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PBOC Researcher: Can Cryptocurrency & Central Banks Coexist?

PBOC Researcher:
Can Cryptocurrency & Central Banks Coexist?

Yao Qian works in the technology department of People's Bank of China, the country's central bank and financial market regulator. Qian discusses the relationship between digital currencies and bank accounts, proposing a design concept where bank accounts and digital currency wallets coexist.

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While technological direction, risk control and security measures are all important, the effectiveness of digital currency ultimately relies on its successful application. For a digital fiat currency (DFC) to show vitality and supplement or even replace traditional currency, it has to be user friendly and well received by the public. Currently, the issuance of fiat currency in China follows the 'central bank-commercial bank' system, and most of the social and economic activities are based on the commercial bank account system.

Therefore, if a digital currency can leverage existing IT infrastructure with a variety of applications and services, the costs of promoting digital currency would be significantly reduced and its use would be more convenient and flexible, facilitating the wide adoption of digital currency by the public. In addition, the incorporation of digital currency into existing applications would generate more diversified scenarios, which would contribute to a greater competitiveness of digital currency, providing better services.

Breaking ground

The most straightforward way to leverage the bank account system is to expand the scope of central bank's balance sheet. In fact, claims on a central bank of commercial banks and other financial institutions in the form of central bank deposits have already been digitized. However, should the central bank provide such services to broader counterparties? Should non-financial institutions such as households be allowed to open accounts at the central bank?

These questions have triggered a lot of discussions. The Bank of England, the European Central Bank (ECB) and the Sveriges Riksbank have already studied this topic. Ben Broadbent, deputy governor of the Bank of England, has pointed out the concerns of commercial banks who worry that it would result in a transfer of deposits from commercial banks to the central bank, thus causing the entire banking sector to shrink. In fact, this is also a common concern of the regulators. Zhou Xiaochuan, governor of the People's Bank of China (PBoC), made an incisive yet illuminating comment on this issue, stating:

"The technological route of digital currency can be either based on bank account system (account-based) or not based on bank account system (non-account-based), and the two approaches may co-exist and operate at different layers."

However, there are various interpretations on how to implement the design idea. I would like to share some of my thoughts on this.

Digital currency attributes

To offset the shock to the current banking system imposed by an independent digital currency system (and to protect the investment made by commercial banks on infrastructure), it is possible to incorporate digital currency wallet attributes into the existing commercial bank account system so that electronic currency and digital currency are managed under the same account. The management of digital currency and that of electronic currency have some similarities in areas such as account usage, identity authentication and money transfer, but there are also differences.

Digital currency should be managed in compliance with the standards on wallet design specified by the central bank. The wallet is similar to a safe box which is managed by the bank based on an agreement with the customer (eg it requires both keys from the customer and the bank to open the safe box). All the attributes of digital currency and cryptocurrency would be preserved to enable customized application in the future.One of the merits of the aforementioned approach is that it leverages the current 'central bank–commercial bank' system for currency issuance.

Digital currency, categorized into M0 (a measure of money supply in a central bank), is the liability of the currency-issuing bank (referred to as the issuing bank) and is not on the balance sheet of the bank providing the account (referred to as the account bank). The approach would not lead to the commercial banks being channelized or marginalized because customers and their accounts are still managed by the account bank. Unlike money transfer, digital currency does not completely rely on bank accounts and the ownership of digital currency can be verified directly by the issuing bank, so as to realize peer-to-peer cash transaction via

Digital Currency Wallet on user's end.

Two types of issuance

The issuing bank could be the central bank or banks authorized by the central bank (as in the Hong Kong dollar issuance model, for example). Determining which model to follow should be based on an actual situation. This article is only for the purpose of academic discussions. Below is an elaboration on the two models. In the first one, the central bank is the only issuer of digital currency, and in the second one, banks are authorized by the

Central Bank to issue Digital Currency.

It should be pointed out that the issuing banks are interconnected with the central bank and among themselves on an infrastructure designed by the central bank. Whether the infrastructure should be migrated to a distributed ledger

Architecture would be a huge topic for the Industry.

