Bitcoin hard fork expected August 1. Crypto universe prepares for life with two Bitcoins, BTC and BCC. Lots of news from Russia. SEC rules that DAO tokens were securities. White hat hackers return 95% of fund taken in Parity wallet exploit. Large Bitcoin mixer Bitmixer shuts down. Man uses TenX debit card to pay toll, buy fast food with Bitcoin. Delaware governor signs landmark blockchain law. New Hampshire blockchain exemption law takes effect next week. Ethereum Enterprise Alliance adds Mastercard and Cisco. Ethereum turns two years old on July 30!
We’ve written out short overviews of the topics discussed on today’s show below! Be sure to listen in to the whole podcast to get more information, insights, and thoughts on each of them from Pedro and JJ!
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Bitcoin Hard Fork Happening August 1st
It is easy to look at a digital construct and say it is a machine, but doing so ignores the most important element — the human using the machine. Machines, software, computers, and screwdrivers are just tools to be interfaced with a human. Sure some tools will operate without constant human interaction but they do so at the behest of a human.
It is this human interaction that breathes life into a tool or computer and for a moment makes it seem as if this device is alive. This spark of life has made its way to the internet and now we have massive networks of computers all carrying that initial human action through a process. Through the network people can interact, share, grow, and become something greater — a single cell in a much larger organism.
We see this same phenomenon in our everyday life. Families grow, multiply, and then divide, only to repeat the cycle again. Businesses, clubs, and other organizations all do the same thing. The same pattern is repeated in each rendition on an array of different scales. The group of people gets so big and then splits into two.
This is no different for Bitcoin. The Bitcoin Organism is comprised of thousands of humans spread across the world each playing some part in the digital ecosystem. The fact is, the Bitcoin Organism has grown so large that it must either evolve into the next form or split into two cells. The delay in this decision has simply raised the stake giving more weight to each action.
Now that SegWit has been locked in and set to activate on November 15th, the choice to evolve has been actualized. Unfortunately this is a sub-optimal solution for a portion of the Bitcoin Organism — too little, too late — as such, the organism will divide. This is a healthy and natural conclusion.
The split is planned for August 1st through a User Activated Hard Fork. The plan is called Bitcoin ABC or Adjustable Blocksize Cap, and it will Fork with a minimum 2MB block, though initially blocks can be as large as 8MB. The result is something called Bitcoin Cash or BCC, and they claim to already have code that includes Replay Attack and Wipe Out protections. The website claims to have optimized the Signature Hash function which will improve security and eliminate the quadratic hashing problem. They also claim to have plans for additional scaling features beyond simply raising the blocksize limit.
This effort is led by Chinese exchange ViaBTC which is offering a futures market for the coming BCC. Currently the BCC futures are trading for around $400.
What does this mean for Bitcoin?
The Bitcoin blockchain will fork into two different chains on August 1st. BTC will be the SegWit chain and BCC will simply have larger blocks. What happens next depends on where the miners point their power.
What does this mean for you?
It really depends on where you have your Bitcoin stored.
- If you have your Bitcoin in a wallet where you hold the private keys, you will be fine. When the fork happens on Block N, you will own an amount of BCC equal to the amount of BTC you had in that address at Block N – 1.
- If you have your Bitcoin on an exchange or hosted wallet, that exchange or service will decide what happens to your BCC. As one example, Coinbase has decided they will not be serving BCC. Anyone on Coinbase with Bitcoin will not have access to the BCC created by the fork. Check with your wallet host or exchange to find out how they will be handling the fork.
What to expect after the fork and what to watch out for.
Immediately after the hard fork there will be a lot of uncertainty, the blocks may come out slower, bad actors may use the opportunity to double spend, and transactions on one chain may be subject to replay attacks on another chain.
*** DO NOT SEND BITCOIN UNTIL YOU HAVE SEPARATED YOUR BTC AND BCC INTO DIFFERENT ADDRESSES ***
BCC wallets may offer Replay Attack and Wipe Out protection but not everyone is going to be using these wallets. In fact, protections built into wallets vary by developer.
Unless you want to roll the dice wait at least 12 Blocks before you test the waters and then be sure your first move is to separate the address that your BTC and BCC are at.
Stay tuned to Neocash Radio! We will be putting out short updates before, during and after the fork.
Russian News Rundown
Alexander Vinnik was arrested on a U.S. warrant alleging his involvement with a $4 Billion money laundering operation. A recent USA Today article points out that 95% of Bitcoin ransomware payments are routed through the Russian exchange BTC-e. The exchange has been offline and listed as ‘under maintenance’ for more than a day. There is little more information and it is unclear what the status of user funds are.
