South Korean Crypto Exchange Bithumb Cleared by Government

After a three-month long investigation, the South Korean government finds no evidence of wrongdoing at the Bithumb crypto exchange, local media report June 8.

Bithumb is currently the largest cryptocurrency in Korea and the seventh largest in the world by trade volume, according to data from Coinmarketcap.

According to reports, the investigation into the exchange began on January 10 and was conducted by multiple government agencies, including the National Tax Service (NTS), Financial Services Commission (FSC) and Korea Financial Intelligence Unit (KFIU).

The government, which described the investigation as intense and extensive, mounted a search and seizure operation on the exchange’s headquarters, taking computer files, devices and information required in order to run a full audit of the exchange’s dealings.

While the government found no evidence of illegal activities, tax evasion or suspicious business practices, Bithumb was ordered to pay 30 billion won (approximately $28 mln) in taxes.

Bithumb became the target of investigation after showing a 171-fold increase in profits in a 12-month period. The NTS was looking to ensure that the company had settled all taxes and properly disclosed their holdings, profits and losses.

A spokesperson for the NTS said that they had “initiated several investigations into Bithumb between 2014 and 2017, and over the past four years, Bithumb has continuously paid all of the taxes imposed to the company without any conflict with the NTS.”

Cryptocurrency a ‘Modern Miracle,” Not Going Away: CFTC Commissioner

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One of the top market regulators in the US said this week that cryptocurrency is a “technological revolution” that will one day be a part of every national economy.

Speaking on Monday before the BFI Summit at the United Nations, Commodity Futures Trading Commission (CFTC) Commissioner Rostin Behnam discussed challenges faced by the agency as it regulates industries associated with the nascent blockchain field. However, far from denigrating this technology as a tool for criminals, he heaped copious praise upon it for its ability to positively transform the financial sector.

“But virtual currencies may – will – become part of the economic practices of any country, anywhere. Let me repeat that: these currencies are not going away and they will proliferate to every economy and every part of the planet,” he said, adding:

“We are witnessing a technological revolution. Perhaps we are witnessing a modern miracle.”

Notably, Behnam, a Democratic Trump Administration appointee who began serving as commissioner in 2017, further stressed that decentralized and privately-issued cryptocurrencies — not central bank-backed digital currencies (CBDC) — will replace physical fiat currencies, at least in many parts of the world.

“Some places, small economies, may become dependent on virtual assets for survival,” he said. “And, these currencies will be outside traditional monetary intermediaries, like government, banks, investors, ministries, or international organizations.”

cryptocurrency derivativesSource: Shutterstock

Reflecting on this prospective future, Behnam expressed cautious optimism that cryptocurrency technology could spur an “equitable” movement of wealth from corrupt gatekeepers to the billions of people whose voices have always been ignored by those in power.

“There are 6.8 billion cell phones in the world, almost one for every person on the planet. Here is our chance to put money directly into the hands of those who need it, without bribery, rake-offs, graft, and shakedowns. Virtual currencies could transform the economic and social landscape. It could mean a massive, and equitable, shift of wealth. Technology could be transformational, without a military take-over, civil war, or political or religious creed.”

However, Behnam warned that this economic transformation could turn dystopian if “economic elites” are able to control the “means of distribution” of these assets, enabling corrupt actors to use this promising technology to further drain the wealth of those suffering from poverty and violence. He said that this would lead to a dark future.

“Virtual assets may be a stranglehold. In other words, technology can be a weapon against the work of the United Nations and others trying to alleviate poverty or violence. Virtual assets become a means of deeper control of wealth and a means of exploitation,” he said.

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Third Largest Crypto Exchange Huobi Creates New Platform in US

Huobi, the world’s third largest crypto exchange by trade volume, has created a new digital currency trading marketplace in the US, Financial Magnates reports Friday, June 8th.

The platform comes via a newly created San Francisco-based company called HBUS, which, as stressed in a Medium post earlier this week:

“…is not an “arm,” “subsidiary,” “division,” or any type of “affiliate” of Huobi. Nor is HBUS to be referenced as “Huobi US” or any variant thereof. HBUS is the “exclusive US strategic partner of Huobi.”

