entre­pre­neurs are always producing more efficient goods and services at lower and lower prices, that’s where we want to be. And I think looking at this through an optimistic lens hopefully I think we could get there. I know we could get there as human beings because we’ve done it many, many times before we’re very resilient and I think that’s how we kind of come out the other side.

Yeah. And I really think it’s shaping up to be bitcoin. That’s the solution. Bitcoin really is the… Because you identify the problem exactly in terms of the problem of not having a hard money and how govern­ment captures that and bitcoin just routes around the way govern­ment is able to capture it. And this is why I think… I’m not one of the people who puts a high proba­bility on there being the violent crack­down on bitcoin because I think it’s just… The natural techno­log­ical limita­tions of physical gold naturally led to govern­ment having the ability to abuse its authority over gold and then having that ability led to all these insti­tu­tions that were built around it.

When new technology is created, it creates its own reality and the world adjusts to it. So people deal with it from a self-interest perspec­tive, and that’s eventu­ally what bitcoin does. That’s the cycle of skepti­cism. You start off thinking, of course, this can’t work, of course, it’s going to fail. Then it continues to work and then you’re starting to appre­ciate why it continues to not fail. Then eventu­ally you under­stand that there’s value related there and that it’s relevant to you and you could use it yourself.

Yeah. I think that every day that goes by, as we see more adoption with bitcoin, the better proba­bility you have that that’s the default mecha­nism. So many people say, “Oh, we’ll never go on a bitcoin center. We’ll never go on a gold standard again. It will never ever happen. Govern­ments will never choose to go on XYZ standard.” But what they’re not under­standing is it might not be govern­ment’s choice.

You might not have an alter­na­tive.

Yeah. The Roman empire didn’t choose to go out of business.

Exactly, right. So if you get this gradual adoption, the more time goes on, the more bitcoin isn’t a new thing. It’s not a bizarre thing. You don’t have these grand­mothers like, “Bit what? Bit who? What’s going on here?” I think it’s very inter­esting and I’m not sure the specific countries in Africa, but I know many of them, the people aren’t even using cash. They’re just trading their their cellphone minutes back and forth on their cellphone or whatever little… I forgot the name of the little unit of exchange, but it just goes back and forth on their cellphone.

Although it might not be bitcoin directly, the bottom line is it’s a currency that’s completely digital that’s going back and forth that people are already starting to adopt. And of course the millen­nials are doing it. Even on your twitter feed, I know someone was making fun of both of us calling us boomers like, “Oh, I’m not watching that one. You got two boomers on there.” Right? But my point is obviously, it’s being more and more adopted by the younger gener­a­tion. So as those kids get older, it’s not so bizarre to them and that benefits bitcoin even more, I think.

You get to that point where govern­ments don’t have a choice because of a total loss of confi­dence in fiat current.

Yeah. All right. So I’m going to sneak in two questions here because you guys are going for 45 minutes on one question, which I love. It’s great. I’m going to sneak two in here.

Making your job easy, huh?

Yeah, exactly. And I want to check in, we’re about 15 minutes away or so from end time.

I forgot where we’re at.

So I want to know if you guys can go a little longer than we had planned or if you have a hard cut off?

I’m fine. Go ahead and let me look at my calendar here. Are people-

You check it out. All right. So here’s the questions. To follow up on the question about transi­tions. So we have some chatter in the YouTube chat about central bank digital curren­cies like a fed coin, right?

So Saif, what do you think about the prospects of a fed coin and the compe­ti­tion that it might bring against bitcoin?

I think ultimately we might get some forms of more digiti­za­tion. I think there will be things like that, but ultimately it’s not a digital currency. It’s still any national currency. And it’s orthog­onal to bitcoin, it’s irrel­e­vant to bitcoin or I shouldn’t say irrel­e­vant, it’s different from bitcoin because it doesn’t do anything that bitcoin does. In partic­ular, there are two things that are distin­guishing bitcoin from current national curren­cies, which is that bitcoin’s monetary policy is algorithmic, it’s not discre­tionary. Nobody wakes up in the morning and decides what to do with bitcoin’s monetary policy.

Also, the bitcoin payment final­iza­tions, clear­ance, and settle­ment is also algorithmic and crypto­graphic and program­mable rather than discre­tionary. So nobody can freeze your bitcoin account, nobody can confis­cate it. So those are the two main functions of central banks. That’s why central banks are there to decide who can pay and who can’t pay on one hand and secondly to decide what’s going to happen with the monetary policy.

So the notion that central banks would invent a digital currency or intro­duce a digital currency that takes away those two things, I think is a non-starter. They’re not getting themselves out of business. They’re not going to intro­duce a currency who supplies algorithmic or whose payment clear­ance is totally crypto­graphic. They’re still going to want what programs call god mode. They’re still going to want the ability to say, “No, you can’t send them money.” And they’re still going to want to set the money supply.

All they’re doing is that they’re just making it more digital­ized and there­fore hopefully making it, just as George was saying getting bitcoin accep­tance into people’s minds. So we thank them for the free PR.

Basically like a last gasp like rebranding of the dollar basically.

I think bitcoin could get us there a lot faster. And going back to what we’re talking about of the collapse of confi­dence in fiat currency itself. So I don’t want to get too wonky on everyone here, but if we create, let’s call it a fed coin and I actually talked to Ron Paul about this the other day. Basically what would have to happen is everyone would have to have a bank account with the fed with bank reserves just like the primary dealer banks and the banks under the fed’s umbrella because the fed right now can’t really create broad money directly as of right now. I think that may change, but right now they just create base money.

And I don’t want to bore anyone with details, but that’s why quanti­ta­tive easing, they could take it up to 10 trillion, 20 trillion and it wouldn’t neces­sarily affect consumer prices because the transfer mecha­nism there is A, the debt moneti­za­tion with the govern­ment. If they’re not doing that, then it has to be lent out into new money by the commer­cial banking system. And those bank reserves, they’re not lending those out directly. Those only just backstop additional loans and increase the capacity of their balance sheet, okay?

So that’s the way it works right now, but I’m thinking that maybe very soon here and we saw this how cumber­some it was to get out these stimulus checks that the fed because, they’re thinking okay, we’re going to take on more power. We want more control over the currency and how money is spent and we want to know where you’re spending every single dollar. We want more and more control over that whether it’s the fed, the govern­ment just the central planners, let’s call them. They want to micro­manage every­thing. So they take that. They set up this fed coin and say, “What you have to do is download this app on your phone and every single month, we’ll send you these stimulus checks or UBI,” whatever you want to call it of let’s say $2,000.

Then you can go right to Starbucks and use that on your phone. Okay. Well, everyone is going to… In my opinion, most people will adopt that because it’s free money and then you are on this fed coin system, if we look at the work of Dr. Lacey Hunt who’s one of my favorite econo­mists, he’s someone that’s really in the defla­tionary camp, but he says that once you change the Federal Reserve Act to allow the federal reserve to change what he calls their liabil­i­ties into actual currency units, into broad money, increase M2 money supply directly, that’s where he goes from being a defla­tionist to someone who sees us being on the path to hyper infla­tion.

Those are his words, not mine. And if you don’t know who Lacy Hunt is, not a tin foil hat guy. He goes all the way back to the Milton Friedman days. He is an OG. He is legit. You can look him up, google him for sure. So that’s how he sees this. So my point is that by creating this fed coin, what they’re doing is they’re getting us on the path to hyper­in­fla­tion. And the faster we get to hyper­in­fla­tion, obviously, that’s by defin­i­tion a loss of confi­dence in fiat currency. That’s when as a society, as a global society, we start looking for an alter­na­tive, whatever it is.

So you see my point? I think they’re going to a fed coin. Obviously, it’s not a cryptocur­rency, it’s just a more digital currency that gives them more control, but I think inadver­tently if they do that, they put us right on the path that will lead to their own destruc­tion.

All right. So here’s the second question I was going to ask then because I didn’t get it in. That was my mistake. All right. So we’re talking about how bitcoin might global, talking about hyper­in­fla­tion, hyper­bit­coiniza­tion. We’ve talked about the path that might be taken to get to a bitcoin future. So yeah, I wanted to go back to that idea, but ask a more specific question. What country do you guys think will be the first to publicly disclose that they have bought some bitcoin for their own treasury if they’re sover­eign treasury.

Again, remem­bering that at the top we talked about how we have macro investors, big investors buying in. We have compa­nies now buying in. It seems like the last kind of stone to fall is a sover­eign nation. Obviously, the game theory says that because it’s an asymmetric bet, you could make an asymmetric bet on the future of your country’s power and really rise and increase your country’s power on the global stage signif­i­cantly by accumu­lating bitcoin now. So what do you guys think? Saif, you want to start?

I think Venezuela.

Because what’s their downside? I mean obviously, the guy running the show there is a complete nut, but if you got someone that actually had some sense, then why not start going on what’s called a Bitcoin Standard. Because if you look at hyper­in­fla­tions throughout history, the way you partic­u­larly get rid of that like with Zimbabwe as an example. You say, “Okay. Just automat­i­cally overnight, we’re not using this Zimbabwe thing anymore. We’re using the dollar.” It’s just a change of confi­dence.

I employ a lot of them in Colombia, so believe me, they’re no fans of what’s going on there to say the least. I mean, viscer­ally it makes them sick when I even talk about it on my videos. So they’re going to have this complete loss in anything that the govern­ment comes out that even resem­bles a fiat currency which just puts them right back in the same position. So why not just say, “Okay. We’re on a bitcoin standard. We are no longer going to control…” I mean, the only other thing they could do is like dollarize something like that. But I don’t think Venezuela would do that because they want nothing to do with the US govern­ment. Although Ecuador did it, but I think that’s kind of what have you got to lose? There’s no downside. The only thing you have is upside so why not?

We know that Venezuela is using bitcoin. We know that Venezuela that some govern­ment depart­ment, I think for passport renewal, they were charging people in bitcoin because they can’t get their money from the regular banking system because they’re bankrupt and they were charging bitcoin. But I think it’s not so much about charging and holding it or using it, it’s about holding it for the long term. That’s the really inter­esting thing.

With a govern­ment like Venezuela, it doesn’t matter how much bitcoin they buy and sell and spend. I mean, it doesn’t matter how much bitcoin they get in, they’re going to continue to spend it and so they won’t really benefit from holding and appre­ci­ating in the long run. It’s really hard to say. I mean, it’s 200 govern­ments or something in the world. It’s really hard to say which one of them is going to take the plunge on it.

If I were to make a wild guess, I’d say Switzer­land just because they were the ones who had the gold standard for the longest time and they went off the gold standard the most recently. So perhaps, they might be the ones that are most percep­tive to it.

Yeah. I’d like to dive into talking a little bit about the market narra­tives in bitcoin and we’ve seen the narra­tive change quite a bit. It seems like the prevailing narra­tive now is probably digital gold in terms of like the widespread view of bitcoin. So Saif, how do you see bitcoin narra­tives evolving as adoption happens and works its way up the S curve?

I mean, I think the main evolu­tion is going to be the one that we mentioned earlier from asymmetric bet on this happening in over long-term into it becoming more and more of just a boring monetary asset that every­body holds and that’s ultimately it. I think we’ve seen a lot of narra­tives come and go and we’re going to continue to see a lot of narra­tives come and go that missed the point. But it may just be that hard money is really… It’s just going to be the narra­tive that is dominant.

Yeah. What I’d be curious to know and I’m sure you guys have your finger on the pulse of this more than I do is what is the proba­bility of the tech around bitcoin advancing to the point where it could legit­i­mately be a medium of exchange? Because correct me if I’m wrong right now, it’s rather cumber­some. The amount of trans­ac­tions that happen on a daily basis would just completely overwhelm the system and it would be slow or the amount of electrical needs what not. But I’m assuming there’s tons of people that are trying to figure out workarounds for that.

Yeah, there are. The thing that I argue in my book is… And that’s why the title of my book is The Bitcoin Standard is that you can’t really compare bitcoin trans­ac­tions with credit card payments. Bitcoin trans­ac­tions are final settle­ment trans­ac­tions so you have to compare them with settle­ment payments across inter­na­tional borders. That’s the advan­tage. If I send you a bitcoin trans­ac­tion and you’re in the same room, it costs let’s say five cents and it takes a few minutes or a couple of hours to confirm.

But if I send that same trans­ac­tion across the world to China, that’s also going to cost the same thing. So the trans­ac­tions that are going to be used in… I mean bitcoin is going to be used, in my opinion more as a settle­ment layer rather than for individual payments. I don’t think individ­uals are going to be using bitcoin to pay for their coffee, the bitcoin tune. And scaling limita­tions, and I show some numbers in my book, bitcoin does, what is it, half a million trans­ac­tions a day or something like that and Visa does I think something like 2 billion.

Even if we improve bitcoin in all kinds of way, there are limita­tions because it’s decen­tral­ized that mean that it will always be different from Visa. But you can’t compare Visa payments to bitcoin payments because Visa payments are credit payments. Visa payment is my credit card goes to your machine and in your shop and then my bank tells your bank that they’re going to settle with them and then they sort it out and it takes several weeks for it to finally settle. But a bitcoin trans­ac­tion is final.

Once you’ve gotten six, 10 confir­ma­tions, whatever, it’s going to take a few hours. Once you’ve gotten a few of these confir­ma­tions, then you’ve gotten to the point where the trans­ac­tion is completely secure. Well, completely is obviously a big word, but it’s secure and it’s irreversible. So in this regard we need to think of the bitcoin chain base layer as being similar to physical gold or physical money and that it’s going to be moved around. Central banks will exchange gold and they will exchange physical cash with each other and banks will move physical cash around, but ultimately the majority of trans­ac­tions will be done digitally without the physical under­lying asset having to move.

I think bitcoin is going to scale with that like there will be second layer solutions that are settled with the second layer bitcoin. It’s the second on the first layer, settled on the first layer of bitcoin chain.

How do you see the exten­sion of credit, if we’re on a bitcoin standard because obviously, you’re not lending… or how does that… Let me just…

My feeling… Well, I wouldn’t say feeling. I think the way that I think about it is that in that kind of situa­tion where we have hard money and what would happen is that banking would have two functions. Deposits where you pay people in order to store your money for you and have it avail­able for you and use it to settle payment around the world. And I think this is a very valuable service that your money is at once safe from theft and also a click of a button away from being sent to China.

So you pay people for offering you that service, so deposit banking and then there’s equity banking in my mind or equity invest­ment. I don’t see the possi­bility of… I don’t think credit really makes sense in this world, but I don’t think that’s neces­sarily a bad thing. I don’t see why it wouldn’t be a problem. I think deposit banking and equity are all that anybody needs. If you want your money to just remain safe or if you want your money to be there, then you pay people to store it.

Now, if you want your money to earn a return, they can’t just store it for you, they have to put it out, which means that there’s going to be a risk involved, which means that it’s going to be invested. And in a world in which nobody has a money printer and central banks can’t bail out banks, I don’t see how you can give depos­i­tors guaran­tees on their invest­ment. If lenders are not offered the guarantee on the downside because the central bank can’t bail them out, I don’t see why they would want to lend with a fixed interest rate rather than just taking equity, which has unlim­ited upside.

Right. So if I’m hearing you correctly, we’re not looking at a fractional reserve system there?

I don’t think it would work. I think bitcoin fixes the glitch in gold that makes fractional reserve banking work, because gold requires banks and places so much value in bank’s ability to clear money that it almost allows them to print money because they almost have like a monopoly network on banks. So bitcoin, by making settle­ments so cheap and open to anybody an open source and not monop­o­listic, anybody can set up their own bitcoin node and settle payments for people all over the world. I think by making it into an open market, it makes it very hard for banks to engage in things like fractional reserve banking or maturity trans­for­ma­tion. That’s also something I get into in detail in the fiat standard.

Yeah. I just wonder how that would work with the growth of the economy needing a growth of the money supply or if it just comes through defla­tion like you’re talking about.

Maybe we get five, 10% defla­tion a year.

Yeah, right because that in essence would increase the amount of… I want to call them units of measure­ment avail­able. Let’s just say that we had one bitcoin or had one dollar. A lot of people say, well, then the economy could never grow. But it could if you just divided the dollar into small amounts. Such as pennies, right?

And then everyone that was saving those quarters or in this case bitcoin, they would just get richer and richer and richer just by holding it. So anyway, it’s just kind of a thing that I’ve tried to think through there. I appre­ciate your feedback.

Yeah. It’s an absolutely amazing idea when you think about it that anybody can have their wealth, hold its value and appre­ciate over time, and that’s avail­able for anybody anywhere. Then if you want to take on extra risk. Once you’ve estab­lished an amount of saving that can protect you from say a rainy day or losing your job or whatever, and then you’re able to take risk, then you’re able to put invest­ments in. You’ll only invest and take risk once you find something that’s extremely compelling as an invest­ment. I think in that world, we’d only get resources diverted toward really valuable invest­ments that produce value in the long-term.

100%. We go back to what I said with a sustain­able business because your hurdle is so much higher. I mean, think what your hurdle rate is when you’re getting a business loan that costs 3% fixed rate over 30 years compared to if your hurdle rate was 10%. I mean, how much stronger would the cash flows of those businesses need to be? So, yeah.

Okay. Yeah, absolutely.

We had Jeff Booth on a couple of episodes ago with Lyn Alden. In his book, The Price of Tomorrow, he talks a lot about the defla­tionary forces that technology brings. We’ve actually like with the fiat standard been overcoming or suppressing the defla­tionary forces of technology.

Yeah, I’d agree.

I think the risk of defla­tion causing some problems or making… I don’t believe in the hoarding effect anyway or bringing the economy to a stand­still anyway. But with the defla­tionary effects of technology then there’s like no risk at all. I think we’re going to see really quick defla­tion especially with the hard money economy. Okay, guys. Time is up there. I want to respect you guys’ time and we’ll wrap it up. Any closing words?

No. This has been a fasci­nating conver­sa­tion. I appre­ciate you both for your time and expressing your views. I’ve learned a lot.

Likewise. Thank you. I really enjoyed this as well. I want to pick your brain about refer­ences on a couple of things that you mentioned, the 7% return in the 1890s. If you can give me refer­ences-

I was just using the 4% combined with 3% defla­tion to get the 7% real.

I’m looking for sources on this and a couple of other things. I’ll probably email you about them.

Okay. I think you’ve got my email, don’t you?

I’ll make sure, Saif has it.

All right. Thanks so much guys. And again, you know can find Saifedean’s work at saifedean.com. That’s d>E-A‑N and George Gammon at youtube.com/georgegammon. It’s been a fantastic episode, guys. Of course, you can start stacking some bitcoin. I know you want to now. You can go stack some bitcoin regularly and steadily with automatic recur­ring buys at swanbitcoin.com. Thanks everyone for being here today.

Thank you so much, Brady. Take care. Bye-bye.

Thanks so much again to Saif and George for joining us today. You can find Saif on Twitter at @saifedean. That’s at d>E-A‑N and George @GeorgeGammon. I am @CitizenBitcoin. On behalf of the Swan team, thanks so much for joining us. We hope you enjoyed this episode of the Swan Signal podcast. It’s fun to join us live on the YouTube broad­cast at youtube.com/swansignal. So head over there, subscribe, and turn on the notifi­ca­tion. We have a lot of fun in the live chat and we often are able to work in some questions for listeners.

Swan Signal is a produc­tion of Swan Bitcoin at swanbitcoin.com, the best way to accumu­late bitcoin with automatic recur­ring buys. Follow us on twitter @SwanBitcoin and subscribe to the podcast at swansignalpodcast.com.

Episode 8 –Andy Edstrom and Ansel Linder

Episode 9 –Rockstar Devel­oper and Jeremy Rubin

Episode 10 – Bitcoin TINA and CK Snarks

Episode 11– Gigi and Knut Svanholm

Episode 12 –Adam Back and Preston Pysh

Episode 13 –Alex Gladstein and Matt Odell

Episode 14 –Robert Breedlove and Tuur Demeester

Episode 15 –Isaiah Jackson and Max Keiser

Episode 16 –Gigi and Udi Wertheimer

Episode 17 –Aleks Svetski and Jimmy Song

Episode 18 –Stephan Livera and Marty Bent

Episode 19 –Mark Moss and Ben Prentice

Episode 20 –Samson Mow and Parker Lewis

Episode 21–Lyn Alden and Jeff Booth

Episode 22– Robert Breedlove and Cory Klipp­sten

Saifedean’s Personal Website

Saifedean on Twitter

The Bitcoin Standard– Saifedean’s book

George Gammon on Twitter

George Gammon on Youtube

as a result of letting the free market do its job, create goods and services at lower and lower prices.

Absolutely. That’s all music to my ears. People don’t get the idea that economics is not a rat race. Economics is we produce stuff and then that makes life better for us. And really by burning the value of our money, we’re making it so that every person is constantly watching… The alter­na­tive is that you’re just going to watch your wealth be dissi­pated. So you have no reason to save, you have no reason to think about the future. Your focus is going to be about what can I do with this money right now.

So that destroys the incen­tive for saving. In fact, think about it. With a hard money that appre­ci­ates at 1 or 2 or 3%, children could start getting their birthday gifts in small little sums of money and then they can start watching them appre­ciate over time. From the age of three, five, 10, you start saving and you watch them appre­ci­ating. And it makes sense that you’d work little jobs in the summer as a kid. You do a little bit of work here and there and you could see people actually saving up from their own money with the help of some savings, some work and some defla­tion.

It’s not impos­sible to imagine that any normal person working any kind of menial job given the techno­log­ical capacity of our society today. It’s normal that people should be able to afford normal and decent homes with 24-hour electricity and running hot water. It’s just something that is so cheap to produce given our techno­log­ical capac­i­ties today that really any burger flipper should be able to afford it. If you spend eight hours a day flipping burgers, that’s an extremely valuable thing. You should be able to afford saving up to that after a few years. You should be able to afford to buy a house.

I think it would be something that would be taken for granted in this world. For most of the 19th century, you’re right, people could save. People had that ethic of saving. They had that idea that you put your money aside and you save and you watch it grow. Now, that’s completely replaced with the idea that no, you just continue to spend and all of your life you spend, you spend, you spend and then when you have major expenses, you just take out a loan, and you get into the debt. Then the more income you get, the bigger debt you can take on.

Yeah. It’s ironic that we’ve got the people in the central bank, all these PhDs that see infla­tion as the solution, right? They see it as the solution to every­one’s problems instead of looking at it as the cause of the problem.

If we could just get people to rearrange their thinking and say, “Okay, wait a minute. If all this additional govern­ment spending, let’s say through welfare, this creates infla­tion. It creates additional money supply. Now, whether that comes out in the CPI due to velocity, that’s a whole other story. But you’re increasing the money supply through the debt moneti­za­tion of the fed and let’s say they’re spending it on welfare, that’s the solution that as a society we look to or the govern­ment just has to spend more money, the govern­ment just has to provide health­care or whatever. But if we turned it on its head, so to speak and said, “Well, if we just go back to defla­tion, we don’t need the govern­ment to solve all these problems, which they just make worse, that society could handle it on their own because they’ve got a hard money that stays consis­tent or appre­ci­ates over time.”

