Wednesday, August 5, 2015
Japanese Government Gets Involved in Mt. Gox Investigation
Tuesday, August 4, 2015
Keynote 2015: FinTech Conference Focuses on Public Ledgers and the Blockchain
Preceding this weekend’s Coin Congress in San Francisco, the inaugural Keynote 2015 took place Monday at the Millennium Biltmore Hotel in Los Angeles, focusing on practical applications of the blockchain as an easily implementable and scalable solution to a number of problems that extend far beyond digital payments.
With the help of an experienced and passionate audience who continued conversations past the end of any specific lecture, Keynote 2015 was able to effectively educate a wide variety of developers and innovators about the seemingly endless list of use cases for public ledgers.
Speakers included Marc van der Chijs, managing partner at CrossPacific Capital, Brennan Byre, CEO of Clef, and Pete Rizzo, U.S. editor at Coindesk. Partners included Blockchain, Netki, and Ledger, among others.
The same team that runs the North American Bitcoin Conference in Miami every January managed Keynote 2015.
While the majority of lectures centered on online payment infrastructures, lectures led by Crowdfunder CEO Chance Barnett and FloQast co-founder and CEO Michael Whitmore focused on the blockchain applications for crowdfunding platforms and accounting software, respectively.
A few segments in particular drew muted criticism from the crowd. Silvio Tavares, CEO of The CardLinux Association, blamed credit card fraud on the Internet’s lack of security protocol rather than the credit cards themselves, saying, “Credit cards are secure. It’s the Internet that’s not secure.”
In addition, he attacked an often-cited belief that credit card fees are exorbitantly expensive for businesses, citing an article posted online on BloombergBusiness.
A panel of the Token executive team also drew criticism after concluding that Bitcoin isn’t ready to innovate the banking industry as key top-level individuals aren’t excited about either Bitcoin or the underlying blockchain technology.
It was almost fitting that Keynote 2015 was moved to the Millennium Biltmore Hotel, a 1923 Beaux Arts-inspired grand dame. With hand-painted frescoes and restored crown moldings, it seemed like the perfect venue to discuss a technology aimed to innovate archaic payment, accounting, security and database infrastructures. Because, after all, the real magic happens when you combine something old and something new.
Symbiont Issues Securities on the Bitcoin Blockchain to Usher Capital Markets into the Blockchain Era
In June, Bitcoin Magazine reported that Symbiont had secured $1.25 million of seed funding from influential financial market leaders including Duncan Niederauer, former CEO of the New York Stock Exchange (NYSE). Symbiont, a fintech company focused on fostering the symbiotic relationship between traditional financial markets and cryptographic blockchain technology, was founded in March by Counterparty and MathMoney f(x) founders to create the first issuance and trading platform for smart securities based on the blockchain technology.
Now, Symbiont has issued the first Smart Securities on the Bitcoin blockchain. Symbiont’s live platform allows institutions and investors to issue, manage, trade, clear, settle and transfer a range of financial instruments more efficiently on decentralized and distributed peer-to-peer financial networks that are cryptographically secured. Initial use cases for Smart Securities include corporate debt, syndicated loans, securitized instruments and private equity.
“We are proud to be on the leading edge of this blockchain and distributed ledger movement,” said Mark Smith, CEO and co-founder of Symbiont. “With interest in distributed ledger technology growing rapidly, financial institutions are exploring how to leverage it to improve the efficiency and security of trading and processing financial transactions. Smart Securities will ultimately change the way that financial instruments are issued, managed and traded.”
According to the Symbiont press release, Smart Securities bring capital markets into the blockchain era. Smart Securities transform the way that security issuance, management, trading, and clearing and settlement take place within global capital markets. Generically known as “smart contracts,” these instruments are programmable versions of traditional securities issued on any type of distributed ledger, such as a blockchain. Once a security is issued onto the ledger, it acts autonomously, eliminating traditionally manual mid- and back-office functions.
Symbiont’s platform allows market participants to create digital, programmable versions of securities. The company hopes the development of programmable securities, and their availability in one global, decentralized peer-to-peer network, will increase efficiency and transparency and lower the cost of issuing, trading, settling and clearing securities.
Symbiont isn’t the only company trying to revolutionize the stock markets with the blockchain technology. Nasdaq, a prestigious stock exchange and leading financial institution, is leveraging blockchain technology as part of an enterprise-wide initiative.
In June, Nasdaq announced a partnership with San Francisco-based Bitcoin API startup Chain to implement the first blockchain technology pilot projects in Nasdaq Private Market, a recently launched marketplace that handles pre-IPO trading among private companies. Nasdaq Private Market is not a stock exchange open to the public, but a service that connects private companies with investors. However, Nasdaq stated that the blockchain initiative could ultimately be extended to record trades of stocks in public firms listed on its exchange.