HBUS’ Medium post, dated June 5, indicates a ‘soft launch’ – pre-registration – date of June 10, offering all users who sign up between June 10 and June 14 a month of trading without fees.

Official trading is set to launch June 15, although HBUS’ website suggests that “overwhelming demand” may postpone the launch, and appeals to the public to sign up for a newsletter and its Telegram channel to be notified when registration opens.

Huobi, originally founded in China, first revealed its plans to open an office in San Francisco in January this year. Now headquartered in Singapore, the exchange has been vigorously targeting overseas markets, launching a South Korean subsidiary, as well as announcing plans to open an office in London.

The US context places high demands on crypto exchanges to come under the purview of regulators, and an HBUS post this week has duly stressed that all its employees have been “educated” in Anti-Money-Laundering (AML) and Counter-Terrorism Financing (KYC), and have been “required to pass tests” on the subjects.

As it vies with leading rival crypto exchanges Binance and OKEx, Huobi has been actively diversifying its investment products and services, announcing the launch of its new public blockchain just two days ago.

Earlier this month, Huobi launched a crypto-based exchange traded fund (ETF), a type of mutual fund that divides ownership of underlying digital assets into shares. The ETF is based on its recently launched market index, which tracks the exchange’s 10 top-traded digital assets against Tether (USDT).

On June 2nd, Huobi entered into a partnership to launch a $93 mln China-South Korea investment fund for blockchain startups, aiming to foster collaboration between the two countries.

Nebulas is Incentivizing Developers to Create Quality Decentralized Applications

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Even though the introduction of blockchain with bitcoin in 2009 has managed to disrupt several existing industries unrelated to cryptocurrency such as logistics and international finance, current implementations of the technology suffer from a myriad of problems. Scalability, upgradability, and accessibility are all problems that current-day cryptocurrencies and decentralized platforms are still struggling to fully comprehend and work around. It is for that reason that new innovations continue to iterate and improve upon the concept of blockchains.

One such evolutionary project is Nebulas, spearheaded by the founder of cryptocurrency NEO, Hitters Xu. Described as “a next-generation public blockchain,” Nebulas aims to bring improvements to smart contracts, blockchain scaling and decentralized applications (DApps). The platform is a blockchain search engine that makes DApp discovery easier and more intuitive for the end user. Nebulas’ rethinking of the blockchain paradigm has even earned the title, ‘Google of Blockchain.’

According to the project’s white paper, the first feature of the platform is Nebulas Rank, which is perhaps the most crucial aspect of the blockchain search engine experience. In essence, it uses an algorithm to measure how valuable a DApp is, similar to what Google does for websites with its PageRank technology.

Using publicly available blockchain data, Nebulas Rank computationally considers the particular DApp’s liquidity, interaction and propagation of assets. By appropriately ranking applications with real world usage potential, Nebulas believes it can boost the growth of the ecosystem. In fact, the total number of DApps available on the platform already exceeds what can be found on the Ethereum blockchain by a fairly large number.

Another important feature is Nebulas Force, which is the platform’s approach to solving the fragmentation problem of blockchain upgrades that Bitcoin most notably suffers from. Instead of relying on a hard fork to make improvements to the underlying technology, Nebulas boasts the capability of self-evolution. Changes to the platform are first carried out on a test-chain for testing and experimentation and are propagated across the mainchain after a consensus process.

DApps built on the Nebulas platform use the platform’s native token NAS to facilitate transfers and blockchain entries, similar to Ethereum. With a continuously growing library of DApps, Nebulas recognized the need for a DApp storefront early on. After releasing the mainnet in March, the team’s attention quickly shifted to developing a mobile wallet and app store solution. Two months later, the official Nebulas mobile wallet NAS Nano received an update that brought a fully integrated DApp store within it.

The main focus of the Nebulas ecosystem remains to be decentralized applications, as is evident by the Developer Incentive Protocol. In a bid to improve the quality of DApps on its platform, Nebulas has committed to rewarding developers with incentives in the form of NAS tokens. The program includes weekly, monthly and referral rewards which will be given out on the basis of the ranking algorithm talked about earlier.