Listen, if that’s where bitcoin can take us, then I think everyone should be on board. Philo­soph­i­cally, I don’t think anyone is more aligned with bitcoin than I am whether it pans out, only time will tell, but I think if you under­stand really the ramifi­ca­tions for society at large to have a currency or a store of value, that’s scarce, that’s limited. You almost solve every single problem that we have at least in the devel­oped economies today.

Yeah. A lot of people make fun of bitcoiners because one of the things that we’re always saying is whatever problem there is bitcoin fixes this. But really, if we do manage to put central banks out of business and replace them with a form of software where every­body in the world can have access to a hard money that they could save in, really that’s going to fix an enormous amount of problems all over the world.

It’s all about hard money.

It’s all about hard money whether it’s gold, whether it’s bitcoin, whether you want a price in oil, whatever you want to do. As long as you got that hard money, that’s what it’s all about.

Yeah. But oil is not a hard money.

I’m just saying you use anything you want. I don’t care what you plug into the equation. As long as-

I mean, the reason gold was used is because it is hard, but I think the inter­esting thing about bitcoin is that it gets over the one limita­tion of gold, which is that gold is physical and clunky to move around. Bitcoin is native to the internet so there’s no physical asset to it anywhere. There’s nothing in the world that is a physical manifes­ta­tion of bitcoin that is needed for bitcoin to operate. So it exists purely digitally. So it can travel around the world very fast, very cheap. That’s the really powerful thing about it.

And so far, the past 11 years we don’t really have time to get into the technical details, but judging by results, we’ve had 11 years in which the supply has not been inflated by anybody or corrupted by anybody. That’s the really inter­esting thing.

Yeah. Where do you… I’m sorry, Brady. Do you have another question, Brady? I was going to…

No. Go ahead man. Go ahead. This is great.

How do you guys recon­cile the advance­ment of bitcoin? Let’s say that it triples in values. It quadru­ples in value. So now all of a sudden, it’s a competitor where the govern­ment really sees this as competing with the dollar. And I under­stand that they can’t ban it from a stand­point that it’s decen­tral­ized. I totally get that, but they make it illegal to where the conse­quences of being caught although very few people actually do get caught, but the conse­quences are so extreme that it prevents people from using it or holding it or want to. How do we get around that with bitcoin?

I mean, first of all, there’s no promises and no guaran­tees. So obviously this is a risk that any investor needs to assume and assess on their own. But I would say the… First of all, the fact that trying to pass a ban like this is highly unlikely to succeed. You can see it from the fact that you can still get drugs in pretty much any major city in the world even though drugs are illegal and even though drugs need to be physi­cally produced and processed and trans­ported and sold, and yet you can still secure them.

So bitcoin requires people to just run code on their computers and it can be encrypted. Of course, there’ll always be surveil­lance mecha­nisms, but there are always ways to get around them. It’s a compli­cated cat and mouse game, but I think ultimately it’s very hard to ban it and I think it seems that… At some point, it might even be ridicu­lous that we are discussing this because it’s been 11 years now and some govern­ments have issued recom­men­da­tions against it here and there, but practi­cally we haven’t seen any kind of real crack down on bitcoin.

It’s getting to a point where it’s entering into the mainstream and I think the way that I look at it is that in a sense this isn’t a superior technology and this is a point that I make repeat­edly in my talks. People think about this as if it’s just like a new gimmick, whether they let us adopt it or they won’t let us adopt it. But I think it’s better to think about it as something like dynamite. So when you’ve invented dynamite, govern­ments can make it illegal, but the smarter ones would rather have the dynamite themselves.

I think this is the case with bitcoin. I think the ultimate security of bitcoin rests not on maybe the technical speci­fi­ca­tions, but it rests on the fact that it’s going to be compelling as an economic option for every­body including people in govern­ment. I think we see this increas­ingly. Members of congress are open about the fact that they hold bitcoin and we see more and more finan­cial insti­tu­tions getting into it. It’s more likely that people once they under­stand the impli­ca­tions of bitcoin, it’s more likely that they would want to be on the side of bitcoin rather than fighting it because fighting it is extremely expen­sive and it has an extremely high oppor­tu­nity cost because if you failed, you could have spent all that time and money on securing yourself more of the scarce bitcoin buy.

Inciden­tally, I think the point where I started really paying atten­tion to bitcoin was in 2013 when it didn’t really collapse after the Silk Road incident. After that was shut down and bitcoin continued to operate. Later on, I remember hearing from one of the inves­ti­ga­tors where she I think said something along the lines of, “Once I started learning about bitcoin, my initial intuition was all right, we should just shut this thing down. But then as I dug into it, I thought to myself no, we should use this to identify the drug dealers and to work with them.”

I’ve heard several stories of this both in person to talking to people as well as reading about them. Inter­est­ingly enough, that same inves­ti­gator ended up also working in bitcoin and holding bitcoin, and using it. Now, she works in some bitcoin compa­nies as well. So I think there’s this allure to hard money that I think you clearly obviously under­stand the value propo­si­tion of gold. And in a sense, if you under­stand gold and you see bitcoin as digital gold, it starts to make sense that people don’t want to ban gold. They want to get their hands on it.

So they if they’re banning it, they’re probably taking it away from you so that they would have it rather than banning it because they don’t want to touch it. Because it’s really scarce and if it’s banned, I’d rather have it banned while I possess it rather than take my chances and not own it because I can’t get it back again because of that scarcity.

I see what has happened, let’s just say, since we can go back a long time, but let’s just take recently what has happened 2020 with the the coron­avirus and the fed coming in and doing limit­less quanti­ta­tive easing, commit­ting to a trillion dollars a day and repo. Just taking their balance sheet from under four trillion up to seven trillion. Or war. Bitcoin would prevent them from going into war, which I’m all about. I think everyone would be in favor of that except for the people in politics that gain polit­ical power through going to war and doing all of these, what I would consider nefar­ious things.

But I think that it’s just… If we were to say, “Okay, listen. We want to use this bitcoin that takes away the power of the central bank to increase the money supply and it elimi­nates the warfare state, it elimi­nates the welfare state. I don’t think govern­ments are going to… Or at least the United States govern­ments and the devel­oped economies are going to jump on board with that. But what I do think is inter­esting, if we get to a point where if bitcoin rises in value that much, then my guess is there’s going to be a lot of skepti­cism at that time even more so than today with fiat curren­cies.

One thing that I’ve looked into just recently because of how hard it is to travel right now, and I don’t even want to go into the story of me trying to get from Medellin, Colombia just to St. Barts. I mean it was like a mission impos­sible movie with Tom Cruise. I mean it was just crazy having to get a human­i­tarian flight out of Medellin to Fort Lauderdale. Then in Fort Lauderdale, I couldn’t get a COVID test in time to get to St. Bart’s because every­where in the Caribbean right now, you have to have a negative test that had been taken within three days.

And in Florida, when I was there, the fastest you could get the results was five days. So effec­tively, you’ve got a Berlin wall around Florida right there if you’re trying to get even somewhere like Puerto Rico. So I had to fly from Fort Lauderdale to St. Thomas in the Virgin Islands just to get a COVID test. Get it in 24 hours or 48 hours. Then once I got the test done, then go to Puerto Rico then down to St. Barts on a semi charter flight.

I mean, it was insanity. But my point is I’m like, “Okay. I’m in the process right now of getting my Colom­bian passport to have dual citizen­ship, but I’ve looked into some of these Caribbean islands.” Now, the passports in these islands right now as an example St. Kitts, St. Lucia, the ones that you always hear about that are actually very good passports, they’re a fraction of the price of what they were prior to COVID because all of their revenues are decreasing so they have to lower their prices to compete with other countries that are selling these passports.

So fast forward or go back to what I was saying about bitcoin and the lack of confi­dence in fiat currency, maybe if we have a United States, Japan that takes those draconian measures, because they want to keep the warfare and the welfare state alive and well, and give the the federal reserve the power to create money supply or at least base money supply or M2. Who knows where it goes in the future? But maybe there’ll be other countries that say, “Hey, listen. What we’ll do is we’ll go and we’ll use bitcoin.

Puerto Rico right now with Act 20 and 22. I know a lot of bitcoin guys have gone there for that. So what Puerto Rico is doing, saying, “Hey, guys. Come here and spend your money. We’ll take bitcoin or we’ll lower your taxes. We’ll do whatever needs to be done to encourage you to come here and create jobs, create businesses, do these things.” So maybe if you’re a country that’s an emerging market and you’re saying, “Hey, how do we get out of our debt problem? How do we save our economy? I know what we’ll do. We’ll take bitcoin, guys. Come here. Bring all your money. Bring all your wealth. Bring your human capital. Bring your brain power, your experi­ence. Come here and create a tech industry, create businesses, create jobs. I think that’s where it could go.

Also too, if central banks, and you guys would know this a heck of a lot better than I would, but a few people that I’ve talked to recently that know the bitcoin space have kind of gone over this hypoth­esis when I was inter­viewing them about if central banks start bringing bitcoin on and using that as an asset on their balance sheet a little bit like they do with gold, so then if you had the central banks that were kind of giving it the green light although it might not become and replace their hallowed fiat currency, it becomes more adopted and then you kind of have that boiling of the frog effect, with bitcoin boiling the frog, being the politi­cians, the federal govern­ment and the central bank of that nation.

They just gradu­ally adopt it. So that kind of goes along with what you’re saying. But that’s kind of where I find the argument very inter­esting against what I brought up initially with the govern­ments just not wanting to lose power over the printing press and just saying, “You know what, bitcoin is illegal.”

Yeah, and I think… Go ahead, Brady.

I want to steer this into a certain direc­tion. Excuse me. So the irony that you were trying to point out, George was that govern­ment inter­ven­tions under the guise of trying to fix the problems, fix certain problems in society and the vast majority of them were caused by this singular inter­ven­tion that we all know as the govern­ment take over control of money. As you say, this is how Saif says bitcoiners have this meme and bitcoin fixes this. Saif, in your book, you write that human civiliza­tion flour­ished in times and places where sound money was widely adopted. Whereas unsound money all too frequently coincided with civiliza­tional decline and societal collapse. So question on the table now, how do you guys see the path toward a better society unfolding given that we transi­tion to a bitcoin based economy? And what lessons might we be able to draw from histor­ical transi­tions between global curren­cies? Saif, you want to start this one?

Sure. So gener­ally as a little disclaimer, my friends will probably let you know that I am the most optimisti­cally delusional person or delusion­ally optimistic person.

You must be a great entre­pre­neur.

It’s best reflected in my support of my football team where I’ve believed for every one of the last 30 years, the Liver­pool are going to win the league, and they never do. Of course, until this year they’ve won it. So now I guess-

Like being a Chicago Cubs fan.

Yeah, basically. So now perhaps my delusional optimism is not entirely misplaced since it did work out eventu­ally. I think in this situa­tion, I like to take the optimistic take that it’s not going to neces­sarily… Or bitcoin is what’s going to mean that the collapse of govern­ment money is going to be less painful and less problem­atic. I think this is the way that I would like to think of it. When hyper­in­fla­tion happens, the reason hyper­in­fla­tion is terrible is not just because people lose money, it’s not just because people lost their wealth.

It’s not just that every­body got an 80 or 90 or 99% haircut on their wealth, it’s the fact that businesses are no longer working. Shelves are empty and economic produc­tion breaks down. Farmers can’t grow food and then food can’t get to the shelves. And all that stuff breaks down because money is no longer usable, because there’s no longer a money in society. So that’s the real catastrophe of hyper­in­fla­tion much more than just the finan­cial losses that are attached to it.

Now, in the case of bitcoin, I’m slightly optimistic that perhaps what’s going to happen is that, because bitcoin is avail­able, as we witness more and more of these hyper­in­fla­tions around the world, more and more people will have access to bitcoin. More and more people will be able to hedge against their national curren­cies with bitcoin, hold a 5% position in bitcoin, 10% position in bitcoin, which could end up being 50% of your net worth after a couple of years of national currency infla­tion and a couple of years of bitcoin appre­ci­a­tion 50 or even 90.

So I think with this being there, it means that… And I don’t think bitcoin is yet at that point where the liquidity is large enough, but possibly in a few years, 10 years maybe let’s say when more hyper­in­fla­tionary cases like, say, Zimbabwe and Venezuela and Lebanon start happening, more and more people will have access to bitcoin and these things will start mattering less and less. The way that I see it is, and I discussed this in my forth­coming book, The Fiat Standard, bitcoin is the way that we eutha­nize and get rid of the fiat standard peace­fully and without too much blood­shed.

We don’t have to butcher it and risk it. Jumping and killing us while we’re butchering it. Nobody needs to be reliant upon it and as it starts to collapse, people can choose to opt out and use bitcoin. Bitcoin is better than gold in this regard because you can continue to use it inter­na­tion­ally whereas gold is much harder to use. So I’m going to go with the… I discuss all different scenarios in the book, maybe delusion­ally, but I’m optimistic that bitcoin ends up being more of an upgrade of the finan­cial software of the world rather than messy cataclysmic Roman empire collapse.

Well, I can tell you that if you can get some way to transact, it gets around the swift system that we have right now and around FATCA. The increase in global produc­tivity would be meaning­less. I mean we’re talking about something that I think would be very much like the airplane. Let me explain.

That’s a great metaphor, yeah.

An airplane would, let’s say, go from Phoenix to Las Vegas. Let’s just say we only had cars, right? So it takes you six hours. Well, that’s six hours of your time. Well, if it only takes you an hour to fly, then that’s five hours that you have saved that you could be producing goods and services. Well, times that by however many flights there are, how many hours we save as a result. I can tell you by doing so much business in South America and in Medellin that just getting my own money that it’s not someone else’s, I’m not going to loan. It’s my money from the United States just down to Colombia and then take the dollars and then buy the pesos, and put them in the bank, and go to the paper­work, and go to the reporting system and blah, blah, blah, blah, blah, blah.

Then you’ve got to pay the spread to the bank for doing the transfer. So think about how much money is flushed down the toilet right there and then how much time is wasted. I mean, we’re talking about billions if not trillions of dollars a year. This is completely wasted in economic output and produc­tivity as a result of having to deal with something so cumber­some as the current dollar fiat system we have. It’s not just about the global reserve currency, just these green pieces of paper, but people have to under­stand it’s about the infra­struc­ture.

So that’s why it’s so hard to go from, let’s say the dollar to the euro, or the yen, or the won, or something like that, it’s not neces­sarily it would be hard to change green pieces of paper for red pieces of paper.

No, but every­body’s locked into the infra­struc­ture and the KYC and all that.

The infra­struc­ture. But this infra­struc­ture is very cumber­some. So to your point, if we could get this seamless way to transfer money… I remember the first time I spoke with my buddy, Alex with Nuggets News, he made me… Right when I was talking to him on the phone. I don’t know if we were live or not, but he had me download this app on my wallet while I was talking to him. I think I still got it right here. It’s this Wallet of Satoshi. He told me to open it up like this and I put it right in front of the the camera there and he trans­ferred me like 2 or $3 in Satoshi’s just through the little webcam thing. I mean, to think about how hard that would have been if he would have tried to transfer me, let’s say 100,000 or something like that from Australia to where I was in Medellin, Colombia at the time.

I mean, this is a huge, huge advance­ment. It’s really a game changer as far as global produc­tivity. Also, what I wanted to say is you were talking about how the current system completely distorts the economy and it creates this… Well, let me back up here. So it distorts the economy, but I would go so far as to take it even a step further back. So what I mean by this is we were talking about infla­tion distorting the economy, but if you look at govern­ment debt, it distorts the economy as well and people say, “Well, yeah. But it’s when the debt gets to a certain level.” But what they don’t realize is it’s getting from A to B that really matters.

I think most people really don’t get that. So let me give you an example. Right now, the United States govern­ment is almost 50% of GDP. The govern­ment spending is over 50% of GDP. So that means that private sector economy or the produc­tive part of the economy is only 50%. Take that back before we had the federal reserve and it was over 90% of the govern­ment was the actual private sector that really produced the goods and services.

So now even if we could just elimi­nate all 26 trillion in debt, the problem is that our economy has been built around this govern­ment spending and these ineffi­cien­cies just like Venezuela using them as an example. You could solve all their debt problems or the dollar denom­i­nated

