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WHY BINANCE SUCKS : CryptoCurrency
@cz_binance: @btcoverlord You are probably new to #crypto. #bitcoin does it once in a while, when it is rising, it sometimes sucks liquidity away from alts a bit. You might also want to research what usually happens afterwards. https://t.co/V9SEjaVnqk
@cz_binance: @pandahunter11 It's understandable. People losing money in stocks may sell crypto to get more cash. There is a short term suck-down effect. But more people will realize there is a fundamental difference between stocks and #bitcoin as time goes on. This is a strong catalyst.
Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses. Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes. First, some background. Here is a summary of how custodians make us more secure: Previously, we might give Alice our crypto assets to hold. There were risks:
Alice might take the assets and disappear.
Alice might spend the assets and pretend that she still has them (fractional model).
Alice might store the assets insecurely and they'll get stolen.
Alice might give the assets to someone else by mistake or by force.
Alice might lose access to the assets.
But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
Alice can't take the assets and disappear (unless she asks Bob or never gives them to Bob).
Alice can't spend the assets and pretend that she still has them. (Unless she didn't give them to Bob or asks him for them.)
Alice can't store the assets insecurely so they get stolen. (After all - she doesn't have any control over the withdrawal process from any of Bob's systems, right?)
Alice can't give the assets to someone else by mistake or by force. (Bob will stop her, right Bob?)
Alice can't lose access to the funds. (She'll always be present, sane, and remember all secrets, right?)
See - all problems are solved! All we have to worry about now is:
Bob might take the assets and disappear.
Bob might spend the assets and pretend that he still has them (fractional model).
Bob might store the assets insecurely and they'll get stolen.
Bob might give the assets to someone else by mistake or by force.
Bob might lose access to the assets.
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are! "On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid". "Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since." "As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!" "Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?" "Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party." "Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!" "What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven." "Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!" "We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies. And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often". How many holes have to exist for your funds to get stolen? Just one. Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so? If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security. The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle. And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet? Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds. So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
ANY CERTAINTY BALANCES WEREN'T EXCLUDED. Quadriga's largest account was $70m. 80% of funds are in 20% of accounts (Pareto principle). All it takes is excluding a few really large accounts - and nobody's the wiser. A fractional platform can easily pass any audit this way.
ANY VISIBILITY WHATSOEVER INTO THE CUSTODIANS. BitBuy put out their report before moving all the funds to their custodian and ShakePay apparently can't even tell us who the custodian is. That's pretty important considering that basically all of the funds are now stored there.
ANY IDEA ABOUT THE OTHER EXCHANGES. In order for this to be effective, it has to be the norm. It needs to be "unusual" not to know. If obscurity is the norm, then it's super easy for people like Gerald Cotten and Dave Smilie to blend right in.
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
First report within 1 month of launching, another within 3 months, and further reports at minimum every 6 months thereafter.
No auditor can be repeated within a 12 month period.
All reports must be public, identifying the auditor and the full methodology used.
All auditors must be independent of the firm being audited with no conflict of interest.
Reports must include the percentage of each asset backed, and how it's backed.
The auditor publishes a hash list, which lists a hash of each customer's information and balances that were included. Hash is one-way encryption so privacy is fully preserved. Every customer can use this to have 100% confidence they were included.
If we want more extensive requirements on audits, these should scale upward based on the total assets at risk on the platform, and whether the platform has loaned their assets out.
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever. Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see. It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation. A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance. Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.) Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive. Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today. Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well. Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do. Facts/background/sources (skip if you like):
The inspiration for the paragraph about splitting wallets was an actual quote from a Canadian company providing custodial services in response to the OSC consultation paper: "We believe that it will be in the in best interests of investors to prohibit pooled crypto assets or ‘floats’. Most Platforms pool assets, citing reasons of practicality and expense. The recent hack of the world’s largest Platform – Binance – demonstrates the vulnerability of participants’ assets when such concessions are made. In this instance, the Platform’s entire hot wallet of Bitcoins, worth over $40 million, was stolen, facilitated in part by the pooling of client crypto assets." "the maintenance of participants (and Platform) crypto assets across multiple wallets distributes the related risk and responsibility of security - reducing the amount of insurance coverage required and making insurance coverage more readily obtainable". For the record, their reply also said nothing whatsoever about multi-sig or offline storage.
In addition to the fact that the $40m hack represented only one "hot wallet" of Binance, and they actually had the vast majority of assets in other wallets (including mostly cold wallets), multiple real cases have clearly demonstrated that risk is still present with multiple wallets. Bitfinex, VinDAX, Bithumb, Altsbit, BitPoint, Cryptopia, and just recently KuCoin all had multiple wallets breached all at the same time, and may represent a significantly larger impact on customers than the Binance breach which was fully covered by Binance. To represent that simply having multiple separate wallets under the same security scheme is a comprehensive way to reduce risk is just not true.
Private insurance has historically never covered a single loss in the cryptocurrency space (at least, not one that I was able to find), and there are notable cases where massive losses were not covered by insurance. Bitpay in 2015 and Yapizon in 2017 both had insurance policies that didn't pay out during the breach, even after a lengthly court process. The same insurance that ShakePay is presently using (and announced to much fanfare) was describe by their CEO himself as covering “physical theft of the media where the private keys are held,” which is something that has never historically happened. As was said with regard to the same policy in 2018 - “I don’t find it surprising that Lloyd’s is in this space,” said Johnson, adding that to his mind the challenge for everybody is figuring out how to structure these policies so that they are actually protective. “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
The most profitable policy for a private insurance company is one with the most expensive premiums that they never have to pay a claim on. They have no inherent incentive to take care of people who lost funds. It's "cheaper" to take the reputational hit and fight the claim in court. The more money at stake, the more the insurance provider is incentivized to avoid payout. They're not going to insure the assets unless they have reasonable certainty to make a profit by doing so, and they're not going to pay out a massive sum unless it's legally forced. Private insurance is always structured to be maximally profitable to the insurance provider.
The circumvention of multi-sig was a key factor in the massive Bitfinex hack of over $60m of bitcoin, which today still sits being slowly used and is worth over $3b. While Bitfinex used a qualified custodian Bitgo, which was and still is active and one of the industry leaders of custodians, and they set up 2 of 3 multi-sig wallets, the entire system was routed through Bitfinex, such that Bitfinex customers could initiate the withdrawals in a "hot" fashion. This feature was also a hit with the hacker. The multi-sig was fully circumvented.
Bitpay in 2015 was another example of a breach that stole 5,000 bitcoins. This happened not through the exploit of any system in Bitpay, but because the CEO of a company they worked with got their computer hacked and the hackers were able to request multiple bitcoin purchases, which Bitpay honoured because they came from the customer's computer legitimately. Impersonation is a very common tactic used by fraudsters, and methods get more extreme all the time.
A notable case in Canada was the Canadian Bitcoins exploit. Funds were stored on a server in a Rogers Data Center, and the attendee was successfully convinced to reboot the server "in safe mode" with a simple phone call, thus bypassing the extensive security and enabling the theft.
The very nature of custodians circumvents multi-sig. This is because custodians are not just having to secure the assets against some sort of physical breach but against any form of social engineering, modification of orders, fraudulent withdrawal attempts, etc... If the security practices of signatories in a multi-sig arrangement are such that the breach risk of one signatory is 1 in 100, the requirement of 3 independent signatures makes the risk of theft 1 in 1,000,000. Since hackers tend to exploit the weakest link, a comparable custodian has to make the entry and exit points of their platform 10,000 times more secure than one of those signatories to provide equivalent protection. And if the signatories beef up their security by only 10x, the risk is now 1 in 1,000,000,000. The custodian has to be 1,000,000 times more secure. The larger and more complex a system is, the more potential vulnerabilities exist in it, and the fewer people can understand how the system works when performing upgrades. Even if a system is completely secure today, one has to also consider how that system might evolve over time or work with different members.
By contrast, offline multi-signature solutions have an extremely solid record, and in the entire history of cryptocurrency exchange incidents which I've studied (listed here), there has only been one incident (796 exchange in 2015) involving an offline multi-signature wallet. It happened because the customer's bitcoin address was modified by hackers, and the amount that was stolen ($230k) was immediately covered by the exchange operators. Basically, the platform operators were tricked into sending a legitimate withdrawal request to the wrong address because hackers exploited their platform to change that address. Such an issue would not be prevented in any way by the use of a custodian, as that custodian has no oversight whatsoever to the exchange platform. It's practical for all exchange operators to test large withdrawal transactions as a general policy, regardless of what model is used, and general best practice is to diagnose and fix such an exploit as soon as it occurs.
False promises on the backing of funds played a huge role in the downfall of Quadriga, and it's been exposed over and over again (MyCoin, PlusToken, Bitsane, Bitmarket, EZBTC, IDAX). Even today, customers have extremely limited certainty on whether their funds in exchanges are actually being backed or how they're being backed. While this issue is not unique to cryptocurrency exchanges, the complexity of the technology and the lack of any regulation or standards makes problems more widespread, and there is no "central bank" to come to the rescue as in the 2008 financial crisis or during the great depression when "9,000 banks failed".
In addition to fraudulent operations, the industry is full of cases where operators have suffered breaches and not reported them. Most recently, Einstein was the largest case in Canada, where ongoing breaches and fraud were perpetrated against the platform for multiple years and nobody found out until the platform collapsed completely. While fraud and breaches suck to deal with, they suck even more when not dealt with. Lack of visibility played a role in the largest downfalls of Mt. Gox, Cryptsy, and Bitgrail. In some cases, platforms are alleged to have suffered a hack and keep operating without admitting it at all, such as CoinBene.
It surprises some to learn that a cryptographic solution has already existed since 2013, and gained widespread support in 2014 after Mt. Gox. Proof of Reserves is a full cryptographic proof that allows any customer using an exchange to have complete certainty that their crypto-assets are fully backed by the platform in real-time. This is accomplished by proving that assets exist on the blockchain, are spendable, and fully cover customer deposits. It does not prove safety of assets or backing of fiat assets.
If we didn't care about privacy at all, a platform could publish their wallet addresses, sign a partial transaction, and put the full list of customer information and balances out publicly. Customers can each check that they are on the list, that the balances are accurate, that the total adds up, and that it's backed and spendable on the blockchain. Platforms who exclude any customer take a risk because that customer can easily check and see they were excluded. So together with all customers checking, this forms a full proof of backing of all crypto assets.
However, obviously customers care about their private information being published. Therefore, a hash of the information can be provided instead. Hash is one-way encryption. The hash allows the customer to validate inclusion (by hashing their own known information), while anyone looking at the list of hashes cannot determine the private information of any other user. All other parts of the scheme remain fully intact. A model like this is in use on the exchange CoinFloor in the UK.
A Merkle tree can provide even greater privacy. Instead of a list of balances, the balances are arranged into a binary tree. A customer starts from their node, and works their way to the top of the tree. For example, they know they have 5 BTC, they plus 1 other customer hold 7 BTC, they plus 2-3 other customers hold 17 BTC, etc... until they reach the root where all the BTC are represented. Thus, there is no way to find the balances of other individual customers aside from one unidentified customer in this case.
Proposals such as this had the backing of leaders in the community including Nic Carter, Greg Maxwell, and Zak Wilcox. Substantial and significant effort started back in 2013, with massive popularity in 2014. But what became of that effort? Very little. Exchange operators continue to refuse to give visibility. Despite the fact this information can often be obtained through trivial blockchain analysis, no Canadian platform has ever provided any wallet addresses publicly. As described by the CEO of Newton "For us to implement some kind of realtime Proof of Reserves solution, which I'm not opposed to, it would have to ... Preserve our users' privacy, as well as our own. Some kind of zero-knowledge proof". Kraken describes here in more detail why they haven't implemented such a scheme. According to professor Eli Ben-Sasson, when he spoke with exchanges, none were interested in implementing Proof of Reserves.