The first installment of the Incentive Program concluded on June 2, with a total of $1.4 million disbursed to app developers in the one month time frame. Of the 2765 Dapps submitted, Nebulas evaluated and awarded 600 applications. The monthly champion of the program for May 2018 was Cell Evolution, a full fledged decentralized strategy and sandbox game. Another prize winner was a NAS Tip Bot, a service that could be used to make micropayments on virtually any social media platform.

Eventually, Nebulas has stated that it will be expanding its incentive program to encourage even more developers to begin creating quality decentralized applications. The recent introduction of an in-app storefront is just the first step to achieve this.

Crypto Markets Remain Sluggish, While Staving Dramatic Losses

All of the top ten coins by market cap are showing minor losses today, June 8, within a range of 1 to 4 percent over the 24 hour period to press time, as Coinmarketcap data shows.

Market visualization from Coin360

Market visualization from Coin360

Bitcoin (BTC) is just about holding its ground above the $7,600 threshold, trading at $7,633 at press time.

The leading cryptocurrency has seen a loss of just under one percent over the 24 hour period, failing to secure a higher price point at $7,600 after it closed at $7,694 yesterday, June 7. A morning spike saw BTC trading as high as $7,870, before falling back to its current level.

Bitcoin price chart from Cointelegraph’s Bitcoin Price Index

Bitcoin price chart from Cointelegraph’s Bitcoin Price Index

As Cointelegraph reported today, newly published statistics from blockchain intelligence firm Chainalysis show that the amount of Bitcoin owned by long-term investors is now almost equalled by short-term speculators.

Chainalysis’ data traces a shift in the BTC markets following their spectacular rally in Dec 2017, with 6 mln BTC still being held by long-term HODLers, but a close 5.1 mln BTC now exchanging hands between day traders.

The figures also show an almost fourfold decline in BTC trading volumes since late 2017 up until today, falling “from close to [$4 bln] daily in December to [$1 bln] today.”

As of press time, CoinMarketCap data indicates BTC trading volumes of 4.38 bln, down from 7.22 bln one month ago.

Top altcoin Ethereum (ETH) has fallen 1 percent over the 24 hour period, trading around $600.59 to press time. The coin is only barely keeping above the psychological price point of $600, but has nonetheless recovered from its dip to $567 one week ago.

Ethereum price chart from Cointelegraph’s Ethereum Price Index

Ethereum price chart from Cointelegraph’s Ethereum Price Index

Of the top ten coins, Cardano (ADA) is showing the heftiest losses of 3.67 percent to press time, trading at $0.20, down from its intra-weekly high of $0.24.

Looking further into the top twenty market coins, only Tether (USDT) and Ethereum Classic (ETC) are in the green, and only just at that: seeing 0.55 percent and 0.58 percent growth respectively over the 24 hour period.

Crypto markets overall remain sluggish after their sharp retreat from a tantalizing rally in early May, stemming dramatic further losses but failing to reclaim significant ground. Total market capitalization for all cryptocurrencies is at $342 bln to press time, down from $440 bln around a month ago.

Yesterday, Robert Sluymer of Fundstrat Global Advisors told CNBC that despite the gloomy market picture, he believes there are “some very important levels coming up for Bitcoin literally in the next couple of days.” He stressed that Bitcoin’s longer term price trend is still “technically up” with $9,500 as its critical level, and that he believes it will soon “challenge its downtrend” if it just gets through the $7,800 level.

Litecoin Cash Allegedly the Latest Small-Cap Altcoin to Suffer 51 Percent Attack

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With all the media coverage surrounding double spend attacks in recent weeks, it appears that one such exploit — a 51 percent attack on litecoin cash (LCC) — managed to slip through the cracks.

Litecoin Cash Allegedly Hit by 51 Percent Attack

The alleged incident appears to have occurred on May 30, when Russia-based cryptocurrency exchange YoBit tweeted that it had identified a 51 percent attack on the coin, which forked away from litecoin (LTC) in February but has struggled to gain traction in the months since.