Designing a new kind of wallet

To follow the customer-centric strategy of commercial banks, digital currency wallet ID fields could be added to the bank account to enable the account-based and non-account-based models to co-exist and operate at different layers. The wallet serves as a safe box and is not involved in activities such as day-end counting and reconciliation, so as to minimize the impact on the existing core banking system.

The ownership verification of digital currency relies on the issuing bank. The combination of traditional bank account and digital currency can significantly enhance the bank's KYC and AML capabilities. The digital currency wallet should be designed in compliance with standards specified by the central bank. The wallet at the bank end is 'lighter', as it only provides security control measures and features at the account level. The wallet offered by the application service providers at the user end would be 'heavier', as the functions of such wallet would extend to the presentation and application layers. At the user end, the role of smart contracts can be played to the fullest and it would also become one of the core

Competitive Advantages of the Application Service Providers.

Wallets meet accounts

Imagine a scenario where earmarked subsidy is distributed by a central government authority to enterprises or individuals through multiple levels of government. It would be very difficult to track the distribution of the money in the traditional way because it heavily relies on data reported by the local governments at various levels, which usually leads to mis-match between information and cash flow due to poor execution or the lack of procedural compliance. With the traceability of digital currency and support from access management of smart contracts, the authority would be able to directly oversee the distribution status without relying on other parties. Misappropriation on the part of local governments would be prevented and the money would be assured for dedicated purposes.

If digital currency wallet attributes are not embedded into the bank account system, government agencies at various levels and all the beneficiaries would have to activate and use digital wallets, which would make the adoption of digital currency very complicated as it requires the selection of physical media of digital wallet and the involvement of various parties. Moreover, the central bank would have to deal with users directly. On the contrary, by leveraging the com And by using existing accounts, the user experience would remain the same in a sense that users can enjoy digital currency service through existing channels such as bank counters,

Online Banking and Mobile Banking.

Summary

In a digitalized world, the economic and financial implications of the digits should by no means be confused simply because they are presented in the same numeral form. The same digits may represent different types of assets – a notion that we should keep in mind when designing digital currency. In terms of the conversion of physical currency into M1 or M2, it's easy to distinguish between physical form and digital form. However, the digital M0 money supply may make people ignore such a distinction. Does the faster conversion between digital assets mean that the distinctions between different types of digital assets are disappearing?

Fan Yifei, vice governor of PBoC, once wrote:

"Digital fiat currency would certainly be influenced by [the] existing payment system and information technologies, but it should be distinguished from [the] current payment system so as to focus on service delivery and play its role in replacing traditional currency. Theoretically, the payment system mainly deals with the portion of current deposits in 'broad money', while the digital currency serves as part of M0 money supply."

By incorporating digital currency attributes into the commercial bank account system, the DFC is integrated into the 'central bank-commercial bank' system by leveraging existing financial infrastructure. More importantly, this approach takes into account the role of digital M0 in commercial banking system and enables digital currency to either operate independently or run in an environment where bank account and digital wallet co-exist and operate at different layers.

This approach ensures clear division of duties and clarifies roles of different parties, where the issuing banks are responsible only for digital currency itself, the account banks conduct specific business and the application service providers enable the realization of functions. With the adoption of other measures, for example collecting management fees (which practically means negative interest rate), the emergence of 'narrow banking' would be less possible.

The incorporation of digital currency attributes is also an innovative step for the commercial bank account system. Commercial banks would be able to not only provide digital currency services based on existing infrastructure but also explore new service models that leverage features of digital currency, which will enhance their service quality and competitiveness. This article is only a beginning of a series of discussions.

Further studies may focus on standards of wallet design with possible questions to think about as follows:

How to set differentiated currency usage cost and asset pricing policies so as to strike a balance among banknotes, DFC and commercial bank deposits during the transition period?
How to build an ecosystem that involves the central bank, issuing banks, commercial banks, wallet service providers, payment service providers and digital currency users?

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

$25 Billion in 30 Days: Are Cryptocurrencies in a Bubble?

$25 Billion in 30 Days:
Are Cryptocurrencies in a Bubble?

The combined market capitalization of all public cryptocurrencies

has surged nearly 80% over the last month, as more than $20bn worth of new investment dollars has flooded the nascent market. In roughly 30 days alone, the market cap for experimental blockchain-based cryptographic assets has ballooned from $27.8bn to $49.5bn, according to data from CoinMarketCap, with the strongest gains observed outside of the market's historical leader, bitcoin.