And yet, Kraken's places their reasoning on a page called "Proof of Reserves". More recently, both BitBuy and ShakePay have released reports titled "Proof of Reserves and Security Audit". Both reports contain disclaimers against being audits. Both reports trust the customer list provided by the platform, leaving the open possibility that multiple large accounts could have been excluded from the process. Proof of Reserves is a blockchain validation where customers see the wallets on the blockchain. The report from Kraken is 5 years old, but they leave it described as though it was just done a few weeks ago. And look at what they expect customers to do for validation. When firms represent something being "Proof of Reserve" when it's not, this is like a farmer growing fruit with pesticides and selling it in a farmers market as organic produce - except that these are people's hard-earned life savings at risk here. Platforms are misrepresenting the level of visibility in place and deceiving the public by their misuse of this term. They haven't proven anything.
Fraud isn't a problem that is unique to cryptocurrency. Fraud happens all the time. Enron, WorldCom, Nortel, Bear Stearns, Wells Fargo, Moser Baer, Wirecard, Bre-X, and Nicola are just some of the cases where frauds became large enough to become a big deal (and there are so many countless others). These all happened on 100% reversible assets despite regulations being in place. In many of these cases, the problems happened due to the over-complexity of the financial instruments. For example, Enron had "complex financial statements [which] were confusing to shareholders and analysts", creating "off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them". In cryptocurrency, we are often combining complex financial products with complex technologies and verification processes. We are naïve if we think problems like this won't happen. It is awkward and uncomfortable for many people to admit that they don't know how something works. If we want "money of the people" to work, the solutions have to be simple enough that "the people" can understand them, not so confusing that financial professionals and technology experts struggle to use or understand them.
For those who question the extent to which an organization can fool their way into a security consultancy role, HB Gary should be a great example to look at. Prior to trying to out anonymous, HB Gary was being actively hired by multiple US government agencies and others in the private sector (with glowing testimonials). The published articles and hosted professional security conferences. One should also look at this list of data breaches from the past 2 years. Many of them are large corporations, government entities, and technology companies. These are the ones we know about. Undoubtedly, there are many more that we do not know about. If HB Gary hadn't been "outted" by anonymous, would we have known they were insecure? If the same breach had happened outside of the public spotlight, would it even have been reported? Or would HB Gary have just deleted the Twitter posts, brought their site back up, done a couple patches, and kept on operating as though nothing had happened?
In the case of Quadriga, the facts are clear. Despite past experience with platforms such as MapleChange in Canada and others around the world, no guidance or even the most basic of a framework was put in place by regulators. By not clarifying any sort of legal framework, regulators enabled a situation where a platform could be run by former criminal Mike Dhanini/Omar Patryn, and where funds could be held fully unchecked by one person. At the same time, the lack of regulation deterred legitimate entities from running competing platforms and Quadriga was granted a money services business license for multiple years of operation, which gave the firm the appearance of legitimacy. Regulators did little to protect Canadians despite Quadriga failing to file taxes from 2016 onward. The entire administrative team had resigned and this was public knowledge. Many people had suspicions of what was going on, including Ryan Mueller, who forwarded complaints to the authorities. These were ignored, giving Gerald Cotten the opportunity to escape without justice.
There are multiple issues with the SOC II model including the prohibitive cost (you have to find a third party accounting firm and the prices are not even listed publicly on any sites), the requirement of operating for a year (impossible for new platforms), and lack of any public visibility (SOC II are private reports that aren't shared outside the people in suits).
Securities frameworks are expensive. Sarbanes-Oxley is estimated to cost $5.1 million USD/yr for the average Fortune 500 company in the United States. Since "Fortune 500" represents the top 500 companies, that means well over $2.55 billion USD (~$3.4 billion CAD) is going to people in suits. Isn't the problem of trust and verification the exact problem that the blockchain is supposed to solve?
To use Quadriga as justification for why custodians or SOC II or other advanced schemes are needed for platforms is rather silly, when any framework or visibility at all, or even the most basic of storage policies, would have prevented the whole thing. It's just an embarrassment.
We are now seeing regulators take strong action. CoinSquare in Canada with multi-million dollar fines. BitMex from the US, criminal charges and arrests. OkEx, with full disregard of withdrawals and no communication. Who's next?
We have a unique window today where we can solve these problems, and not permanently destroy innovation with unreasonable expectations, but we need to act quickly. This is a unique historic time that will never come again.
Everyone and his grandma know what cryptocurrency mining is. Well, they may not indeed know what it actually is, in technical terms, but they have definitely heard the phrase as it is hard to miss the news about mining sucking in energy like a black hole gobbles up matter. On the other hand, staking, its little bro, has mostly been hiding in the shadows until recently. by StealthEX Today, with DeFi making breaking news across the cryptoverse, staking has become a new buzzword in the blockchain space and beyond, along with the fresh entries to the crypto asset investor’s vocabulary such as “yield farming”, “rug pull”, “total value locked”, and similar arcane stuff. If you are not scared off yet, then read on. Though we can’t promise you won’t be.
Cryptocurrency staking, little brother of crypto mining
There are two conceptually different approaches to achieving consensus in a distributed network, which comes down to transaction validation in the case of a cryptocurrency blockchain. You are most certainly aware of cryptocurrency mining, which is used with cryptocurrencies based on the Proof-of-Work (PoW) consensus algorithm such as Bitcoin and Ether (so far). Here miners compete against each other with their computational resources for finding the next block on the blockchain and getting a reward. Another approach, known as the Proof-of-Stake (PoS) consensus mechanism, is based not on the race among computational resources as is the case with PoW, but on the competition of balances, or stakes. In simple words, every holder of at least one stake, a minimally sufficient amount of crypto, can actively participate in creating blocks and thus also earn rewards under such network consensus model. This process came to be known as staking, and it can be loosely thought of as mining in the PoS environment. With that established, let’s now see why, after so many years of what comes pretty close to oblivion, it has turned into such a big thing.
Why has staking become so popular, all of a sudden?
The renewed popularity of staking came with the explosive expansion of decentralized finance, or DeFi for short. Essentially, staking is one of the ways to tap into the booming DeFi market, allowing users to earn staking rewards on a class of digital assets that DeFi provides easy access to. Technically, it is more correct to speak of DeFi staking as a new development of an old concept that enjoys its second coming today, or new birth if you please. So what’s the point? With old-school cryptocurrency staking, you would have to manually set up and run a validating node on a cryptocurrency network that uses a PoS consensus algo, having to keep in mind all the gory details of a specific protocol so as not to shoot yourself in the foot. This is where you should have already started to enjoy jitters if you were to take this avenu entirely on your own. Just think of it as having to run a Bitcoin mining rig for some pocket money. Put simply, DeFi staking frees you from all that hassle. At this point, let’s recall what decentralized finance is and what it strives to achieve. In broad terms, DeFi aims at offering the same products and services available today in the traditional financial world, but in a trutless and decentralized way. From this perspective, DeFi staking reseblems conventional banking where people put their money in savings accounts to earn interest. Indeed, you could try to lend out your shekels all by yourself, with varying degrees of success, but banks make it far more convenient and secure. The maturation of the DeFi space advanced the emergence of staking pools and Staking-as-a-Service (SaaS) providers that run nodes for PoS cryptocurrencies on your behalf, allowing you to stake your coins and receive staking rewards. In today’s world, interest rates on traditional savings accounts are ridiculous, while government spending, a handy euphemism for relentless money printing aka fiscal stimulus, is already translating into runaway inflation. Against this backdrop, it is easy to see why staking has been on the rise.
Okay, what are my investment options?
Now that we have gone through the basics of the state-of-the-art cryptocurrency staking, you may ask what are the options actually available for a common crypto enthusiast to earn from it? Many high-caliber exchanges like Binance or Bitfinex as well as online wallets such as Coinbase offer staking of PoS coins. In most cases, you don’t even need to do anything aside from simply holding your coins there to start receiving rewards as long as you are eligible and meet the requirements. This is called exchange staking. Further, there are platforms that specialize in staking digital assets. These are known as Staking-as-a-Service providers, while this form of staking is often referred to as soft staking. They enable even non-tech savvy customers to stake their PoS assets through a third party service, with all the technical stuff handled by the service provider. Most of these services are custodial, with the implication being that you no longer control your coins after you stake them. Figment Networks, MyContainer, Stake Capital are easily the most recognized among SaaS providers. However, while exchange staking and soft staking have everything to do with finance, they have little to nothing to do with the decentralized part of it, which is, for the record, the primary value proposition of the entire DeFi ecosystem. The point is, you have to deposit the stakable coins into your wallet with these services. And how can it then be considered decentralized? Nah, because DeFi is all about going trustless, no third parties, and, in a narrow sense, no staking that entails the transfer of private keys. This form of staking is called non-custodial, and it is of particular interest from the DeFi point of view. If you read our article about DeFi, you already know how it is possible, so we won’t dwell on this (if, on the off chance, you didn’t, it’s time to catch up). As DeFi continues to evolve, platforms that allow trustless staking with which you maintain full custody of your coins are set to emerge as well. The space is relatively new, with Staked being probably the first in the field. This type of staking allows you to remain in complete control of your funds, and it perfectly matches DeFi’s ethos, goals and ideals. Still, our story wouldn’t be complete if we didn’t mention utility tokens where staking may serve a whole range of purposes other than supporting the token network or obtaining passive income. For example, with platforms that deploy blockchain oracles such as Nexus Mutual, a decentralized insurance platform, staking tokens is necessary for encouraging correct reporting on certain events or reaching a consensus on a specific claim. In the case of Nexus Mutual, its membership token NXM is used by the token holders, the so-called assessors, for validating insurance claims. If they fail to assess claims correctly, their stakes are burned. Another example is Particl Marketplace, a decentralized eCommerce platform, which designed a standalone cryptocurrency dubbed PART. It can be used both as a cryptocurrency in its own right outside the marketplace and as a stakable utility token giving stakers voting rights facilitating the decentralized governance of the entire platform. Yet another example is the instant non-custodial cryptocurrency exchange service, ChangeNOW, that also recently came up with its stakable token, NOW Token, to be used as an internal currency and a means of earning passive income.