Litecoin cash developers appeared to allude to the attack in an announcement published the following day, adding that they are discussing a range of strategies to prevent similar incidents:

“We are currently investigating consensus-based strategies for increased protection against hashrate-driven / difficulty manipulation attacks. Some options may include PoS ideas. Our 0.16 codebase is otherwise ready to go, so along with increased network protection will come great features such as native bech32.”

LCC’s developers further said that while a long-term fix will likely require a hard fork, users should wait at least 100 blocks before feeling confident that a transaction has been confirmed and cannot be reversed by a malicious miner.

“As our network protection features will likely mean a hard fork, we will continue to communicate throughout development to ensure that all core nodes, pools, exchanges and the entire community is ready to update when the time comes. In the meantime, we urge everyone to wait 100+ blocks before treating transactions as confirmed.”

Small-Cap Altcoins Increasingly Hit by 51 Percent Attacks

asic minerAn abundance of hashpower available through cloud mining services leaves many small-cap altcoins at risk of being hit by a double spend attack.

In a 51 percent attack, a malicious miner acquires a majority of a network’s hashrate and uses it to force other nodes to accept fraudulent blocks. Specifically, the attacker can reverse transactions that they made in previous blocks by reorganizing the blockchain, though they can only manipulate transactions made by addresses to which they control the private keys.

Typically, 51 percent attacks are monetized by depositing funds at cryptocurrency exchanges, laundering them, and then withdrawing them into an attacker-controlled wallet. The attacker then uses their majority hashpower to reorganize a series of recent blocks, including the one that contained the initial exchange deposit. They replace this transaction with one transferring the same coins to an address in their control, effectively causing them to vanish from the exchange’s wallet.

This is known as a double spend attack, and it was presumably how the LCC attacker sought to profit from the 51 percent exploit. However, CCN has not yet reviewed hard evidence demonstrating that the attacker successfully executed a double spend.

As CCN has reported, a number of smaller-cap altcoins have been hit by 51 percent or other similar attacks in recent months, including bitcoin gold, monacoin, zencash, and verge (at least twice).

This is possible because the cost of deploying these attacks is often shockingly low for small Proof-of-Work (PoW) coins and exacerbated by the fact that cloud mining providers allow users to rent hashpower for a limited period of time — as short as one hour — reducing the financial risk associated with attempting such an attack compared to that of a large-cap cryptocurrency like bitcoin, which — given the relative dearth of available cloud mining hashpower — would require an attacker to make a significant up-front investment in mining hardware.

The good news for ordinary users is that you can only lose funds in a double spend attack if the attacker makes a payment to you directly and that payment is later reversed in a chain reorganization. However, these attacks damage the coin’s reputation and raise questions about its blockchain’s security, immutability, and long-term viability.

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Data Shows Switch From ‘Hodlers’ to Speculators in Bitcoin in Last 6 Months

Data from Chainalysis shows that the amount of Bitcoin owned by long-term investors is now almost equalled by short-term speculators, according to Financial Times report June 8.

Chainalysis is a blockchain research company that analyzes “connections between entities on the Bitcoin blockchain.”

Since December 2017, the amount of Bitcoin held by day traders has risen to 5.1 mln BTC, almost equaling the amount held by long-term investors — those who have held the coins for more than a year — which equals about 6 mln BTC, in what has been called Bitcoin’s “liquidity event.”

The Chainalysis data, which was shared with the Financial Times, also shows that “[Bitcoin] trading volumes have now fallen in tandem with the prices, from close to [$4 bln] daily in December to [$1 bln] today.” Philip Gradwell, the chief economist at Chainalysis, believes this sudden rise in liquidity has been a “fundamental driver” behind Bitcoin’s recent decline in price.

In addition to this finding, the data from Chainalysis also shows an imbalance in the wealth distribution of Bitcoin, with a small number of investors — colloquially termed “whales” — holding a disproportionate amount of the cryptocurrency.