21-12-17One more ICO I used to be once hooked in to investing in was once HOQU. I had been trying to win an ICO review out once a day (there are such a wide amount of) and the polished web sites and whitepaper construct on this one drew my consideration. So right here it is, the longest review I possess achieved to this level nearly 50 minutes in length. Exercise designate to it in the event you are in mattress and are tormented by insomnia. Works whenever. HOQU is the first decentralized marketing platform that allows merchants and affiliates to possess interplay straight away without brokers and ensures resplendent rate per actions affords primarily primarily based on a smooth contracts.Fleshy disclosure, thats indeed my affiliate link. Every dinky bit helps!I used to be once no longer paid or backed to attain this video, right here is my enjoy realizing and as Im no longer a financial adviser, this video would possibly perhaps perchance perchance also mute no longer be taken as financial recommendation. Continually make investments at your enjoy possibility and never make investments extra than you would possibly perhaps perchance perchance perchance afford to lose.Donations are very noteworthy liked if you happen to admire my reveal and are trying to reinforce my channel.BTC: 1J4ifExyozP66KPMMZApMWQLrxHrs3hEDJLTC: LhHuLC1AJCZGGbc6cL9wnJmqgBQNxLRiyUETH: 0x00a7c5e2f95B0d79d8F5FddFCa85dBBd098b8A9dFor a 3% cut mark on Genesis Mining please exhaust my code 2J5yMr Hashflare cloud mining: Be aware me on Twitter @cryptonomatron Be aware me on InvestFeed: Be aware me on Steem bangkokheartsBe aware me on Facebook: [Music] [Music] welcome to the cripton Omicron and this present day were doing an ICO review of Haku now what is Haku they are the realms first decentralized affiliate platform and nicely Im no longer sure if theyre the realms first nonetheless they intend to be aware the block crew to web marketing now they seek that Haku is the first decentralized marketing platform that allows merchants and affiliates to possess interplay straight away without brokers and ensures resplendent rate per action affords primarily primarily based on a smooth contract machine so web marketing on the block crew attention-grabbing thought lets snatch an extra glance at it so to begin with lets appropriate glance on the web sites which is aesthetic spectacular its nicely designed they spent a form of time on it as you would possibly perhaps perchance perchance perchance seek and theyre taking a glance at potential market of over 200 billion US dollars 40% of that exists in the us and all the strategy during the different worldwide locations right here and they suspect about in the come future this can adopt the blockchain technology the recent mannequin as we can seek right here the financial mannequin thats currently extinct in online promoting is as follows we possess the merchants we then possess the banks and price programs Atika rate and we possess the CPA networks the selling agencies they additionally snatch a better chunk of the rate then extra Price goes for the selling platforms and products and companies for his or her diverse methods of the usage of the selling admire the banner ads the blogs social media marketplace emails etc and then on the very close of the tree tree there youve got the affiliates so if we scroll down we can seek the decentralized platform that Hoku intend to put into effect so with smooth contracts merchants can win in contact with affiliates straight away saving over 44 p.c of their promoting budget and as you would possibly perhaps perchance perchance perchance seek there theyll missions by the usage of a smooth contract the Prices between the merchants and affiliates are cut true down to half a p.c which is a unprecedented saving so we scroll down a dinky bit extra theres a comparison on the home web reveal with a centralized platform that most web marketing schemes exhaust for the time being versus the Hoku decentralized platform the centralized platform as we can seek it makes exhaust of a string of brokers that feel to manufacture transparency and fee each merchants and affiliates so I wager the issues that theyre trying to eradicate are better commissions excessive charges tough entry and unstable operations as a consequence of a centralized machine so of their solutions will be decrease charges free exhaust easy entry resplendent rivals and nameless modules and bearing in mind extra steadiness and uptime with the machine theyve a dinky comparison there with diverse blockchain applied sciences that possess long past to make a title for themselves including storage Civic Ripple 10x etcetera and they seek that they are the first gazing beast affiliate platform in the realm and to collapse the numbers for you and right here were the effectivity is 55% in the centralized mannequin with the Prices right here and 99.5% M environment excellent on the decentralized mannequin with easiest half a p.c of Prices in recount thats a saving of over eighty eight billion a twelve months they they mumble so the Hoku platform is the most optimum solution for all fervent for merchants for affiliates and for CPA networks and they seek that the theyve a minimal Viable Product thats what MVP stands for thats now accessible for closed discovering out so you would possibly perhaps perchance perchance perchance in level of truth exhaust it theyve a video you fade to the web sites you would possibly perhaps perchance perchance perchance search for it and they mumble the platform MVP demonstrates and work principles of merchants and affiliates by approach to CPA community for 2 forms of unpolluted contracts P for a target you name and a P for a lead so that theyve got our MVP minimal treasured product in recount thats honest we clutch to glance that we dont admire em I seals which will be launched on a white papers easiest and then theres a couple of educated opinions right here from other of us had been serious about blockchain etc theres the roadmap and well snatch a glance at that in reasonably and theyve the affiliate crew so of us had been affiliating this and trying to win unfold the be aware of this I seek you already theres some suggestions there they are partnered with block lancer aetherium community da ABC and f is d and their advisors of roar Ralph Louie whos an funding banker dr. mo Levin whos a CEO of keynote if you happen tove heard of them they are worldwide technology conference Kenneth Goodwin there I extinct to work for the US Federal Reserve attention-grabbing and Alec Schifrin whos an x ee or Saatchi and Saatchi they extinct to be one and likely mute are one in all the mammoth mammoth advertisers Mike Coppola their mature vp at contact Tunes M Boris Levitt a lever Denko and hes the honest adviser so there we fade now they seem to possess locations of work in London where their essential locations of work Contemporary York Moscow and opening soon in Los Angeles so very attention-grabbing and they seem to be on loads of social media channels which we admire they seem to be building a honest crew theyve over 3200 followers on telegram I at all times admire expose ed to exhaust telegram as a honest indicator of where initiatives are so a long way as crew strengthen is worried and something else over 3000 theres on the whole pretty a honest dwelling and there they are theyve had their I attach a media covered coverage in them on the accept and in diverse publications we can seek there so very attention-grabbing so who are Hokus rivals there are a couple of in the blockchain attach nonetheless first Id clutch to be in contact about these which will be centralized programs and they seem to dominate the market for the time being there are programs admire tap philia and others which will be already nicely established so that theyve already got their work cut out to win one of the market shear off these established firms there are a couple of on the blockchain theres this one I discovered this AFF talking that desires to manufacture I seek all initiatives with their non-public merchants through a web based marketing device theres this one known as DZ corn which is a web marketing and appears to possess something to attain with the blockchain although I havent had time to envision this one fully there is rath Tolkien which additionally claims to be the realms first decentralized affiliate platform so theres loads of of these firms which will be claiming to be the realms first which one is Im no longer entirely sure and then there is this one reasonably Kumal which says they are the funnily adequate the first decentralized platform and the CPA market community primarily primarily based on blockchain technology to exhaust smooth contract algorithms so a form of firms available a trying and telling of us theyre going to be the first on this converse self-discipline next Id clutch to be in contact relating to the problems they intend to resolve for this Ill exhaust the white paper the white paper as you would possibly perhaps perchance perchance perchance seek is terribly very impressive nicely supplied and I enjoyed discovering out it and appropriate as an aside I used to be once gazing a youtube video the day earlier than this present day where a gentleman acknowledged that he doesnt learn the white papers and I judge thats fully ridiculous you would possibly perhaps even possess to learn the white paper ahead of you make investments in any mission having a main plan in fact having a whole plan of a mission youre investing in is at all times going to be your most efficient wager dont depend on hype easiest dont depend on other factors learn the white paper so you would possibly perhaps perchance perchance perchance make a transparent and told dedication anyway serve to the problems they intend to resolve so right here were right here they mumble the industry issues are as follows a controversy of false schemes deepest identification issues making sure the effects the relate of security and steadiness rate issues the relate of conflicts and functionality and ease of exhaust so lets fade and possess a swiftly glance so these seek that frauds are relate so why is that allows seek nicely they seek on the percentage of affiliates in the case of advertisers in the space of e-commerce affiliates can remark over with web sites themselves with police orders so theres a form of playing round they exhaust grey or dubious schemes to originate customers records em and when making funds in-home personnel can meet calls and in my realizing and customers on the percentage of the affiliate networks themselves and suing advertisers an exaggerated quantity of leads discretely debit advertisers accounts as nicely so a form of issues going on in web marketing which will be perchance no longer in avenue down the motorway so theres additionally this element known as sieve which is informing em an affiliate that an command has no longer being delivered in most cases admire skimming if you happen to admire it ignoring customers calls contacting them straight away etc that form of element so there are pretty reasonably of fraud linked in anecdotes theyre exhibiting how noteworthy that it in level of truth charges the industry in recount thats a mammoth mammoth relate so fraud is one relate they intend to resolve one other one it was once the deepest identification issues so mature promoting products and companies attain no longer entirely resolve the relate of distant identification of individuals and that additionally contributes and what we spoke about appropriate they are the the sheave as they name it and fraud so that theyre going to make the most of of the Civic blockchain which you would possibly perhaps perchance even possess heard of and thats going to be constructed-in to efficiently title the whole users as a consequence of this truth taking out any deepest identification issues one in all the different problems that they intend to resolve is making sure results so the they seek when ordering adverts by approach to ads from mature promoting exchanges advertisers invent no longer possess any guarantee that their funding will fabricate the desired consequence true thats aesthetic easy so that they seek that there are algorithms that possess improved this nonetheless they attain no longer give advertisers any guarantees so that they hope to put into effect a extra environment excellent machine theres additionally a controversy about security instability centralized networks open to hacking then this rate issues and as we discussed in the opening sprint there is pretty a shipshape rate to win fervent with us in these programs as you would possibly perhaps perchance perchance perchance seek right here there are three they title there are rivals and a centralized platform Hass affords a feast and cake and theyre all the strategy through a couple of hundred dollars to in level of truth win fervent with so that they intend to replace that theyre going to possess free win admission to for his or her blockchain platform exhaust theres one other relate of conflicts and they mumble that customers on CPN works possess to trust them without being in a draw to audit the effects and clearly this on the whole results in diverse conflicts who through its tracking mechanism and smooth contracts ensures that every particular person prerequisites of a buyers provide are transparent them in recount that will guarantee transparency honesty and the block crew clearly contributes in direction of that one other relate is functionality and ease of exhaust reward platforms provide easiest products and companies to users who ku will work with all that you would possibly perhaps perchance perchance perchance accept as true with forms of buyer action and likewise to products and companies provide loads of alternative forms of collaboration with open machine API for integration and SDKs for developers as nicely and therell be a web app mobile app and they mumble there is its worth noting that there isnt very one of these thing as a convenient mechanism for dealing with shipshape portions of records from advertisers when working with extra than one CPA networks as a consequence advertisers possess a relate evaluating the effectiveness of marketing campaigns and clearly with the whole ku machine that will now no longer be a controversy and because it says they are the whole ku platform stores date on the blockchain and that capability that you can glance the whole records on the chain itself so their objectives then vivid the problems that they are searching to resolve is to manufacture a decentralized ecosystem which is ready to be extinct to construct CPA web marketing products and companies starting from affiliate programs to affiliate networks and linked products Hoku will integrate advertisers networks and affiliates into a single platform a good deal lowering the financial charges for all market contributors the missions mission is to make the distribution of rewards and the accept affiliate market extra equitable and to dwelling contemporary requirements of transparency and effectivity to serve all conscientious market contributors their aim is to manufacture advertisers affiliates and affiliate networks the contemporary provider so the accept marketing becomes easy for its contributors thus making a decentralized ecosystem where market contributors can openly have interaction pretty straightforward very sure and extremely easy marketing so lets glance on the likely market for his or her product now they mumble that the realm market for web promoting grew by 15 to 22 p.c once a year from twenty thousand and ten to twenty thousand 16 the fragment of television promoting charges has historically been better than that of Web promoting in 2017 the fragment of web promoting has exceeded the fragment of TV promoting for the first time in recount thats attention-grabbing and the scope of web promoting continues to grow I judge thats with an rising pattern of of us nice looking away from the mature family utilizing the television dwelling to their very enjoy deepest instrument and that were seeing now in the 21st century so the M seek that the fragment of web promoting next twelve months 2018 will exceed 50% of the total promoting market in eight worldwide locations Australia UK Denmark China and Netherlands Contemporary Zealand Norway and Sweden and by and by 2021 the worldwide fragment of web promoting will amplify from 36 to 50 p.c I would possess I would have a tendency to agree with that from what dinky I know relating to the selling industry it sounds as if that pattern is a ideally safe element to practice so in step with eMarketer the market quantity for the accept promoting will quantity to 335 billion dollars by the twelve months 2020 so USA appears to be like to be the most attention-grabbing quantity there with China following surprisingly UK in third dwelling Japan and Germany following up so a form of market a form of cash fervent and thats continuing to grow all the strategy during the next two or three years and theres something efficiency marketing which it says a lovely contemporary phenomenon and the accept promoting market has been the increasing recognition of efficiency marketing and in Russia the first half of 2016 the market for efficiency promoting and amounted to fifty level two billion roubles which is 30% of the total a market all the strategy through that interval 2nd easiest to television and its increasing in the UK as nicely and that appears attention-grabbing it is attributable to the rising rate of attracting users so advertisers easiest are trying to pay for his or her focused customers that they win its a dinky level in promoting to all individuals akin to youre doing the television if easiest 5 p.c or 10 p.c or in in level of truth attracted to your product and web marketing then in step with estimates meet by the a when marketing company the total world market on this industry is thirteen level two billion dollars and and affiliate programs generate between 15% and 30% of all online sales for advertisers so its very attention-grabbing a mammoth market in the u.s. a five level four billion dollars a UK 2.1 billion dollars so multi multi-billion greenback market thats continuing to grow in the long run lets now glance on the blockchain and the ecosystem that they suggest to put into effect for the Hoku affiliate device so lets seek right here on the white paper on the head theres a tremendous graphic exhibiting how this can aim theoretically work you would possibly perhaps even possess the whole Koo ecosystem in the essential right here with the blockchain being extinct you would possibly perhaps even possess apis which is ready to generate leads from a domains mobile phone traces and other advertisers theyll possess affiliates which is ready to make a contribution to leads and they are going to receives a rate with the hqx token through smooth contract as will the merchants and therell be an appeal counter right here and an affiliate community where other leads are generated as nicely in recount thats a truly regular mannequin of it the whole queue platform affords a wide series of alternatives no longer easiest to advertisers and affiliates nonetheless additionally to affiliate networks so its key tering for all individuals and to operation modes are that you would possibly perhaps perchance perchance perchance accept as true with explain interplay between advertisers and affiliates and collaboration between advertisers and affiliates through interplay with affiliate networks so something else goes to be that you would possibly perhaps perchance perchance perchance accept as true with through this ecosystem therell be four key gamers the merchant the affiliate the affiliate community or partner community and the customer the advertiser hosts affords on the whole queue machine in a converse extra or much less records so that they in most cases requested for no topic leads the they require and what theyre prepared to pay as much as a specified rate an affiliate trying to promote and advertisers provide independently deploys and maintains a marketing community by attracting customers and through marketing resources no topic theyre doing whether or no longer thats a domains ads will be a pulsar on a lamppost open air to illustrate the affiliate generates the float of weeds are serene and processed by tracking products and companies for a converse provide the tracking provider creates the lead records and provides key records about it to the platform if the advertiser approves the lead and then theyre going to fee the rate of the consequence in the legend and it goes to the affiliate the rate for the platform which was once half a p.c I judge we discussed so by endorsing the lead the advertiser gains win admission to to the plan and can originate Fuli records the Hoku platform performs or affords the different of working no longer easiest with the advertisers and affiliates nonetheless additionally with the networks as we mentioned and the affiliate community can police all its affords and leads on the platform and any affiliate already working with platform will be in a draw to glance and work with the affords of the community so as to gain to register which is pretty easy and theres the as the vogue it in fact works in most cases youve got the actual individual that registers the will get verified after all the usage of the Civic machine as I mentioned earlier in recount that all individuals can even be in my realizing identified and then theyve got their aetherium take care of where theyll receive the ERC twenty hqx token and and theres the merchants and the filly on the head so very easy and then weve got the platform objects right here so decentralized web apps will be designed to work with the platform and would possibly perhaps perchance perchance also additionally be accessed through Hoku comm as nicely as a sdk for custom solution developers so the purposes will encompass an advertisers app and affiliates app and affiliate community administrator app and an app for the appeal or audit provider operator if theres any issues as nicely its plenty about working prerequisites there so now we in most cases know how the blockchain goes to operate lets glance on the technical facets of the platform so that they are going to be maintained through an aetherium blockchain solution as we acknowledged already em and the fundamental share a platform functionality is utilized through smooth contracts and the source code is available on github so you would possibly perhaps perchance perchance perchance in level of truth fade glance at that and the whole coop platform can possess a dwelling of decentralized apps and well glance at them very quick with the serve of which you would possibly perhaps perchance perchance perchance add affords and leads manufacture custom affiliate networks and and with the whole benefits supplied by the platform theyre going to additionally possess many pre-installed modules as nicely as a characteristic enabling the advent of custom modules or plugins so lets quick glance on the apps that had been discussed ahead of we possess the merchant app on the head there which is ready to in most cases allow the merchants to possess interplay seek the whole statistics seek the affiliate seek the balance glance on the leads youve got profile etc the affiliate is terribly linked on the bottom and theyll glance all their records too and right here is the vogue theyre going to manufacture an affiliate program so within an advertisers decentralized web app the advertiser has the different to manufacture their very enjoy affiliate program which theyll register affords on the machine by surroundings the guidelines for and the quantity of the rewards as nicely and roughly thats in most cases how its going to work you would possibly perhaps even possess the provide there in the middle and the merchant will a MeetMe provide itll fade in the blockchain and likewise youll possess the affiliate the database and the affiliate community and merchants as nicely contributing to it so the rewards are sure in the hqx token and a reward can possess either a collection aside worth or calculated as a percentage of the worth of an swish lead and its additionally additionally this can additionally be that you would possibly perhaps perchance perchance perchance accept as true with and I judge right here is severe to roar that and its that you would possibly perhaps perchance perchance perchance accept as true with to fix the rate of any consequence in the fiat forex if this is the case need and that will appropriate clearly replicate the alternate rate between the XQ hqx talking on the time so that theyre going to additionally possess a decentralized web app for affiliate Network administrators as we mentioned ahead of and they dont easiest appropriate cater for a single affiliates or merchants they can even possess an affiliate community portal in recount that an affiliate community administrators can fade in and seek the whole records so that theyll possess tools as nicely because it reveals on the infographic on the head there and they are going to put into effect whats known as every um which is kuku particular person management thats a machine for managing the administrators of an affiliate community we can characteristic for creating diverse roles etc the anti-fraud machine that will title false leads the usage of extra than 50 diverse metrics and machine learning and automation tools that will encompass tools for creating templates for promo materials and tools for increasing an working device for affiliate programs the usage of converse algorithms and allowing an amplify in the most important efficiency indicators or KPIs and they are going to additionally possess affiliate management machine permits affiliate contributors of the community to be half of diverse groups and set aside them diverse ranks and impact the reputations theyll possess plugins vogue so you would possibly perhaps perchance perchance perchance exhaust it for a customization statistic stories devoted mobile phone numbers and therell be strengthen from affiliates and advertisers that entails a ticketing machine as nicely in recount that appears very attention-grabbing very whole and the tech appears to be like pretty nicely thought out and nicely supplied so whats going to the tokens be extinct for nicely you would possibly perhaps perchance exhaust them for price for the affiliate community products and companies by advertisers you would possibly perhaps perchance perchance perchance additionally exhaust them for funds from affiliate networks you would possibly perhaps perchance perchance perchance exhaust them for funds from advertisers director affiliates and after all the hqx token can even be exchanged on exchanges akin to ether Delta bit recs etc onto the token seal now and the tokens are going to be the ERC twenty normal on the etherion blockchain the total quantity of issued tokens will be nearly three hundred and a million the ticker is hqx and no contemporary tokens can even be issued after the sale is total tokens are asserting to the crew will be frozen for six months with a unhurried defrosting of 10% per quarter of the typical quantity so even after six months theyllt dump all of their tokens on the exchanges now the general parameters as I acknowledged the total was once appropriate beneath 301 bill a million sorry the total quantity to be sold all the strategy during the token sale ICO and presale is a hundred and ninety five million five hundred and fifty five thousand three hundred and sixty M of that appropriate over twenty three million has sold at a non-public sale thirty four level six million had been sold all the strategy through a presale and a hundred and thirty seven level seven million will be disbursed in salt all the strategy during the mainsail theyve a tough cap of appropriate beneath fifty million dollars and the accept the thought bitcoin and litecoin all the strategy during the ICO so the pre-sale has already took dwelling that took dwelling from the 13th of November to the 20th of November this twelve months and so there was once a forty p.c bonus over the worth of the mainsail the mainsail is currently ongoing its a prolonged mean sale it started on the 27th of November and can proceed to 26 of February and as I mentioned ahead of the total quantity on the mainsail will be 137 level seven and million hqx the harsh cap on the mainsail on my own is 12.25 million dollars and the worth on the mainsail is one hqx will equal zero level zero zero zero two etherium or one a theorem five thousand hqx the minimal quantity to grab is 0.01 aetherium nonetheless the most is limitless there are bonuses all the strategy during the mainsail interval currently theres a 20% bonus ongoing nonetheless as you would possibly perhaps perchance perchance perchance seek em as extra are sold then the bonus will decrease so I judge every 10 p.c the bonus decreases if my swiftly maths are appropriate there and taking a glance on the token distribution 30 p.c will fade to founders 1 p.c will fade to the ecosystem strengthen 4 p.c goes to advertisers bounty and marketing and 65 p.c will be sold all the strategy during the crew sale so we can predict about 197 million to hit the exchanges which is an inexpensive quantity its no longer too dinky its no longer too noteworthy either so Im hoping to grab half and likewise you would possibly perhaps perchance perchance perchance fade to the web sites and register on the waitlist youll need clearly a our C 20 admire minded pockets admire my ether pockets mate a conceal etc and vital to roar that every particular person unsold tokens will burn if theyre they dont attain their tough cap which is honest and then as soon as you settle them youre talking would possibly perhaps perchance perchance also mute be considered on the actual person web reveal on the head of the sale nonetheless then a couple of days the hqx tokens will be disbursed to the wallets there is a bounty campaign 2% of the total relate of tokens will be disbursed to the bounty campaign in a quantity appropriate over six million hqx theyre going to distribute it they are going to be disbursed as follows 39% two signature and Avatar campaigns 26 p.c on reveal advent fifteen p.c on translation and moderation and 20 p.c on social media therell be a dinky bonus if their KPIs are key a key efficiency indicators are reached and social media will encompass the whole and the essential ones as you would possibly perhaps perchance perchance perchance seek there there additionally as an affiliate program a my affiliate link is beneath sorry about that nonetheless if these I seek youll bustle them I will attach my affiliate link on the video of this I seek you pursuits you please exhaust it and strengthen me and they are going to exhaust a efficiency marketing mannequin for the reason that starting attach of the mode the mission theyve acknowledged and they are going to provide at 0.5% of the total quantity of tokens which is ready to quantity appropriate 1.5 million hqx and they are going to be disbursed amongst the affiliates in step with their invested portions and the affiliate program will be launched from the starting attach of the pre-sale and can bustle except the head of the mean sales so theres pretty a truly prolonged time so if you happen to grab share of that you would possibly perhaps perchance stand to serve lets now glance on the avenue draw so vogue of the CPL smooth contract prototype and decentralize affiliate software begun in November of this twelve months in January next twelve months theyre going to deploy their smooth contracts for the whole price kinds CPA Cpl etc trackers by price kind will be accessible in February 2018 by March 2018 theyre going to liberate the decentralize affiliate and advertiser purposes the decentralized affiliate community software will be accessible two months later in Might well perchance additionally 2018 by September 2018 theyre going to open the realm first decentralized affiliate community on the Hoku platform in october of the an analogous twelve months theyre going to liberate the appeal heart operator an administrator decentralized software february 2019 the decentralized platform mobile app and in March 2019 the developer toolkit the SDK will be released taking a glance on the crew now it appears that theyve been serious relating to the accept marketing self-discipline for the reason that early 2000s so that they claim the dwelling up a promo web reveal moved are you for exact estate and in 2015 they dwelling up an affiliate Network for Cortland known as market Cole which apparently works the usage of the efficiency marketing mannequin which we discussed earlier where an advertiser pays easiest for the effects of focused calls from the customers so that they become leaders in the market they mumble right here is the Hoku CEO Alexei Smirnov and he is an entrepreneur and online promoting educated he is one in all the founders of market name and moved on are you Ralph lui is one in all the advisers hes an funding banker it says and a project investor in the self-discipline of blockchain and he has a truly swish bowtie he apparently was once founder and managing director of developed possibility management solutions mature vice-president UBS MD of JP Morgan Glide and Morgan Stanley an govt vp and funding director of China ever destroy bank and impressive CV I would snatch into legend hes an all-star his LinkedIn hyperlinks are there theyre all on the white paper if you happen to comprehend to possess to head and remark over with them it makes it tremendous and simple you would possibly perhaps perchance perchance perchance fade on him compare them on LinkedIn who did you elect then theres this Maxim Anna Keith and he has found many firms as we can seek open diverse initiatives it now operates 55 initiatives again one other swish bowtie I wear a bowtie myself by the vogue Im no longer Im no longer slagging them off on the whole easiest for murky-tie times nonetheless you never know and dr. Moore Levin hes one in all the advisors hes the CEO of keynote as we can seek there and hes been serious about many other Ram online activities akin to Dropbox lab contemporary etc and Alex schefren was once the different one I desired to reward right here and he has been regional CEO at Saatchi and Saatchi and promoting company of some repute in command we can seek the crew had been pretty competent and advisory ability very very a legit indeed undoubtedly a couple of MVPs in amongst Tom and its pretty huge we fade down the much less theyve programmers on board plump stack programmers working on their blockchain tech smooth contract developers working on the blockchain lets glance quick on the partners they easiest possess four listed on the web sites block lancer aetherium dai b c and f is di couldnt safe any records on f is d nonetheless block lancer is a freelance blockchain an organization i seek all begins in january next month so be attention-grabbing to glance how theyre fervent with Hoku additionally the dai bc is some carry out of asian a blockchain conference where Hoku are a sponsor and as i acknowledged i couldnt safe any records about FIS d and aetherium theyre partnered with the thought as theyre the usage of the etherium community or blockchain for his or her mission so lets snatch a glance on the crew as you would possibly perhaps perchance perchance perchance seek theyve covered almost every shameful on social media theyre active on YouTube reddit telegram Instagram WeChat Twitter a Bitcoin remark medium Facebook github yoku yuku which ive never heard of steam it and we boo ye boo yeah lets snatch a couple at random right here lets glance at telegram there theyve an English and a Chinese language one and theyve three thousand 2 hundred eighty three contributors I clutch to exhaust telegram as a gauge to glance what number of individuals are in level of truth attracted to this converse mission so a a dinky assistance to gauge in direction of how noteworthy hype is fervent so over three thousand as I honest mumble the Chinese language model is easiest 135 contributors and lets possess a glance at Twitter and theyve a respectable following 4,500 followers and theyre pretty active on the whole social media as nicely a Facebook theyre active and theyre active on medium which is a weblog web sites if you happen tore no longer familiar which I clutch to glance I clutch to glance updates typically task offers us some a mark of the seriousness and professionalism of the crew in the serve of this mission so we wont fade into to any extent further of the crew web sites nonetheless attention-grabbing and and pretty nicely supported in social media and finally for my verdict so what are the positives I took from this I seek you nicely to begin with theyve a working MVP or minimal Viable Product that you would possibly perhaps perchance perchance perchance win admission to and likewise you would possibly perhaps perchance perchance perchance exhaust in recount that its vital to me that were no longer appropriate working as a white paper I seek oh I dont admire these Ive spoken ahead of many over and over one in all my criteria for investing in an ICO is that they even possess something functioning ideally extra than a prototype nonetheless a minimal a prototype and theyve this theyve a Minimal Viable Product which leads me to accept as true with that theyre involving about enforcing and no longer appropriate trying to attain a money recall or a earnings-raising exercise the 2nd element that I know is about this mission is it is terribly nicely supplied nearly impeccably the topic topic in the the web sites for starters is unbelievable as you would possibly perhaps perchance perchance perchance seek from the review right here fully gorgeous the white paper is equally as nicely supplied it has the whole records that you need as an investor to clutch what youre entering so unbelievable fantastically achieved I judge theyve a stable crew and I judge theyve a stable advisory body as nicely theyve been serious about marketing already nonetheless they are in the whole respective fields they seem very competent weve got guys from JPMorgan Glide and they are other marketing firms admire Saatchi and Saatchi its a its a stable crew for what theyre trying to carry out quantity four I judge its an inexpensive token mark for the quantity of offer now what I mean by thats if they had been asking a greenback per token all the strategy during the ico that would possibly perhaps perchance perchance be too costly now that the scope for making a return on your funding would possibly perhaps perchance perchance be restricted if this is the case provided that this overall offer goes to be in 301 million tokens we possess to grab into legend the room for roar given the whole market cap carry out of seek to illustrate youre on your token would possibly perhaps perchance perchance be a mark 10 cents thats going to make it a 30 million greenback market cap which is a resplendent dimension nonetheless no longer very mammoth and it mute got pretty reasonably of room for roar so provided that the tokens are going to be between I would mumble with the worth of a thought Im for the time being between carry out of 13 to 20 cents thats an inexpensive token mark given the provision that will give a market cap beneath 50 million and there is pretty reasonably of room for roar quantity five the market is stable if theyll penetrate the market now what I mean by right here is if theyll win in and produce on their guarantees then the market is stable there is a form of cash accessible theres a theyll theyll undoubtedly win a fragment of the pie quantity six what I love right heres a lovely discontinuance to implementation that its no longer going to be too prolonged ahead of theyve got something up and working extra than appropriate the minimal treasured product theyll possess something concrete theyll in level of truth starting up to a monetize or starting up to originate to exhaust quantity seven theyve an inexpensive nonetheless no longer overwhelming strengthen in the crew quantity eight theyll possess a token burn so if they dont meet their their dreams or their tough cap and if one of the tokens remain unsold theyre going to expire and they are going to be burned what he additionally loved was once theyve a crew remark and lock up and a defrost afterwards now on the whole having a token lockup is most I seek us attain it nonetheless what I loved was once the token lockup for six months and then the unhurried defrost of ten p.c over every quarter it was once worth I mention right here because it takes longer for the tokens to come serve onto the market so theres no flooding the different element and that relates to the competency of the crew is that theyve already got abilities in marketing which I judge for these extra or much less initiatives is terribly vital know as frequent there are some negatives no longer many with this I seek you nonetheless my #1 detrimental is that rivals is stiff and it is already established now no longer on the block crew let me clarify true right here that there are a couple of rivals trying to attain precisely the an analogous element as Hoku right here and nonetheless a the rivals that we possess already got the centralized rivals is terribly stiff and as a competitive market marketing is something that there are a form of firms serious about and there are a form of established firms available already the quantity two element that I understand it as a detrimental was once that the problems they intend to resolve our industry in fact exhaust easiest now theyre no longer going to replace the realm with this this blockchain technology and block teen technology as a whole would possibly perhaps perchance perchance also switch the realm nonetheless this converse ecosystem is easiest going to replace the industry theyre serious about so the scope fora is pretty narrow and it undoubtedly me nicely switch the industry ahead of the easier and and and and make a make a deaf definitive designate on it nonetheless it wider than that it doesnt it doesnt be aware quantity three and its no longer exactly their fault nonetheless the worth of aetherium is excessive for the time being after I checked it was once eight hundred and forty dollars this morning so its going to rate you additional to win into this IC o- if you happen to comprehend to possess to use money its going to rate you additional settle tokens and thats no longer going to serve and quantity four and the closing detrimental that I current on this IC or was once the inability of a solid partnership they dont possess any backing rather then rather then aetherium the blockchain that theyre going to exhaust and one other I seek all thats going on next next month so that they in level of truth would possibly perhaps perchance perchance also attain with a solid solid partnership I realized even the aim the the co-founders previous firms werent listed on the as partners which I safe unfamiliar they would possibly perhaps perchance also in fact attain with having a couple of mammoth hairs em available backing for them so all that taking into legend what attain I judge of this I seek you overall nicely I judge its a honest solid mission its the strongest marketing I seek or Ive considered to this level in my realizing and Im going to provide it three-and-a-half stars out of five now the cause I possess given them three a 3 and a half out of five is because I dont accept as true with that the you understand its no longer going to be in innovative I seek all this one a innovative blockchain as I mentioned em and additionally and there are a couple of alternative dinky issues that I understand it that would possibly perhaps perchance perchance also inhibit the the growth of this company its gonna be you understand its honest were gonna possess to wait on except theyre in level of truth fully utilized to glance how unparalleled theyre going to be I mumble from my minor issues I love this ICO and Im pondering investing I havent already and I will let you know guys if I attain and I I judge its a honest mission I judge theres sure potential with this one in command I seek Im going to grab into legend investing in it nicely Im hoping you enjoyed that prolonged review its taken me some time to attain it this morning as Iver if you happen to did win pleasure from it please admire please subscribe to the channel every dinky bit helps guys and as ever I possess to position my disclaimer Im NOT a financial marketing consultant and right here is never any longer financial recommendation right here is appropriate me giving my realizing on the Hoku I seek you all and if you happen tore going to make investments in something else attain your enjoy due diligence attain your enjoy study and easiest make investments what you would possibly perhaps perchance perchance perchance afford to lose please dont be going mortgaging your non-public home to grab bitcoins guys yeah its no longer whats all about nonetheless make investments wisely and likewise you would possibly perhaps perchance perchance perchance meet some reasonable returns um okay thats it Im about achieved so again thanks for gazing and Ill settle you later with one other vid [Music] [Music]