Nowadays, with most economies on pause or going downhill, staking has become a new avenue for generating passive income outside the traditional financial system. As DeFi continues to eat away at services previously being exclusively provided by conventional financial and banking sectors, we should expect more people to get involved in this activity along with more businesses dipping their toes into these uncharted waters. Achieving network consensus, establishing decentralized governance, and earning passive income are only three use cases for cryptocurrency staking. No matter how important they are, and they certainly are, there are many other uses along different dimensions that staking can be quite helpful and instrumental for. Again, we are mostly in uncharted waters here, and we can’t reliably say what the future holds for us. On the other hand, we can go and invent it. This should count as next. And remember if you need to exchange your coins StealthEX is here for you. We provide a selection of more than 250 coins and constantly updating the list so that our customers will find a suitable option. Our service does not require registration and allows you to remain anonymous. Why don’t you check it out? Just go to StealthEX and follow these easy steps: ✔ Choose the pair and the amount for your exchange. For example ETH to BTC. ✔ Press the “Start exchange” button. ✔ Provide the recipient address to which the coins will be transferred. ✔ Move your cryptocurrency for the exchange. ✔ Receive your coins! The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision. Original article was posted onhttps://stealthex.io/blog/2020/09/08/cryptocurrency-staking-as-it-stands-today/
[ 🔴 DELETED 🔴 ] Topic originally posted in Bitcoin by nut__sackington [link] Hey all, I've closed my account with Coinbase because, well, they suck. I made a Kraken account but found that their ACH partner Etana Custody is extremely invasive with personal information. Now I've narrowed down to Binance and Gemini for where I will buy crypto from. How do these compare to each other? My main concerns are privacy--I'm fine giving my state ID and everything, but some of the privacy agreements look real sketchy these days, saying things like "...and any other means of tracking, potentially using 3rd party services" (obviously not verbatim lol, but vague statements like that which leave a lot of room for data collection). I don't mind waiting a few days to be able to purchase and send coin after an ACH deposit.. but I'd like it faster than the entire week that Coinbase makes you wait. How do you all weigh these pros and cons when deciding where to buy/trade? Any thoughts on how Gemini and Binance compare for US residents? Edit: If anyone uses these markets, how much of a hassle was it to successfully on-ramp fiat with ACH? Extra verifications/applications/etc. ? nut__sackington your post has been copied because one or more comments have been removed by a moderator. This copy will preserve unmoderated topic. If you would like to opt-out, please PM me.
Lost 94% of my capital (over $100K) mostly due to Substratum, but it was my own fault
I posted a comment in the daily discussion thread today about my $100K+ crypto losses and among the kind responses a few people asked for more information on what happened. So I thought I'd post it here to explain. Note that I'm not blaming anyone else for this, it was my own stupidity and I should have stuck with Bitcoin instead of gambling so much on an altcoin, but sad to say I had drunk the koolaid and basically I fell for a scam project. I think I was sucked in to Substratum because the IDEA sounded so good. A decentralized Internet, breaking through firewalls and stuff like that. Even though the price was falling all last year I thought I was buying the dip but it kept dipping more and more. In the end I spent about $115,000 on Substratum ERC20 tokens, and I was forced to sell them all last week for $7K to pay for an emergency home repair. I lost 94% of my capital. Even a week ago I was convinced it would recover in the next bull market, but the Binance delisting was what made me realize it was always a scam. After that I looked into it more and found out about the leader gambling away the last ICO money, shorting ETH at the bottom, the fabricated GitHub commits, fake partnerships, the flaw that lets the devs print unlimited tokens (same problem as PRL). Plus lots more red flags that I just didn't see before. I also found out it can't even do decentralized Internet because it's reliant on centralized ISPs... SMH. It fell so hard after the Binance delisting that its even out of the top 300. I think it was ranked 50 when I started buying. I feel like a complete fool to be honest. In the end I had to sell because I needed the money and if I didn't sell my $7K would probably be down to $3K or $4K in a few months. I'll buy crypto again but in my position I won't have the funds to buy again for another six months or more. Knowing my luck crypto prices will pump back up now that I sold, although I don't think SUB will ever recover because of all the red flags and the likelihood of it being deemed a security by the SEC and anyway there's no decent exchanges to trade it on now. So that's my story.
Technical: A Brief History of Payment Channels: from Satoshi to Lightning Network
Who cares about political tweets from some random country's president when payment channels are a much more interesting and are actually capable of carrying value? So let's have a short history of various payment channel techs!
Generation 0: Satoshi's Broken nSequence Channels
Because Satoshi's Vision included payment channels, except his implementation sucked so hard we had to go fix it and added RBF as a by-product. Originally, the plan for nSequence was that mempools would replace any transaction spending certain inputs with another transaction spending the same inputs, but only if the nSequence field of the replacement was larger. Since 0xFFFFFFFF was the highest value that nSequence could get, this would mark a transaction as "final" and not replaceable on the mempool anymore. In fact, this "nSequence channel" I will describe is the reason why we have this weird rule about nLockTime and nSequence. nLockTime actually only works if nSequence is not 0xFFFFFFFF i.e. final. If nSequence is 0xFFFFFFFF then nLockTime is ignored, because this if the "final" version of the transaction. So what you'd do would be something like this:
You go to a bar and promise the bartender to pay by the time the bar closes. Because this is the Bitcoin universe, time is measured in blockheight, so the closing time of the bar is indicated as some future blockheight.
For your first drink, you'd make a transaction paying to the bartender for that drink, paying from some coins you have. The transaction has an nLockTime equal to the closing time of the bar, and a starting nSequence of 0. You hand over the transaction and the bartender hands you your drink.
For your succeeding drink, you'd remake the same transaction, adding the payment for that drink to the transaction output that goes to the bartender (so that output keeps getting larger, by the amount of payment), and having an nSequence that is one higher than the previous one.
Eventually you have to stop drinking. It comes down to one of two possibilities:
You drink until the bar closes. Since it is now the nLockTime indicated in the transaction, the bartender is able to broadcast the latest transaction and tells the bouncers to kick you out of the bar.
You wisely consider the state of your liver. So you re-sign the last transaction with a "final" nSequence of 0xFFFFFFFF i.e. the maximum possible value it can have. This allows the bartender to get his or her funds immediately (nLockTime is ignored if nSequence is 0xFFFFFFFF), so he or she tells the bouncers to let you out of the bar.
Now that of course is a payment channel. Individual payments (purchases of alcohol, so I guess buying coffee is not in scope for payment channels). Closing is done by creating a "final" transaction that is the sum of the individual payments. Sure there's no routing and channels are unidirectional and channels have a maximum lifetime but give Satoshi a break, he was also busy inventing Bitcoin at the time. Now if you noticed I called this kind of payment channel "broken". This is because the mempool rules are not consensus rules, and cannot be validated (nothing about the mempool can be validated onchain: I sigh every time somebody proposes "let's make block size dependent on mempool size", mempool state cannot be validated by onchain data). Fullnodes can't see all of the transactions you signed, and then validate that the final one with the maximum nSequence is the one that actually is used onchain. So you can do the below:
Become friends with Jihan Wu, because he owns >51% of the mining hashrate (he totally reorged Bitcoin to reverse the Binance hack right?).
Slip Jihan Wu some of the more interesting drinks you're ordering as an incentive to cooperate with you. So say you end up ordering 100 drinks, you split it with Jihan Wu and give him 50 of the drinks.
When the bar closes, Jihan Wu quickly calls his mining rig and tells them to mine the version of your transaction with nSequence 0. You know, that first one where you pay for only one drink.
Because fullnodes cannot validate nSequence, they'll accept even the nSequence=0 version and confirm it, immutably adding you paying for a single alcoholic drink to the blockchain.
The bartender, pissed at being cheated, takes out a shotgun from under the bar and shoots at you and Jihan Wu.
Jihan Wu uses his mystical chi powers (actually the combined exhaust from all of his mining rigs) to slow down the shotgun pellets, making them hit you as softly as petals drifting in the wind.
The bartender mutters some words, clothes ripping apart as he or she (hard to believe it could be a she but hey) turns into a bear, ready to maul you for cheating him or her of the payment for all the 100 drinks you ordered from him or her.
Steely-eyed, you stand in front of the bartender-turned-bear, daring him to touch you. You've watched Revenant, you know Leonardo di Caprio could survive a bear mauling, and if some posh actor can survive that, you know you can too. You make a pose. "Drunken troll logic attack!"
I think I got sidetracked here.
Bears are bad news.
You can't reasonably invoke "Satoshi's Vision" and simultaneously reject the Lightning Network because it's not onchain. Satoshi's Vision included a half-assed implementation of payment channels with nSequence, where the onchain transaction represented multiple logical payments, exactly what modern offchain techniques do (except modern offchain techniques actually work). nSequence (the field, but not its modern meaning) has been in Bitcoin since BitCoin For Windows Alpha 0.1.0. And its original intent was payment channels. You can't get nearer to Satoshi's Vision than being a field that Satoshi personally added to transactions on the very first public release of the BitCoin software, like srsly.
Miners can totally bypass mempool rules. In fact, the reason why nSequence has been repurposed to indicate "optional" replace-by-fee is because miners are already incentivized by the nSequence system to always follow replace-by-fee anyway. I mean, what do you think those drinks you passed to Jihan Wu are, other than the fee you pay him to mine a specific version of your transaction?
Satoshi made mistakes. The original design for nSequence is one of them. Today, we no longer use nSequence in this way. So diverging from Satoshi's original design is part and parcel of Bitcoin development, because over time, we learn new lessons that Satoshi never knew about. Satoshi was an important landmark in this technology. He will not be the last, or most important, that we will remember in the future: he will only be the first.
Incentive-compatible time-limited unidirectional channel; or, Satoshi's Vision, Fixed (if transaction malleability hadn't been a problem, that is). Now, we know the bartender will turn into a bear and maul you if you try to cheat the payment channel, and now that we've revealed you're good friends with Jihan Wu, the bartender will no longer accept a payment channel scheme that lets one you cooperate with a miner to cheat the bartender. Fortunately, Jeremy Spilman proposed a better way that would not let you cheat the bartender. First, you and the bartender perform this ritual:
You get some funds and create a transaction that pays to a 2-of-2 multisig between you and the bartender. You don't broadcast this yet: you just sign it and get its txid.
You create another transaction that spends the above transaction. This transaction (the "backoff") has an nLockTime equal to the closing time of the bar, plus one block. You sign it and give this backoff transaction (but not the above transaction) to the bartender.
The bartender signs the backoff and gives it back to you. It is now valid since it's spending a 2-of-2 of you and the bartender, and both of you have signed the backoff transaction.
Now you broadcast the first transaction onchain. You and the bartender wait for it to be deeply confirmed, then you can start ordering.
The above is probably vaguely familiar to LN users. It's the funding process of payment channels! The first transaction, the one that pays to a 2-of-2 multisig, is the funding transaction that backs the payment channel funds. So now you start ordering in this way:
For your first drink, you create a transaction spending the funding transaction output and sending the price of the drink to the bartender, with the rest returning to you.
You sign the transaction and pass it to the bartender, who serves your first drink.
For your succeeding drinks, you recreate the same transaction, adding the price of the new drink to the sum that goes to the bartender and reducing the money returned to you. You sign the transaction and give it to the bartender, who serves you your next drink.
At the end:
If the bar closing time is reached, the bartender signs the latest transaction, completing the needed 2-of-2 signatures and broadcasting this to the Bitcoin network. Since the backoff transaction is the closing time + 1, it can't get used at closing time.
If you decide you want to leave early because your liver is crying, you just tell the bartender to go ahead and close the channel (which the bartender can do at any time by just signing and broadcasting the latest transaction: the bartender won't do that because he or she is hoping you'll stay and drink more).
If you ended up just hanging around the bar and never ordering, then at closing time + 1 you broadcast the backoff transaction and get your funds back in full.