Of the roughly 17 mln Bitcoin available, the data shows that, as of April 2018, around 1,600 Bitcoin wallets hold at least 1,000 bitcoins each, equalling almost 5 mln BTC and accounting for almost a third of all Bitcoin in circulation.

The data from Chainalysis raises questions concerning manipulation of crypto markets by a small number of investors. While institutions have begun carving out a share of the market, many believe that the future of Bitcoin will depend on which approach regulators take.

To Better Organize, Decentralize: Matan Field of DAOstack

It’s time to move past the inefficiency of antiquated organizational structures, and blockchains are the key. So say the creators of DAOstack, a solution that’s designed to intuitively move people into systems of decentralized governance and away from the traditional top-down hierarchies that predominate the planet today.

DAOstack CEO Matan Field was the featured guest on Episode #237 of Epicenter, joining hosts Brian Fabian Crain and Sébastien Couture for a deep dive into his personal journey with, and considerable ambitions for, the company he co-founded. It’s the second act in the world of Decentralized Autonomous Organization (DAO) design for this theoretical physicist, who originally set out to combine the blockchain and decentralization with the short-lived company Backfeed.

Realizing in the midst of Backfeed that both a technological partner and a revised focus were necessary, the company stopped operations. Field hit reset, and the result was DAOstack, a platform for decentralized governance which allows collectives to self-organize, gathering with relative ease and efficiency over their shared goals and values.

Unpacking the Stack

In conversation with Crain and Couture, Field described how the primary appeal of DAOstack crystallizes around its concept as a “WordPress for DAOs.” 

Evolved from open-source origins, WordPress provides website creators with a set of backend tools that make it relatively simple to design, launch and grow an extremely wide array of websites, from simple blogging to full-blown media portals and e-commerce operations.

Thousands of plugins and themes are available to further customize a WordPress site and make it suit an individual organization’s unique needs.

“When I say that you establish and operate a DAO easily, like you would a blog in WordPress,” Field says in the interview, “the meaning is that you have a framework of rules for coordination of people. If I want to establish a new DAO with its own rules, its own governance protocol, I don’t have to code that from scratch.”

The idea that this WordPress workflow can be applied to enabling DAOs is compelling, to say the least. It makes the massive challenge of taking on ancient systems of hierarchical management seem achievable, even user-friendly. That’s key if Fields’ vision of enabling decentralized infrastructures — for everything from governments to hedge funds, insurance companies, coding collectives and climate change warriors — is going to see significant adoption.

From there, users who get drawn in will discover what makes this system a “stack,” built as it is on a modular Ethereum-based smart contract framework (“Arc”); a JavaScript developer environment (“Arc.js”); and an intuitive user interface designed to encourage participation (“Alchemy”) even by the non-technically inclined.

In Practice       

Need a use case of a deployment where the user-friendly DAOstack can make a positive impact? Field provides one with the Ethereum project itself which, in his estimation, has abundant financial and human capital (in the form of thousands of developers).

“So what is the limiting factor in producing solutions? Why haven’t we solved the scalability problem?” he posits. “The actual answer is the decision-making capacity to wisely deploy capital into human capital and produce solutions. That’s exactly the role for Alchemy: decentralizing the decision-making function, so that people can get into the system, and they can make any proposal to use funds. People can vote on a proposal and produce decisions in large numbers, effectively.”

GENESIS Is Next

The rollout of DAOstack took another step with the public sale in May of GEN, which is the native crypto token of DAOstack’s ecosystem. Meanwhile, there is a Q3 2018 release scheduled for the GENESIS DAO, which will be open to public participation as it marks the first DAO created using this stack.

How will it fare? Doubtless, Field and his colleagues will patiently be on pins and needles as they watch it unfold, informed as they were by their Backfeed experience which showed them that infrastructures require time to evolve.

No matter how it pans out, however, his experiment bears out a truth noted by Crain at the podcast’s conclusion: “Finding new ways of collaborating, organizing and building structures and organizational systems is one of the most exciting aspects of blockchain.”