A closer look reveals the total market cap of so-called 'altcoins', cryptographic tokens that seek to serve alternative use cases to bitcoin, has surged to $23.5bn, up more than 600% from just over $3bn in early March. Amid this sharp rally, some market observers have expressed concerns that the asset class may have entered a speculative bubble. When supporting his argument, Jacob Eliosoff, a trader who runs a cryptocurrency fund, pointed to not only to the price gains, but also the fact that so many cryptocurrencies — including those that haven't seen technical or business progress — have risen in value.

Eliosoff told CoinDesk:

"I've been making the bubble argument for weeks. Doge, Dash, Litecoin, Stellar, Gnosis … practically every coin has surged."

He further cautioned that this development is "a sign of unthinking buyers that will sell as soon as the tide turns." Daniel Masters, director of the regulated investment vehicle Global Advisors Bitcoin Investment Fund (GABI), offered similar sentiment, emphasizing that even cryptocurrencies with smaller market caps — like litecoin, ether, namecoin and ripple — have all experienced strong gains over the last few months. He told CoinDesk that he believes "sentiment [is] too strong," noting that between this and record prices for cryptocurrencies, a bubble may be forming.

More room to grow

While the aforementioned analysts provided cautious viewpoints, other market observers were more optimistic, asserting that cryptocurrency prices have significant room to appreciate despite current prices. Harry Yeh, the managing partner of Binary Financial, took a bullish slant, telling CoinDesk that "there's still quite a ways to move" as more investors take note of big gains in the sector. Tim Enneking, chairman of Crypto Currency Fund, also spoke to the market's potential. "I would agree that prices have increased too far too fast, but I don't think it's a serious problem — more like a buying opportunity," he said. He elaborated on this statement, pointing out that it is challenging to determine the "true value" of a cryptocurrency: "I'm not sure I would label it a bubble, at least not yet. It's quite difficult to definitively state what the intrinsic value is or should be of an altcoin,"

he said, adding:

"Property is worth what people are willing to pay for it."

Rising OTC trading

One strong indicator of the bullish sentiment is robust trading. While transaction volume for many of the digital assets listed on Coinmarketcap has risen, over-the-counter (OTC) trading firms have also reported an increase in activity. Martin Garcia, vice president of Genesis Global Trading, noted that his New York-based firm is experiencing such an improvement. "Our new applications are up significantly, and old clients are circling back as well," Garcia said. Ryan Rabaglia, head trader for Octagon Strategy, expressed a similar sentiment.

"Our desk has had [a threefold] volume increase over the last few months and over the last few weeks we're onboarding new counterparties at a record rate," he said. Finally, Rabaglia spoke to the changing demands of his customers, emphasizing that while bitcoin and ether are still the "hottest names," his trading desk has repeatedly received requests for trades involving lesser-known alternative cryptocurrencies such as ZEC, DASH, ETC and XRP. Ultimately, he characterized the current market as one with abundant opportunities for his business.

He concluded:

"Up to this point we've dabbled in each and are considering dedicating more resources if the demand persists."

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Cryptocurrency â Looking Ahead from May 2017

Cryptocurrency –
Looking Ahead from May 2017

For cryptocurrency enthusiasts, developers and investors,

the first half of 2017 has been nothing but exciting. Very few people would have predicted the trends that we are now seeing today: a vibrant and rapidly growing altcoin market, massive all time highs for both Bitcoin and Ethereum and an initial coin offering (ICO) crowdfunding mechanism that is creating enormous investor hype. Among all of this noise are a number of very interesting developments. These developments could indicate what’s to come in the second half of 2017, and this article aims to summarize events so far and what may be to come. Whatever your role in the cryptocurrency space, this piece should serve as some inspiration as to where to look next.

Ripple — Bitcoin for Banks

ripple logo

The popularity of Bitcoin’s blockchain stems from its ability to circumvent banks and allow users to engage in peer to peer transactions without authority; creating an enormous array of applications for Bitcoin gambling and dark net markets, as well as limitless “white hat” models. This ideology is more powerful than ever today, but the introduction of Ripple in 2013 has demonstrated that banks themselves can be revolutionized by overhauling their systems to use blockchain-based payments.