Now, even if you pass 50 drinks to Jihan Wu, you can't give him the first transaction (the one which pays for only one drink) and ask him to mine it: it's spending a 2-of-2 and the copy you have only contains your own signature. You need the bartender's signature to make it valid, but he or she sure as hell isn't going to cooperate in something that would lose him or her money, so a signature from the bartender validating old state where he or she gets paid less isn't going to happen. So, problem solved, right? Right? Okay, let's try it. So you get your funds, put them in a funding tx, get the backoff tx, confirm the funding tx... Once the funding transaction confirms deeply, the bartender laughs uproariously. He or she summons the bouncers, who surround you menacingly. "I'm refusing service to you," the bartender says. "Fine," you say. "I was leaving anyway;" You smirk. "I'll get back my money with the backoff transaction, and posting about your poor service on reddit so you get negative karma, so there!" "Not so fast," the bartender says. His or her voice chills your bones. It looks like your exploitation of the Satoshi nSequence payment channel is still fresh in his or her mind. "Look at the txid of the funding transaction that got confirmed." "What about it?" you ask nonchalantly, as you flip open your desktop computer and open a reputable blockchain explorer. What you see shocks you. "What the --- the txid is different! You--- you changed my signature?? But how? I put the only copy of my private key in a sealed envelope in a cast-iron box inside a safe buried in the Gobi desert protected by a clan of nomads who have dedicated their lives and their childrens' lives to keeping my private key safe in perpetuity!" "Didn't you know?" the bartender asks. "The components of the signature are just very large numbers. The sign of one of the signature components can be changed, from positive to negative, or negative to positive, and the signature will remain valid. Anyone can do that, even if they don't know the private key. But because Bitcoin includes the signatures in the transaction when it's generating the txid, this little change also changes the txid." He or she chuckles. "They say they'll fix it by separating the signatures from the transaction body. They're saying that these kinds of signature malleability won't affect transaction ids anymore after they do this, but I bet I can get my good friend Jihan Wu to delay this 'SepSig' plan for a good while yet. Friendly guy, this Jihan Wu, it turns out all I had to do was slip him 51 drinks and he was willing to mine a tx with the signature signs flipped." His or her grin widens. "I'm afraid your backoff transaction won't work anymore, since it spends a txid that is not existent and will never be confirmed. So here's the deal. You pay me 99% of the funds in the funding transaction, in exchange for me signing the transaction that spends with the txid that you see onchain. Refuse, and you lose 100% of the funds and every other HODLer, including me, benefits from the reduction in coin supply. Accept, and you get to keep 1%. I lose nothing if you refuse, so I won't care if you do, but consider the difference of getting zilch vs. getting 1% of your funds." His or her eyes glow. "GENUFLECT RIGHT NOW." Lesson learned?
Payback's a bitch.
Transaction malleability is a bitchier bitch. It's why we needed to fix the bug in SegWit. Sure, MtGox claimed they were attacked this way because someone kept messing with their transaction signatures and thus they lost track of where their funds went, but really, the bigger impetus for fixing transaction malleability was to support payment channels.
Yes, including the signatures in the hash that ultimately defines the txid was a mistake. Satoshi made a lot of those. So we're just reiterating the lesson "Satoshi was not an infinite being of infinite wisdom" here. Satoshi just gets a pass because of how awesome Bitcoin is.
CLTV-protected Spilman Channels
Using CLTV for the backoff branch. This variation is simply Spilman channels, but with the backoff transaction replaced with a backoff branch in the SCRIPT you pay to. It only became possible after OP_CHECKLOCKTIMEVERIFY (CLTV) was enabled in 2015. Now as we saw in the Spilman Channels discussion, transaction malleability means that any pre-signed offchain transaction can easily be invalidated by flipping the sign of the signature of the funding transaction while the funding transaction is not yet confirmed. This can be avoided by simply putting any special requirements into an explicit branch of the Bitcoin SCRIPT. Now, the backoff branch is supposed to create a maximum lifetime for the payment channel, and prior to the introduction of OP_CHECKLOCKTIMEVERIFY this could only be done by having a pre-signed nLockTime transaction. With CLTV, however, we can now make the branches explicit in the SCRIPT that the funding transaction pays to. Instead of paying to a 2-of-2 in order to set up the funding transaction, you pay to a SCRIPT which is basically "2-of-2, OR this singlesig after a specified lock time". With this, there is no backoff transaction that is pre-signed and which refers to a specific txid. Instead, you can create the backoff transaction later, using whatever txid the funding transaction ends up being confirmed under. Since the funding transaction is immutable once confirmed, it is no longer possible to change the txid afterwards.
Todd Micropayment Networks
The old hub-spoke model (that isn't how LN today actually works). One of the more direct predecessors of the Lightning Network was the hub-spoke model discussed by Peter Todd. In this model, instead of payers directly having channels to payees, payers and payees connect to a central hub server. This allows any payer to pay any payee, using the same channel for every payee on the hub. Similarly, this allows any payee to receive from any payer, using the same channel. Remember from the above Spilman example? When you open a channel to the bartender, you have to wait around for the funding tx to confirm. This will take an hour at best. Now consider that you have to make channels for everyone you want to pay to. That's not very scalable. So the Todd hub-spoke model has a central "clearing house" that transport money from payers to payees. The "Moonbeam" project takes this model. Of course, this reveals to the hub who the payer and payee are, and thus the hub can potentially censor transactions. Generally, though, it was considered that a hub would more efficiently censor by just not maintaining a channel with the payer or payee that it wants to censor (since the money it owned in the channel would just be locked uselessly if the hub won't process payments to/from the censored user). In any case, the ability of the central hub to monitor payments means that it can surveill the payer and payee, and then sell this private transactional data to third parties. This loss of privacy would be intolerable today. Peter Todd also proposed that there might be multiple hubs that could transport funds to each other on behalf of their users, providing somewhat better privacy. Another point of note is that at the time such networks were proposed, only unidirectional (Spilman) channels were available. Thus, while one could be a payer, or payee, you would have to use separate channels for your income versus for your spending. Worse, if you wanted to transfer money from your income channel to your spending channel, you had to close both and reshuffle the money between them, both onchain activities.
Poon-Dryja Lightning Network
Bidirectional two-participant channels. The Poon-Dryja channel mechanism has two important properties:
No time limit.
Both the original Satoshi and the two Spilman variants are unidirectional: there is a payer and a payee, and if the payee wants to do a refund, or wants to pay for a different service or product the payer is providing, then they can't use the same unidirectional channel. The Poon-Dryjam mechanism allows channels, however, to be bidirectional instead: you are not a payer or a payee on the channel, you can receive or send at any time as long as both you and the channel counterparty are online. Further, unlike either of the Spilman variants, there is no time limit for the lifetime of a channel. Instead, you can keep the channel open for as long as you want. Both properties, together, form a very powerful scaling property that I believe most people have not appreciated. With unidirectional channels, as mentioned before, if you both earn and spend over the same network of payment channels, you would have separate channels for earning and spending. You would then need to perform onchain operations to "reverse" the directions of your channels periodically. Secondly, since Spilman channels have a fixed lifetime, even if you never used either channel, you would have to periodically "refresh" it by closing it and reopening. With bidirectional, indefinite-lifetime channels, you may instead open some channels when you first begin managing your own money, then close them only after your lawyers have executed your last will and testament on how the money in your channels get divided up to your heirs: that's just two onchain transactions in your entire lifetime. That is the potentially very powerful scaling property that bidirectional, indefinite-lifetime channels allow. I won't discuss the transaction structure needed for Poon-Dryja bidirectional channels --- it's complicated and you can easily get explanations with cute graphics elsewhere. There is a weakness of Poon-Dryja that people tend to gloss over (because it was fixed very well by RustyReddit):
You have to store all the revocation keys of a channel. This implies you are storing 1 revocation key for every channel update, so if you perform millions of updates over your entire lifetime, you'd be storing several megabytes of keys, for only a single channel. RustyReddit fixed this by requiring that the revocation keys be generated from a "Seed" revocation key, and every key is just the application of SHA256 on that key, repeatedly. For example, suppose I tell you that my first revocation key is SHA256(SHA256(seed)). You can store that in O(1) space. Then for the next revocation, I tell you SHA256(seed). From SHA256(key), you yourself can compute SHA256(SHA256(seed)) (i.e. the previous revocation key). So you can remember just the most recent revocation key, and from there you'd be able to compute every previous revocation key. When you start a channel, you perform SHA256 on your seed for several million times, then use the result as the first revocation key, removing one layer of SHA256 for every revocation key you need to generate. RustyReddit not only came up with this, but also suggested an efficient O(log n) storage structure, the shachain, so that you can quickly look up any revocation key in the past in case of a breach. People no longer really talk about this O(n) revocation storage problem anymore because it was solved very very well by this mechanism.
Another thing I want to emphasize is that while the Lightning Network paper and many of the earlier presentations developed from the old Peter Todd hub-and-spoke model, the modern Lightning Network takes the logical conclusion of removing a strict separation between "hubs" and "spokes". Any node on the Lightning Network can very well work as a hub for any other node. Thus, while you might operate as "mostly a payer", "mostly a forwarding node", "mostly a payee", you still end up being at least partially a forwarding node ("hub") on the network, at least part of the time. This greatly reduces the problems of privacy inherent in having only a few hub nodes: forwarding nodes cannot get significantly useful data from the payments passing through them, because the distance between the payer and the payee can be so large that it would be likely that the ultimate payer and the ultimate payee could be anyone on the Lightning Network. Lessons learned?
We can decentralize if we try hard enough!
"Hubs bad" can be made "hubs good" if everybody is a hub.
Smart people can solve problems. It's kinda why they're smart.
After LN, there's also the Decker-Wattenhofer Duplex Micropayment Channels (DMC). This post is long enough as-is, LOL. But for now, it uses a novel "decrementing nSequence channel", using the new relative-timelock semantics of nSequence (not the broken one originally by Satoshi). It actually uses multiple such "decrementing nSequence" constructs, terminating in a pair of Spilman channels, one in both directions (thus "duplex"). Maybe I'll discuss it some other time. The realization that channel constructions could actually hold more channel constructions inside them (the way the Decker-Wattenhofer puts a pair of Spilman channels inside a series of "decrementing nSequence channels") lead to the further thought behind Burchert-Decker-Wattenhofer channel factories. Basically, you could host multiple two-participant channel constructs inside a larger multiparticipant "channel" construct (i.e. host multiple channels inside a factory). Further, we have the Decker-Russell-Osuntokun or "eltoo" construction. I'd argue that this is "nSequence done right". I'll write more about this later, because this post is long enough. Lessons learned?
Bitcoin offchain scaling is more powerful than you ever thought.
Last thread on this topic here Here's why consistent block times are important:
Exchanges require block confirmations
Binance requires 2-blocks before funds are tradeable
Traders move high volume of money to and from exchanges
Need expectancy of when funds will arrive.
Bitcoin is a liquid pair, but the user is guessing due to congestion.
Bitcoin Cash is a liquid pair, but the user is guessing due to random block confirmations.
I'm looking at this from the perspective of a trader. We should not exclude traders as they move high volume of money. Speculative trading also generates a liquid market. Bitcoin sucks as a trading pair because traders leave funds on exchanges because the block congestion and this puts the trader at a security risk. That leads me to the question regarding the longterm fix for the DAA. Is the assumption that increased future hash rate will increase the likelihood of consistent block times?
Bitcoin may NEVER return to previous heights, and a lot of you are worrying me.