Sell-Off Incoming? Mysterious ‘Asian Whale’ Begins Funneling Bitcoins Back to Huobi

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A mysterious “Asian whale” accumulated more than 94,000 bitcoins during the first half of 2018, and now they have begun to move them back to one of the cryptocurrency exchanges from which they originated, sparking fears of a new selloff.

Blockchain data shows that bitcoin address 1KAt6STtisWMMVo5XGdos9P7DBNNsFfjx7 accumulated more than 93,947 BTC — at one point worth more than $700 million — during a two-month period between March 25 and May 27.

Since then, the wallet owner has reduced their balance by 8,000 BTC. The address sent 4,000 BTC directly to Huobi in two equally-sized transactions. They have sent another 4,000 BTC during that same timeframe, with the majority of those funds ending up at Huobi as well after being funneled through other addresses.

Even after this reduction, the address still ranks as the sixth-richest in the bitcoin ecosystem, with a current value of approximately $650 million.

bitcoinSource: BitInfoCharts

So to whom does this address belong? The answer is not immediately clear.

Most of the largest bitcoin addresses belong to cryptocurrency exchanges. Indeed, the five addresses holding more funds belong to Bitfinex, Binance, Bittrex, Huobi, and Bitstamp, respectively. Private keys to exchange-controlled addresses are generally stored in “cold wallets,” which are more secure since they are not connected to the internet and thus not at risk if a hacker breaches the exchange.

Many of these addresses are also P2SH addresses, which begin with the leading symbol “3” and are often multisignature addresses, which require multiple keys to sign a payment before it can be sent.

However, it is unlikely that the address in question is part of a new exchange-owned cold wallet, as it holds funds sent from multiple, unconnected exchanges. Nor is the address a multi-signature address, as it begins with the leading symbol “1.”

Data from WalletExplorer indicates that a significant portion of the funds originated from Singapore-based cryptocurrency exchange Huobi and China-based wallet platform HaoBTC, suggesting the wallet’s owner resides in Asia or is at least employing the services of an Asia-based broker.

bitcoin whaleSource: BABI Finance

However, China-based news outlet BABI Finance found that most of the funds appear to have been garnered from wholesale trading on over-the-counter (OTC) platforms. Large-scale buyers and sellers generally use OTC platforms to keep trades “off the books” and prevent them from having too much influence on the global spot markets, which often fluctuate wildly in response to large buy or sell orders.

BABI cites an anonymous source involved with OTC cryptocurrency sales who said that the wallet belongs to a broker in Dubai acting on behalf of an unknown — perhaps institutional — buyer. CCN has been unable to independently verify this claim.

In any case, the fact that the wallet has begun to transfer funds back to exchanges raises the question of whether the whale, whoever they may be, is preparing for a sell-off — or perhaps that one has already begun.

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Bitcoin Set to Challenge Downtrend in ‘Next Couple of Days’, Says Fundstrat Advisor

Robert Sluymer of Fundstrat Global Advisors spoke to CNBC Thursday, June 7, about his view that Bitcoin (BTC) is set up for a price breakout in the near future.

During a Bitcoin price explanation, Sluymer said that he believes there is “some very important levels coming up for Bitcoin literally in the next couple of days.” Even though Bitcoin’s price had failed to make the expected rally in May — one predicted by Fundstrat’s Tom Lee — Sluymer notes that Bitcoin’s longer term price trend is still “technically up” with $9,500 as its critical level.

According to Sluymer, Bitcoin is now set up to “challenge its downtrend:”

“When we think about what does it take to turn a security, a market, a cryptocurrency around, it first needs to bottom, then it needs to reverse through that uptrend or downtrend, and then it needs to turn that trend positive. So we have step one in place.”

Sluymer did note that there are “plenty of technical bears out there” that are predicting price bottoms as low as $5,000 or $3,000, but Sluymer believes that Bitcoin will rally if it just gets through the $7,800 level.

In spite of the failed rally, Tom Lee stated in May that he still maintains his prediction of Bitcoin hitting $25,000 by the end of the year.

Bitcoin is currently trading at around $7,592, down almost 1.5 percent over a 24 hour period to press time.