Proposed Rules on Initial Coin Offerings (ICO) in the Philippines By: pnl | April 3, 2019 in Corporate and Investments Leave a reply | Related posts at the bottom of article [The Securities and Exchange Commission (SEC) issued a notice, requesting for comments on the updated Proposed Rules on Initial Coin Offering (ICO). According to the SEC, ICOs will help raise capital and resources for small and local businesses start-ups or ventures, and provide alternative investment opportunity for the investing public. While the deadline for submission of comments has passed, we are reproducing the full text of the Proposed Rules on Initial Coin Offering for future reference.] Section 1. Applicability and Coverage. These Rules shall be known as the “Rules and Regulations Governing Initial Coin Offerings (ICOs)”.  These Rules shall primarily govern the conduct of ICOs wherein convertible security tokens are issued by start-ups and/or registered corporation organized in the Philippines, and start-ups and/or corporations conducting ICOs targeting Filipinos, through online platforms. Initial coin offerings conducted through other means or media other than online electronic platform is not within the coverage of these Rules; hence, the usual requirements under the SRC shall apply. Section 2. Definition of Terms. For purpose of these Rule, the following definition of terms shall apply, unless the context otherwise requires: 2015 SRC Rules – refers to the 2015 Implementing Rules and Regulations of the Securities Regulator Code. B.        Advisors – are persons who act as mentors to the Issuer, and announced as such by the issuer through distributed documents, websites and other media, that provide assistance and advice to the Issuer from time to time or as needed or required by the agreement.  C.        Asset Tokens – are tokens that represent assets such as a debt or equity claim on the issuer. D.        Blockchain –is a decentralized, distributed ledger that records transactions in a particular token or tokens, in chronological order.  E.        Coin – is a unit of value employed as a means of exchange within the blockchain to incentivize the network of participants to use the blockchain. It has functions limited to exchange of value.             For purposes of these Rules, the terms “coins” shall not include legal tender, unless the context otherwise provides.  F.         Commission – refers to the Securities and Exchange Commission. G.        Convertible and/or open virtual currency –is a virtual currency that has an equivalent value in real currency and can be exchanged back-and-forth for real currency.  H.        Crowd sale/ Token Generation Event – is the main token sale of the ICO. It is more widely promoted and advertised than presale. Evidence of financial capabilities – evidence of funds to conduct his proposed business which may include but not limited to a document from a bank which attests that the applicant has sufficient funds,  J.        Fiat Currency – is the coin and paper money of a country that is designated as its legal tender circulates and is customarily used and accepted as a medium of exchange in the issuing country.  K.        Hard cap – refers to the maximum amount of capital that the ICO project aims to gather.  L.         Initial Coin offerings (ICO)/ Token sale – are distributed technology fundraising operations involving the issuance of tokens in return for cash, other cryptocurrencies or other assets.  They involve coins (or “tokens”) being issued in order to raise money from the general public. Once the project reaches a certain stage, benefits to tokenholders may include, but is not limited to, any of the following: Gains through profits or increase in the value of tokens which can be sold if the project is successful; For purposes of these rules, initial coin offering shall include follow-on offerings or issuance of tokens, the previous issuance of which have been registered in accordance with these Rules. M.        Investor – is person that puts money into financial schemes, property etc. with the expectation of achieving a profit.  N         Issuer – is the originator, maker, obligor, or creator of the token. O.        Lock up-period – is a window of time when investors and/or issuer, team members and advisors are not allowed to redeem, trade or sell their tokens. P.        Non-convertible and/or closed virtual currency – is a virtual currency intended to be specific to a particular virtual domain or world, and cannot be exchanged for fiat currency. Q.        Payment Tokens – are tokens which are intended to be used, nor or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer.  R.        Pre-Sale-a token sale conducted before main crowd sale, as set by the issuers. S.        Private Sale / Institutional Round – is a sale of tokens to early investors that is not open to the public or not announced.  T.         Prospectus – is the document made by or on behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through registration statement filed with the Commission. U.        Soft cap – refers to the minimal amount of funds needed and aimed by the project to proceed as planned.  V.        SRC – is the Securities Regulation Code under Republic Act No. 8799.  W.       Securities – are shares, participation or interest in a corporation or in a commercial enterprise or profit making venture evidenced by a certificate, contract, instruments, whether written or electronic in character, It includes: (a) Shares of Stock, bonds, debentures, notes evidence of indebtedness, asset-backed securities (b) Investment contracts, certificates of interest or participation in profit sharing agreement, certificates of deposit for future subscription; (c) Fractional undivided interests in oil, gas or other mineral rights; (d) Derivatives like options and warrants ; (e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments; (f) Proprietary or nonproprietary membership certificates in corporations; and (g) Other instruments as may in the future be determined by the Commission, as defined under Section 3 of the Securities Regulation Code (SRC). X.        Security Tokens – are payment, utility and/or asset tokens that satisfy the definition of securities under the SRC, its implementing rules and regulations, and other issuance of the SEC. Y.        Smarty Contract – is a contract written in programming code that is able to execute itself given certain specified conditions. Z.         Start-up – refers to a venture or project which is at initial phase of business. AA.      Team – refers to the board, chief executive, controller, and any  other persons who are primarily responsible for the operations of the issuer and/or the developers of the ICO project. BB.      Tokens – refers to a virtual currency that vests certain rights, including a digital representation of value that—  is used as a medium of exchange, unknit of account or store of value; is intended to represent assets such as debt or equity in the promoter; is otherwise intended to represent any assets or rights associated with such assets; or is intended to provide access to an application or service or product; a transaction in which a person grants value as part of an affinity or rewards program, which value cannot be taken or exchanged with the person for legal tender, bank credit or any digital or cryptoasset; or a digital representation of value issued by or on behalf of the publisher and used within an online game or game platform sold by the same publisher or offered on the same game platform. Utility Tokens – are digital instruments that grant their bearer access to a decentralized platform or service. Virtual Currency – refers to a financial value recorded by electronic means on electronic devices; which may be used to pay the price of goods purchased or borrowed or services received and which may be purchased from and/or sold; or which may be exchanged reciprocally, with person(s), with any financial value as defined (a) above,                         either of which may be transferred via electronic data processing system.                           For purposes of these rules, virtual currency shall not include fiat currency and electronic money         EE.      Wallet – is a software applications or other hardware mechanism/medium for holding, storing and transferring virtual currencies. Whitepaper – is a document that states the technology behind a project, including among oth  ers a detailed description of the system architecture and interaction with the users, description of the project and use of proceeds, information on the market cap, anticipated growth, other technical details and the team and advisors behind the project. It does not represent an offer to sell the tokens and is not interchangeable with a prospectus. Section 3. Submission of Initial Assessment Request. Except in cases of follow-on offerings as defined under these Rules, all start-ups and/or corporations organized in the Philippines and/or duly registered tithe the Commission who proposes to conduct, conducting or conducted an ICO, and start-ups and/or corporations who conducted, conducting or who will conduct ICOs targeting Filipinos must submit an initial assessment request including the attachments required under these Rules to the Commission in the form and manner directed under these Rules not later than ninety days before the start of the pre-sale period.  Section 4. Contents of the Initial Assessment Request. Any Initial Assessment Request that lacks any of the following may be rejected motu proprioby the Commission: Duly accomplished application form as stated in Appendix I hereof; Certificate of Incorporation, Articles of Incorporation and By-Laws, and certified true copy of other permits and licenses, or equivalent; Comprehensive curriculum vitae of all team members with clear recent photographs, containing the following information in the minimum: List of positions and offices the team member held or will hold in the issuer company, term of office if applicable; Brief description of the business experience of each team member for five years from receipt of initial assessment request by the Commission or start date of pre-sale of corresponding tokens, whichever is earlier; Identification of other companies where each team member held or is currently holding any other executive position, directorship position or acts as advisor; and, Description 1) any bankruptcy petition against the team member or any corporation to which the team member is the Chairman of the Board within five years from receipt of initial assessment request by the Commission or start date of pre-sale of corresponding tokens, whichever is earlier, (2) any conviction by final judgment against the team member by any competent judicial or administrative body or having his license or permit revoked or suspended by such body; (3) revocation or suspension of membership of the team member form any self-regulating organization; or, (4) any violation of the commodities, securities, banking, real estate or insurance laws; NBI clearances, Police Clearances and other documents to prove the good repute of the members of the ICO team; Description of the ICO project, in accordance with these Rules; Proposed whitepaper, the contents of which abides by that provided in these Rules; In case of ICOs conducted for projects already in operation,Operations Manual detailing the system architecture documentations and the corresponding source codes and commands, including detailed flowcharts of the process; In case the project is to be instituted in a later date, detailed flowcharts showing how the project will operate, including the corresponding documentations and timeframes for each process; Notarized undertaking by the duly authorized representative of the Issuer attesting that the Issuer will report any listing made of the tokens in any virtual currency exchange within five days from the date of approval of the application for listing; Legal Opinion on whether or not the tokens sold or will be sold through the ICO are securities, including sufficient justifications; and Payment of the application fees, amounting to ten thousand pesos (P10,000.00). Section 5. Description of the ICO Project. The description of the ICO project as required under the above Section musty contain the business plan and feasibility study outlining proposed ICO project. It must include the following: The problems in the Filipino market that proposed ICO project aims to solve, the nature and brief description of the ICO project, and a comprehensive discussion on how it will solve the identified problem; Brief description of the ICO tokens, including but not limited to the tapped blockchain technology, the value of each token, lock-up period, if any and the returns, profits, bonuses, rights and/or other privileges to the buyer of the token, both monetary and non-monetary; Brief description on the use if proceeds from the sale of the tokens, including percentage of allocation to each usage category; Target market, including respective percentages, number and reasonable demographical descriptions; Description of the currency, other cryptocurrency and/or other assets that will be received as payment for the tokens; Price per token, including amounts of discount and/or premiums; and  Timeline including identification of the determined or determinable date for each major phase in the ICO project.  Section 6. Form of the Initial Assessment Request. The initial Assessment Request and all the required supporting documents as specified under Article Two – Initial Assess Request and additional documents information as may be required under the above Sectionshall be submitted in the form required under rule 72.1.2 of the 2015 SRC Rules.  CHAPTER TWO: Action on the Initial Assessment Request  Section 7. Review by the Commission. The Commission will review the initial assessment request to determine whether the token is a security.  To do so, the Commission will, within 20 days form receipt, extendable to another 20 days and as soon as reasonably practicable, after it has received a complete initial application assessment request, assess the nature and business model, the team members, and of the products and services which the issuer proposed to offer. Section 8. Result of Review.  The determination of the token as a security by the Commission shall be communicated in writing to the issuer within five days from conclusion of the review. If the token is determined to be a security, the issuer must register the said tokens under these rules.  Section 9. Contents of the Whitepaper.The whitepaper should contain relevant, complete and timely information regarding the ICO project which are understandable users with reasonable knowledge on blockchain technology. The contents of the whitepaper must include but is not limited to the following information: name, address, contact details and brief description of the corporate background of the issuer, including any of its subsidiary in the Philippines territory; Names, addresses, contact details and brief description of the corporate background of the team members and advisors, with clear recent photographs; The problems in the Filipino market that the proposed ICO project aims to solve, the nature and brief description of the ICO project, and a comprehensive discussion on how it will solve the identified problem; The use of the funds generated from the sale of the ICO tokens, including percentage and amount allocation to each proposed usage; Brief description of the ICO tokens, including but not limited to the tapped blockchain technology, the value of each token, lock-up period, if any, and the returns, profits, bonuses rights and/or other privileges to the buyer of the token, both monetary and non-monetary; Brief description of the tokens that will be held by issuer, team members and/or advisors, including but not limited to information on the type, quantity, lockout period, discounts, and the returns, profits, bonuses rights and/or other privileges to the buyer of the token, both monetary and non-monetary; Timeline and duration of the ICO campaign, including identification of the determined or determinable date for each major phase in the ICO project; Brief description of the currency, other cryptocurrency and/or other assets that will be received as payment for the tokens; Price per token, including amounts of discounts and/or premiums; Target market, including respective percentages, number and reasonable demographical descriptions; Brief description of the risks present in investing in the tokens, including risks that the price can and does fluctuate and any individual token may experience upward or downward movement, and may even become valueless, that there is an inherent risk that losses may be incurred rather than profit as a result of buying and selling tokens, and technological and other risks brought by the nature of virtual currencies; In the case of Whitepapers of ICOs pending initial assessment by the Commission, disclaimer that (1) the whitepaper does not represent an offer to sell, and (2) a statement in bold letters that “THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE TOKENS OR DETERMINED IF THE TOKENS ARE SECURITIES AND THUS, MUST BE REGISTERED, OR THAT THE CONTENTS OF THE WHITEPAPER ARE ACCURATE AND COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE SEUCITIES AND EXCHANGE COMMISSION”; In the case of Whitepapers of security token ICOs pending approval of the Registration Statement by the Commission, disclaimer that (1) the whitepaper does not represent an offer to sell, and (2) a statement in bold letters that “THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE TOKENS OR DETERMINED IF THE PROSPECTUS AND WHITEPAPER ARE ACCURATE OR DETERMINED IF THE PROSPECTUS AND WHITEPAPER ARE ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE AND SHOULD BE REPORTED IMMEDIATELY TO THE SECURITIES AND EXCHANGE COMMISSION”; and  Other information necessary to make the whitepaper understandable to users with reasonable knowledge blockchain technology and ICOs. Section 10. Consistency of Whitepaper. The contents of the whitepaper must be consistent and not deviate from the contents of the application form, certificate of incorporation, business model, curriculum vitae and other documents and information in the initial assessment form.  Section 11. Access to the Whitepaper.  The latest available version of the whitepaper should be made available to members of the target market through online platform as identified under these Rules.  Section 12. Amendments initiated by the Issuer.  The Issuer may amend the contents of Whitepaper or other documents submitted during the initial assessment and registration proper stage at any time before the Commission determines whether the tokens are security tokens or approves the tokens for registration, respectively, Provided,the consistency of the Whitepaper and other documents are maintained in accordance with Section 10 of these Rules; and Provide further,that the amendments shall be submitted for approval of the Commission and automatically renew the twenty-day period for review under Section 7 hereof. Section 13. Power of the Commission to Require Amendment of the Whitepaper, or other Documents Submitted with the Initial Assessment Request.  The Commission may order amendments to be made to the Whitepaper or other documents submitted by the Issuer with the Initial Assessment Request in order to include information that may be necessary for the reasonable understanding of the readers.  ARTICLE THREE: QUALIFICATIONS AND DISQUALIFICATIONS OF ISSUER AND ADVISORS CHAPTER ONE: Qualifications and Disqualifications of Issuers Section 14. Qualifications of Issuer. Any start-up or existing corporation duly registered with the Commission who has an innovative project for a security token ICO for which there is no hindering law may file an application for registration with the Commission. Section 15. Issuer with Principal Office Outside the Philippines. Registration of security of tokens pursuant to these Rules by a nonresident foreign startup or corporation shall be conditioned upon there being an information sharing arrangement in place between the Commission and the competent regulator in the jurisdiction under the laws of which issuer is organized or where it has its principal place of business, that is applicable to the issuer, and is subject to reciprocity; Provided that, the security tokens are registered in another jurisdiction and the issuer provides sufficient proof of such registration and regulatory framework of the jurisdiction where registered. In the absence of any of the requirements in the above paragraph, the Issuer must establish a branch office within Philippines jurisdiction in accordance with the Securities Regulation Codeandits Implementing Rules and Regulations Section 16. Incorporation of Start-ups Conducting Security Token ICOs. Start-ups that are conducting or will conduct an ICO involving security tokens, as found by the Commission during the initial assessment shall register as corporation under the Securities Regulation Code. Section 17. Disqualification of Issuer and Team Members. A start-up or corporation or any of its team members that had or is committing any of the following acts shall be disqualified from conducting a security token ICO: Willfully violating any provision of these Rules, the SRC and its implementing rules and regulations, any rule, regulation or order made hereunder, or any other laws administered by the Commission; Willfully made or caused to be made false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to state any material fact that is required to be stated therein; Failed to satisfy the qualifications for registration prescribed under Section 13 hereofand any related provisions under the SRC and its rules; Been convicted by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real estate, or insurance laws; Been enjoined or restrained by a competent judicial or administrative body from engaging in securities, commodities, banking, real estate or insurance activities or from willfully violating laws governing other such activities; Been subject to an order of competent judicial or administrative body refusing, revoking or suspending any registration, license or other permit under these Rules, the SRC and its Rules, and any other laws administered by the Commission.  Been subject to an order of a self-regulatory organization suspending or expelling him from membership or participating therein or from an association with a member or participant thereof; Been found by a competent judicial or administrative body to have willfully violated any provisions of securities, commodities, banking, real estate or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation; or Been judicially declared insolvent, or being Chairman of the Board a corporation which have been declared insolvent or undergone bankruptcy within five years from receipt of initial assessment request by the Commission or start date of pre-sale corresponding tokens, whichever is earlier. For purposes of this subsection, the terms “competent judicial or administrative body” shall include a foreign court of competent jurisdiction and a foreign financial regulator. CHAPTER TWO: Qualifications and Disqualifications of Advisors Section 18. Qualifications of Advisors. Any natural persons with vast knowledge on a specific security token ICO project may file an application for registration with the Commission.  Section 19.  Disqualification of Advisors.  Any person who had or is committing any of the following acts shall be disqualified from being an advisor in a security token ICO project; Willfully violating any provision of these Rules. The SRC and its rules, any regulation or order made hereunder, or any other laws administered by the Commission; Willfully made or caused to be made false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to stated any material or fact that is required to be stated therein; Failed to satisfy the qualifications for registration prescribed under Section 16 hereofand any related provisions under the SERC and its rules; Been convicted by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real estate, or insurance laws; Been subject to an order of a self-regulatory organization, suspending or expelling him from membership or participating therein or from an association with a member or participant thereof; Been found by a competent judicial or administrative body to have willfully violated any provisions or securities, commodities, banking, real estate or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation.  For purposes of this subsection, the term “competent judicial or administrative body” shall include a foreign court of competent jurisdiction and a foreign financial regulator.  Section 20. Submission of the Registration of Form. Upon issuance of a ruling of the SEC that the tokens offered in an ICO is a security token in accordance with Section 8 hereof,and in case of follow-on offerings of tokens previously registered in accordance with these Rules, and unless the ICO falls into Exemptions under Article 4 Chapter 2 hereofor is conducted exclusively through crowdfunding intermediary falling under the Rules on Crowdfunding, the issuer must register the ICO in accordance with these Rules not later than 45 days before the start of the pre-sale period. Section 21. Contents of Registration Statement. The registration statement of a security token ICO must include the following:             a.         Cover Page, which includes information on the following:       the name ticker of the tokens; he amount to be registered; e price per token; number of tokens to be sold; and              b.         Prospectus, in the form and manner required under these Rules; c.         Exhibit tables listing in chronological order Sub-sections d to s hereof, including the proper exhibit number(s) d.         Operations Manual detailing the system architecture, documentations and corresponding source codes and commands, including detailed flowcharts of the process, and code audit over the same; e.         KYC/AMLA procedures, Disaster Recovery Plan and Risks and Security Protocols, and corresponding audit code reports; f.         Written request for ocular inspection and system walkthrough of the company operating system, including specified date and time for the conduct of inspection; A notarized undertaking that the issuer will publish the notice of filing of the registration statement in its website for two consecutive weeks, and stating that: i.          a. registration statement for the sale of the security tokens has been filed with the Commission; ii.         the registration statement and the documents attached thereto are open for inspection at the Commission during the business hours by interested parties; and  iii.        copies of the registration statement and the documents attached thereto can be obtained at the Commission at a reasonable charge.  f.          Certificate of Incorporation duly issued by the Commission, Articles of Incorporation and By-Laws; g          Comprehensive curriculum vitae of all team members, with clear and recent photographs, and including the information listed under Section 4(c) of these Rules in a minimum; Comprehensive curriculum vitae of all advisors with clear recent photographs, containing the following information in the minimum: i.          Names, ages and citizenship of each advisor; ii.         List of positions and offices the advisor held or will hold in the issuer company, and term of office, if applicable; iii.        Brief description of the business experience of each advisor for the last five years; iv.        