I see a lot of people excited about cryptocurrency buying into these low prices. This is a generally good strategy, but I would posit this is not a good strategy for Bitcoin. Bitcoin is an asset we really don't understand. Further, it's not the only asset of its kind, and MOST IMPORTANTLY, there are FAR better alternatives already in existence. Trying to dollar cost average on Bitcoin could very well end up with you not only trying to catch a falling knife, but repeatedly stabbing yourself in the foot with it while several of us around you happened to put our money in newer technology. All I'm trying to say with this post is this: This could very well be the beginning of a major move away from "silly" money (pouring billions into Bitcoin, something that is worth what it is ONLY because it was the first, and for literally no other reason), and very much so a move towards investing in projects with better technology. If this is the case, which I suspect it could be, those of you deciding to hold onto Bitcoin could have an extremely unpleasant outcome. Edit: People calling me an idiot, asking if I'm being sarcastic. I'm truly not. If you haven't looked into the many interesting projects happening in this area as we speak, I suggest you do so. If you think that Bitcoin adds a value proposition that none of the other "coins" can offer, please enlighten me. Edit2: I'm a computer science guy who enjoys graph theory and cryptography; I actually read the whitepapers most of you gloss over. I'm not saying this as a "Bitcoin hater", but rather as a technology and theory enthusiast within the space. Edit3: BILLIONS of dollars are being sucked out of the market as we speak. The market cap is currently only at 300 billion dollars. It was over 800 billion at one point. The cryptocurrency space is vastly different than it was one year ago. When this money re-enters the market, it may not be in a similar manner as of last time. Edit4: Market cap is not a 1-to-1 pairing with actual invested fiat. Market cap = price of coin * shares in existence. I should have clarified further, that not only is the market cap rapidly dropping, but if you look at the past few days, billions of dollars are being removed from the market as we speak. Edit5: I've had to comment in response to many mentions of the price correlation issue. I would expect that the introduction of more fiat/crypto pairs will lead to a reduction in price correlation to Bitcoin. Most alternatives are only available through non-standard means, and so one must go through bitcoin, ethereum, litecoin, or bitcoin cash (Coinbase availabilities) to get coins offered on binance or other crypto only exchanges. This is one of my biggest concerns in cryptocurrency at the moment.
I've been trying to buy Ripple for over a month now... Suggestions?
Can anyone recommend an exchange that allows bank/card deposits (because I don't have any crypto yet) that doesn't suck? I've waited over a month to get verified by Bitstamp (even though they say two weeks) and my support ticket has gone unanswered for 6 days now. Coinbase were quicker to verify, but refused my card and bank deposits 'because my name doesn't match'. Weird, because I have never had a problem buying anything online anywhere before. I've done a little research and heard some bad things about nearly all of the exchanges listed in the sidebar. Kraken and Gatehub both look decent? But a flashy website doesn't mean they actually do their job. I'd rather not give my details to a host of dubious exchanges, so recommendations would be appreciated!
Which exchanges do you recommend after the Binance AWS issue, which also affected KuCoin, Bitmax, etc.
The binance exchange's AWS issue results in the error in deposit and withdrawal. What is worse is that Bitmax's orderbook is broken, and there was a deep dip and people could buy the $8000 bitcoin cause the market makers failed to provide the liquidity caused by the API bug of Binance. Bitmax's also planning to roll back the data, and stopped users from trading nor withdrawing, which I think also sucks. https://preview.redd.it/l72xyishc6i31.png?width=2104&format=png&auto=webp&s=2a609a21065fc5ac594c02dea0b8003c435f00fe Is there any better exchange to choose where the liquidity is good, safe, and stable? I'm planning to deposit a part of my assets out of binance.
Just spent about 12 hours figuring out my tax liabilities with bitcoin.tax. Here is how it went...
I have been reading more lately about all the US tax liabilities that can come into play in the crypto world and have started worrying about how much I would owe for 2017. I was starting to lose some sleep on the matter and finally decided to organize all of my activity once and for all. I figured I'd write this post for other people who might want to find out what I have learned in this process. I am filing in the US, but some of this might apply to people in other countries as well. If you have just bought and HODL'd then it will probably be much simpler for you. But if you have done ICOs and any trading and are worried about this stuff, don't worry too much. Its totally possible to get yourself organized with a little bit of work. Background Bought my first ETH in Feb '17 from Coinbase and since then:
Have traded probably 50 different tokens on 10 different exchanges
Have participated in 21 ICOs
Have received Airdropped tokens
Have sold some and withdrawn profits to my bank account
The Tools The best place to get started is bitcoin.tax Referral Link Normal Link I signed up for the 1 year plan for $19.95 (they also accept crypto) and believe me its worth every penny. You can use it for free, but are limited to 100 items (I ended up having > 1500). It really does almost everything for you, so you don't have to worry about figuring out the cost basis yourself. The only time USD was involved was buying via coinbase, everything else was handled as a token to token trade. Microsoft Excel or Google Sheets is a must if you are doing any trading on the non-supported exchanges because you might have to massage the data into the correct format. Etherscan Unfortunately, for some trades and the ICOs, I had to go directly to Etherscan to track down the data. DeltaBalances This is a lifesaver for tracking trades made on ED. I wasn't able to get the export feature working, but copy/pasting the table into Excel was fine. Html Table to CSV If you are having trouble copy/pasting table data this comes in handy. You can just copy the raw table HTML from Chrome Dev Tools and get a nice CSV. Exchanges I am only going to list the exchanges I use and how I was able to get the data into bitcoin.tax. But regardless of the method, make sure you verify all the data that was imported. The system did a bad import on my Bitfinex data and I had to wipe it and reimport because it was missing a bunch of rows. All the importing is done on the trading tab of bitcoin.tax. Some exchanges require you to download a .csv file from the exchange website, and some have direct API access. Just follow the tutorials on bitcoin.tax for each exchange. The Easy Ones Bitcoin.tax supports API data pulls for these exchanges: Bitfinex, Coinbase, GDAX, Kraken. For these, I still recommend going to the exchanges and downloading a copy of your history for your personal records. You need to login to the exchange and download trade history and then use bitcoin.tax's import tool for these: Binance, Bittrex, Poloniex The Tough Ones Trades made on Etherdelta present a bit of a challenge. There is no direct import into bitcoin.tax so you will have to manually compile a CSV and import it to their system. They give you a template to follow with the required data and it will require a bit of "massaging" to get the ED data to the correct format. For this is it extremely helpful to use DeltaBalances. For each wallet you use you will need to check the trade history and go back a sufficient number of days to cover your trading history. Warning, it might take a long time for this process to finish and it isn't 100% reliable. When I ran it, it needed to download > 200MB worth of data for the 260 days I went back. My suggestion is to run it a few times to validate the results. You will need to run it for each wallet you use to trade on ED. Once you get the results, you can try copy/paste the table into Excel and then format the columns to match. Liqui was the biggest pain in the ass of them all. If you traded a lot on Liqui, be prepared for some pain because they have no export and only show you the history of 1 pair at a time (and only the last 30 trades!). Liqui has over 250 trading pairs so if you forgot what you traded, you will tediously have to go through each pair to check. I couldn't bear this, so I ended up coding a custom script to query all 250 trading pairs and dump out the data for me, then I had to import that into Excel and format it to match the bitcoin.tax template. Kucoin wasn't too bad. They don't have an export function, but you can copy paste the tables into Excel and massage the data there. I did a few trades with OasisDEX but when I went there it didn't have any of my history, so I had to manually cobble that together from looking at Etherscan. Luckily it was only a few trades or else this would have been very tedious. ICOs Like I mentioned, I participated in something like 20 ICOs this last year. Unfortunately I have no records of any of them. In bitcoin.tax I handled these as just another trade. In order to track down the ICOs I participated in, I was forced to use Etherscan and go through my whole transaction history looking for them. In order to add the trades manually in bitcoin.tax you need the Date, the # of ETH you spent and the # of tokens you received. It's not super difficult, but just very tedious. One that threw me for a curve ball was RedPulse. This was a NEO ICO, but adding a trade manually doesn't yet support NEO as a currency. The workaround for this is putting it into a CSV and importing it that way. In fact, if I was to do this again, I would have built a CSV for all the ICOs and just imported it that way rather than inputting them one-by-one. Airdrops I treated airdrops as "Gifts/Tips" under the income tab. I had to find these through Etherscan. Verifying the data In order to verify that all seemed right and there are no problems, there are two things that I was working toward:
No unmatched trades -- On the reports tab, you can filter by "unmatched trades". Ideally you won't have any of these. If there are some, you may need to do some more digging to see why
Closing position report -- On the reports tab, your closing position report should match as closely as possible to your current holdings in Blockfolio.
Conclusion Overall, although there was some tedious parts, this was a really good exercise. Going through my entire history gave me some great insight on how my strategies played out (ICOs were great / I suck at trading). As far as the taxes themselves, it turned out to be a lot more than I was expecting, but considering the gains I am not too sad. Going into this next year I am going to make some changes. First of all, I will probably stop trading as much. It just wasn't that successful for me and created a lot of work and taxes on top of that. Secondly, I really want to try and stay away from exchanges that don't (or don't plan to) offer history exports. Third, I will probably hold most of my unsold ICOs for at least a year so as not to be liable for short term gains. Lastly, I will keep better records as I go along so I don't have to do so much digging for next tax season. I hope this can help some of you guys figure this out and I would love to hear any additional tips from those of you who have gone through this. Edit: A couple other hiccups that I just remembered. Some tokens change their symbol, this can cause some havoc, I had done some trades in MyriadCoin as MYR then it changed to something else and it got all wacky. Updating the old token symbol to the new one seemed to do the trick. Also, to add to the Liqui woes, I had bought some BCAP way back in the day, but it got delisted so there is no way I found through the UI to get that information. The only way I found out I had actually done that trade was that the script I coded iterated through every possible trading pair and only then it was uncovered. Edit #2: I got a request for the liqui ruby script
In this short post I want to set out my case for the moral justifiability of 51% attacks against proof of work cryptocurrencies. In the past, a 51% attack was a theoretical construct that most people didn´t seem to think would be practically achievable or lucrative. This has now changed, as hashpower can be rented on sites like Nicehash and Mining Rig Rentals for a few hours at a time. The attack delivers the attacker two prominent opportunities: -You can orphan blocks of ¨legitimate¨ miners. This essentially means that whatever work was produced by legitimate miners during your attack became worthless. Mine a secret chain of two hours worth of blocks, release it and you orphaned 2 hours worth of blocks by your competitors. By the time most of the miners have noticed their blocks were orphaned in an attack, their nodes will have been automatically mining on your own chain for a while and it will be too late for them to do anything about it. The amount of money they lost would be equivalent to the amount you had to spend to produce your chain. Because mining is an industry with tight margins, the economic impact on these miners can be very big. The cost may be sufficient in case of a very long attack, to persuade them to quit their endeavor and get a real job. -The more important opportunity is that you´re able to double spend your coins. This is potentially, incredibly lucrative. How lucrative it is tends to depend primarily on the inflation rate of a cryptocurrency. A low inflation rate means relatively little ¨work¨ is done to maintain the security of the system. A high inflation rate on the other hand, turns the cryptocurrency into a very poor long-term investment. As a consequence, most cryptocurrencies face declining inflation rates, that delay the problem of their ultimately unsustainability into the future. The bank of international settlements explains this issue here. When it comes to the moral justification of a 51% attack, we first have to ask ourselves why proof of work is morally unjustifiable. There are two main reasons for this: -Proof of work has an enormous environmental impact, that ensures future generations will have to deal with the dramatic consequences of climate change. There is no proper justification for this environmental impact, as it delivers no clear benefits over existing payment systems other than