Ripple is unlike most other cryptocurrencies, in that it operates on a private or “consortium” blockchain, whereby the nodes (transaction verifiers) are controlled by trusted financial institutions that have been vetted to join the network — on the contrary, anyone in the world is free to join and use the Bitcoin network. The Ripple tokens (XRP) power international transactions on the network, whether that’s fiat to fiat, crypto to crypto or a mix of the two — with currency exchange conversions happening on the fly. Ripple allows banks to reduce global (and domestic) payment times from days and weeks down to seconds, with layers of transparency that are unprecedented in the traditional banking sector.

Despite being a private blockchain, anyone in the world is able to purchase XRP, and with a fixed supply of 100bn, scarcity may play an important role in the future price of XRP. This scarcity has also been compounded by the founding team of Ripple agreeing to verifiably “lock up” well over half of that total supply — adding some predictability to the XRP price. This lock up time is possibly planned for an extension, which — combined with the listing of XRP on major exchanges like Bitstamp, and Ripple’s partnership with Japan’s largest bank — has led to a meteoric rise in the value of XRP from $0.01 to $0.18 in a matter of weeks. Over the past several months, it has become apparent that large financial institutions are leaning towards consortium based blockchains as opposed to the public ones offered by Bitcoin — although Ethereum may buck that trend as discussed below.

Ethereum — EEA and Development Roadmap

Ethereum Logo

Ethereum was the first blockchain to successfully convince investors that altcoins had a viable place in what was largely considered a Bitcoin-only ecosystem. Popular due to its built-in smart contract protocol, Ethereum is able to run computations that can transact value without middlemen. As a result, the project has led to the formation of the Enterprise Ethereum Alliance (EEA) which connects dozens of businesses and academics who are rapidly researching and developing smart contract technology.

While a number of the projects being worked on are private forks of Ethereum — such as JP Morgan’s Quorum protocol — the interoperability with the main Ethereum chain, as well as the lessons being learned (and shared among EEA members and the open source community), is having profound effects on Ethereum as a whole. The EEA is just one offshoot of Ethereum that has attracted enormous investment, however, there are other developments which have led to a recent upsurge in the price of Ether, from $10 to roughly $90 at the time of writing.

Ethereum Name Service

In May 2017, the Ethereum Foundation (EF) launched the Ethereum Name Service (ENS). This protocol is analogous to the separate Domain Name Service (DNS), which ties domain names to i.p. addresses — making them more readable to human users. In a similar way, the ENS will tie long and unreadable smart contract or personal wallet addresses to a memorable “name” such as mywallet.eth. These names are currently at auction, and there has so far been $7m worth of bids, with the exchange.eth receiving a massive $600,000 bid. Note that this is a proxy bid, meaning the winner would only ever pay a trivial amount more than the next highest bidder.

Reducing Miner Reward

A poll taking place on carbonvote.com has indicated that an overwhelming 99.73% are in agreement with a move to reduce the miner reward from 5 ETH per block to 2 ETH (with blocks continuing to be mined at roughly 15-second intervals). The motivation behind such a change is to reduce uncertainty about the future total ETH token supply, helping to drop ETH inflation from 13% to a figure that is more in line with Bitcoin’s 4% inflation.

Proof of Stake

Proof of Stake (PoS) is an alternative consensus protocol to the Proof of Work (PoW) mechanism that was made famous by Bitcoin’s blockchain. In order to secure a blockchain, miners must be rewarded by processing valid transactions and ignoring invalid transactions. In a PoW system, a miner must expend enormous amounts of energy (with a significant cost in doing so) to process a “block” of transactions and to earn their reward. PoW protocols are enormously inefficient, with huge energy requirements that are not in line with modern day environmental considerations.

Proof of Stake serves as an alternative consensus protocol that achieves similar levels of security but requires “miners” (called validators) to stake value in the form of cryptocurrency — expending little to no energy at all. If the validator tries to game the system for their own advantage, they lose all of their stated value. Validators that act honestly are rewarded by receiving what is analogous to interest payments. Ethereum plans to move from their PoW structure to a PoS one, and this move is pegged for the end of 2017/start of 2018. Such a change in protocol would lock enormous amounts of Ether in taking contracts, removing said Ether from the ecosystem and reducing circulating supply.