Identification of other companies where each advisor held or is currently holding any other executive position, directorship position or acts as advisor; and  Description of (1) any conviction by final judgment of the advisor by any competent judicial or administrative body or having the license or permit of such advisor revoked or suspended by any competent judicial or administrative body; (2) revocation or suspension of membership of the advisor by any self-regulating organization; or (3) any violation of the commodities, securities, banking, real estate or insurance laws. Notarized Affidavit executed by authorized signatory of the Issuer attesting that the advisors have all the qualifications and none of the disqualifications under Chapter II Article III of these Rules; Whitepaper, including all the information listed under Section 9 of these Rules; Legal opinion on (1) the legality of the security tokens being registered, indicating whether they will when sold can be legally issued and transferred, and (2) that all applicable permits and licenses required for the issuer has been secured, including copies of such permits and licenses; Copy of the escrow agreement with reputable independent escrow agent, in accordance with Article VII Chapter One hereof, unless the proponents can prove that the purpose of the escrow requirement can be met by other means; Copies of the material contracts entered into by the Issuer; For purposes of these Rules,material contracts shall refer to contracts entered into by the Issuer or not in the ordinary course of business and/or contracts in the ordinary course of business which are entered into with the team members or advisors as the other party, contracts  upon which the Issuer’s business is substantially dependent, contracts of acquisition or sale of property, plant and equipment of the issuer amounting to at least 15% of its property, plant and equipment account, material lease agreements, and other contracts deemed material by the issuer; Code audit report issued by an independent code auditor, including but not limited to testing of the source code KYC/AMLA framework, technology risks and security protocols; Power of attorney in the name of the person signing the registration statement executed by the issuer; Annual audited financial statements for the immediately preceding year and dated within 135 days from the date of filing of the Prospectus, in case the Issuer has been doing business for at least one  year, which shall include the following documents: i.          Audit Report of the Independent Accountant, which must be dated, signed by the certifying independent accountant, identify the financial statements covered, state the signing accountant’s license, TIN and PTR numbers and registration number with the BOA including its expiration date, complete mailing address of the client and the auditor, and, in case of an auditing firm, signature of the certifying partner with his name printed in the form and an indication that is signing for the firm; ii.         Statement of management responsibility on the financial statements signed under oath; iii.        Balance sheet or statement of financial position; Supplementary schedules of (1) reconciliation of retained earnings available for dividend declaration, (2) a map showing the relationship between and among the issuer, its ultimate parent company, middle company, subsidiaries or co-subsidiaries, and associates; (3) in case the security tokens are previously traded in a virtual exchange, a schedule containing the gross and net proceeds of such in the previous prospectus, actual gross and net proceeds was used, and balance of the proceeds as of the end of the reporting period; (4) schedule of financial assets; (5) schedule of accounts receivable from the directors, officers, employees, related parties and principal stockholders; (6) schedule of amounts receivable from related parties which are eliminated during the consolidation of financial statements, if applicable; (7) schedule of long-term debts; (8) schedule of indebtedness to related parties; (9) schedule of security of tokens and capital stocks; and (9) supplementary audit report in the said schedules; For purposes of this requirement, the issuer must submit the audited annual report in a consolidated basis n case the business has been of existence for more than one year; Provided that, in case the prospectus is filed more than 135 days from the date of the audited financial report, interim financial statements must be submitted in addition to the same; Corporate income tax return for the immediately preceding year, in case the Issuer has been doing business for at least one year; r.          Copy of the board resolution approving the ICO and the filing of the Registration Statement has filed under these Rulesand assuming liability for the information contained therein; and  Duly verified resolution of the Board of Directors of the issuer approving the disclosures in the Registration Statement file under these Rulesand assuming liability for the information contained therein; and,  Manual on Corporate Governance with corresponding Secretary’s Certificate as to its adoption by the Board, including information on the following: i.          Evaluation system established to measure the level of compliance with the Manual of Corporate Governance; ii.         Measures being undertaken to fully comply with the adopted leading practice on good corporate governance; and, ii.         In case the Issuer has been doing business for at least one year on the date of the registration statement, (1) any deviation from the Manual of Corporate Governance, including the names and positions of the person involved and the sanction(s) imposed; and (2) any plans to improve corporate governance.             u.         Payment of the applicable application fees. Section 22. Contents of the Prospectus.  The prospectus as required under Section 21 hereof must contain the following Parts as detailed under Appendix II hereof. Section 23.  Form of the Registration Statement.The Registration Statement and all the required supporting documents as specified under Article Four  – Registration of Security Token  and additional documents and information as may be required under the above Section shall be submitted in the form required under Rule 72.1.2 of the 2015 SRC Rules. Section 24. Schedule for Ocular Inspection and System Walkthrough. Upon submission of the registration statement under Section 21,the Commission or its duly authorized representatives shall conduct an ocular inspection of the Philippine office of the Issuer and office of the Issuer and system walkthrough of the operating system for the ICO within reasonable time upon written approval of the ocular inspection request. Section 25. Deviation or Adjustment on the Planned Use of Proceeds. In the event of any deviation or adjustment on the planned use of proceeds as stated in the prospectus in accordance with Section 22 hereof, the Issuer shall inform the token holders and the Commission in writing at least 30 days before such deviation or adjustment is implemented. Any material or substantial adjustment on the use of proceeds, as indicated above, should be approved by the Issuer’s Board of Directors and disclosed the Commission. Section 26. Granting of the Application for Registration. Upon finding that the issuer substantially complied with the requirements for registration under these Rules and satisfaction of the Commission that the issuer with at all times comply with the regulatory principles, the Commission may grant registration to the security token ICO through the issuance of the Order of Registration and Permit to Sell.  Section 27. Power of the Commission to Require Amendment to the Prospectus and Other Documents Submitted with the Registration Statement.The Commission may order amendments to be made to the Prospectus or other documents submitted by the Issuer with the Registration Statement in order to include information that may be necessary for the reasonable understanding of the readers. Section 28. Rejection of the Application for Registration.  The Commission by order may reject the project outright if the latter is of opinion that the proposed activity infringes public policy, injures investors or violates these Rulesor any of the laws, rules and regulations implemented by the Commission. CHAPTER TWO: EXEMPTION FROM REGISTRATION OF SECURITY TOKENS Section 29. Eligibility for Exemption from Registration of Security of Tokens.An issuer may offer or sell security tokens without the need for registering said securities under these Rules, provided that the same is made: At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy. By or for the account of a pledge holder, or mortgagee or any of a pledge line holder selling of offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provision of this Rules, to liquidate a bona fide debt, a security pledged in good faith as security for such sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transaction of a like character by such owner or representative. An isolated transaction in which any security token is sold, offered for sale, subscription or delivery by the owner therefore, or by his representative for the owner’s account, such sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transaction of a like character by such owner or representative. The sale of security tokens by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period. The sale of security tokens to any number of the following qualified buyers: iv.        Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral to engage in trust functions; Such other person as the Commission may rule by determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management, or Transactions exempted by the Commission upon finding that the requirements of registration under this Code is not necessary in public interest or for the protection of the investors, such as by the reason of the small amount involved or the limited character of the initial coin offering.  Section 30. Allowed Media for Advertisements.Aside from the whitepaper, the issuer may advertise the security token ICO through any of the following media: outdoor advertising, including billboards, signs at public venues, and transit advertising; the internet, including webpages, banner advertisement, video streaming (e.g. YouTube), and social networking and microblogging (e.g. Twitter); mobile phone messages (e.g. SMS, MMS, text messages); telemarketing activities and audio messages for telephone callers on hold; presentations to groups of people, seminars and advertorials; and,  any other reasonable means available to the issuer.  Section 31. Contents of the Advertisements. The advertisements of the security token ICO should contain the following information: a.         a balanced description of the returns, features, benefits and risks; b.         sufficiently prominent statements of warnings, disclaimers, qualifications and fine prints which are, if applicable, read or presented at a speed comprehensible to an average listener; c.         a realistic impression of overall fees and costs; d.         past performance with warning that past performance is not indicative of future performance; and, e.         Forecast based on reasonable assumptions and warning that such forecast is not a guarantee. Section 32. Form of Advertisements. The advertisements must be in such form that can be clearly understood by targeted audience and presented in an accurate, balanced and helpful manner.  Section 33. Ability to Keep Record. The public should be able to keep a record of the advertisements, including the disclaimers and warnings. Section 34. Consistency with the Whitepaper and Other Documents. The advertisements should be consistent with the information in the whitepaper, prospectus and other documents submitted to the Commission.  Section 35. Forms of Prohibited Advertising. The following advertising activities are prohibited: advertisements with false or misleading statements; advertisements containing comparison with other products, except— i.          comparison with products that have sufficiently similar features or when the differences are made clear in the advertisement; ii.         comparison about returns if the information used is current, complete and accurate; or iii.        Comparisons using ratings which should are properly explained in the advertisement itself or with details on where the investor can obtain further information; advertisements with photographs or images that contradict, detract form or reduce the prominence of any warnings, disclaimers or qualifications; and  advertisements made in violation of Chapter One –  Allowed advertising hereof. CHAPTER ONE: Continuing Compliance to the Law and Rules Section 36. Compliance with the Law and Rules. A security token issuer must at all times comply with the Rules, the provisions of the SRC, implementing rules and regulations and other laws implemented by the Commission. Section 37. Possible Non-compliance with the Law and Rules.A security token issuer must promptly inform the Commission of any event which the said issuer knows or is reasonably expected to know that may affect its compliance with these Rules,the provisions of the SRC,implementing rules and regulations and other laws implemented by the Commission.  Section 38. Annual Reports. The security token issuer must submit the following reports to the Commission every fiscal year starting from the year the order of registration and permit to sell is issued by the Commission, and for each fiscal year thereafter, within one hundred five (105) days after the end of the fiscal year and using the form: Section 39. Quarterly Report. The security token issuer must submit the on a quarterly basis the unaudited interim financial statements to the Commission within forty-five (45) days after the end of each of the first three quarters of each fiscal year.  The first quarterly report of the issuer shall be filed either within forty-five (45) days after the issuance of the order of registration and permit to sell by the Commission or on or before the date on which such required would have been required to be filed if the issuer had been required previously to file the quarterly report, whatever is later, and in the form.  Section 40. Other Interim Reports. The security token issuer must submit the semi-annual report to the Commission for every six-month period ending June 30 and December 31 of every fiscal year starting from the year the order of registration and permit to sell is issued by the Commission, and for each fiscal year thereafter, within forty five (45) days after June 30 and December 31, containing the following information: Status update on the implementation of the business plan and the ICO, including relevant dates and brief descriptions and justifications from the business plan; b.         problems encountered, and the procedures applied or will be applied to manage and resolve such problems; c.         risk control mechanism and efficiency; and,  d.         table of safeguards and conditions with status of compliance for each.  Section 41. Submission of the Progress Report to the Commission.The Escrow agent of the Issuer should submit to the Commission the original copy of the Progress Reports of the Issuer on the project funded by the initial coin offering of security tokens. Section 42. Other Reports that may be Required by the Commission. Other reports as may be from time to time required by the SEC.  Section 43. Escrow Agent.Unless the issuer can prove to the Commission that other mechanisms will be employed to satisfy the purposes of an independent escrow agent, the issuer of the security token sale and the private key of the issuer wallet.  Section 44. Release of proceeds to the Issuer.The issuer and the escrow agent shall enter into an escrow agreement with provisions, among others, on the schedule of release of proceeds, the progress reports that will be required before each release of proceeds, and provisions (1) that the proceeds shall be withdrawn only upon the presentation of the Issuer’s work progress report, and (2) that the Escrow Agent will return the said proceeds to the investors in case the soft cap of the project is not reached or in a pro rata basis in case the project is abandoned by the issuer before the completion. Copies of the escrow agreement should be submitted to the Commission in accordance with Section 20of these Rules. Section 45. Dissolution of the Issuer-Escrow Relationship. The contract shall be dissolved upon full usage of the proceeds, unless the initial coin offerings failed to meet the soft cap or the project has been abandoned by the issuer with notification to the escrow agent and the Commission.  Section 46. Return of Funds if the Soft Cap is not Reached.If an ICO does not reach the soft cap as set in the Registration Statement, the independent escrow agent must within five business days therefrom: Give or send each security token investor a notification of the same and refund the amount that the investor paid for the tokens; and  b.         Report the refund made, the cancellation of the ICO and the failure to reach the soft cap to the Commission. A copy of the notice of abandonment executed by the issuer must be forwarded to the Commission together with the abovementioned Report.  Section 48. Application on existing ICOs.  This regulation applies to persons and/or corporations who, immediately before the day on which these Rules comes into operation, conducted an ICO. Section 49. Registration of Existing ICOs.  A person or corporation falling under the immediately preceding Section who is intends to continue its ICO operations or who completed ICOs prior to operation of these Rulesmust file an initial assessment request with the Commission within three months form the day on which these Rulescome into operations.  Section 50. Status of ICO Conducted Prior to Effectivity.  An Issuer who files an initial assessment request in accordance with this Chaptermay continue to its ICO process until the application has been determined and, in so doing, is not regarded as carrying on the ICO activity in contravention to these Rules.  Section 51. Suppletory Application of the 2015 SRC IRR.In the absence of applicable provisions in these Rules, the 2015 Implementing Rules and Regulations of the Security Regulation Code shall apply in a suppletory manner, unless otherwise stated herein.  Section 52. Sanctions. If the Commission finds that there is a violation of any provisions of this Rule or any applicable rules under the SRC, or that any person, in a registration statement or its supporting papers and the prospectus, as well as in the periodic reports required to be filed with the Commission h as made any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or refuses to permit any lawful examination into its corporate affairs, the Commission shall, in its discretion impose additional sanctions in addition to the existing sanctions and/or penalty fees approved and published by the Commission through its official publications such as the SRC Section 54,  memorandum circulars, resolutions website and other issuances.  Section 53. Repealing Clause.  All rules and regulations, circulars, orders, memoranda, or any part thereof and the rules and regulations previously promulgated by the Commission and/or by persons required to be registered under the Code or any part thereof, in conflict with or contrary to these Rules. Section 54. Separability Clause.  If any portion or provisions of these Rulesis declared unconstitutional or invalid, the other portions or provisions hereof, which are not affected shall thereby continue in full force and effect.  Section 55. Effectivity Clause. These rules shall take effect fifteen (15) days after the date of the last publication in two (2) newspapers of general circulation.                            EMILIO B. 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the most economically lively Italian areas and the place eight% of the inhabitants speaks Italian appears to be a particularly horny harbor for the Italian crypto marketers who may just in finding right here lighter bureaucratic procedures, easy taxation and a regulatory framework already allowing for the desires of crypto companies.A few of the ICOs ranging from inventive Italians and making landfall out of the country, some had been ready to assemble an excellent quantity of sources. Its nearly not possible, alternatively, to provide a census of the managers and builders born or educated in Italy who occupy necessary positions within global initiatives. Some notable Italians, as an example, come withAlessandro Chiesa, co-founder of Zcash, andSimone Giacomelli, trade developer at SingularityNet.Companies: taking part in protected with the blockchainAfter remaining autumns critical drop out there, phrases equivalent to cryptocurrencies or ICO have misplaced maximum in their glamor in Italys public opinion. Blockchain continues to be a buzzword within the Italian media; on the other hand, the trade global turns out concerned about discovering a method to take solely the sure parts of this era (e.g., blockchain as a device of knowledge recording), striking apart the destructive ones (e.g., cryptocurrencies). Corporations and trade associations are subsequently fairly kinfolk to seem with extra hobby to permissioned platforms quite than to discover the possibility of a freely disbursed ledger. By means of the best way, its not simple to measure the readiness of the Italian trade global to the inventions offered by way of blockchain, allowing for that only some initiatives are already reaching some exact effects.Fintech seems to be the sphere of software closest handy, with a powerful choice a few of the primary gamers for answers in response to decentralized quite than disbursed blockchains.In June 2018, as an example, 14 individuals of the Italian Banks Affiliation (ABI) started to check the opportunity of ablockchain-based interbank machine in response to Cordas R3, which was once evolved by way of the ABI Lab innovation heart. The newest information to be had concerning the mission (from February 2019) states that the appliance for interbank reconciliations, labelled the Spunta Challenge, now comes to 78% of the Italian banking sector and that it is coming into right into a preproduction check section. Significantly, probably the most greatest Italian banks, Unicredit which was once additionally amongst Ripples supporters did not sign up for the nationwide mission and finished its first transaction by way of blockchain in August 2018, depending at the platform We.Business.The main Italian energy supplier, Enel (previously a state-owned monopoly), begana operating workforce to discover the possibility of blockchain in 2016, and from the spring of 2017, the Italian corporate has been a few of the companions ofEnerchain, a mission promoted by way of the German IT provider supplier Ponton to experiment with the opportunity of blockchain-based power buying and selling amongst utilities. Its, on the other hand, tough to retrieve details about the prevailing building degree of the mission; but even so, some slightlycontemporary statements made by way of Enels head of commercial building, Giovanni Vattani, wired the hobby of the corporate in blockchain as a device for bettering ultimate buyer cost or refund. Because of this, Enel partnered with Polytechnic of Milan and the consultancy Answer for a analysis mission aiming to create a Ecu Central Financial institution-issued cryptocurrency.The hobby of many corporations are nonetheless in an exploratory degree, quite than aiming to have already got an outlined software. For example, in January 2019, the Italian postal provider supplier,Poste Italiane, joined the Hyperledger Material neighborhood, intending to assemble new competencies in a box that the corporate feels as related for long term innovation.In different circumstances, the dedication to the blockchain revolution appears to be fostered most commonly by way of conversation objectives: In those circumstances, the trail from announcement to building of the initiatives turns out deeply suffering from the volatility of the general publics hobby in cryptos and blockchain which is, in flip, suffering from the volatility of the crypto marketplace. Its unclear, as an example, if the football group Juventus, which introduced its Legit Fan Tokenremaining fall, met its roadmap (the token will have to had been activated right through Q1 2019), as the corporate answerable for its building, Socios.com, does not be offering data or any way of touch thru its web site.Along initiatives involving massive corporations equivalent to those above, DLT may just receive advantages Small Medium Enterprises (SME), that are the spine of the Made-in-Italy sector.Some commentators, as an example, tension that blockchain can be a great tool within the coverage of industries equivalent to style, offering alternatives for higher detection of counterfeit or faux items and adorning buyer association.Probably the most well-known Italian manufacturers havent begun to announce any important initiatives on the other hand, acheck regarding traceability within the textile sector was once introduced by way of the Ministry of Financial Construction in mid-March 2019, because of a partnership with IBM.The crypto humansDespite the fact that a big a part of the Italian inhabitants continues to be ignoring what cryptos and DLT are or know them just for their pathological distortions the Italian crypto neighborhood is fairly a thriving fact. Alternatively, the real dimensions of the phenomenon are fairly laborious to measure.On Feb. nine, 2017, Cointelegraph introduced its Italian model with the purpose of publishing translated articles from the global version in addition to particular native content material.The discussion board Bitcointalk postedthe primary message at the native Italian board on April 2013, and because then, the Italian neighborhood has grown continuously: Six years after the primary message by way of moderator HostFat, who continues to be answerable for the board, the posts in Italian are greater than 258,000, on nearly 16,000 subjects. The Italian neighborhood, then, is one of the top-10 maximum lively native forums (score 6th) and 2nd, after the German one, a few of the Ecu forums.Telegram is some other medium that the Italian crypto neighborhood broadly makes use of: Italians are after all broadly provide within the global crypto-themed channels, however additionally they acquire in a number of Italian-language chats, every now and then structured with a prime chat and a cluster of kid chats on particular subjects. The themes and contours are lovely various: Some teams are extra concerned with buying and selling, others on ICOs and new initiatives. Theyre all the time run on a voluntary foundation, on the other hand, with some having quite skilled results, such because the participation in ICOs on preferential phrases and even bonds with marketplace sign services and products.The founders and coordinators of those channels ceaselessly disguise their identification below their chats usernames, that are, on the other hand, fairly clear for the insiders of the neighborhood.Opposite to the overall propensity for virtual anonymity, the channel Crypto Bar promotes reside conferences and a face-to-face relationships amongst its individuals. Silvia Jones, founding father of the crowd along Fa Busheri and MM, described the more than one faces of the Italian crypto-enthusiasts:The individuals of our neighborhood are an excessively heterogeneous workforce which spans from the housewife to the entrepreneur, from the salesperson to the scholar or the attorney. The age too may just range from 18 to 65. Regardless of those variations, they all have the foundation for expressing their opinion and for debating it, bringing worth to our channel, which goals to provide an ok cultural viewpoint, data and the foundation for a legitimate research.The collection of individuals within the Italian channels gifts volatility that mirrors the crypto marketplace. As of press time, allowing for more than one subscriptions (it is thought to be to be an act of politeness to take part within the channels of the competition) and faux or inactive individuals, its more likely to estimate the aggregated size of those communities in about 2,000-Three,000 humans. That may be a smaller workforce, if when compared with the months of the ICO hype. Alternatively, this is a residing and extra competent neighborhood, a minimum of within the opinion of the Crypto Dave, writer of probably the most oldest channels, CoinUp! (in the past Ico & Co), whichcontrolled about 40 subchannels right through the bullish section of the marketplace:The Italian crypto-people had modified for higher as a result of they changed into extra aware. Who survived the iciness are individuals who understood what cryptos may just be offering as a substitute style of the financial system, regardless of the losses they persevered as a result of initiatives which did not take off. Who did not run away is, certainly, the Darwinian evolution of 2017s traders: individuals who had turn out to be extra a professional, extra dedicated and not more prone to fall sufferer of straightforward good points fascination.Please, not more white elephantsThe controversy about cryptos in