Also in June, Overstock announced the first crypto-securities to be offered on the blockchain.
“We have started building things that replace what Wall Street does,” said Overstock CEO Patrick Byrne. “It does them far cheaper, and with far more transparency, and without any of the opportunity for rigging.”
Overstock’s platform, dubbed t0.com, can augment other trading exchanges and power financial transactions. Overstock filed a registration with the Securities and Exchange Commission seeking permission to issue public crypto-stock, and purchased a stake in stock brokerage firm Pro Securities, whose technology will power the crypto-stock exchange.
Photo Stéfan / Flickr
Bitcoin Considered a ‘Traditional Currency’ by Australian Senate Committee
The inquiry of the Australian Senate committee may overrule the decision of the Australian Taxation Office (ATO), which classified bitcoin as an intangible/foreign asset that falls under the coverage of Goods and Services Tax.
The proposal submitted by the Australian government will have bitcoin considered as a traditional currency, and thus will nullify many of the regulations or legal “restrictions” set to be applied on bitcoin.
“The opportunities for trade, investment, high salaries and world-leading skills are far more important [than any potential loss of revenue], and I urge the states to work with the Commonwealth to make what amounts to simple change,” Labor Senator Sam Dastyari told the Australian Financial Review.
Dastyari said that such leniency on the currency will help many bitcoin- or other digital currency-based entrepreneurs and startups in the nation to continue their operations without any interruptions or restrictions.
“Without a doubt, the main benefit will be the confidence and certainty that removing a GST will provide to our own digital entrepreneurs, and the foreign businesses who want to set up here,” Dastyari added. “The Treasury ministers need to work with the states to make the changes necessary to bring our legislation into the 21st century.”
The proposal of the Australian Senate Committee will be taken up for vote this week, and will conclude the tax-free status of bitcoin in Australia once and for all.
The ruling from the Senate Economics References Committee into digital currency, predicted to be considered this week as well, will bring Australia in line with the United Kingdom in terms of its treatment on bitcoin.
Venezuela: A Severe Case of Bolivaritis (Op-Ed)
AUG 4 DIGEST: Mt. Gox ‘Ran out of Funds 6 Months before Going Bust’; Australia Warms towards Bitcoin as Currency
How 3 Central Banks & the Financial Elite Embraced Bitcoin for One Day
Huobi Takes Bitcoin Trading Mobile; Targets Western Users
How an Australian Teen Nearly Created a Decentralized Reddit in 1997 (Op-Ed)
Monday, August 3, 2015
When Disaster Strikes: Developing a Recovery Plan for Bitcoin and Digital Tokens
This is a guest post by Pamela Morgan, the CEO of Third Key Solutions. She is a widely respected authority on multi-signature governance, smart contracts, and legal innovation with cryptocurrencies. Third Key Solutions is the culmination of her work advising bitcoin startups in multi-signature governance processes and key management.
Your company’s recovery plan is the most important document you can create to ensure your business will survive an emergency. If you operate a bitcoin-, altcoin- or asset-token-based business, a recovery plan isn’t just nice to have – it’s absolutely necessary. A strong, well-thought-out recovery plan can help to prevent opportunistic fraud and asset transfer mistakes by providing clear guidance during atypical events. Coin recovery should be just one part of your overall strategic operations and recovery plan. These guidelines are one tool that your company may use in building its recovery plan.
When to plan? New organizations should complete the plan prior to launch, reviewing and updating the plan quarterly throughout the first year. After Year One, you’ll probably need to update your plan once or twice a year. If your company has already launched and you don’t have a recovery plan, do it now. Don’t wait. Don’t put it off until you find some spare time. You owe it to your customers, your team, your investors and yourself to get this done within the next 30 days.
Is this a complete guide? No, but it’s a great start. The following list is meant to begin a discussion within your company about policies and procedures relating to recovery. It’s not meant to be an exhaustive list, and your team should add concerns as they arise.
Vital Records:
What vital records are required for recovery of coin?
What vital records are required for the continuation of the business? (For example, what data do you need of employees, clients, vendors, investors; accounting and payroll records; insurance policies; tax returns; contracts; etc.?)
Where are they backed up?
How will they be accessed in case of emergency?
Who has authorization to access them?
Are they encrypted?
Who has the encryption passwords?
Who is responsible for records management?
Who is responsible to update the backup copies of these records and how often?
Where are insurance contracts located, if any?
Recovery Event Processes: (recovering funds from single addresses)
Who is responsible to initiate the recovery and under what circumstances?
Who must initially verify the request and what are the verification standards?
How is verification documented in an auditable way?
To what address will the recovery transaction sweep the funds?
Who created the address and how is customer/client control preserved?