Bitcoin — Segregated Witness and the Litecoin test bed

bitcoin logo

Bitcoin has been unswayed by the incredible rise in altcoin market caps over the past 6 months and remains one of the best performing cryptocurrencies in the market. Having matured beyond the “pump and dump” phase, the currency has now established itself as the gateway to the world of crypto. Bitcoin is, in its current form, the ultimate store of value and medium for exchange when dealing with other currencies. All of this is despite major concerns over the currency’s ability to scale. Transaction fees have increased several times, and the mempool (unconfirmed transactions) has seen enormous growth — leading to delays of several hours or even days.

Thankfully, Bitcoin’s little cousin — Litecoin — has played a vital role in abating fear amongst Bitcoin investors. Litecoin, whose market cap is a fraction of Bitcoin’s, has acted as a test bed for introducing Segregated Witness (SegWit) — a code change to help mitigate some of the scaling problems mentioned above. Litecoin’s activation of SegWit has given developers, users and miners renewed confidence in what this code change can do for Bitcoin, providing a “light at the end of the tunnel” on a 3-year long debate.

Where do cryptocurrencies go from here?

Many early adopters have hailed blockchain technology as “the internet 2.0”. In past years, a number of key figures in the industry analogized the current state of blockchain to that of email in the 1990s, suggesting that what we see today is a fraction of what can be achieved with the protocol in the years ahead. That analogy, which was (and still is) heavily criticized by skeptics, is now becoming too obvious to ignore. Rather than blockchains competing with one another, we are seeing interoperability take hold, and growth is practically ubiquitous amongst all major cryptocurrencies. Smart contract technology is destined to have an enormous impact on a broad range of markets in the years to come, and the impact that blockchain-based banking will have on global economics is undeniable.

It is likely that cryptocurrencies will continue to grow at an unprecedented rate until, in the same analogous way to the Internet, we experience a gigantic bubble. At what point the bubble bursts is an unknown, however — sticking with the analogy — it wasn’t until the Internet reached a value well into the trillions that the market crashed. Compare this figure with that of the blockchain market which is worth no more than $100bn and it seems that we may still be some way off. Despite what seems like an inevitable bubble, the very long-term outlook for blockchain users, investors and developers could not be brighter.

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Launching Today: Liberalcoins.com â the First One-Stop-Shop for Cryptocurrency Trading

Launching Today:
Liberalcoins.com — the First One-Stop-Shop for Cryptocurrency Trading

Let's unite the diverse cryptocurrency market by also facilitating trades between cryptocurrencies.

The next generation of cryptocurrency trading has arrived:

Liberalcoins.com is the first local cryptocurrency exchange that offers Bitcoin and Altcoin trading for cash as well as inter-cryptocurrency trading all under one roof. The new user-friendly platform charges the lowest fees in the market and offers unrivaled security features.

Liberalcoins is the brainchild of entrepreneur Simon Lange, 26, who addresses the need for more flexibility, privacy, and safety in the cryptocurrency exchange market. After two years of development, his international one-stop-shop for crypto trading launches today (13/5/2017). With its secure, intuitive and easy interface, Liberalcoins is perfect for newbies who want to start their crypto portfolio as well as for experienced traders. Users can find local traders via the platform and arrange to meet face to face for cash for Bitcoin or cash for Altcoin exchanges. Alternatively, they can choose from a wide array of wire and transfer services.

Bitcoin/cash trades are charged at 0.5% per completed transaction. This is the lowest fee in the market.

Here’s the brilliant thing: The platform aims to unite the diverse cryptocurrency market by also facilitating trades between cryptocurrencies. This will give users the option of easily balancing their cryptocurrency portfolio, and has potential to further drive the demand for Altcoins on the back of the recent surge in Bitcoin prices. Currently supported are exchanges between Bitcoin, Dash, Monero and Litecoin in any combination, giving traders ultimate flexibility when balancing their portfolio. As Lange puts it, “Liberalcoins has the potential to bring the cryptocurrency community closer together to drive towards a common goal — a stronger integration of digital currencies into our daily lives.”