Italy mirrors the most efficient and the worst within the nation. Italians are famend on the planet for being ingenious and inventive humans. The rustic has, on the other hand, sturdy resistance to novelties (the web, as an example, unfold very slowly in Italy). As well as, new companies face many difficulties:An research produced by way of the Harvard Industry College mentioned that startups set in Italy, as an example, may just acquire not up to 1/10 a big gamble investments which might be to be had, on reasonable, throughout the EU (solely Romania and Greece are in a worse place).Additionally, different issues for the wholesome building of the industries in response to DLT come from the bureaucratic and trade tradition of the rustic: Italy has, in reality, fairly a powerful custom in development white elephants, each bearing in mind its public sector and a few personal corporations. The panorama of the rustic dangers then being plagued by way of half-unfinished highways, empty hospitals, unused exhibition facilities and out of date business crops, which the native politicians or trade associations infallibly introduced as a sport changer at each and every opening rite.On height of this, the loss of a systemic and long-term method hindered the improvement of inventions for which connectivity and compatibility are the most important. This was once the case, as an example, of the primary wave of the unfold of IT right through the 1970-80s: Many small Italian corporations had been proud at the moment to enforce an IBM-compatible machine, in spite of the just about whole loss of appropriate trade programs (referring to programs within the Italian language, the void was once absolute). Because of this, many good, younger tool engineers gave delivery to a plethora of small and micro IT-boutiques, which adapted particular equipment, other for each and every corporate and missing any shared requirements. The effects of this fragmentation affected the nationwide machine right through the successive waves of IT innovation, each bearing in mind studying processes and implementation facets. Public intervention rarely eased the method of era appropriation: Much more lately, the trouble to carry Italy to the virtual technology produced Italian-only oddities such because theItalian certificated mail protocol (recognized in Italy as PEC), as an alternative to an appropriate virtual signature process.To stop blockchain sectors from retracing the similar steps, Italy must method those new applied sciences with an open-minded angle, and a few alerts permit for the hope of a transformation in viewpoint. Davide Casaleggio, as an example, underlined that:Italian politics spotted fairly overdue the underway revolution. Throughout the primary half of of 2018, 4 Italian corporations collected thru their ICOs greater than the entire home project capital marketplace. Despite the fact that, they all had been pressured to include out of the country since the Italian machine was once no longer in a position. Marketplace understood blockchain greater than politics; on the other hand, right through the remaining months, some giant adjustments took place. The criminal popularity of sensible contracts appears to be a small factor, however its a very powerful step in a brand new route.A brand new regulatory framework or an incentivization scheme, on the other hand, would no longer be sufficient with out an lively intervention at the key driving force of innovation i.e., humans. Consistent with Di Nicola:The most important drawback I see is that Italy lacks dramatically of doers, equivalent to skilled tool architects and builders. It hurts to mention, however all our very best minds in IT went out of the country, and right now Italy does not possess the important mass of humans wanted for frontline initiatives. Weve got a determined want for reshoring who is aware of the right way to construct: the Executive may just inject never-ending gas within the blockchain sector, on the other hand, if no person is aware of the right way to construct a Ferraris engine, its tough to participate within the race.http://platform.twitter.com/widgets.js window.fbAsyncInit = serve as() ; (serve as(d, s, identity) var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(identity)) js = d.createElement(s); js.identity = identity; js.src = http://attach.fb.internet/en_US/sdk.js; js.async = true; fjs.parentNode.insertBefore(js, fjs); (file, script, facebook-jssdk)); !serve as(f,b,e,v,n,t,s) if(f.fbq)go back;n=f.fbq=serve as(); d>n;n.loaded=!zero;n.model=2.zero; n.queue=[];t=b.createElement(e);t.async=!zero; t.src=v;s=b.getElementsByTagName(e)[0]; s.parentNode.insertBefore(t,s)(window,file,script, https://attach.fb.internet/en_US/fbevents.js); fbq(init, 1922752334671725); fbq(monitor, PageView);Crypto-Italy: Institutions, Politics, Business and Societythebreakingnewsheadlines 1 day agoCryptocurrencyLeave a comment53 Views Between Would possibly 23 and 26, 2019, the Ecu Unions voters are renewing their continental parliament. A few of the international locations that may take part within the poles is Italy (vote casting on Would possibly 26) probably the most founding individuals of the EU, along France, Germany, Belgium, Netherlands and Luxembourg. Because of the very nature of cryptocurrencies, it is difficult to get a proper determine of the particular penetration of those applied sciences in one nation. Alternatively, depending on some proxies as within the chart underneath its most probably that the Bel Paese (the Gorgeous Nation) would fall outdoor the main Ecu workforce. But, since a few years in the past, crypto and blockchain have turn out to be related subjects for Italian establishments, political actions, trade global and public opinion. This hobby has been raised right through the previous couple of months, and it is very most probably that those problems will turn out to be an increasing number of related right through the weeks instantly after the Ecu elections, when some important novelties are scheduled.Unknown by way of the legislationNo particular legislation prevents Italian voters from proudly owning, purchasing or promoting, or the use of cryptocurrencies as a method of cost. Alternatively, cryptocurrencies are nonetheless a moderately mysterious entity for Italian regulation and monetary observe.The Italian central financial institution, Banca dItalia (the Financial institution of Italy), issueda primary caution about digital currencies originally of 2015, defining them as virtual representations of a price [] created by way of personal topics who perform at the Internet. The dangers that the financial institution pinpointed, as an example, incorporated: the lack of understanding about those equipment, the absence of any particular legislation, surveillance or ensure, prime volatility, and the chance to be taken with illicit actions (equivalent to global terror or cash laundering).But even so those, Banca dItalia underlined that the tax government did not acknowledge the particular nature of the virtual currencies, growing severe considerations concerning the views that had been open to the homeowners.Agenzia delle Entrate, the Italian company answerable for decoding and making use of tax legislation, tackles the subject solely in two of its paperwork. First, inSeptember 2016, the company mentioned that businesses providing skilled services and products buying and selling fiat as opposed to crypto (and vice versa) might be equated, for fiscal functions, with topics buying and selling amongst other conventional currencies (the company carried out to Italya prior judgment of the Court docket of Justice of the Ecu Union).Extra lately, in September 2018, the tax company introduced its opinion concerning the fiscal nature of application tokens issued right through an preliminary coin providing (ICO) and equated them both to a voucher purchased as an anticipation of a transaction involving exact items or services and products (if bought by way of the general public) or to a cost in nature (in the event that they supposed to be hired as a type of retribution).But even so those statements, the fiscal nature of cryptocurrencies stays for the Italian government uncharted territory: Best hypotheses are allowed, as an example, a couple of herbal consumers source of revenue coming from mining or even from capital good points (some commentators assimilate the latter to the other earning, as outlined by way ofarticle 67 of the Presidential Decree 22/12/1986 no. 917).The very criminal nature of cryptocurrencies stays blurred, as the one particular point out to them within the Italian statutory frame this present day is one of the initial definitions of theDecree 25/05/2017 no. 90, which accepts into the Italian regulatory framework some norms about cash laundering established by way of the EU in 2015. This decree describes digital currencies as a virtual illustration of worth, no longer issued by way of a central financial institution or a public authority, no longer essentially associated with a fiat forex, used as a device of alternate for getting items or services and products, and electronically transferred, saved and traded.The decree additionally established the duty for all provider suppliers associated with the usage of virtual forex to document their actions in a distinct phase of the registry already set for normal currencies exchanges (a moderately debatable factor,as in the past reported by way of Cointelegraph). As an issue of reality, Italian professionals of juridical and tax problemsare nonetheless debating if legislation will have to higher body cryptocurrencies as exact cash (like currencies), as funding equipment, as items or as virtual paperwork.The watchdogsIn December 2017, shopper affiliationCodacons introduced a petition to 104 public prosecutor workplaces far and wide Italy, asking them to analyze bitcoin (BTC) and blaming the new forex as imaginable fraud. Due to this fact, the affiliation requested the judiciary to determine everybody who issued BTCs at the nationwide territory and to persecute unregulated buying and selling services and products and on-line rip-off schemes founded in Italy. Along underlining the loss of fundamental wisdom about cryptos which is fashionable within the Italian public opinion Codacons initiative identified some other related factor: As an issue of reality, because of the loss of particular legislation, the Italian government can not lend a hand however maintain cryptocurrencies the use of their conventional frameworks or decoding it in step with Ecu resolutions.At first of 2019, as an example, the chapter department of the Court docket of Florence was once ready to settlethe sophisticated case of the BitGrail hack by way of seizing the non-public belongings of its founder and refunding the purchasers of the alternate from which hackers stole $187 million value ofNanos in February 2018.At the regulatory aspect, Banca dItalia is the splendid regulatory frame and guarantor of the Italian banking machine, with none serve as as an issuing financial institution (the similar as different nationwide central banks within the eurozone). Till now, the central financial institutionreflected the similar considerations of different equivalent Ecu our bodies, and its subsequently tough to learn some declarations about central financial institution issued virtual currencies given by way of its deputy governor, Fabio Panetta,right through a convention in Milan remaining June as a dramatic opening to cryptos.But even so, Italy has an impartial authority liable for regulating the Italian securities marketplace since 1974 theCommissione Nazionale in line with le Societ e los angeles Borsa (CONSOB). The basic legislation that governs the Italian monetary markets is theTesto unico in materia di intermediazione finanziaria (TUF) actually, the Consolidated Regulation on Monetary Middleman which was once promulgated on Feb. 22, 1998 (Decree Regulation No. 58).In line with this, CONSOB has been very lively right through the previous months, hitting companies selling crypto-based monetary services that fall outdoor the regulatory framework of the TUF, which is aimed toward offering Italian traders with ok data and promises.In November 2018, as an example, the authority focusedRichmond Making an investment, Crypton Ltd., Eagle Bit Business and an Italian consultant of Cryptoforce Ltd. Throughout the next month, CONSOB issued a caution or suspended the actions of different crypto-related companies together with OriginalCrypto,Bitsurge Token, Inexperienced Power Certificate,Avacrypto and the ICOTogacoin.The authority is, nonetheless, fairly aware of the inadequacy of its conventional equipment in coping with the brand new trade fashions and the way of the crypto financial system, particularly with ICOs. The designation of Paolo Savona as the brand new CONSOB president a procedure that precipitatedfairly a harsh disagreement between the political fronts gave a substantial spice up to the talk inside the company. Certainly, in spite of his age the economist and previous minister is 83 years previous Savona mentioned his hobby in frontier applied sciences, even sooner than his appointment in March 2019.On March 19,CONSOB introduced its dedication to an open debate to determine the pillars for brand new legislation explicitly designed for ICOs. The freshly appointed CommissionerPaolo Ciocca declared to the native magazine Repubblica that CONSOB goals to position an finish to phenomena the place pathology is overcoming body structure, atmosphere, within the period in-between, the premises to succeed in new kinds of legislation. Due to this fact, CONSOB printed a 15-page file on its web site (to be had additionally inEnglish) that summarizes the state-of-the-art of the talk about cryptos, ICOs and blockchain, presenting 15 operative questions to assemble critiques from the professionals. The company was once amassing feedback at the file by way of mail or thru anon-line shape (in Italian solely) till Would possibly 19.The central establishments: a brand new viewpoint?The former executive, led by way of Paolo Gentiloni (from the leftist-moderate Democratic Birthday celebration, PD), promoted a complete nationwide plan to spice up investments in new virtual applied sciences (below the label ofPiano Impresa four.zero, Business four.zero). Alternatively, blockchain entered within the Italian political schedule and jargon solely afterMarch 2018s basic election, which dropped at energy a coalition between Movimento Five Stelle (Five-Superstar Motion) and Lega Nord (Northern League).Ultimate September,Italy joined the Ecu Blockchain Partnership, a brand new entitypromoted by way of Ecu Fee 5 months previous as a car for cooperation among Member States to interchange revel in and experience in technical and regulatory fields and get ready for the release of EU-wide [blockchain] programs around the Virtual Unmarried Marketplace for the advantage of the private and non-private sectors.Some months after, in December 2018, Italy was once a few of the seven southern EU member states that supported aMalta-promoted declaration calling for lend a hand within the promotion of disbursed ledger eras (DLT) use within the area.Throughout the similar span of months, Deputy Top Minister and Minister of Financial Construction Luigi Di Maio (from the Five-Superstar Motion) introducedthe introduction of a suppose tank of professionals answerable for offering recommendation about rising applied sciences, equivalent to synthetic intelligence and blockchain. The30-member workforce on blockchain collected for the primary time on Jan. 21, 2019, and had different conferences right through the next months in response to a wide-ranging schedule. Their task is to offer, by way of June 2019, an research of the current state of affairs and to signify appropriate methods to use DLT to the industries and sectors that would acquire extra benefits from them. The ambition of the crowd is that Italy may just design a formulation that may be disseminated amongst different Ecu international locations.Within the opinion of Vincenzo Di Nicola, probably the most Ministrys advisors and co-founder of the Conio on-chain pockets, Italy will have to keep away from a overdue get started, as has in the past took place within the historical past of the rustic:I am happy that Italy is waking up and that the rustic is giving consideration to new applied sciences which will have a deep have an effect on on its financial system. Up to now, sadly, we did not understand waves equivalent to e-commerce or sharing financial system. The outcome? They overwhelmed us, and international corporations seized the brand new markets. My non-public hope is that, finally, this workforce would set step one to maintain the introduction of Italian companies, which might then turn out to be leaders within the blockchain trade.The advisory workforce simply met originally of the 12 months; subsequently, its tough to acknowledge a powerful correlation between its paintings and theproposals about blockchains definition, which have been below debate on the Senato (the Italian higher area of parliament) since Jan. 23. The modification to the wider decree on Simplification (Delegated Decree Regulation no. 989) goals to introduce criminal drive to the paperwork recorded by way of blockchain or sensible contract, and its beenformally a part of the Italian statutory frame sinceFebruary 2019. The real technical requirements required to compare this criminal requirement, on the other hand, will have to be unveiled by way of theCompany for the Italian Digitalization by way of the start of subsequent Would possibly.Blockchain is going nativeNo longer solely central establishments but in addition native government appear an increasing number of concerned within the debate about blockchain. Some tasks are, as an issue of reality, extra vibrant than disruptive. Its tough, as an example, to measure the real have an effect on of the council-run cryptocurrency AHU!, which was onceintroduced by way of Luigi Lucchi, the mayor of Berceto, in January 2018.Berceto, a 2,000-person the town within the Apennine Mountains, which has a twinning with the Lakota country (some other marketing campaign promoted by way of Lucchi), goals to make use of AHU! to unfastened its native financial system from the so-called tyranny of the euro on the other hand, no details about the roadmap of the mission isright now to be had at the town councils reputable web site.On a fully other scale, town of Turin (led by way of the Five-Superstar Motion since 2016) is investigating the probabilities of blockchain since 2017 and, as a winner of the competition promoted by way of the EU City Leading edge Movements Initiative, is creatingCo-Town, a mission for collaborative control of city commons to counteract poverty and socio-spatial polarization.Despite the fact that the conversation subject material produced by way of the mission rarely mentions blockchain, Co-Town has a partnership with theCollege of Turin Blockchain Initiative. This interdisciplinary analysis workforce is operating to expand a kind of local-based round financial system, during which the voters that collaborate to the reuse of city commons might be rewarded by way of acquiring credit in cryptocurrencies that the native trade actions concerned within the initiative would settle for as cost.Much more bold is the dedication of town council of Naples, which Mayor Luigi De Magistris (who created his personal neo-leftist motion in 2015, Democracy and Autonomy) made public right through the spring of 2018 and which was once already reported inhis interview with Cointelegraph remaining June.Throughout the previous 12 months, a focal point workforce of about 300 volunteers heldcommon conferences, discussing proposals and changing them in pilot programs. The problems below debate span from the adoption of cryptocurrencies within the retail outlets of town to their use for bills because of town management, bearing in mind even the tokenization of a few services and products supplied by way of town council (e.g., college canteen vouchers, college e-book vouchers, ect.). Some subjects have more potent political implications, such because the introduction of blockchain-based electoral processes or the improvement of a complementary forex for town, fostering a extra really extensive native autonomy.This latter subject isnt new for Naples, because the council led by way of De Magistris (right through his first time period) already promoted thenapo, a kind of bargain banknote (on paper) that are supposed to aspect with euros for bills in retail outlets becoming a member of the mission. Napo had brief lifestyles between 2012 and 2015, because the Neapolitan shop-owners seldom accredited it.Blockchain for democracyIts laborious to acknowledge if and the way the other and ceaselessly quarrelsome Italian political events have other attitudes about problems equivalent to cryptocurrencies and blockchain (or if theyve an angle in any respect). At the present time, they unveiled few or no particular issues in their systems for the Ecu Parliament election, and none of them involving the aforementioned subjects.But even so, only a few had been within the systems for the remaining elections within the spring of 2018. A point out to fintech with out additional definition was once, as an example, incorporated within thePDs program for 2018s basic election (on web page 12). On the different aspect of the political spectrum,Northern Leagues 2018 program encompassed a bankruptcy about Virtual Evolution (web page 67), which comprises some basic remarks concerning the want for Italy to oppose the overpowering energy of Over The Most sensible IT tycoons (i.e., Amazon, Apple, Google and Microsoft) and no mentions of DLT.Forza Italia (FI) some other birthday celebration on moderate-right positions expressed some hobby for blockchain simply after the remaining basic election, when Ezio Luigi Fabiani, coordinator of the FI golf equipment set in the UK,formally recommended the mission Multiversum as a imaginable software to make stronger the vote casting process of Italian voters residing out of the country. After amassing greater than $21 million right through its ICO, from Would possibly to June 2018, this mission for a brand new technology blockchainencountered critical difficulties to transport directly to an operational degree, and no contemporary details about a imaginable collaboration between Multiversum and FI is right now to be had.Blockchain, on the other hand, turns out to pique the hobby of the Italian political events, additionally relating to their inside workings and procedures.The Five-Superstar Motion, as an example, seems because the extra lively in experimenting with the probabilities of data era as a device to succeed in kinds of direct democracy. The birthday celebration was once created in 2009 by way of former comic Beppe Grillo and by way of internet entrepreneur Gianroberto Casaleggio round Grillos web site. Due to Casaleggios recommendation, the Five-Superstar Motion collected its supporters and decided on its applicants and program most commonly thru on-line equipment, no longer with out thrilling sharp complaint amongst competition concerning the potency and transparency of those way.Ultimate March, Davide Casaleggio Gianrobertos son, right now main Casaleggio Related and the figurehead of the motion introduced a shift towards the Rousseau blockchain, the net platform lately used to glue Five-Superstar Motion supporters amongst themselves and with their representatives within the parliament.Casaleggio informed Cointelegraph that this selection was once aimed to succeed in the next degree of safety, certification and steadiness within the vote casting process, which blockchain may just guarantee. But even so, an software involving democracy will have to ensure whole anonymity of each and every vote/transaction keeping up, nonetheless, the chance to certify the topics having exact vote casting rights and fighting more than one vote casting.The Five-Superstar Motion held a check right through its remaining collecting in Milan, depending on a clone of the Monero personal blockchain, which the individuals may just get right of entry to the use of an Android pockets (the debatable factor below scrutiny was once the menu on the finish of the assembly, with Margherita pizza being democratically elected).The result of the check have been encouraging, Casaleggio defined on the other hand some related problems lay forward, equivalent to the right combination between blockchains extensive distribution (which means some roughly incentive for the participation of impartial nodes) and the wish to ensure a free-of-charge vote, fairly laborious to succeed in in a in truth permissionless community (on this case, unfastened tokens had been disbursed simply sooner than the ballot).The Five-Superstar Motions experiment did not fail to lift some political controversy: Amongst its most powerful critics is PDs Member of Parliament Francesco Boccia, who has been within the software of virtual innovation to democracy since 2012. In December 2018, Boccia promoted a workshop in Rome to reveal the pitfalls of Rousseau (the pre-blockchain model) and to offer his proposal for an alternate platform workforce of builders was once already operating on known as Hackitaly, which is in response to the web-based framework Laravel.The purpose of the mission Boccia informed Cointelegraph is to create an open-source software that the PD may just bear in mind to undertake within the brief time period and that, one day, would even be presented to different political events (even to the competition). Hackitaly will incorporate blockchain as a method of safe vote casting on the other hand, the PDs workforce subordinates selection a few of the other technical answers below learn about to extra basic problems. Boccia added:In my view, I would incline for a actually disbursed, permissionless resolution; on the other hand, I may just no longer make sure that this may be lifelike. Adopting the viewpoint of the State, a permissioned possibility turns out extra possible, however this will have to meet a algorithm about virtual vote casting as an example the right way to ensure truthful and impartial validators additionally in a personal community which, right now, does no longer exist in Italy. Were development an tool this is open to everyone, however we want regulations equivalent for everyone.No nation for ICOsItaly is a long way from being a few of the international locations website hosting the easiest numbers of ICOs, equivalent to the US, Singapore, the U.Okay. or Russia. Consistent with ICObench database, which has systematically accumulated knowledge about ICOs for the reason that summer season of 2015, on the finish of 2017, solely 3 initiatives had set their headquarters in Italy, they usually collected about $860,000 at the entire (in the similar length, 142 ICOs integrated within the U.S., elevating about $6.1 billion). Throughout the next 12 months, the collection of ICOs founded in Italy and the capital accumulated by way of them rose dramatically on the other hand, at a slower tempo when compared with different international locations. Consistent with the newest knowledge to be had, 40 ICOs set their house in Italy as of now, but bearing in mind the global score by way of price range collected, the rustic slid from the 49th place on the finish of 2017 to the 71th in March 2019 (by way of the best way, ICOs in Italy raised as much as $7.6 million, whilst the U.S. reached $7.four billion).A few of the better initiatives atmosphere their headquarters in Italy, solely two reached or overcame the purpose of $1 million. Alternatively, the volume exact collected was once very a long way from the utmost threshold those ICOs set (Native Global Forwarders accumulated 47% of the envisaged laborious cap, whilst Namacoin fulfilled solely Five%).By means of the best way, the image of the Italian ICOs can be significantly distorted if it didnt believe initiatives which might be de facto Italian, despite the fact that they seem like labelled differently within the reputable paperwork and statistics. Is that this the case, as an example, of the ICOs whose totality or overwhelming majority of the founders, height control and builders are Italian voters and that nonetheless set their headquarters in international locations that presented a trade or taxation atmosphere extra favorable than Italy.Switzerland, which stocks its southern border with essentially