the ability to carry out morally unjustifiable actions like blackmail. -Proof of work is fundamentally unsustainable, because of the economic burden it places on participants in cryptocurrency schemes. Cryptocurrencies can´t produce wealth out of thin air. The people who get rich from a cryptocurrency becomes rich, due to the fact that other people step in later. In this sense we´re dealing with a pyramid scheme, but the difference from regular pyramid schemes lies in the fact that huge sums of wealth are not merely redistributed, but destroyed, to sustain the scheme. The cost of the work to sustain the scheme is bigger than you might expect, because the reality is that relatively little money has entered bitcoin. JP Morgan claims that for the crypto assets at large, a fiat amplifier of 117.5 is present, as a purported $2 billion in net inflow pushed Bitcoin’s market capitalization from $15 billion to $250 billion. You have to consider that the Digiconomist estimates that $2.6 billion dollar leaves the Bitcoin scheme on an annual basis, in the form of mining costs to sustain Bitcoin. The vast majority of retail customers who entered this scheme ended up losing money from it. In some cases this lead to suicides. The fact that proof of work is morally unjustifiable doesn´t directly lead to a moral justification for a 51% attack. After all a sane society would use government intervention to eliminate the decentralized ponzi schemes that are cryptocurrencies. There are a few things that need to be considered however: -Governments have so far failed in their responsibility to address the cryptocurrency schemes. Instead you tend to see officials insist that proof of work might suck and most cryptocurrency is a scam, but ¨blockchain technology¨ will somehow change the world for the better. Most libertarians who saw these schemes emerge insisted that it´s stupid to participate in them because the government would eventually ban them and round up the people who participated in them. This didn´t happen because of the logistical difficulty of suppressing these schemes (anyone with an internet connection can set one up) as well as the fact that suppressing them would lend credence to the anti-government anarcho-capitalist ideology on which these schemes are based. Goverments might say ¨these schemes facilitate crime, ruin the environment and redistribute wealth from naive individuals to scammers¨, but anarcho-capitalists would insist that governments have grown so tyrannical that they want to ban you from exchanging numbers on computers. -Because cryptocurrency is fundamentally an online social arrangement, governments have very limited influence over the phenomenon. Binance seeks to become a stateless organization, not subject to the jurisdiction of any particular government. Just as with regular money laundering and tax evasion that hides in small nations that can earn huge sums of money by facilitating these practises, governments are dependent on the actions of individuals to address these practices. Whistleblowers released the panama papers and the tax evasion by German individuals through Swiss bank accounts. Through such individuals, the phenomenon could be properly addressed. In a similar manner, cryptocurrency schemes will need to be addressed through the actions of individuals who recognize the damage these schemes cause to the fabric of society. -The very nature of a 51% attack means that it primarily punishes those who set up and facilitate the cryptocurrency scheme in the first place. The miners who pollute our environment to satiate their own greed are bankrupted by the fact that their blocks are orphaned. The exchange operators are bankrupted due to double-spend attacks against the scams that they facilitate. When this happens, the cryptocurrency in question should lose value, which then destroys the incentive to devote huge sums of electricity to it. Finally, there´s the question of whether 51% attacks are viable as a response to cryptocurrency. There´s the obvious problem you run into, that the biggest and oldest scams are the most difficult to shut down. In addition, cryptocurrencies that fell victim to an attack tend to move towards a checkpoint system. However, there are a few things that need to be considered here: -51% attacks against small cryptocurrencies might not have a huge impact, but their benefit is nonetheless apparent. Most of the new scams don´t require participants to mine, instead the new schemes generally depend on ¨staking¨. If people had not engage in 51% attacks, the environmental impact would have been even bigger now. -51% attacks against currencies that implement checkpointing are not impossible, if the checkpoints are decentrally produced. What happens in that case is a chain split, as long as the hostile chain is released at the right time. This would mean that different exchanges may get stuck on different forks, which would still allow people to double spend their cryptocurrency. -There are other attacks that can be used against proof of work cryptocurrencies. The most important one is the block withholding attack. It´s possible for people who dislike a cryptocurrency to join a pool and to start mining. However, whenever the miner finds a valid solution that would produce a block, he fails to share the solution with the pool. This costs money for the pool operator, but it can be lucrative for the actor if he also operates a competing pool himself. In the best case it leads to miners moving to his pool, which then potentially allows him to execute a 51% attack against the cryptocurrency. -It´s possible to put up a 51% attack bounty, allowing others to do the work for you. This works as following. You make transaction A : 100 bitcoin to exchange X, for a fee of 0.001 BTC. Once this transaction has been included in a block, you immediately broadcast a conflicting transaction with another node: You´ŕe sending those 100 bitcoin to your own wallet, but you´re also including a 50 bitcoin fee for the miners. The miners now have a strong incentive to disregard the valid chain and to start mining a new chain on an older block that can still include your conflicting transaction. Provided that pool operators are rational economic agents, they should grab the opportunity. -Selfish mining in combination with a Sybil attack allows someone to eclipse the rest of the network, while controlling less than 51% of the hashrate. Your malicious nodes will simply refuse to propagante blocks of your competitors, thereby giving you more time to release your own block. Selfish mining will always be possible with 33% of the hashrate and as far as I can tell there are no pathways known currently to make the scheme impossible for people with 25% of the hashrate. This potentially makes a 51% attacks lucrative without having to carry out double-spend attacks against exchanges. Although double spending is a form of theft, it´s not clear to me whether a selfish mining attack would get you into legal trouble or not.
The dreaded 51% attack is a morally justifiable and potentially lucrative solution to the Nakamoto scheme.
Yeah, it’s another one of “those”. But honestly, after being in the game for long enough, you end up developing an eye for the good coins. Not the “good” ones, the GOOD ones. Believe it or not, research and common sense is the name of the game!
A little bit more about me: I come from a business & logistics management background. I started investing in cryptocurrencies and trading a little more than six months ago. As a person, I am very detail oriented and I’ve been researching all kinds of cryptos, for hours a day, for the past six months. The more I researched, the more I learned, the more I became hungry for knowledge, and therefore the more i researched. From trading to cryptocurrency basics, their economics, their political implications, the technology revolution they represent, the human psychology aspect as well as emotional trading behaviours (FOMO, FODO, etc.), all of it!
I’ve purchased Ethereum at 150$ (when I first started in crypto). Then NEO back when it was still AntShares and trading under 3$. Gas (Antcoin back then) at 30c, OMG when it was sub-1$, and ETP at exactly a dollar (selling it later at 5$). This was all before I even knew how to do a basic margin trade & was still in the process of learning about crypto (and while tether still had a “reasonable” market cap! LOL)
My approach is pretty simple when it comes to crypto. I split coins into seven main categories:
-Store of Value (BTC) -Payment (DASH, BCH, LTC) -Pure Anonymity and/or Evil Stuff (XMR) -Platform/platform’ish (ETH, NEO, LISK, CARDANO, ETP, Iota, Factom and the likes) -Shitcoins (99% of ERC20 tokens) -Absolute Shitcoins (Boolberry, Embercoin et al.) -Fee Split / Dividend Coins
That last category is my favorite. While I do strongly believe in diversification (10% store of value, 10% payment, 5% anonymity, 25% platform in my case), I always have a “lean” towards coins that make business sense. Coins that derive their value directly from the amount of usage the platform gets (Factom, for example). Coins such as NEO, BNB, Kucoin, Coss, ICN, TenX and the likes, basically coins that either have a direct “dividend-paying” property (NEO generating gas, Kucoin/Coss awarding holders with a % of the exchange’s trading fees) or an indirect “dividend paying” property such as BNB, ICN, TenX using quarterly profits to buy back their own coins and burn them, thus raising the value of the rest of the coins in circulation over time.
Now let’s look at market caps of these direct and indirect “dividend” coins.
Neo: 2.3B TenX: 246M Binance: 200M Iconomi: 155M Kucoin: 44M (68M at ath, not too long ago) Coss: 5M
You see that odd one there with only 5M market cap? Yeah. That’s the great buy right now. That’s the x10, x20 or even x30 that most people haven’t realized yet. That’s also the “dividend coin” you can scoop a ton of while it’s on the cheap, and make massive recurring revenue from as the exchange solidifies and evolves.
What is COSS? COSS stands for Crypto One Stop Solution. They’re a Singapore based cryptocurrency exchange with an amazing team that’s currently expanding. They aim at becoming the “One Stop” solution for crypto, meaning A) an exchange, B) a payment gateway for merchants to accept crypto payments, and probably sometime in the future C) crypto debit/credit cards. They offer their own coin (COSS coin), and holders of this coin receive 50% of the trading fees generated by the exchange (more on this later).
Now, what a lot of people still don’t realize in crypto, you don’t invest in the bigger market cap coins expecting to make a killing (“the moonshot”). Sure, they’ll bring you nice long term growth as the whole market matures, and that’s where you want to diversify and solidify your portfolio, solid coins with a purpose. But what if you want more thrill? An actual opportunity to “moon”? You find a project that makes business sense, that has at least a working product, and a good team. Buying NEO at 2.5B market cap? You missed the boat, it was a dollar a few months ago and already went x60 (“mooned”), and now stabilized at roughly x38. OMG had it’s x10-15 already. BNB as well. Their market caps are big, and a lot of buying needs to happen to even double in price.
Antshares (NEO) back then was a steal at 1, 2 and 3$. It was a huge risk, with huge rewards. They didn’t even have a product other than their blockchain. No dApp running or even being built on it, no english resources to even figure out how to code on it and deploy a smart contract, no marketing, hell we didn’t even know if Da Hongfei was still alive. All it was is a Chinese based smart contract platform, with an innovative dBFT concensus algorithm. It was a 100M market cap coin that early adopters believed in, and essentially invested in when it was not much more than a website and a blockchain. Look where it’s at now, with more than a dozen dApps being built on it, a solid team of roughly 10 devs, with the NEO council also funding City of Zion (team of 20+ NEO devs). NEO has grown into an incredible community, and is now launching coding dApp contests left and right, with the latest one in partnership with Microsoft china & offering half a million dollar’s worth in prizes.
NEO holders get rewarded with GAS on a daily basis. When NEO gets further adoption, all fees such as registering an asset, deploying a contract, changing an asset, etc. will be redistributed to NEO holders as well on a pro rated basis. Only transaction fees are not, as those will go out to MasterNodes. If you got yourself a thousand NEO’s back when they were a dollar or two a piece, you’re now generating 7 gas per month. That’s roughly 161$ USD per month, on a recurring basis, at current gas prices, out of a 1000$ investment. That’s a whopping 16.1% PER MONTH on original investment, and not even counting the fact that you pretty much made 37000$ profit on the NEO’s themselves. Today? Well, you gotta dish out 38000$ to buy a thousand neos and make 161$ per month, basically bringing you 0.4% per month on original investment.
Same with bitcoin. Early adopters that got it at pennies. It just hit $10K USD a piece. For every 30 cent spent purchasing bitcoin in 2009, you’d have $10K USD in the bank account. Invested 3$? 100K. Invested 30$? 1M.
Ethereum? From a dollar to half a grand now.
Moral of the story? Early adoption pays off. History repeats itself, and it will continue to do so. Bitcoin was digital money for nerds, ethereum was a cool project that nobody really gave a crap about until they got EEA which showed credibility (early adopters of eth had a great vision, I’ll give them that!). Neo was chinese vaporware. What do they all have in common? Their.Early. Adopters. Made. A. Killing.
Look where they stand now. Look where a lot of coins stand now. Even a lot of ERC20 tokens that don’t even really have a reason to exist have market caps over 100M. And for what? They don’t reward you with anything other than price increasing because more people buy (greater fool theory)? They don’t reward you with dividends from the project/platform itself? Their value isn’t derived directly from the amount of usage it gets (a la Factom, PaulSnow you genius.)? They still don’t even have a minimum viable product to show? When you ask yourself why does it need a coin, and the answer is either “uhh…” or “oh it grants you voting rights” (that nobody gives a crap about, let’s be honest), you should reconsider your investment strategy. Cause I can tell you a lot of people don’t know what the hell they’re doing, and they’d be better off diversifying in the top 5 or 10 coins and holding than investing in the shitcoinfest that crypto has become.