Has the new address been tested?
Who will create the recovery transaction?
How will the recovery transactions be verified, as properly authorized and going to the correct address?
What methods are in place to eliminate opportunities for collusion or bad actors?
How will the verified transactions be transmitted to the recovery company?
What is the process for the recovery company to verify the validity of the recovery request?
What if the recovery company cannot verify the recovery request or if the recovery request was unauthorized?
If the recovery company provides signed transactions, who is responsible to broadcast them and under what circumstances, if any, should they not be broadcast? (This is particularly relevant in an entire tree recovery)
Recovery Event Processes: (recovering funds from HD or HDM trees)
Review the Recovery Event Process in terms of recovering an entire tree or all trees.
What changes?
Are there additional safeguards in place to prevent errors?
Who, within the company, will be responsible to oversee the recovery of trees?
In the event the company is no longer operational, who will be responsible to facilitate recovery?
Payment for Recovery:
Who will pay transaction fees for the recovery transactions?
How will transaction fees be paid (company hot wallet, pre-divided UTXO, customer)?
Will the transaction fees be chained, affecting confirmation of other recovery transactions?
Who will pay the recovery company’s fees?
If a fund has been set up to pay recovery fees, who manages/administers the fund?
If not, how will recovery companies be paid?
Communication:
Who is responsible to communicate to customers/clients/employees/public about the recovery?
Are there communication policies in place that govern crisis communications?
If so, where can employees find the policies during a crisis?
Changes to the Recovery Plan:
How often is the plan reviewed and by whom? (must be at least annually)
Who is authorized to make changes to the plan and by what process are changes made?
Where is the recovery plan stored?
Are redundant copies stored securely off-site?
How will they be accessed in case of emergency?
Who has authorization to access them?
Are they stored encrypted?
Who has the encryption passwords?
Who is responsible to update the redundant plans and ensure the most current versions are properly stored?
Building a Key Compromise Policy:
How many keys are currently in use in the company and to which assets/addresses/projects are they associated?
Who are the authorized signers for each address and where are the primary keys stored?
Where and how are backup keys stored?
What is a key compromise? (Examples include: system hacked, vulnerability identified on key generation or storage device, physical compromise of key storage location, authorized signer leaves the organization, incomplete chain of custody logs.)
How will the company learn that one or more keys may have been compromised?
Who should be notified of possible compromise?
What confidentiality policies, if any, are implemented during investigation of compromise?
What steps should be taken (in succession) during the investigation of a possible compromise?
How will a compromise be confirmed or disproved?
Who should be notified if compromise is confirmed?
How will they be notified?
What is the process for investigating possible compromise?
What is the process for migrating funds if the company’s security is breached? If the third party’s security is breached?
What is the process for limiting damage to clients and the company itself in the event of key compromise?
Other Considerations:
Personnel: In the event of emergency, who will be responsible to coordinate company efforts and lead the Recovery Team? Who should be part of a Recovery Team?
Physical Locations: If you have a physical location, you should also consider physical evacuation procedures, employee communications, and business continuity plans for geographic natural disasters including fire, flood, etc.
Encrypted Communications: As a reminder, encrypting and signing communications whenever possible protects both confidentiality and authenticity (prevents man-in-the-middle and impersonation attacks).
Audited Standards: Companies should consider building systems compliant to industry best practices and standards, such as the CryptoCurrency Security Standard. (* disclosure, the author is a board member of the non-profit organization hosting CCSS development – the CryptoCurrency Certification Consortium (C4)).
Popular Arcade Game Launches Token Sale with Shapeshift
Spells of Genesis, one of the most highly anticipated arcade games of 2015, developed by well-known game developer EverdreamSoft, is introducing and implementing bitcoin and its blockchain technology in the game’s storyline and as an in-game currency.
Before the game’s launch on both iOS and Android Play Store, EverdreamSoft plans to host a crowdfunding campaign for its game and storyline development. Spells of Genesis will be using BitCrystal tokens as its in-game currency which can be used to purchase game items and to trade with other users within the game.
The concept behind Spells of Genesis’ crowdfunding campaign is similar to Ethereum’s: People purchasing BitCrystals will become investors and will be provided with BitCrystals early on. BitCrystal is a tradable Counterparty asset, which can be traded and purchased on the Counterparty platform.
BitCrystals also operate on the bitcoin blockchain and therefore, there is not much difference in using bitcoin or BitCrystals.
“Both Bitcoin and BitCrystals are digital tokens operating on the Bitcoin blockchain, and both have monetary value,” Emily from ShapeShift told Bitcoin Magazine. “I don’t think there’s anything significantly different about using one vs. the other.”
