Wall Street is finally looking into Cryptocurrencies

After writing off cryptocurrencies for years, Wall Street seems to be keen on cashing in on cryptocurrencies and their underlying blockchain technology lately. Some of the most prominent banks including JP Morgan and Goldman Sachs have started trading in bitcoin derivatives through their fund manager clients. Some banks have also reportedly started developing unspecified arrays of products and services by hiring young crypto developers.

Banks seem to be finding new horizons as per Ben McLannahan of The Financial Times. “Custody, or the business of keeping financial assets safe and accounted. Analysts say that if the banks get it right, providing services comparable to mainstream custody specialists like BNY Mellon or State Street, they could unlock billions of dollars of investment in crypto from funds required by law to keep assets with a qualified custodian, and hence a whole new world of fees.”

Wall Street’s Historical Blind-Eye

Wall Street’s stand on cryptocurrencies has traditionally ranged from general indifference to outright hostility. James Dimon, the Chief Executive Officer of JP Morgan Chase had said in September of 2017 that Bitcoin “is a fraud” and will blow up. Last week, he noted that crypto assets are not backed by “law, police or the courts” unlike gold or the US dollars.

A research note by Goldman Sachs had put ‘cryptocurrency mania’ as one of its top risks along with terrorism, populism and cyber attacks.“It is worse than tulips bulbs,” Dimon said, referring to the famous market bubble from the 1600s.

Wall Street’s problem with cryptocurrency stems from the fact that it cannot be handled physically unlike a wad of cash or bar of gold. This results in the technical problem of the safety of stock exchanges and protection against the hacker threats also bringing along with it the psychological impact on traditional investors.

The remedy: Cold Storage

An overwhelming majority of the coins stolen in the past were from ‘hot wallets’ – customer accounts held on crypto exchanges connected to servers. However, coins stashed in ‘cold storage’ – stored in hard drives completely disconnected from the web have proven to be much safer. This has resulted in an emerging breed of custodians experimenting with computers in vaults in multiple locations protected by randomly generating backup keys to fortified bunkers in the swiss alps. New york city based ItBit and Gemini are frontrunners in this field.

The Japanese broker Nomura is the first in the industry to try to close the gap by entering into a three way venture called Komainu. Switzerland’s stock exchange which is a part of the SIX group owned by a conglomerate of 130 banks announced plans for a venue for trading, storing and settling coins last month.

The growing demand by big investors is the reason for this recent flurry to set up platforms according to Sam McIngvale of Coinbase Custody based in San Francisco, which works with ETC, a registered broker dealer. According to him, about $5bn of institutional crypto assets will be cold stored by Coinbase Custody this year, about a quarter of the total they store for retail investors currently. Sam quoted that people chanted: “We were already holding bitcoin with you, we trust you, but we need more; we need a regulatory, we need monthly statements, we need different insurance”, he says.

The bottom-line

We are seeing the demise of crypto as an asset class. A log of obituaries kept by a site called 99bitcoins already has 306 and is still counting, many of them noting crypto’s extreme volatility.

The sands of time have also changed Wall Street’s attitude towards crypto, with big banks already hedging their bets. At the economic club of New York last week, Goldman chief executive Lloyd Blankfein noted that money has often “morphed” into unexpected forms. He further noted that it would be “arrogant” to assume that Bitcoin would never make the grade as a medium of exchange, a unit of account or a store of value.

The bottom line is that traditional institutions are now coming to terms with the fact that cryptocurrencies and blockchain technology is here to stay and the argument for its adoption is now stronger than ever. Hence, the implication of recent innovations is that Wall Street is finally coming out and getting ready to cash in on cryptocurrencies.

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Revealed: The ‘Unknown’ dev who detected the BCH Bug

The ‘unknown person’ who notified the popular Bitcoin Cash developer Bitcoin ABC of the critical ‘Chain-Splitting’ bug has been revealed to be a Bitcoin Core (bitcoin’s primary software implementation) developer.

Cory Fields revealed in a Medium blog post how he anonymously reported the consensus bug, known as SIGHASH_BUG in April 2018. A so-called ‘chain-splitting’ bug, the vulnerability “would have allowed a specially crafted transaction to split the Bitcoin Cash blockchain into two incompatible chains,” wrote Fields.

Chain-splitting Vulnerability

Fields explained that “a portion of the transaction signature verification code was rewritten, but the new code omitted a critical check of a specific bit in the signature type. I refer to that bit in the disclosure as SIGHASH_BUG. This omission would have allowed a specially crafted transaction to split the Bitcoin Cash blockchain into two incompatible chains.”

The blockchain was open to being jammed with a block that would have caused complete consensus failure, halting transactions and crippling its utility and price. Cryptocurrency engineer Eric Wall took to Twitter, lambasting the project for having missed such a glaring vulnerability.