The company has gone to lengths to offer the best security features on the market: Shortly after launch, users will be able to encrypt access to their assets with a password — an industry first. A built-in escrow system releases the coins after the transaction is completed. Liberalcoins is business validated by Symantec, which also runs daily security checks. Users also benefit from the stringent privacy laws of the Isle of Man and Scandinavia, where servers and email storage are located respectively.

“At Liberalcoins we seek to give traders the opportunity to trade and invest in digital currencies minimizing dependence on the global banking system”, says Lange. “We firmly believe in the future of cryptocurrencies and the security and privacy of our users.” “We strongly advocate that the cryptocurrency market remains free from any governmental regulatory and legal intervention. In an economic reality of historically increasing inflation, rising prices and central bank printing of fiat currencies we are part of the evolution of our financial future.”

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Russians and Koreans are the biggest payers to the global ransomware hackers

Russians and Koreans are the biggest payers to the global ransomware hackers

There for the taking, but who's watching?
Users with infected computers in Russia and South Korea are so far the two biggest ransom payers to the hackers who mounted a global ransomware attack, called “Wannacry,” yesterday, according to new data from Chainalysis, a provider of software that works with banks, law enforcement agencies, and bitcoin companies to analyze the blockchain for financial crimes.

All bitcoin transactions are permanently recorded on the blockchain, and anyone can view them. Chainalysis crunches these transactions and assigns them to clusters of “entities,” which could be bitcoin exchanges, wallet providers, or bitcoin miners. The firm found that the hackers, who ask for ransom to be sent to three bitcoin addresses, had received a total of nearly $23,000 so far in dollar terms, converted at the point the transaction was made. The two entities that sent the most money to the hackers were bitcoin exchanges serving the Russian and Korean markets. “If you look at the infection rates, a lot of it is in Russia, so [the data] is complementing that,” says Jonathan Levin, a Chainalysis co-founder. “Given that we know the infections are also in Russia, I would say, it’s Russian users.”

Analysis by information security firm Kaspersky Lab showed Russia had the most infections, although South Korea doesn’t appear among the top countries. Here’s the list of where ransoms originated from via Chainalysis:

Counterparty name	Counterparty category	US dollar value of bitcoins sent
BTC-e.com	exchange	$4,270.66
Bithumb.com	exchange	$2,163.48
Bitstamp.net	exchange	$2,012.15
Kraken.com	exchange	$1,917.03
Poloniex.com	exchange	$1,627.24
Unknown	uncategorized	$1,526.32
Coinbase.com	exchange	$1,043.04
CoinPayments.net	merchant services	$849.30
Unknown	uncategorized	$774.25
CoinOne.co.kr	exchange	$684.05
LocalBitcoins.com	exchange	$670.84
Gemini.com	exchange	$627.97
MaiCoin.com	exchange	$627.79
Unknown	uncategorized	$576.62
CoinJar.com	exchange	$550.05
BitPanda.com	exchange	$375.71
Bitfinex.com	exchange	$313.63
Korbit.co.kr	exchange	$312.10
Bittrex.com	exchange	$295.78
Unknown	uncategorized	$294.16
Unknown	uncategorized	$253.50
Unknown	uncategorized	$205.33
BitoEX.com	exchange	$168.11
Xapo.com	hosted wallet	$165.39
Circle.com	exchange	$101.01
Bter.com	exchange	$91.42
Yunbi.com	exchange	$60.14
Unknown	uncategorized	$45.28
Paxful.com	exchange	$44.24
Huobi.com	exchange	$43.28
Hashnest.com	mining pool	$20.88
OKCoin.com	exchange	$15.07
Unknown	uncategorized	$14.56
Unknown	uncategorized	$9.60
HaoBTC.com	mining pool	$7.21
Unknown	uncategorized	$5.82
AlphaBay Market	Tor market	$5.41
Unknown	uncategorized	$2.80
ANXPro (Payout wallet)	uncategorized	$2.07
Silk Road Marketplace	Tor market	$1.85
	Total	$22,775.16
Source: Chainalysis

There are a few caveats to the data. Levin points out that the payments attributed to “Tor markets,” the term Chainalysis uses to describe darknet markets, are probably “noise” generated by his analysis, and should be ignored. The low payment amount also suggests that it’s unconnected to the ransomware. Each entity could be using thousands of addresses, and it’s Chainalysis’ job to group them accurately. For instance, Levin says that one exchange, Poloniex, uses 376,000 bitcoin addresses, all of which have been clustered by Chainalysis, allowing correct attribution.