EverdreamSoft initially planned to launch its in-game token sale on a decentralized bitcoin-powered crowdfunding platform Swarm. However, due to technical difficulties, the game developers will be launching its crowdfunding campaign on the BitCrystals website.
Furthermore, Spells of Genesis has partnered with ShapeShift to have the altcoin exchange power the Spells of Genesis BitCrystals Token Sale, begining on August 4.
The ShapeShift team explained on their blog, “BitCrystals were designed to purchase new card decks and game items while working as the medium of exchange within the gameplay. These tokens are tradable Counterparty assets which serve as the in-game currency in Spells of Genesis.”
“BitCrystals will be available to buy or sell on ShapeShift after the crowdsale is over,” Emily told Bitcoin Magazine.
Expected Sale
EverdreamSoft expects to serve tens of thousands of users in the first few months from its launch.
“We expect the first few months to quickly achieve about 50,000 MAU (Monthly Active Users),” Shaban Shaame of EverdreamSoft told Bitcoin Magazine. “Usually the conversion between a free player and a paying player in the game industry is about 5% to 9%. If we convert 5% of the player base into purchaser we estimate to have 2,500 paying players. In our experience on our previous game Moonga the MARPPU (Monthly Average Revenue Per Paying user) is about $40 USD. So the first month’s estimated BitCrystal we receive should be around 2,500 * 40 USD = $100,000 USD value of BitCrystals per month.”
Shaban explained that the game intends to take full advantage of the Bitcoin blockchain and its shared economy.
“We believe when project [is] crowdfunded people who pre-purchased the product should receive a part of it,” Shaban said. “They should take part in fueling the game economy. Once the game is funded and up and running, all the assets we put on sale will be acquired with BitCrystals (BCY).”
Image Herckeim / EverdreamSoft
UK Prime Minister Cameron Praises the Innovate Finance Manifesto Despite Views on Encryption
Innovate Finance, an independent membership-based industry organization that aims to advance Great Britain’s standing as a leader in financial technology (FinTech) innovation both domestically and abroad, has released its new manifesto: Innovate Finance Manifesto: 2020.
“Our vision for 2020 is for the U.K. to be the most investment-friendly environment for FinTech globally, attracting $4 billion of venture investment and $4 billion of institutional investment in corporate venture funds, accelerators and innovation programs,” states the manifesto. “Our vision for 2020 is for the U.K. to be the premier location for at least 25 global FinTech leaders, whether by IPO, global market share or by valuation.”
The manifesto mentions the need for effective regulation, a proactive policy environment and a commitment to greater financial inclusion, and emphasizes that the U.K. must produce more graduates in technical disciplines and create a deep pool of mathematical and scientific expertise. In partnership with Open University, Innovate Finance developed the world’s first introduction course to FinTech.
The coming wave of graduates in technical disciplines related to FinTech won’t be unemployed.
“Increasing investment in U.K. FinTech and developing an increasing number of global leading companies will help create an additional 100,000 jobs in U.K. FinTech,” states the manifesto.
Prime Minister David Cameron, who was on a trade mission to southeast Asia with FinTech specialists from across Great Britain, enthusiastically praised the manifesto.
“This government wants the U.K. to be the leading FinTech center in the world. That’s why, at the Summer Budget, we appointed a special envoy for this fast growing sector,” said Cameron. “I’m pleased that Innovate Finance’s manifesto has set such ambitious goals, including the creation of 100,000 jobs. This will ensure we are a world leader in the development of financial services technologies.”
The FinTech special envoy mentioned by Cameron is Eileen Burbridge, a partner at Passion Capital, a London early-stage technology investment fund, dubbed the “Queen of British VCs” by Fortune.
The manifesto doesn’t mention Bitcoin and blockchain-based digital currencies explicitly. However, Great Britain is on its way to becoming a global hub for bitcoin and other digital currencies, with both the government and Bank of England having made recent moves designed to stimulate the development of digital FinTech.
Cameron’s government has launched a new research initiative that brings together the Research Councils, Alan Turing Institute and Digital Catapult with industry in order to address the research opportunities and challenges for digital currency technology, and will increase research funding in this area by £10 million ($14.6 million USD) to support this.
Cameron expressed very different views on cryptography – the technology that Bitcoin is built upon – and recently said that his government intends to ban strong encryption. Renowned industry expert Bruce Schneier noted that the proposed ban would be a disaster for the U.K. technology leadership and economy.
“When the U.S. tried to ban strong cryptography in the 1990s, hundreds of foreign companies sprang up to fill the gap in what the market demanded,” said Schneier. “Today, security is vitally important in everything we do online, and this law would put U.K. businesses and citizens under an enormous disadvantage.”
It appears that perhaps Cameron’s government hasn’t realized – yet – that technological freedom and technological leadership are two sides of the same coin, and eliminating one would destroy the other.
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