The big threat

Fields warned in the same post that the greatest threat facing Bitcoin is software development. Avoiding catastrophic software bugs is paramount in Bitcoins future as per the developer who works for MIT Media Lab’s Digital Currency Initiative.

“Working through this bug, which certainly had the potential for catastrophe, has reaffirmed my belief that the threat of software bugs is severely underestimated in the cryptocurrency world,” writes Fields. ”[This] is a real-world example of how much work is still required to reach the sophisticated level of engineering that cryptocurrencies require, and as a wake-up call to companies who have not adequately prepared for this type of scenario.”

Fields’ Personal safety

As he used his name for the disclosure, hard proof would exist that he had the knowledge and means to attack the network and no way to prove that he was not the attacker. Moreover, there is also the fact that collectively, billions of dollars could have been lost as a result of this exploit. “People have been killed for much less,” Fields added.

Fields wanted to submit the vulnerability anonymously since identifying oneself leaves the possibility of being accused of any exploits that might be perpetrated by a malicious actor. “There were no keys listed for any of the lead developers on the public PGP key servers where they would usually be found, and there were none present in their code repository either. At that point, I had no option other than to request keys anonymously through different online channels, using Tor to mask my identity as much as possible.” he wrote.

The tale of two Bitcoins

Proponents of Bitcoin and its competing cryptocurrency Bitcoin Cash, which was created as a “fork” of Bitcoin’s code and history, haven’t been in good terms. They regularly take to Social media channels to argue which coin is better and which one is more deserving of the “Bitcoin” name.

Bitcoin Cash has a history of ridiculing the original Bitcoin chain – known as Bitcoin Core for clarity purposes – and those developers who work on and promote it. Bitcoin.com owner Roger Ver, who is a major proponent of Bitcoin Cash along with others have been trying to convince the online community that their altcoin will usurp Bitcoin in the future citing technical superiority.

The irony of the news that Bitcoin Cash may well have floundered without help from Bitcoin Core was therefore not lost on many of the cryptocurrency space’s best-known names. “Once again Core devs had to save BCash. Play stupid games…,” commentator WhalePanda wrote, while developer Jimmy Song and economist Tuur Demeester joined those highlighting the event.

The right thing to do?

Fields related that he had begun to question if it was worth all the trouble While trying to figure out whether a completely anonymous disclosure was possible since he had no obligation to report it after all.

“But if someone had discovered an equally nasty bug in Bitcoin Core, I would hope that person would bring it to our attention as discreetly and securely as possible. So I decided to do exactly that: create the report I would want to read and deliver it as I would want to receive it.” said Fields

Several notable cryptocurrency figures lauded his effort, including Civic CEO Vinny Lingham who tweeted that “Responsible and ethical behavior by everyone in the community, regardless of ideological beliefs, should be applauded.” Vitalik Buterin, the co-founder of Ethereum, retweeted Lingham’s tweet. Fields’ example shows that it’s still possible to help each other out to the ultimate benefit of all and the importance of such a positive developer’s community.

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Dominik Schiener: Cryptocurrency Needs Innovation, not Speculation

Dominik Schiener has called for more focus on innovation and development instead of money making from crytocurrency communities.

The Co-Founder of Iota made the statement in a recent interview piece via a blog from Bosch, the technology company working closely with the network. The developer answered the question ‘What drives me nuts about blockchain…’:

“…is the speculation going on in the community. We’ve kind of lost track of why we developed this technology. Initially, it was developed to solve fundamental problems in society. But over the last few years, the focus has turned to speculations and the question of how to get rich using these cryptocurrencies. “

It is true that sentiments may have transitioned since the close-knit development groups of the early days when only a small number of dedicated people were involved in the scene. When Dominik himself joined the community it was as a 14 year old selling coding services, the blog explains. Excluded from centralized platforms, he told Bosch that blockchain provided the tools he needed to be his own boss and as a developer.

Today there is a much broader community of people involved, with Telegram channels overflowing. In some communities -and Iota is one which has been accused of this, there is a pervasive bad atmosphere. Division has led to tribalism, and individuals have toed the line between support and fanaticism.

While there may have been a change, it could be argued that this shows cryptocurrency communities are moving closer towards mainstream adoption. It may also be true that while the overall sentiment may have changed, there are far more developers contributing to distributed ledger technologies around the world in 2018 than ever before, with many projects really ramping up.

Schiener made the point that there real obstacles in the path for blockchain’s success, with scalability an as of now unsolved limitation to mass adoption. In his opinion, tackling these issues will require collaboration, with the whole industry working together.

 “I’ve realized that the only way to make blockchain a success story is to bring the entire ecosystem together. This means industry and the community have to sit down at one table and work together to push blockchain forward.”

It’s possible that for deeply divided cryptocurrency communities, this may be  too much to ask, but it might also hold true that outlying individuals within these groups tar the communities with a noisy and negative brush. Developers, those who these networks are truly dependent on, may be more inclined to work together to ensure this fledgling technology’s success.

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