Additionally, just because a payment is from an exchange that serves Korean or Russian customers doesn’t necessarily mean the infected users are indeed in Korea or Russia—although it’s a reasonable inference. Lastly, little is known about BTC-E, the exchange at the top of the list, except that its operators are anonymous, it’s one of the longest running exchanges in bitcoin, and it notoriously doesn’t perform the identity checks that regulated exchanges must comply with, and it deals in the ruble-bitcoin market.

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Top Safe Bitcoin Wallets

Top Safe Bitcoin Wallets

The only way to properly store your bitcoin wealth is by using a safe wallet solution.

It is hard to quantify what makes one wallet safer than the next, as users have their individual preferences and needs in this regard. However, there are some wallet solutions out there that take keeping funds safe to a whole new level. Keep in mind these wallets are listed in random order.

Electrum

On the software side of things, there are quite a few different bitcoin wallets to choose from. However, one of the primary wallets people use in this regard is Electrum, as it is a lightweight wallet that offers plenty of functionality. Thanks to proprietary — yet decentralized and redundant — servers, synchronizing with the bitcoin blockchain takes mere minutes. Moreover, the wallet offers a cold storage solution, as well as multisig wallet support.

Trezor

Bitcoin users all over the world are familiar with the Trezor brand, as it is one of the most secure hardware wallets available today. Trezor is the original hardware wallet for bitcoin users and comes at affordable prices. It is also compatible with all major operating systems. Various bitcoin businesses implemented Trezor support, including Bitstamp, Bitwala, and BitPay. It also supports two-factor authentication for additional security.

Mycelium

On the mobile front, there is a lot of competition for the crown of being the most secure wallet solutions available today. Mycelium has gotten a lot of support in this regard, as they are considered to be a must-have secure bitcoin storage application. Their HD wallet support, as well as an option to delete the private key from the device and integrate “watch only” accounts make Mycelium one of the top secure mobile bitcoin wallets.

KeepKey

Hardware bitcoin wallets have become quite popular over the past few years. That is only normal, as storing bitcoin in a secure manner becomes more important than ever. Hardware wallets are designed to facilitate secure funds storage, with quite a few companies launching their products in recent years. KeepKey is one of the top solutions in this regard, as the device requires users to manually approve every transaction. Moreover, the device has PIN protection, adding an extra layer of security.

Ledger Nano (S)

The Ledger line of hardware bitcoin wallets can not be ignored. The company prides itself on making affordable yet secure bitcoin wallet solutions. There is no reason to pay hundreds of dollars for a device when the same goal can be achieved with a device costing a fraction of the price. Don’t let the cheap price fool you, though, as every one of Ledger’s devices is more than capable of keeping your wealth safe. All of Ledger’s wallets come in the form of a USB-size, although there are minor differences between each type. The Ledger Nano S is by far the most popular hardware wallet, as it is capable of storing both Bitcoin and Ethereum. Moreover, users can complete wallet actions through the display on the device or by using the browser plugins. An affordable, robust, and secure line of products, that much is certain.

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Jaff Ransomware Demands a Two Bitcoin Payment to Decrypt Files

Jaff Ransomware Demands a Two Bitcoin Payment to Decrypt Files

Ransomware comes in many different shapes and sizes.

Some malware strains are rather easy to remove free of charge, whereas others can be a real pain in the rear. Jaff, a new type of ransomware, is perhaps one of the most expensive types of malware we have seen in quite some time. It demands a ransom of $3,700 to be paid in Bitcoin, which is a rather steep amount.

Jaff Ransomware Swings For The Fences

It is evident criminals who rely on ransomware distribution are looking to make a lot of money in quick succession. That is much easier said than done, though, as security researchers often come up with free decryption tools to nullify these threats. However, in the case of Jaff, there is no free decryption option whatsoever right now. Similarly to virtually any other type of ransomware, the Jaff malware encrypts files and gives them a custom file extension. It appears the files are encrypted using AES, which has become the norm over the past few months. It also appears Jaff shares a lot of similarities with Locky, at least here the payment page is concerned. That is rather interesting, although Jaff demands a much higher amount compared to Locky.