And that’s why COSS is a pretty buy right now. You’re investing in a platform that’s already up and running, not a whitepaper or vaporware. Hell even Eth and Neo were riskier investments for early adopters. Let’s go over the cons first:
It’s ugly. The UI sucks. It doesn’t have API’s yet, meaning there’s no bots to create liquidity, and therefore low volume. It’s been fudded to death by KuCoin shills (and their referral links you’ve seen everywhere a month ago). Charts are horrible
That’s about it. Whenever you read up about coss, those are the cons you’ll find. But what about the pros? Well, all of this is in the process of being fixed, as we speak.
Singapore has lax laws about cryptocurrencies and issued a statement it does not feel the need to regulate them. It’s securing exclusive ICO’s already despite being a tiny exchange, and has mentioned being able to secure from 4 to 6 per month. The team listens to the community’s feedback and takes it seriously. This is Gold. One of the first things they were criticized about was trying to do too many things at once (an exchange, a payment gateway, a full one-stop solution for crypto, etc.) and they’ve taken the community’s advice and decided to focus solely on the exchange for now and build it properly, before branching out to the rest. “Better excel at one thing and build from there, than be mediocre at multiple things at once” Also following community feedback, they are implementing trading promotions “a la Binance”. Part of the total supply of COSS tokens will be donated to charities (the community votes to who they go). First of all, that’s just plain nice. Secondly, I find it pretty damn cool that we donate this for good causes, and they basically keep “generating” income from it. It’s basically like a “perpetual donation” on behalf of COSS and all of its users, and definitely will make a lot of people feel good about using the exchange. Thirdly, this pretty much guarantees millions of COSS tokens are going to be in perpetual “HODL” mode, essentially taking them off the market. They will be implementing a FIAT gateway sooner than later. We all know FIAT gateways are game changers. They are constantly hiring. The team growing is definitely a good sign. They are revamping the overall UI and charts, once again following the community’s advice, and the proposed new look is fantastic! Check it out here, as well as other great announcements: https://medium.com/@runeevensen/coss-io-7379b7628d93EDIT: It has been brought to my attention that there is a UI upgrade scheduled for tomorrow (Dec. 3rd), although it isn't clear if it's a minor one or the actual major overhaul, might wanna keep an eye out on that! They are upgrading the matching engine and releasing API’s soon to allow bots to create liquidity and significantly raise the trading volume. Unlike KuCoin, the revenue split (COSS token holders) will always receive 50% of the fees, whereas kucoin will start decreasing it in 4-6months and it will bottom out at 10-15% The revenue split from trading fees is controlled by a DAO, meaning the COSS team cannot arbitrarily decide to change it later down the line, unlike KuCoin where the control over the fee split is centralized and they decrease it as they please. The DAO model also avoids it being labeled a security. First of all, those aren’t really “dividends” as dividends would require them to calculate income minus expenses to determine profit, and then distribute this profit to shareholders, and obviously that’s a legal nightmare. With the DAO model, you don’t get a percentage of the “profits”, you get a revenue split from the exchange fees, and it’s done by clicking a “distribute” button which makes a call to the smart contract and distributes your coins. COSS itself is not giving you anything COSS is still in Beta. It has a tiny market cap. Now’s the time to pick it up, not when it’s out of beta and has become successful, or you’ll be in another Antshares/NEO situation. A ridiculously small move from 5M to 50M in Mcap and that’s x10, a move from 5M to 150M (still under binance levels) and that’s x30. In the long run, COSS aims to be more than just an exchange. Holders of the token, who currently get 50% of the exchange’s trading fees, will also get 50% of other fees charged from coss. This includes their eventual payment gateway. Merchants around the world wishing to accept crypto payments will be able to use COSS’s gateway and COSS will charge a 0.75% fee per transaction. We, as COSS holders, also get 50% of that. You believe crypto is the future and going mainstream? Well your COSS will entitle you to the revenue generated by tens of thousands, if not hundreds of thousands of businesses accepting crypto payments via COSS Point-Of-Sale. COSS also mentioned that all other COSS “fee generating” products to come will all be subject to the same DAO/50% split. Logically, If they have 1) The trading platform, and 2) the payment gateway, then the third step is solving the problem of spending the crypto in places that don’t accept direct crypto payment, AKA a crypto credit/debit card. Well, guess what? Users of such cards will be charged a small fee as well when their crypto is being converted to fiat in real time for payment at a gas station. We as COSS holders are, again, getting 50% of that fee. As you can see, this is a coin that makes business sense to invest in. Unless you really, reaaaaaally care about a coin being the “Future of decentralized prediction markets” or “the future of decentralized dating” or the “decentralized gambling coin” and whatnot. Smart money is smart. It's only a matter of time before savvy investors discover this coin.
ALTHOUGH, keep in mind, the calculations above take into consideration an average trading fee of 0.2% and while this fee is accurate right now, it will most likely average 0.1% once API’s are released and liquidity/market maker bots start operating on the platform. Also, the calculations above do NOT take into consideration that in 4 years from now, there will be 200M (hard cap) COSS tokens on the market. HOWEVER, these calculations also do not take into consideration that by then, COSS will have a fully up and running payment gateway, crypto credit cards, and other revenue-generating products such as a crowdfunding platform, smart contract deployment platform, etc. that are also generating revenue for COSS holders.
All in all, if all goes as planned, the payment gateway/cards/other products will negate the additional COSS tokens released in the market as well as the average trading fee of 0.1%, and therefore the numbers presented in the excel docs will remain sensibly the same. Also, if crypto really takes off in the mainstream, then the revenue split to coss holders from the payment gateway & credit card spending could very well double, triple or quadruple all the numbers you’re seeing in these excel sheets, and that’s on the low end. Remember, the exchange only charges 0.2% (0.1% average once we have bots) out of which we get half, but the payment gateway on the other hand charges a flat 0.75% (7.5x the what the exchange’s fee), out of which COSS holders get half. This could be a massive revenue driver, easily surpassing the exchange itself, and honestly if at that point in time this coin is NOT valued at 3B+ (I mean, even ethereum classic is over that right now..), then I’ll just give up on the whole notion of logical thinking.
Quick example, assuming in 4 years 50M in gateway processing daily (18B yearly), 0.375% of that would be 187.5K USD daily for COSS holders. With 200M Coss tokens total supply, if you hold 10K coss you’d generate 9.375$ per day (65$ per week, 282$/mo.), and that’s purely from the gateway (totally excluding the exchange revenue, crowdfunding revenue, credit card revenue, etc.).
If you have 100K coss you’d generate 93.7$/day, 650$/week, 2820$/mo, again purely from the gateway.
If you’d rather assume more conservative figures (let’s say 25M in daily gateway processing on COSS, all around the globe, or 9B yearly), then simply divide these figures by half. If you wanna go balls to the walls, double them (100M daily, 36B yearly). Play around, have fun with the numbers! To keep things in perspective, square has processed 50B’s worth of transactions in 2016. Therefore I believe using 9B, 18B and 36B for our calculations isn’t too far fetched, and actually pretty reasonable.
Anyway, to sum this up, no matter how you look at it, COSS is an extremely promising project with huge potential, and actually has working math (and a working beta!) behind it. It’s only a matter of a month or two before they’re out of their Beta, have upgrades to their UI and engine, and start really growing from there. The team listens to the community, which is super important, and they’re working on a multitude of revenue streams, out of which not only them, but all coss holders will benefit from, fifty fifty.
Their crowdfunding platform will be a competitor to indiegogo, gofundme, kickstarter, and they’ll have a small percentage fee (50% of which goes to COSS holders). The crypto Point-Of-Sale will be a competitor to Square and the likes (50% revenue to COSS holders). The crypto credit card (also 50% revenue to COSS holders). It is truely an admirable project. Shovel manufacturers made a killing during the gold rush, and COSS is positioning itself as the shovel manufacturer in the crypto adoption gold rush. This is a coin that makes sense to invest in, it is ultra tangible, and will give greater returns than any type of “decentralized [insert function here]” type coins.
On a personal note: Honestly, I believe this is the proper way to ICO, by NOT giving people worthless tokens that only go up in value due to speculation (looking at you, 99% of ERC20 tokens). Let investors guide you, let them reap 50% of the rewards as THEY are the ones funding you. This’ll keep the investors interested in the project, and every single one of them will have a direct incentive to vouch for your product. It’s only right for the investors to get rewarded with something tangible, I’d take that any day over a speculative shitcoin who’s only purpose was to put money in the project’s founders pockets
Quoted directly from said link:“For those that are most interested in discussions regarding the trading price of COSS. Please have in mind that when we entered our token sale, our clear sales message was a 3–5 year road-map, and not a 3–5 months pump and dump. We are a small team, doing our utmost to deliver and all we ask is for you to continue to give us feedback and also for you to give us some time to deliver. *That being said. We still aim to be out of BETA as soon as possible with a new engine for the exchange in Q1 2018. New UI should be in place well before that.** Once we feel we have this in place we will roll out massive marketing campaigns to attract users and increased volume. So although we have a 3–5 year road-map ahead, you should expect to see 2018 being “our year”. The 3–5 year plan is more on the complete roadmap when we proudly can call ourselves a one-stop solution. For now it is all about the exchange, and there we will see rapid changes over the coming weeks/months.”*
All in all, i’d like to thank the COSS team for actually caring about their investors, keeping them in the loop, listening to their feedback and giving them a unique and tangible opportunity. I’d also like to thank all the other COSS investors, who see a huge potential in this project and support the team, and lastly, all of you crypto-heads for reading through!
Happy hodling, and hopefully see you all at 500M+ market cap by late 2018 :)
-Some random guy on Reddit.
PS: Not investment advice. Always do your due diligence. Also, if you’d like, you can join the discussion at /cossIO
Friendly reminder: ETH is the quickest way to get your funds on the COSS exchange, and COSS/ETH pair has 4x the volume of the COSS/BTC pair.
This thing is long af and I'm on of those guys now...
Hey guys. One last big dramatic post, even though it feels kind of awkward now since I had no idea I'd attract as much attention as I did with the one yesterday. But a few people asked directly what happened and I feel like I ought to do this. (u/trb0x, u/NefariousNaz) The amount of self-reflection and encouragement I received was astonishing. And u/jtnichol thank you for the gold! I’ve got a lot of respect for you as a moderator and you’ve been great pulling the sub together this last few weeks especially. So I was going into the field for drill (National Guard Reserves US) and I wasn't going to have an opportunity to sell a little peth at a time and edge my liquidation down as u/TheRealDatapunk suggested. When I got back today I saw the amazing reactions to my post and saw that the PETH/Eth ratio changed slightly to put my liquidation at 184.xx. As you guys may have seen, we went to 185.01 on Binance. I took advantage of this bounce to drop the liquidation price again to 165 by selling PETH bit by bit, I'll probably try to lower it further tonight, but I’ve made my peace with getting squeezed out if it happens. It still feels horrible to sell Eth for less than half my avg cost, but it is what it is. I feel lucky (For now, although I know we are likely to keep dropping), and also awful for other people that got squeezed so far. u/JakovTheJakovasaur, u/BakedEnt, u/richyboycaldo, I hope you guys made it I really do. It got me thinking: Part of what grew Bitcoin into what it is today was the community. And this sub is a stellar (no pun intended) example of that. We're a community. We talk about the latest toys like Augur or God's Unchained, debate the politics of issuance and such, and provide support and advice for one another. We are all here because we saw the same thing and recognized its’ value. These losses suck. We may love the tech but we all invested for the money. Like I said this has been a hard lesson, but even if ETH continues to tank and never recovers to ATH (I still know it can, but if it doesn’t…) then we’ll still be a community of people enthralled by the evolution of this wonderful protocol, and the crypto space in general. The ecosystem won’t die because the price can’t hit 1000 again. Looking through the sub I can’t see how any but the most desperate and sadistic trolls would really be entertained considering how well people have been handling their liquidations and supporting one another. We are not undignified, we are not a laughing stock, because we knew what we were getting ourselves into when we signed up for this roller-coaster. I just want to emphasize again how blown away by what an amazing community this is, and I’m right there with all y’all with heavy losses. To answer u/91143fd7dc4a5c4e7e74 My loss so far is in the five-figure range. And is (was) most of my savings. It is more than some of you, and less than others. I’m young and inexperienced. It isn’t the end of the world for me, and it isn’t for any of you either. Don’t let anyone make you feel bad about taking the gamble and putting your money where your beliefs were. Even if it only turned out to be a costly lesson. Take the lesson to heart. Be careful with leverage, diversify (Not just in coins, mind you), never assume you know how far the market “can” go, don’t dismiss the bears entirely, be scrutinizing about the timing of your investment, and don’t FOMO even if you think what you see is cheap. This isn’t your only opportunity to achieve wealth in life, and wealth isn’t all there is to life anyway. I think I am still gonna prowl the sub every so often, but I’m definitely taking a break. Anyone that actually read all of this I hope you got something out of it, and l wish you the best! (Even the shorters…good game.)