thebreakingnewsheadlines 1 day ago Cryptocurrency Leave a comment 48 Views Ultimate month, stories surfaced on crypto mining analysis performed by way of tech conglomerate Cisco with the next headline: “School youngsters are the use of campus electrical energy to mine crypto.”Certainly, many scholars don’t have to fret about paying energy expenses, as according to their college housing contracts, which generally tend to hide electrical energy bills. That “unfastened” energy permits them to host cost-efficient mining rigs, the place the one expense is the true hardware. It virtually turns out too excellent to be true: Mining scholars obtain a passive source of revenue, which will probably quilt the acquisition of a couple of textbooks — and even pay for the entire semester and extra.On the other hand, there’s a catch: No electrical energy is in truth unfastened, and somebody in the long run has to pay the fee.Cisco’s safety researchers investigated cryptocurrency mining job throughout more than a few business verticals. The analysis was once performed with the corporate’s cloud safety platform Umbrella, which displays purchasers’ community connections to display screen malicious job, allegedly revealing incidents of crypto mining.In keeping with the findings, college campuses are the second-biggest miners of digital foreign money throughout business verticals at 22 p.c, moment most effective to the power and utilities sector, with about 34 p.c.As Cointelegraph reported, miner revenues started to wane in 2018 (the ultimate complete yr for statistics), due to the crypto iciness and its attendant worth drop. That made mining much less winning. However hash charges have persevered to extend, indicating that the worldwide mining pool continues to develop, whilst person miners come and cross.Cisco danger researcher Austin McBride defined the fad to PCMag, pronouncing that “you permit [the mining rig] working on your dorm room for 4 years, you stroll out of faculty with a large bite of exchange.”Whilst working mining rigs in dorm rooms, scholars purportedly keep away from electrical energy prices related to cryptocurrency mining profitability, stated McBride, including:“Mining issue for numerous cash could be very excessive at this time — because of this it prices extra for electrical energy and web than the cash in you’ll be able to produce from mining the ones cash. In the event you should not have to pay for the ones prices, then you’re in a truly excellent spot for creating wealth at the college’s dime.”Cointelegraph reached out to Cisco and Cisco Umbrella to explain which campuses had been monitored, however has but to obtain a reaction.  A equivalent document was once performed previous in March 2018, when cyber assault tracking company Vectra discovered that each intentional cryptocurrency mining and cryptojacking was once changing into extra prevalent on school campuses than in every other business.As according to Vectra, universities aren’t in a position to watch their networks as carefully as huge firms with high-budget IT departments, “at absolute best [advising] scholars on how to offer protection to themselves and the college by way of putting in running device patches and developing consciousness of phishing emails, suspicious internet sites and internet commercials.”Scholars who make the most of this “unfastened energy,” in flip, are “merely being opportunistic as the price of cryptocurrencies surged over the last yr,” Vectra’s weblog put up said. Matt Walmsley, Europe, Center East and Africa director at Vectra, advised Cointelegraph that, whilst the scope in their analysis was once world, he can’t divulge which universities participated within the learn about:“The knowledge was once supplied by way of from training institutions around the globe at the working out that any figuring out knowledge would stay nameless.”Subsequently, whilst it’s tough to pinpoint the new spots for varsity digital foreign money mining at the map, the phenomenon appears to be rather fashionable general. In keeping with the 2019 Vectra document issued previous this yr, “cryptocurrency mining has surged in reputation with scholars and criminals, in particular amongst universities with huge pupil populations.”Probably the most major issues about mining in college housing prerequisites is that it needs to be discreet — another way, the wardens may listen the noise and get started investigating. Mark D’Aria, founder and CEO of Bitpro, a New York-based set up and mining operation control company, advised Cointelegraph:“I think the majority of mining from school campuses is not from what you can bring to mind as mining ‘rigs’ — the ones large machines with a couple of GPUs [graphics processing units], function constructed for mining. ASICs [application-specific integrated circuits] also are without a doubt going to be extraordinarily uncommon just because they are so loud and sizzling that nobody goes to tolerate them of their dorm room for terribly lengthy. The scholar goes to want to provide an explanation for that, and he isn’t going to escape with it for lengthy.”As an alternative, lots of the mining appears to be coming from scholars’ outdated PCs, the Bitpro CEO steered. Significantly, informal machines may supply their house owners with a reasonable source of revenue even right through the present, bearish marketplace. For the reason that further electricity-related bills are coated by way of a third-party, in fact. In keeping with D’Aria:“A gaming rig with a unmarried excessive finish GPU may produce possibly $1/day. However even a monotonous computer may produce a couple of cents as neatly. The vital factor to acknowledge is that despite the fact that $1/day is small — in case you should not have to pay for electrical energy, there is not any explanation why for somebody with a gaming rig or quite robust computer *no longer* to mine. It is actually unfastened cash.”Additionally, producing cryptocurrency with a pc does no longer essentially require really extensive technical abilities and data. “It is extraordinarily simple to do with products and services equivalent to NiceHash [a crypto cloud mining marketplace], which may also be set to routinely mine when you are no longer the use of your PC like a display screen saver,” D’Aria added.Certainly, Tom (a pseudonym to handle confidentiality), a College of Mississippi pharmaceutical sciences pupil, advised Cointelegraph that he used NiceHash together with his gaming PC to mine Bitcoin for roughly two months, however quickly made up our minds to desert the speculation as a result of the regularly excessive workload and emerging GPU costs:“I used to be in a position to make about $120 USD if the cost of bitcoin had stayed at $15,000. With bitcoin lately round $four,000 USD it can be winning, making an allowance for I used to be getting unfastened electrical energy. On the other hand, as a result of the stress at the device, plus the overinflated costs of GPUs, I wouldn’t do it anymore.”Tom specified that, being a resident marketing consultant within the dormitory, he was once in a position to make inroads with the native repairs assistant. That allowed him to ensure that his flooring had enough air-con to host a miner:“It will be inconceivable to inform if I had my PC on always, particularly because it was once an enormous, 11- tale construction.”Tom’s room felt cold right through the iciness months, so further warmth was once in truth helpful. He stated, “I simply used my pc as a substitute of an area heater.”On the other hand, from time to time, mining scholars get uncovered. Ken (a pseudonym to handle confidentiality), an Arizona State College undergraduate who research carried out physics, confirmed Cointelegraph a screenshot of an alleged electronic mail from a college personnel member. In it, Ken was once being knowledgeable that the protection workforce “has detected a coin miner program” on two of his units.“We would really like you to both uninstall the techniques, or run an epidemic scan within the tournament that you simply had been unaware of those techniques, as that is indicative of malware to your units,” it said.Ken certainly was once the use of NiceHash on the time, as he showed to Cointelegraph. After consulting with fellow miners at the r/BitcoinMining subreddit, he made up our minds to make use of a digital non-public community (VPN) every time he was once mining, pronouncing: “I already had one, and I made certain that it grew to become on startup and the web kill transfer was once energetic so that they couldn’t observe me.”On the other hand, as soon as Ken had controlled to mine “a few hundred greenbacks,” NiceHash was once hacked, and the coed misplaced a big proportion of his budget, as he hadn’t but moved them to a non-public pockets.Chris Partridge is a computing safety graduate from the Rochester Institute of Era (RIT), who additionally mined cryptocurrency right through his time in school, beginning in 2015 and proceeding till mid-2016. “I used to be enthusiastic about Bitcoin and that gave the impression of an effective way to be told,” he advised Cointelegraph. His setup was once a little bit extra complicated in comparison with Tom and Ken, as he used “a pair” of Antminers, a BFL Monarch and a Prospero X1. Because of this, the volume of warmth produced by way of his apparatus was once considerably upper:“None of them [the mining rigs] had been remotely current-gen even on the time, and they all had been closely underclocked/undervolted/modded to be cooler and quieter. Dwelling up in Rochester [New York), the place it was once freezing always, we had our window open 24/7 (even right through blizzards!) and the miners identified into it, or else it turned into too sizzling in our residing spaces in no time. It was once a little bit of a pressure for my roommate and I, however he was once a excellent game about issues.”Partridge stated that he was once by no means stuck within the act, regardless of a few room tests that happened because of unrelated causes. “No person looked as if it would care,” he stated. “Particularly because it was once an overly small operation — I guess I got here off as a little bit eccentric, however no additional investigation was once precipitated.”Although it wasn’t a profit-focused undertaking for the previous RIT pupil, he walked away with round zero.four BTC, which he then bought for a hefty sum of $6,000. The income got here at simply the correct time: Partridge wanted money that might raise him thru to an internship. After spending the cash on common residing bills for a couple of months, he even had some left over for nonessential buying groceries:“I additionally purchased a Roomba, as a result of if there may be anything else I’ll spend income from magic web cash on, it is a Roomba.”There are even higher luck tales: Marco Streng, co-founder and CEO of Genesis Mining, a big cloud mining corporate whose farms are situated throughout a number of international locations, claims that he necessarily began his trade out of a dorm room again in 2013. He declined to specify which college he went to, on the other hand, pronouncing that it’s “the similar any place on the earth.”“There was once this sort of sauna environment in my 10-13 sq. meter room, and the noise was once truly loud,” he advised Cointelegraph. “We attempted to mitigate it by way of striking some pillows over the miner and put it nearer to the window to chill it down.”Streng stated that, whilst the uproar was once attracting consideration, his neighbors didn’t appear disturbed. “I imply, I discovered it traumatic, however it was once a trade-off for me,” he added. “I used to be excited, passionate, and there was once a cheap side — it created some cash.”Round 2014, Streng discovered that the native pupil group had began to actively arrange their very own mining rigs throughout campus. “The hearsay was once spreading, so it [mining] were given some traction,” he recalled. “The electrical energy invoice of the coed dorm went up rather considerably.”When crypto marketplace started rising and Streng’s job turned into increasingly more winning, he discovered that he may run “a couple of thousand of the ones machines,” organising a mining operation on an business scale.“That result in the advent of Genesis Mining, one of the crucial biggest mining firms,” Streng advised Cointelegraph. “I’m truly satisfied that I did that during my dorm and located that chance. Differently, it might by no means have come this some distance.”Whilst no college turns out to have a particular coverage in regard to cryptocurrency mining on its premises, in January of 2018, Stanford College issued a public caution towards crypto mining on campus, arguing that college assets “will have to no longer be used for private monetary achieve.” The caution additionally cited the college’s leader knowledge safety officer:“Cryptocurrency mining is maximum profitable when computing prices are minimized, which sadly has resulted in compromised techniques, misused college computing apparatus, and in my view owned mining units the use of campus energy.”Certainly, many universities appear to ban using their assets for private monetary achieve — together with those seen on this article. RIT’s code of behavior for pc use, as an example, states the next:“No member of the RIT group might use an RIT computing account or any communications apparatus this is owned or maintained by way of RIT to run a trade or industrial provider or to market it for a industrial group or undertaking. […] In keeping with different explicit insurance policies, contributors of the RIT group must no longer waste college assets or use them for private get advantages or for the advantage of a non-university entity.”On the other hand, no longer having explicit rulesets for cryptocurrency mining may in truth induce tax issues for academic establishments who (unwillingly or no longer) host such job on their premises. As Selva Ozelli, world tax lawyer and CPA, advised Cointelegraph:“For the reason that electrical energy is generally integrated in a pupil’s tuition or hire, Universities would want to set coverage as as to if they’re going to permit cryptocurrency mining on campus premises or no longer or whether or not scholars must be charged further for electric bills when it comes to cryptocurrency mining. If Universities don’t set correct coverage on this regard, they might matter themselves to tax issues. As a result of phase four, Q&A-Eight of Realize 2014-21 states that cryptocurrency mining which is handled as a provider job must be handled as abnormal source of revenue within the yr it’s mined, and the bills of mining — together with electric fees — deducted as incurred in accordance with the matching of source of revenue and bills.”  From a moral perspective, the location could also be rather complicated, and reviews range even amongst those that benefited from mining on campus.“I pay to have the room and because no particular main points in my contract punished overuse of electrical energy I figured I used to be positive, particularly since I might have had to make use of an area heater anyway as a result of scholars couldn’t keep watch over the temperatures in their very own rooms,” stated Tom from the College of Mississippi, denying that he was once within the mistaken for putting in place a mining rig in his room.Rochester Institute of Era’s Partridge was once extra crucial. “I do not consider it is moral to mine at scale on school campuses,” he advised Cointelegraph. “The electrical energy being ‘unfastened’ to me is not the similar because the electrical energy being unfastened, sadly.” The previous RIT pupil recalled that he burned round $200 whilst mining in his dormarty, “assuming they get lovely cast industrial electric charges.” He persevered:“Most of the people who declare that mining on campuses is moral do not take into accout crucial moment variable: this isn’t with out chance. Scholar housing is not designed to house huge amounts of digital apparatus, and could not suppress or another way include electric fires – that might simply result in large assets harm and lack of existence.”Streng, the Genesis Mining CEO, believes that, whilst scholars can give a contribution to the decentralized community by way of mining, they shouldn’t exploit the assets in their universities and tell the native management, if imaginable. “I believe it’s nice if a pupil needs to do it [mine in his/her room] and is fascinated with it,” he stated. “However in fact they’ve to pay their expenses.” He persevered:“The brand new side-effect of the entire cryptocurrency thought is that somebody residing in a small room can flip electrical energy to cash. There are lots of institutional setups — no longer most effective in training — when somebody is paying for the electrical energy of a particular house, whilst citizens need to pay a flat contribution regardless of how a lot electrical energy they eat. I believe the ones suppliers must pay attention to those chances now and that folks could make use of them. They must appreciate that and draft it into their agreements.”Subsequently, if universities proceed to in large part forget mining on their premises, the phenomenon is more likely to keep, permitting scholars to a minimum of earn some beer cash.“I will’t consider any school pupil goes to show down $30/month and even $five/month,” stated D’Aria of Bitpro. “Although they are coping with small quantities on a person foundation, dorm room mining is introducing cryptocurrencies to a complete technology of younger adults. It does not take them lengthy to determine how simple and helpful it’s to make use of one thing like Ethereum to separate the price of a 12 pack of natty ice — in particular when there is not any bank card observation their oldsters can control.” window.fbAsyncInit = serve as() FB.init(); FB.AppEvents.logPageView(); ; (serve as(d, s, identity)(record, ‘script’, ‘facebook-jssdk’)); !serve as(f,b,e,v,n,t,s) (window,record,’script’, ‘https://attach.fb.web/en_US/fbevents.js’); fbq(‘init’, ‘1922752334671725’); fbq(‘observe’, ‘PageView’); Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Like this:Like Loading... Related Estonia-based crypto company Paxful Inc. has been accused of defrauding Nigerian traders out of hundreds …Your email address will not be published. Required fields are marked * Notify me of follow-up comments by email. Notify me of new posts by email.