In a partnership with Russia’s biggest bank airline S7 has begun ticket sales on the public Ethereum blockchain. A local media outlet Kommersant reports that the platform is designed to reduce settlement times between the airline and the agent.
Current regulations in Russia do not fully cover crowdfunding or ICOs. Lawmakers are hard at work changing that. The climate surrounding cryptocurrencies in Russia has been volatile. At first they were ignored, then they were attacked, and now it seems Russia may be falling in love with crypto.
On July 25, 2017, the US Securities and Exchange Commission (SEC) published a report of investigation regarding The DAO. Per the report, “under the facts presented, the Commission has determined that DAO Tokens are securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.” In an accompanying release, the SEC explained that “offers and sales of digital assets by ‘virtual organizations’ are subject to the requirements of the federal securities law.”
The report provides four criteria that illuminate why DAO Tokens are securities:
- Foundational Principles of the Securities Laws Apply to Virtual Organizations or Capital Raising Entities Making Use of Distributed Ledger Technology
- Investors in The DAO Invested Money
- With a Reasonable Expectation of Profit
- Derived from the Managerial Efforts of Others
The agency has decided not to bring charges in the case of The DAO, but urges caution.
Issuers of distributed ledger or blockchain-based securities must register their offers and sales “unless a valid exemption applies.” Unregistered offers could be liable for violations of securities laws.
Not all ICOs are securities. The “Howey Test,” as articulated by the Supreme Court, includes three requirements: investment of money, a common enterprise, and buyers expect profits from efforts of others.
Here are some best practices ICO’s can follow to prevent being classified as a security:
Consumptive use: Appcoin developers should consider building tokens with true consumptive value. An appcoin has consumptive value because it can be consumed and put to real use with a decentralized product. This addresses the “expectation of profit.
Decentralized development and operation: Appcoin developers should consider building products communally, which run communally or in a decentralized fashion.
Developer kits: Appcoin developers should consider selling a complete software developer kit (SDK). Selling just a coin misses an opportunity to point at real, tangible evidence that the thing you are selling is ill-suited for speculators and investors.
Related listening: Neocash Radio Ep163: The Hubris of ‘The DAO’ (July 10, 2016)
Following wreckage of the latest security flaw, the White Hat Hacker group has returned most of the funds to the rightful owners. Last week we talked about how an attacker managed to exploit a flaw in the code behind the Parity Multi-Sig Wallet Contracts. The WHH group was quick to respond and using the same exploit managed to save millions of dollars of Ether. If you are one of the few left to claim your funds visit this link to find out how to get your Ether back.
A surprise announcement came that the popular coin mixing service Bitmixer.io is shutting down. The founder of the service claims to have had a change of heart and wants Bitcoin to have a “clean and transparent” ecosystem, without darknet markets. But several users on bitcointalk.org and Reddit are questioning whether this is a warrant canary—shutting down because of government or legal pressure that they are not permitted to directly mention. Users point to Bitmixer’s strange recommendation to use Zerocoin for privacy—a basically obsolete platform—and not something like Monero or ZCash.
Coin mixing services are under great scrutiny from “law enforcement”. Let us not forget what was said at a large Interpol meeting in Qatar this January: “All countries are advised to take action against digital currency mixers/tumblers. Such services are designed exclusively to anonymize transactions and to make it impossible for law enforcement agencies to detect and trace suspicious transactions. The existence of such companies should not continue to be tolerated.”
A resident of the Netherlands posted video of himself using his TenX debit card for the first time. He pays a toll and then buys lunch at McDonald’s. Both transactions are approved instantly, despite the delays usually associated with Bitcoin, and they appear instantly in the TenX Wallet app on his Android phone.
The governor of Delaware has signed a new blockchain law making it explicitly legal for companies to use blockchain for stock trading and record-keeping. This is important because Delaware is home to a majority of incorporated businesses in the U.S.
The bill creates an exception from money transmission requirements for “persons conducting business using transactions conducted in whole or in part in virtual currency.”
Ethereum Turns 2 years old on July 30!
JJ did two special interviews this week!
Check them out here:
NXT, ARDOR, IGNIS ICO Explained! Interview with Lior Yaffe from Jelurida
or Direct Download this episode as an MP3 – Neocash Radio Interview with Lior Yaffe from Jelurida
The Tokes Platform Interview with Michael and Gabriel
or Direct Download this episode as an MP3 – Neocash Radio Interview with Michael and Gabriel from the Tokes Platform
BTC Address: 1MmFwDeZPgxJ4GyzbfmZVLJv3aZcpxSfR5
ETH Address: 0xe4689EF88F239C6eed1Ff262876e2499495c1617
DASH Address: XtLEPo6DKeu45e2czdHLEb5EzJRVDz2aLZ
NXT Address: NXT-TT49-WV65-HZJA-5EJF9
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