Dev meeting? Would say so, yes The people are still exhausted from the payment ID meeting :) Guess we could ping some people vtnerd, moneromooo, hyc, gingeropolous, TheCharlatan, sarang, suraeNoether, jtgrassie Anyone up for a meeting? Yep I'm here Here o/ Perhaps we should just start and people will eventually hop in? oof sorry guys, I'm working on the new FFS and I forgot all about this. Got a couple of new volunteers. This literally might be able to launch tomorrow. I know that. It's called "flow" :) I could run if you're out of time? go for it dEBRUYNE you guys are going to like this new FFS. We're like 99% done. Hi rehrar: someone else do the milestone thing already? All right, jtgrassie, perhaps you'd to start w/ briefly describing your most recent PR? https://github.com/monero-project/monero/pull/5091 oneiric, xiphon did everything like....everything As far as I can see, it allows the user to push his transaction over I2P, thereby masking the origin IP of the sendeuser great And it hooks into vtnerd's PR right? Sure. It basically just builds on vtnerds Tor stuff. sorry dEBRUYNE Really not much added. I have it running and tested. From the perspective of the user, what needs to be configured exactly? Nice Assuming the PR is included in the release binaries I'm using knacccs i2p-zero duirng testing but will of course work with any i2p setup sorry dEBRUYNE <= Np Looks a little like dams breaking, now that we have some dark clouds over Kovri and people take matters into their own hands ... User needs to run i2p, expose a socks service and and inbound tunnel. Basically same as Tor Okay, so should be reasonable as long as we write proper documentation for it (e.g. an elaborate guide) rbrunner, yes, knaccc credit for jumping on i2p-zero really dEBRUYNE: documentation monero side is kindof done. i2p side is very much implementation specific. I suppose we could write some guides for the most popular implementations? e.g. i2p-zero aims to be zero conf, but i2pd or Kovri would be differnet. I see, great vtnerd___: Do you want to add anything? could amend the current kovri guide for monero use from --exclusive-peer to the new proxy support Now I have i2p-zero running and tested with the #5091, I plan to jump back over to helping knaccc on getting that polished. I added support for socks proxy in the basic wallets ^ excellent Yes vtnerd___ I havent tested it yet but looks sweet. So connections to `monerod` over Toi2p are possible within wallet cli and wallet rpc Awesome This also implies auth+encryption even if ssl is not in use (when using an onion or i2p address) All right moneromooo: are you here? If so, could you perhaps share what you've been working on? I am. I revived the SSL PR, more stuff on multi sender txes, an implementation of ArticMine's new block size algorithm. I presume a multi sender tx works similar to multisig insofar as the senders have to exchange data before the transaction can be performed right? Yes. There are 2 SSL PRs. What's the diff? Theoretically this would also allow the sender to provide an output right? Which would be kind of similar to Bitcoin's P2EP The second one adds some things like selecting a cert by fingerprint. Yes. (for the first sentence) All right, awesome For anyone reading, this breaks the assumption of the inputs belonging to a single sender, which makes analysis more difficult Nice side-effect. Much work coming for the various wallets to support that rbrunner: Anything you'd like to share in the meeting btw? Yes, just a little info I have started to seriously investigate what it would mean to integrate Monero into OpenBazaar I have already talked with 2 of their devs, was very interesting In maybe 2 or 3 weeks I intend to write a report Too early to tell much more :) Soon^tm I guess :) Yep Currently wrestling with Go debugging whole new world moneromooo: Has pony recently shared any insights regarding the upcoming 0.14 release btw? No. All right I would love to see the tor & i2p PR's merged sooner rather than later so we can get more testing done. ^ +1 Isn't that famous early code freeze already on the horizon? fluffypony, luigi1111 ^ I suppose I could provide a little update regarding the GUI btw As always, lots of bug fixes and improvements :-P selsta has recently added a feature to support multi accounts dsc_ has revamped the wizard and will now start working on implementing the different modes and a white theme dsc_ is working fulltime on the GUI already? yes :) dsc_ is bae In light of the recent payment ID discussion, we've also, by default, disabled the option to add a payment ID unless the user explicitely activates the option on the settings page rehrar ^ nice I spoke about this yesterday at the coffee chat, this is not a good decision. How does it handle integrated addresses? The same way? rehrar ? For the next many months, we are still stuck with PAyment IDs in the ecosystem. Making it harder for people to access them will make Monero suck so hard to use for the average person for many months. i agree with rehrar Remove the option of Payment IDs when we remove Payment IDs rehrar: The new GUI release won't be live until probably mid march though Which is a few weeks in advance of the scheduled protocol upgrade Payment ID removal comes in October right, but Payment IDs are not removed in March Did we not have loose consensus on removing the old, unencrypted payment IDs in march? they are removed in October We had discussed a deprecation in March and a ban in October ok, then if we are going to do that, we have to commit to it and contact the exchanges like Binance that use them and get rid of them in the next few months (of unencrypted) Binance is huge, and if they still use them, then people will be very upset that they can't deposit or use Payment IDs easily I'm just speaking from a UX perspective. I thought it was unencrypted in April and possibly encrypted in October Yes I do agree Timeline and notes: https://github.com/monero-project/meta/issues/299 impossible to remove them for march, many exchanges still use them We can defer it to the 0.15 release if needed Well, that wasn't the impression for them log that I just read today This was all discussed in the earlier meeting linked above We have to force the ecosystem off of Payment IDs before we remove them from the UI, is all I'm saying Remove != make difficult to use ... or make them more difficult there, right? ping sgp_ sarang, I understand, and I agreed with you during that meeting. But then I started thinking of it as a UX person, which I am. And that huge massive problem leapt out at me i think making them difficult to generate is a good idea but making them difficult to consume and use is a bad idea well, maybe not a good idea, but a better idea ^ If we defer the decision to depriciate long payment IDs to october, won't we have the same issue then? The UI can gave an expandable payment ID field like MyMonero and we can still call it deprecated It is foolhardy to remove an option that the ecosystem uses. So I suggest we keep the Payment ID in the UI until October when they are completely banned. no dEBRYUNE, because they will be banned via consensus sgp_ imo it may be a misdirection of dev resources to add that since things are proceeding in the short term rather than long term but this is a relatively minor point Nothing matters til exchanges change All right The issue is that consensus will still have them in April, and exchanges won't upgrade because they are still allowed. Thus they must still be in the UI. endogenic these changes are already merged in the GUI to hide it like you do ok But when they are banned, exchanges are forced to upgrade or stop using Monero, so we can remove them safely because they won't be in use rehrar: that's a strong assumption sarang that they will upgrade? yes if they don't, then they can't use Monero If exchanges require pid, users need a way to set a pid. Making it hard for the user in the interim is just going to be a nightmare. we have decided to take our "stand" in October A way that is not too hard, then To be clear, we still intend to deprecate long encrypted payment IDs in April right? But no enforcement until October the term "deprecated" doesn't mean much if it's still allowed, and used in popular places yes, as far as I understand it jtgrassie, exactly True I suppose dEBRUYNE: we need to be more specific when talking about deprecation the person who suffers is the user There are two proposals for GUI deprecation: 1. Hide it in the send screen with a simple option to expand (currently merged iirc) 2. Hide it completely in the send screen unless users enable the field in advanced settings (PR'd but not merged yet iirc) What are the arguments for 2? Both are poor options, but 1 is better than 2 by a long shot Well the people who need to be made to "suffer" are the exchanges. And I don't see a way to make exchanges "suffer" other than by having their suffering customers complain to them constantly that they need to update. ^ CLI has something similar where users need to set a manual payment ID transfer mode. Not sure if it's merged yet the way to make the exchanges suffer is when we ban PIDs. They either upgrade or don't use Monero. exact;y Agree with rerahr here have exchanges been provided with clear, practical, sufficient technical upgrade plans for supporting what they're doing with PIDs but with subaddrs? Both are poor options, but 1 is better than 2 by a long shot <= I wouldn't call 1. a poor option. Have you actually checked how it looks? Because it states "Payment ID" and a user has to click on the + to expand the field endogenic: yes the email when out. Blog post coming soon, but contains the same info as the email also the exhcnages' users are often using wallets that don't support subaddresses ok great as well, it should be noted that the timeline for exchanges to upgrade is September, not October when the fork is. Which wallets are that? Rehrar: I don't see option 1. causing any issues/confusion i guess it doesnt matter too much if withdrawing as a personal user the main address should suffice Because September is when the new versions will be coming out without PIDs in the UI If there's opposition to 2, 1 is fine. We can still call it deprecated which is the optics we need anyway exchange users are often just using other exchanges lol. No wallets involved. dsc_ dEBRUYNE, ok, I trust you guys here then rbrunner: i was thinking mymonero last i heard Ok pigeons: rbrunner yes receiving on subaddresses won't be supported yet sending to them has been possible though and yes as learnandlurkin says often they withdraw to other systems like exhcnages that also dont yet support subaddresses I really can't come up with any good argument for 2. right now endogenic: seems not much of an issue then. Exchanges will typically support withdrawals to both subaddresses and plain addresses (especially if we are going to force them to use subaddresses) For deposits, MyMonero works properly if the user sends to a subaddress Actually the second solution was already merged: https://github.com/monero-project/monero-gui/pull/1866 Maybe not enough eyes watching :) The important thing is to have done something to justify having a big "DEPRECATED IN APRIL" stamp on PIDs to spook exchanges in the interim This was for solution 1: https://github.com/monero-project/monero-gui/pull/1855 The Monero Community Workgroup will start making noise everywhere we can to exchanges, and everywhere else that will listen. Try to get on those garbage news sites also. So everyone knows that deprecated in April, and banned in September Hey, for solution 1, write "Payment ID (optional, deprecated)" or similar there rbrunner: noted rehrar: probably wait until the blog post, but it should only be a few days Maybe a Reddit sticky post would be useful? With the blog post If people are over freaking out about the hashrate or terabyte blockchain :) sigh Any questions for the MRL side? Is someone checking ArticMine's block size changes for weird behaviour in some cases etc ? How would such testing work? Private blockchain?