makes creating digital currency straightforward. Let's revisit this claim. When Alice wishes to pay Bob, she broadcasts the transaction to all bitcoin nodes. A transaction is simply a string: a statement encoding Alice's wish to pay Bob some value, signed by her. The eventual inclusion of this signed statement into the ledger by miners is what makes the transaction real. Note that this doesn't require Bob's participation in any way. But let's focus on what's not in the transaction: conspicuously absent are Alice and Bob's identities; instead, the transaction contains only their respective public keys. This is an important concept in bitcoin: public keys are the only kinds of identities in the system. Transactions transfer value from and to public keys, which are called addresses. In order to "speak for" an identity, you must know the corresponding secret key. You can create a new identity at any time by generating a new key pair, with no central authority or registry. You do not need to obtain a user name or inform others that you have picked a particular name. This is the notion of decentralized identity management. Bitcoin does not specify how Alice tells Bob what her pseudonym isthat is external to the system. Although radically different from most other payment systems today, these ideas are quite old, dating back to David Chaum, the father of digital cash. In fact, Chaum also made seminal contributions to anonymity networks, and it is in this context that he invented this idea. In his 1981 paper, "Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms,"9 he states: "A digital 'pseudonym' is a public key used to verify signatures made by the anonymous holder of the corresponding private key." The term blockchain has no standard technical definition but is a loose umbrella term used by various parties to refer to systems that bear varying levels of resemblance to bitcoin and its ledger. Now, having message recipients be known only by a public key presents an obvious problem: there is no way to route the message to the right computer. This leads to a massive inefficiency in Chaum's proposal, which can be traded off against the level of anonymity but not eliminated. Bitcoin is similarly exceedingly inefficient compared with centralized payment systems: the ledger containing every transaction is maintained by every node in the system. Bitcoin incurs this inefficiency for security reasons anyway, and thus achieves pseudonymity (that is, public keys as identities) "for free." Chaum took these ideas much further in a 1985 paper,11 where he presents a vision of privacy-preserving e-commerce based on pervasive pseudonyms, as well as "blind signatures," the key technical idea behind his digital cash. The public-keys-as-identities idea is also seen in b-money and bit gold, the two precursor essays to bitcoin discussed earlier. However, much of the work that built on Chaum's foundation, as well as Chaum's own later work on ecash, moved away from this idea. The cypherpunks were keenly interested in privacy-preserving communication and commerce, and they embraced pseudonyms, which they called nyms. But to them, nyms were not mere cryptographic identities (that is, public keys), but rather, usually email addresses that were linked to public keys. Similarly, Ian Goldberg's dissertation, which became the basis of much future work on anonymous communication, recognizes Chaum's idea but suggests that nyms should be human-memorable nicknames with certificates to bind them.20 Thus Bitcoin proved to be the most successful instantiation of Chaum's idea. Back to Top The Blockchain So far, this article has not addressed the blockchain, which, if you believe the hype, is bitcoin's main invention. It might come as a surprise to you that Nakamoto doesn't mention that term at all. In fact, the term blockchain has no standard technical definition but is a loose umbrella term used by various parties to refer to systems that bear varying levels of resemblance to bit-coin and its ledger. Discussing example applications that benefit from a blockchain will help clarify the different uses of the term. First, consider a database backend for transactions among a consortium of banks, where transactions are netted at the end of each day and accounts are settled by the central bank. Such a system has a small number of well-identified parties, so Nakamoto consensus would be overkill. An on-blockchain currency is not needed either, as the accounts are denominated in traditional currency. Linked time-stamping, on the other hand, would clearly be useful, at least to ensure a consistent global ordering of transactions in the face of network latency. State replication would also be useful: a bank would know that its local copy of the data is identical to what the central bank will use to settle its account. This frees banks from the expensive reconciliation process they must currently perform. Second, consider an asset-management application such as a registry of documents that tracks ownership of financial securities, or real estate, or any other asset. Using a blockchain would increase interoperability and decrease barriers to entry. We want a secure, global registry of documents, and ideally one that allows public participation. This is essentially what the timestamping services of the 1990s and 2000s sought to provide. Public blockchains offer a particularly effective way to achieve this today (the data itself may be stored off-chain, with only the metadata stored on-chain). Other applications also benefit from a timestamping or "public bulletin board" abstraction, most notably electronic voting. Let's build on the asset-management example. Suppose you want to execute trades of assets via the block-chain, and not merely record them there. This is possible if the asset is issued digitally on the blockchain itself, and if the blockchain supports smart contracts. In this instance, smart contracts solve the "fair exchange" problem of ensuring that payment is made if and only if the asset is transferred. More generally, smart contracts can encode complex business logic, provided that all necessary input data (assets, their prices, and so on) are represented on the blockchain. Blockchains are frequently presented as more secure than traditional registriesa misleading claim. This mapping of blockchain properties to applications allows us not only to appreciate their potential, but also to inject a much-needed dose of skepticism. First, many proposed applications of blockchains, especially in banking, don't use Nakamoto consensus. Rather, they use the ledger data structure and Byzantine agreement, which, as shown, date to the 1990s. This belies the claim that blockchains are a new and revolutionary technology. Instead, the buzz around blockchains has helped banks initiate collective action to deploy shared-ledger technology, like the parable of "stone soup." Bitcoin has also served as a highly visible proof of concept that the decentralized ledger works, and the Bitcoin Core project has provided a convenient code base that can be adapted as necessary. Second, blockchains are frequently presented as more secure than traditional registriesa misleading claim. To see why, the overall stability of the system or platform must be separated from endpoint securitythat is, the security of users and devices. True, the systemic risk of block-chains may be lower than that of many centralized institutions, but the endpoint-security risk of blockchains is far worse than the corresponding risk of traditional institutions. Block-chain transactions are near-instant, irreversible, and, in public block-chains, anonymous by design. With a blockchain-based stock registry, if a user (or broker or agent) loses control of his or her private keyswhich takes nothing more than losing a phone or getting malware on a computerthe user loses his or her assets. The extraordinary history of bitcoin hacks, thefts, and scams does not inspire much confidenceaccording to one estimate, at least 6% of bitcoins in circulation have been stolen at least once.39 Back to Top Concluding Lessons The history described here offers rich (and complementary) lessons for practitioners and academics. Practitioners should be skeptical of claims of revolutionary technology. As shown here, most of the ideas in bitcoin that have generated excitement in the enterprise, such as distributed ledgers and Byzantine agreement, actually date back 20 years or more. Recognize that your problem may not require any breakthroughsthere may be long-forgotten solutions in research papers. Academia seems to have the opposite problem, at least in this instance: a resistance to radical, extrinsic ideas. The bitcoin white paper, despite the pedigree of many of its ideas, was more novel than most academic research. Moreover, Nakamoto did not care for academic peer review and did not fully connect it to its history. As a result, academics essentially ignored bitcoin for several years. Many academic communities informally argued that Bitcoin could not work, based on theoretical models or experiences with past systems, despite the fact it was working in practice. We have seen repeatedly that ideas in the research literature can be gradually forgotten or lie unappreciated, especially if they are ahead of their time, even in popular areas of research. Both practitioners and academics would do well to revisit old ideas to glean insights for present systems. Bitcoin was unusual and successful not because it was on the cutting edge of research on any of its components, but because it combined old ideas from many previously unrelated fields. This is not easy to do, as it requires bridging disparate terminology, assumptions, and so on, but it is a valuable blueprint for innovation. Practitioners would benefit from being able to identify overhyped technology. Some indicators of hype: difficulty identifying the technical innovation; difficulty pinning down the meaning of supposedly technical terms, because of companies eager to attach their own products to the bandwagon; difficulty identifying the problem that is being solved; and finally, claims of technology solving social problems or creating economic/political upheaval. In contrast, academia has difficulty selling its inventions. For example, it's unfortunate that the original proof-of-work researchers get no credit for bitcoin, possibly because the work was not well known outside academic circles. Activities such as releasing code and working with practitioners are not adequately rewarded in academia. In fact, the original branch of the academic proof-of-work literature continues today without acknowledging the existence of bitcoin! Engaging with the real world not only helps get credit, but will also reduce reinvention and is a source of fresh ideas. Acknowledgments. Thanks to Adam Back, Andrew Miller, Edward Felten, Harry Kalodner, Ian Goldberg, Ian Grigg, Joseph Bonneau, Malte Mser, Mike Just, Neha Narula, Steven Goldfeder, and Stuart Haber for their valuable feedback. Back to Top References 1. Aspnes, J., et al. Exposing computationally challenged Byzantine imposters. Yale University Department of Computer Science, 2005; http://cs.yale.edu/publications/techreports/tr1332.pdf. 2. Back, A. 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Princeton University Press, 2016; http://bitcoinbook.cs.princeton.edu/. 37. Pass, R., et al. Analysis of the blockchain protocol in asynchronous networks. In Proceedings of the 2017 International Conference on the Theory and Applications of Cryptographic Techniques; https://link.springer.com/chapter/10.1007/978-3-319-56614-6_22. 38. Pinkas, B. and Sander, T. Securing passwords against dictionary attacks. In Proceedings of the Ninth ACM Conference on Computer and Communications Security, 2002, 161170; https://dl.acm.org/citation.cfm?id=586133. 39. Reuters. Mind your wallet: Why the underworld loves bitcoin, 2014; es-bitcoin.html. 40. Rivest, R.L. and Shamir, A. PayWord and MicroMint: Two simple micropayment schemes. In Proceedings of the 1996 International Workshop on Security Protocols. 41. Sirer, E.G. Bitcoin guarantees strong, not eventual, consistency. Hacking, Distributed, 2016; es-strong-not-eventual-consistency/. 42. Szabo, N. Smart contracts, 1994; ture/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html. 43. Szabo, N. Bit gold. Unenumerated, 2008; https://unenumerated.blogspot.com/2005/12/bit-gold.html. 44. Vishnumurthy, S., Chandrakumar, S. and Sirer, E.G. Karma: A secure economuc framework for P2P resource sharing. In Proceedings of the Workshop on the Economics of Peer-to-Peer Systems (Berkeley, CA, June 2003). 45. Wattenhofer, R. The Science of the Blockchain. Inverted Forest Publishing, 2016. Back to Top Authors Arvind Narayanan is an assistant professor of computer science at Princeton University. He leads the Princeton Web Transparency and Accountability Project to uncover how companies collect and use our personal information. Twitter @random_walker. Jeremy Clark is an assistant professor at the Concordia Institute for Information Systems Engineering. He has also worked with several municipalities on voting technology and testified to the Canadian Senate on bitcoin. Twitter @PulpSpy. Back to Top Sidebar: Sybil-Resistant Networks In his paper on Sybil attacks, John Douceur proposed that all nodes participating in a BFT protocol be required to solve hashcash puzzles. If a node were masquerading as N nodes, it would be unable to solve N puzzles in time, and the fake identities would be purged. Karma, an early peer-to-peer digital cash system, uses a hashcash-like puzzle to rate-limit nodes joining the Karma network and receiving credits for file sharing.44 A malicious node, however, could still obtain a moderate advantage over an honest node that claimed only a single identity. A follow-up paper in 20051 suggested honest nodes should instead mimic the behavior of malicious nodes and claim as many virtual identities as they computationally can afford to claim. With these virtual identities executing a BFT protocol, the assumption, "At most a fraction f of nodes are faulty" can be replaced with the assumption "The fraction of total computational power controlled by faulty nodes is at most f." Thus, it is no longer necessary to validate identities, and open peer-to-peer networks can run a BFT protocol. Bitcoin uses exactly this idea. But Nakamoto asks: What motivates nodes to perform computationally expensive proof of work? The answer requires a further leap: digital currency. Back to Top Sidebar: Smart Contracts A smart contract takes the idea of putting data in a secure ledger and extends it to computation. In other words, it is a consensus protocol for the correct execution of a publicly specified program. Users can invoke functions in these smart-contract programs, subject to any restrictions specified by the program, and the function code is executed in tandem by the miners. Users can trust the output without having to redo the computation and can write their own programs to act on the output of other programs. Smart contracts are especially powerful when combined with a cryptocurrency platform, because the programs in question can handle moneyown it, transfer it, destroy it, and, in some cases, even print it. Bitcoin implements a restrictive programming language for smart contracts. A "standard" transaction (that is, one that moves currency from one address to another) is specified as a short script in this language. Ethereum offers a more permissive and powerful language. The idea of smart contracts was proposed by Nick Szabo in 199442 and so named because he saw them as analogs of legal contracts, but with automated enforcement. (This view has been critiqued by Levy31 and Felten.16) Presciently, Szabo presented smart contracts as extensions of digital-cash protocols and recognized that Byzantine agreement and digital signatures (among others) could be used as building blocks. The success of cryptocurrencies has made smart contracts practical, and research on the topic has bloomed as well. For example, programming languages researchers have adapted their methods and tools to automatically discover bugs in smart contracts and to write verifiably correct ones. Back to Top Sidebar: Permissioned Blockchains While this article has emphasized that private or permissioned blockchains omit most of bitcoin's innovations, this is not meant to diminish the interesting work happening in this space. A permissioned blockchain places restrictions on who can join the network, write transactions, or mine blocks. In particular, if miners are restricted to a list of trustworthy participants, the proof of work can be dropped in favor of a more traditional BFT approach. Thus, much of the research is a rebirth of BFT that asks questions such as: Can we use hash trees to simplify consensus algorithms? What if the network can fail only in certain ways? Further, there are important considerations around identity and public-key infrastructure, access control, and confidentiality of the data stored on the blockchain. These issues largely do not arise in public blockchain settings, nor are they studied in the traditional BFT literature. Finally, there is also the engineering work of scaling blockchains for high throughput and adapting them to various applications such as supply-chain management and financial technology. Copyright held by owners/authors. Request permission to (re)publish from the owner/author The Digital Library is published by the Association for Computing Machinery. Copyright2017 ACM, Inc. No entries found Sign In for Full Access User Name Password Forgot Password? Create an ACM Web Account Sign In Article Contents: Introduction The Ledger Proof Of Work Putting It All Together The Blockchain Concluding Lessons References Authors Sidebar: Sybil-Resistant Networks Sidebar: Smart Contracts Sidebar: Permissioned Blockchains More News & opinions The Perfect Dose Joe Dysart Want Awesome Robots? You'll Have to Best These Challenges Wired End Anonymous Refereeing Bertrand Meyer ACM Resources Windows XP Professional: An Introduction CoursesHome/Magazine Archive/December 2017 (Vol. 60, No. 12)/Bitcoin's Academic Pedigree/Full Text Practice Bitcoin's Academic Pedigree By Arvind Narayanan, Jeremy Clark Communications of the ACM, Vol. 60 No. 12, Pages 36-45 10.1145/3132259 Comments View as: Print Mobile App ACM Digital Library Full Text (PDF) In the Digital Edition Share: Send by email Share on reddit Share on StumbleUpon Share on Tweeter Share on Facebook Share Credit: Inked Pixels If you have read about bitcoin in the press and have some familiarity with academic research in the field of cryptography, you might reasonably come away with the following impression: Several decades' worth of research on digital cash, beginning with David Chaum,10,12 did not lead to commercial success because it required a centralized, bank-like server controlling the system, and no banks wanted to sign on. Along came bitcoin, a radically different proposal for a decentralized cryptocurrency that did not need the banks, and digital cash finally succeeded. Its inventor, the mysterious Satoshi Nakamoto, was an academic outsider, and bitcoin bears no resemblance to earlier academic proposals. This article challenges that view by showing nearly all of the technical components of bitcoin originated in the academic literature of the 1980s and 1990s (see Figure 1). This is not to diminish Nakamoto's achievement but to point out he stood on the shoulders of giants. Indeed, by tracing the origins of the ideas in bitcoin, we can zero in on Nakamoto's true leap of insightthe specific, complex way in which the underlying components are put together. This helps explain why bitcoin took so long to be invented. Readers already familiar with how bitcoin works may gain a deeper understanding from this historical presentation. (For an introduction, see Bitcoin and Cryptocurrency Technologies.36) Bitcoin's intellectual history also serves as a case study demonstrating the relationships among academia, outside researchers, and practitioners, and offers lessons on how these groups can benefit from one another. Figure 1. Chronology of key ideas found in bitcoin. Back to Top The Ledger If you have a secure ledger, the process to leverage it into a digital payment system is straightforward. For example, if Alice sends Bob $100 by PayPal, then PayPal debits $100 from Alice's account and credits $100 to Bob's account. This is also roughly what happens in traditional banking, although the absence of a single ledger shared between banks complicates things. This idea of a ledger is the starting point for understanding bitcoin. It is a place to record all transactions that happen in the system, and it is open to and trusted by all system participants. Bitcoin converts this system for recording payments into a currency. Whereas in banking, an account balance represents cash that can be demanded from the bank, what does a unit of bitcoin represent? For now, assume that what is being transacted holds value inherently. How can you build a ledger for use in an environment like the Internet where participants may not trust each other? Let's start with the easy part: the choice of data structure. There are a few desirable properties. The ledger should be immutable or, more precisely, append only: you should be able to add new transactions but not remove, modify, or reorder existing ones. There should also be a way to obtain a succinct cryptographic digest of the state of the ledger at any time. A digest is a short string that makes it possible to avoid storing the entire ledger, knowing that if the ledger were tampered with in any way, the resulting digest would change, and thus the tampering would be detected. The reason for these properties is that unlike a regular data structure that is stored on a single machine, the ledger is a global data structure collectively maintained by a mutually untrusting set of participants. This contrasts with another approach to decentralizing digital ledgers,7,13,21 in which many participants maintain local ledgers and it is up to the user querying this set of ledgers to resolve any conflicts. Linked timestamping. Bitcoin's ledger data structure is borrowed, with minimal modifications, from a series of papers by Stuart Haber and Scott Stornetta written between 1990 and 1997 (their 1991 paper had another co-author, Dave Bayer).5,22,23 We know this because Nakamoto says so in his bitcoin white paper.34 Haber and Stornetta's work addressed the problem of document timestampingthey aimed to build a "digital notary" service. For patents, business contracts, and other documents, one may want to establish that the document was created at a certain point in time, and no later. Their notion of document is quite general and could be any type of data. They do mention, in passing, financial transactions as a potential application, but it was not their focus. In a simplified version of Haber and Stornetta's proposal, documents are constantly being created and broadcast. The creator of each document asserts a time of creation and signs the document, its timestamp, and the previously broadcast document. This previous document has signed its own predecessor, so the documents form a long chain with pointers backwards in time. An outside user cannot alter a timestamped message since it is signed by the creator, and the creator cannot alter the message without also altering the entire chain of messages that follows. Thus, if you are given a single item in the chain by a trusted source (for example, another user or a specialized timestamping service), the entire chain up to that point is locked in, immutable, and temporally ordered. Further, if you assume the system rejects documents with incorrect creation times, you can be reasonably assured that documents are at least as old as they claim to be. At any rate, bit-coin borrows only the data structure from Haber and Stornetta's work and reengineers its security properties with the addition of the proof-of-work scheme described later in this article. In their follow-up papers, Haber and Stornetta introduced other ideas that make this data structure more effective and efficient (some of which were hinted at in their first paper). First, links between documents can be created using hashes rather than signatures; hashes are simpler and faster to compute. Such links are called hash pointers. Second, instead of threading documents individuallywhich might be inefficient if many documents are created at approximately the same timethey can be grouped into batches or blocks, with documents in each block having essentially the same time-stamp. Third, within each block, documents can be linked together with a binary tree of hash pointers, called a Merkle tree, rather than a linear chain. Incidentally, Josh Benaloh and Michael de Mare independently introduced all three of these ideas in 1991,6 soon after Haber and Stornetta's first paper. Merkle trees. Bitcoin uses essentially the data structure in Haber and Stornetta's 1991 and 1997 papers, shown in simplified form in Figure 2 (Nakamoto was presumably unaware of Benaloh and de Mare's work). Of course, in bitcoin, transactions take the place of documents. In each block's Merkle tree, the leaf nodes are transactions, and each internal node essentially consists of two pointers. This data structure has two important properties. First, the hash of the latest block acts as a digest. A change to any of the transactions (leaf nodes) will necessitate changes propagating all the way to the root of the block, and the roots of all following blocks. Thus, if you know the latest hash, you can download the rest of the ledger from an untrusted source and verify that it has not changed. A similar argument establishes another important property of the data structurethat is, someone can efficiently prove to you that a particular transaction is included in the ledger. This user would have to send you only a small number of nodes in that transaction's block (this is the point of the Merkle tree), as well as a small amount of information for every following block. The ability to efficiently prove inclusion of transactions is highly desirable for performance and scalability. Figure 2. The ledger data structure in linked timestamping. Merkle trees, by the way, are named for Ralph Merkle, a pioneer of asymmetric cryptography who proposed the idea in his 1980 paper.33 His intended application was to produce a digest for a public directory of digital certificates. When a website, for example, presents you with a certificate, it could also present a short proof that the certificate appears in the global directory. You could efficiently verify the proof as long as you know the root hash of the Merkle tree of the certificates in the directory. This idea is ancient by cryptographic standards, but its power has been appreciated only of late. It is at the core of the recently implemented Certificate Transparency system.30 A 2015 paper proposes CONIKS, which applies the idea to directories of public keys for end-to-end encrypted emails.32 Efficient verification of parts of the global state is one of the key functionalities provided by the ledger in Ethereum, a new cryptocurrency. Bitcoin may be the most well-known real-world instantiation of Haber and Stornetta's data structures, but it is not the first. At least two companiesSurety starting in the mid-1990s and Guardtime starting in 2007offer document timestamping services. An interesting twist present in both of these services is an idea mentioned by Bayer, Haber, and Stornetta,5 which is to publish Merkle roots periodically in a newspaper by taking out an ad. Figure 3 shows a Merkle root published by Guardtime. Figure 3. Guardtime Merkle root published in newspaper. Byzantine fault tolerance. Of course, the requirements for an Internet currency without a central authority are more stringent. A distributed ledger will inevitably have forks, which means that some nodes will think block A is the latest block, while other nodes will think it is block B. This could be because of an adversary trying to disrupt the ledger's operation or simply because of network latency, resulting in blocks occasionally being generated near-simultaneously by different nodes unaware of each other's blocks. Linked timestamping alone is not enough to resolve forks, as was shown by Mike Just in 1998.26 A different research field, fault-tolerant distributed computing, has studied this problem, where it goes by different names, including state replication. A solution to this problem is one that enables a set of nodes to apply the same state transitions in the same ordertypically, the precise order does not matter, only that all nodes are consistent. For a digital currency, the state to be replicated is the set of balances, and transactions are state transitions. Early solutions, including Paxos, proposed by Turing Award winner Leslie Lamport in 1989,28,29 consider state replication when communication channels are unreliable and when a minority of nodes may exhibit certain "realistic" faults, such as going offline forever or rebooting and sending outdated messages from when it first went offline. A prolific literature followed with more adverse settings and efficiency trade-offs. A related line of work studied the situation where the network is mostly reliable (messages are delivered with bounded delay), but where the definition of "fault" was expanded to handle any deviation from the protocol. Such Byzantine faults include both naturally occurring faults as well as maliciously crafted behaviors. They were first studied in a paper also by Lamport, cowritten with Robert Shostak and Marshall Pease, as early as 1982.27 Much later, in 1999, a landmark paper by Miguel Castro and Barbara Liskov introduced practical Byzantine fault tolerance (PBFT), which accommodated both Byzantine faults and an unreliable network.8 Compared with linked time-stamping, the fault-tolerance literature is enormous and includes hundreds of variants and optimizations of Paxos, PBFT, and other seminal protocols. Virtually all fault-tolerant systems assume that a majority or supermajority of nodes in the system are both honest and reliable. In his original white paper, Nakamoto does not cite this literature or use its language. He uses some concepts, referring to his protocol as a consensus mechanism and considering faults both in the form of attackers, as well as nodes joining and leaving the network. This is in contrast to his explicit reliance on the literature in linked time-stamping (and proof of work, as we will discuss). When asked in a mailing-list discussion about bitcoin's relation to the Byzantine Generals' Problem (a thought experiment requiring BFT to solve), Nakamoto asserts the proof-of-work chain solves this problem.35 In the following years, other academics have studied Nakamoto consensus from the perspective of distributed systems. This is still a work in progress. Some show that bitcoin's properties are quite weak,45 while others argue that the BFT perspective does not do justice to bitcoin's consistency properties.41 Another approach is to define variants of well-studied properties and prove that bitcoin satisfies them.19 Recently these definitions were substantially sharpened to provide a more standard consistency definition that holds under more realistic assumptions about message delivery.37 All of this work, however, makes assumptions about "honest," that is, procotol-compliant, behavior among a subset of participants, whereas Nakamoto suggests that honest behavior need not be blindly assumed, because it is incentivized. A richer analysis of Nakamoto consensus accounting for the role of incentives does not fit cleanly into past models of fault-tolerant systems. Back to Top Proof Of Work Virtually all fault-tolerant systems assume that a strict majority or supermajority (for example, more than half or two-thirds) of nodes in the system are both honest and reliable. In an open peer-to-peer network, there is no registration of nodes, and they freely join and leave. Thus an adversary can create enough Sybils, or sockpuppet nodes, to overcome the consensus guarantees of the system. The Sybil attack was formalized in 2002 by John Douceur,14 who turned to a cryptographic construction called proof of work to mitigate it. The origins. To understand proof of work, let's turn to its origins. The first proposal that would be called proof of work today was created in 1992 by Cynthia Dwork and Moni Naor.15 Their goal was to deter spam. Note that spam, Sybil attacks, and denial of service are all roughly similar problems in which the adversary amplifies its influence in the network compared to regular users; proof of work is applicable as a defense against all three. In Dwork and Naor's design, email recipients would process only those email messages that were accompanied by proof that the sender had performed a moderate amount of computational workhence, "proof of work." Computing the proof would take perhaps a few seconds on a regular computer. Thus, it would pose no difficulty for regular users, but a spammer wishing to send a million email messages would require several weeks, using equivalent hardware. Note that the proof-of-work instance (also called a puzzle) must be specific to the email, as well as to the recipient. Otherwise, a spammer would be able to send multiple messages to the same recipient (or the same message to multiple recipients) for the cost of one message to one recipient. The second crucial property is that it should pose minimal computational burden on the recipient; puzzle solutions should be trivial to verify, regardless of how difficult they are to compute. Additionally, Dwork and Naor considered functions with a trapdoor, a secret known to a central authority that would allow the authority to solve the puzzles without doing the work. One possible application of a trapdoor would be for the authority to approve posting to mailing lists without incurring a cost. Dwork and Naor's proposal consisted of three candidate puzzles meeting their properties, and it kicked off a whole research field, to which we will return. Hashcash. A very similar idea called hashcash was independently invented in 1997 by Adam Back, a postdoctoral researcher at the time who was part of the cypherpunk community. Cypher-punks were activists who opposed the power of governments and centralized institutions, and sought to create social and political change through cryptography. Back was practically oriented: he released hashcash first as software,2 and five years later in 2002 released an Internet draft (a standardization document) and a paper.4 Hashcash is much simpler than Dwork and Naor's idea: it has no trapdoor and no central authority, and it uses only hash functions instead of digital signatures. It is based on a simple principle: a hash function behaves as a random function for some practical purposes, which means the only way to find an input that hashes to a particular output is to try various inputs until one produces the desired output. Further, the only way to find an input that hashes into an arbitrary set of outputs is again to try hashing different inputs one by one. So, if I challenged you to find an input whose (binary) hash value begins with 10 zeros, you would have to try numerous inputs, and you would find that each output had a 1/210 chance of beginning with 10 zeros, which means that you would have to try on the order of 210 inputs, or approximately 1,000 hash computations. As the name suggests, in hashcash Back viewed proof of work as a form of cash. On his webpage he positioned it as an alternative to David Chaum's DigiCash, which was a system that issued untraceable digital cash from a bank to a user.3 He even made compromises to the technical design to make it appear more cashlike. Later, Back made comments suggesting that bit-coin was a straightforward extension of hashcash. Hashcash is simply not cash, however, because it has no protection against double spending. Hashcash tokens cannot be exchanged among peers. Meanwhile, in the academic scene, researchers found many applications for proof of work besides spam, such as preventing denial-of-service at-tacks,25 ensuring the integrity of Web analytics,17 and rate-limiting password guessing online.38 Incidentally, the term proof of work was coined only in 1999 in a paper by Markus Jakobsson and Ari Juels, which also includes a nice survey of the work up until that point.24 It is worth noting that these researchers seem to have been unaware of hashcash but independently started to converge on hash-based proof of work, which was introduced in papers by Eran Gabber et al.18 and by Juels and Brainard.25 (Many of the terms used throughout this paragraph did not become standard terminology until long after the papers in question were published.) Proof of work and digital cash: A catch-22. You may know that proof of work did not succeed in its original application as an anti-spam measure. One possible reason is the dramatic difference in the puzzle-solving speed of different devices. That means spammers will be able to make a small investment in custom hardware to increase their spam rate by orders of magnitude. In economics, the natural response to an asymmetry in the cost of production is tradethat is, a market for proof-of-work solutions. But this presents a catch-22, because that would require a working digital currency. Indeed, the lack of such a currency is a major part of the motivation for proof of work in the first place. One crude solution to this problem is to declare puzzle solutions to be cash, as hashcash tries to do. More coherent approaches to treating puzzle solutions as cash are found in two essays that preceded bit-coin, describing ideas called b-money13 and bit gold43 respectively. These proposals offer timestamping services that sign off on the creation (through proof of work) of money, and once money is created, they sign off on transfers. If disagreement about the ledger occurs among the servers or nodes, however, there isn't a clear way to resolve it. Letting the majority decide seems to be implicit in both authors' writings, but because of the Sybil problem, these mechanisms are not very secure, unless there is a gatekeeper who controls entry into the network or Sybil resistance is itself achieved with proof of work. Back to Top Putting It All Together Understanding all these predecessors that contain pieces of bitcoin's design leads to an appreciation of the true genius of Nakamoto's innovation. In bit-coin, for the first time, puzzle solutions don't constitute cash by themselves. Instead, they are merely used to secure the ledger. Solving proof of work is performed by specialized entities called miners (although Nakamoto underestimated just how specialized mining would become). Miners are constantly in a race with each other to find the next puzzle solution; each miner solves a slightly different variant of the puzzle so that the chance of success is proportional to the fraction of global mining power that the miner controls. A miner who solves a puzzle gets to contribute the next batch, or block, of transactions to the ledger, which is based on linked timestamping. In exchange for the service of maintaining the ledger, a miner who contributes a block is rewarded with newly minted units of the currency. With high likelihood, if a miner contributes an invalid transaction or block, it will be rejected by the majority of other miners who contribute the following blocks, and this will also invalidate the block reward for the bad block. In this way, because of the monetary incentives, miners ensure each other's compliance with the protocol. Bitcoin neatly avoids the double-spending problem plaguing proof-of-work-as-cash schemes because it eschews puzzle solutions themselves having value. In fact, puzzle solutions are twice decoupled from economic value: the amount of work required to produce a block is a floating parameter (proportional to the global mining power), and further, the number of bitcoins issued per block is not fixed either. The block reward (which is how new bitcoins are minted) is set to halve every four years (in 2017, the reward is 12.5 bitcoins/block, down from 50 bitcoins/block). Bit-coin incorporates an additional reward schemenamely, senders of transactions paying miners for the service of including the transaction in their blocks. It is expected the market will determine transaction fees and miners' rewards. Nakamoto's genius, then, was not any of the individual components of bitcoin, but rather the intricate way in which they fit together to breathe life into the system. The timestamping and Byzantine agreement researchers didn't hit upon the idea of incentivizing nodes to be honest, nor, until 2005, of using proof of work to do away with identities. Conversely, the authors of hashcash, b-money, and bit gold did not incorporate the idea of a consensus algorithm to prevent double spending. In bitcoin, a secure ledger is necessary to prevent double spending and thus ensure that the currency has value. A valuable currency is necessary to reward miners. In turn, strength of mining power is necessary to secure the ledger. Without it, an adversary could amass more than 50% of the global mining power and thereby be able to generate blocks faster than the rest of the network, double-spend transactions, and effectively rewrite history, overrunning the system. Thus, bitcoin is bootstrapped, with a circular dependence among these three components. Nakamoto's challenge was not just the design, but also convincing the initial community of users and miners to take a leap together into the unknownback when a pizza cost 10,000 bitcoins and the network's mining power was less than a trillionth of what it is today. Public keys as identities. This article began with the understanding that a secure ledger