This brings us to what puts Jaff on the radar of security researchers right now. The malware demands victims to pay $3,700 worth of Bitcoin to have the files restored. It is rated unusual for ransomware types to charge such a steep amount, considering most consumers won’t spend that amount of money on recovering their files. Then again, people who are genuinely worried about losing sensitive files may be tricked into paying the ransom in the end. Regarding the distribution of Jaff ransomware, it appears the malware is actively distributed through MALSPAM traffic originating from the Necurs botnet. People who have been following our ransomware coverage may recall the Necurs name, as it is a popular botnet to distribute malware on a rather large scale. Spam email campaigns have been a very popular tool among cybercriminals over the past few years, and it looks like things will not change anytime soon.

To be more specific, the Jaff ransomware is hidden in a malware-laden email attachment that requires users to enable macros in Microsoft Word. Once the user does so, they will download multiple malicious files on their machine, including the Jaff payload itself. As soon as the download is finished, the files on the computer will be encrypted. Breaking this encryption is impossible right now unless the money is paid. A demand of a $3,700 payment in Bitcoin is rather unusual, to say the least. This aggressive method by the criminals will make their ransomware a type priority for security researchers to decrypt with a free tool, though. It is doubtful anyone would pay 2 Bitcoin to restore file access. It is unclear if files can be restored from a previous backup, though, as most ransomware types often delete shadow volume copies as well.

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Why Bitcoin’s Price Has Been Surging and Where It Could Go From Here

Why Bitcoin’s Price Has Been Surging and Where It Could Go From Here

Bitcoin has shown amazing, and fairly steady, growth over the last year.

A single bitcoin was worth just $455 in May 2016. And even after retrenching slightly from a record Thursday high of over $1,800 per token, it has shown a stunning 286% annual return, based on prices from CoinMarketCap. As with most assets, explaining bitcoin’s bull stampede is more art than science. Bitcoin's price is fundamentally linked to how many people use the system to send money. But it's currently mostly driven by speculators, who trade on their belief that it will become more popular in the future. Positive news on that front has been plentiful in the last three months in particular.

Globally, Bitcoin is being treated with a great deal more respect by regulators. Positive comments about blockchain by Minneapolis Federal Reserve President Neel Kashkari coincided with the latest Bitcoin price surge. Japan approved Bitcoin as a legal method of payment in early April, and Chinese regulators have made progress in squaring Bitcoin usage with that country’s tight capital controls. There have been positive internal indicators, as well. Bitcoin’s major headwind is an ongoing debate over scaling up the system to handle more transactions. While that effort is still basically stalled by bitter infighting, some have seen a positive development in the successful deployment of a solution known as Segregated Witness on the LiteCoin system, which is largely a Bitcoin clone.

When considering further upside on Bitcoin and other cryptocurrencies, one factor looms above all: cryptocurrency is still essentially off-limits for institutional investors. While venture capitalists have poured more than $1.5 billion into blockchain startups, the tokens themselves don’t meet regulatory standards for more traditional funds. Once something like the Winklevoss twins’ proposed Bitcoin ETF is approved, the pool of potential Bitcoin investors will explode overnight. There are also two very important points of caution. First, Bitcoin is still a risky asset in the short term. Boosters were just as excited when it peaked at over $1,100 in late 2013—and the price then spent years gradually slumping, reaching a low of $200 in mid-2015.

There’s also a serious long-term downside risk to Bitcoin. While the potential of Bitcoin’s underlying blockchain technology is widely acknowledged, Bitcoin itself is now only one of dozens of implementations of the idea. Bitcoin has a big first-mover advantage, but innovators with names like Ripple and Dash have already significantly expanded on its features. Foremost among those innovative competitors is Ethereum, the second-largest cryptocurrency, whose price has also spiked over the last month. Many entrepreneurs building blockchain applications are using Ethereum, so it’s likely to share in—and maybe even cannibalize—Bitcoin’s long-term growth.

Chuck Reynolds
Contributor
Please click either Link to Learn more about Bitcoin.

Alan Zibluk Markethive Founding Member

Cryptocurrency Bubble?