What’s a chain fork? The IRS claims only 802 people claimed Bitcoin on their 2015 taxes, and we explore the difficulty BTC users face with IRS compliance. Numerous Bitcoin exchanges issue joint letter regarding Bitcoin ticker tag in the face of the chain fork. Darren talks about what to expect from a Bitcoin Unlimited / Bitcoin Core hard fork and elaborates on what a chain fork is. Bitcoin Core explores a new Bitcoin Proof-of-Work algorithm that would render current ASICs obsolete for Bitcoin mining. Pedro shares a new website that monitors and optimizes Ethereum transaction gas prices. Darren has a scam alert and a cautionary tale about CoinTelegraph’s article credibility. China demands explicit details from Bitcoin exchange users, including receipts that will be verified against Chinese National Archival records. The Zcash Company announces the creation of the Zcash Foundation which will be rewarded with part of the Zcash Founder’s Reward. We talk about methods used by the Zcash team to create the initial public and private keys. Charlie Shrem is looking for funding to create a Dash based debit card. Prediction markets are a big part of the crypto space, can they actually predict the future? Matchpool looks to link up people for a variety of reasons including dating.
All this and more on the Neocash Radio podcast, episode 199 — Wednesday, March 22nd, 2017!
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 JJ, Darren, and Randy!
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|Traditional Financial Markets||Cryptocurrency Markets|
|Gold $1,248||Bitcoin (BTC) $1,015|
|Silver $17.51||Ethereum (ETH) $40.57|
|Oil $48.13||DASH $99.00|
|Dow Jones 20,661 points||Zcash (ZEC) $65.40|
|30Y UST Yield 3.017%||Monero (XMR) $20.70|
New documents were filed in federal court last Thursday, revealing that the IRS found less than a thousand people had filed a Form 8480 to account for a “property description likely related to Bitcoin.” (807 people reportedly filed in 2013, 893 in 2014, and 802 in 2015.)
The IRS has previously demanded that Coinbase give them private customer information and detailed transaction records from every Coinbase account, though Coinbase has pledged to fight the blanket “John Doe” summons.
On the Neocash Radio podcast Ep182, we discussed a searing 31-page report from the U.S. Treasury Inspector General for Tax Administration that summarized a nine-month audit of the IRS’ (gross mis)handling of virtual currencies including Bitcoin: Questions from the public seeking guidance on how to comply with tax regulations often went unanswered, and the most common IRS tax forms—like 1099s and the W-2—have no dedicated space for virtual currencies to be reported. Another major hurdle for compliance is that the IRS categorizes Bitcoin as property rather than a currency, which they claim subjects it to capital gains tax. They also claim this would require users to determine what portion of which Bitcoin was used to make EACH purchase based on a daily exchange rate, converted all into dollars, and then at reporting time, calculate whether there were any gains or losses from when the user received those Bitcoin.
Ahead of the seemingly inevitable Bitcoin hard fork, numerous cryptocurrency exchanges issued a joint letter declaring the Bitcoin Core Implementation to be forever known as BTC or XBT and the Bitcoin Unlimited Implementation to be referred to as BTU or XBU. The list contains such names as Bitfinex, BTCC, Kraken and Shapeshift, but absent are power players Coinbase, BitPay, Huobi, and OKcoin.
Though there were several developments from ShapeShift.io CEO Erik Voorhees and Kraken CEO Jesse Powell:
Related reading: Neocash Radio podcast co-host Dr. Darren Tapp shared a new post to our blog on Monday entitled “So Bitcoin Might Fork. Here’s What to Expect…“ In it you’ll find what will happen if the Bitcoin blockchain sees a chain fork, potentially creating two separate blockchains, one representing Bitcoin Core and another representing Bitcoin Unlimited (similar to what happened with Ethereum and Ethereum Classic after last year’s DAO debacle.)
Bitmain is known for making the Antminer, a cutting-edge Bitcoin ASIC miner, and they also own Antpool.com, a Bitcoin mining pool responsible for around 15% of today’s Bitcoin network hashrate. (Plans are also in the works for Bitmain to build a BTC mining facility that could house enough equipment for Antpool to control upwards of 45% of the Bitcoin network hashrate.)
Now that Antpool has begun mining BTC blocks that signal support for Bitcoin Unlimited, there is talk that Bitcoin Core developers may be researching a change aimed at limiting the mining power of massive Chinese Bitcoin miners. The new Proof-of-Work algorithm would still work for ASIC hardware, but would require a redesign of the current SHA-256 ASICs, rendering all current Bitcoin miners effectively useless. (This is being billed by Bitcoin Core as an “upgrade” to Bitcoin’s current Proof-of-Work algorithm.)
Changing Bitcoin’s proof-of-work to prevent miners from mining is the most absurd and reckless thing I’ve heard in the scaling debate.
— Erik Voorhees (@ErikVoorhees) March 20, 2017
Am I misunderstanding? If a Bitcoin w/ 2MB blocks is “an altcoin” because different rules, then is not a dif POW chain also an altcoin?
— Erik Voorhees (@ErikVoorhees) March 20, 2017
The CEO of BitFury also launched a tirade on Twitter and threatened to sue Bitcoin Core if they were to change Bitcoin’s Proof-of-Work algorithm.
This week Bitcoin.com experienced DDoS attacks eerily reminiscent of Bitcoin Classic and Bitcoin XT DDoS days.
Chinese cryptocurrency exchange Huobi recently sent a letter to a number of its customers, asking for draconian customer “verification” declarations. Huobi confirmed to Bitcoin.com that these customers must now provide explanations and evidence of how their Bitcoin exchange wallets were funded, as well as destinations and purposes for their Bitcoin withdrawals. The letter also informs Huobi customers that all documents and proof submitted will be sent to the National Archives, where they will verify and certify its authenticity.
Huobi cites anti-money laundering regulations imposed by Chinese regulators including the People’s Bank of China (PBOC) and the China Banking Regulatory Commission. Will we see similar news from other Chinese cryptocurrency exchanges in the near future?
In an article entitled “Forget Bitcoin. The Blockchain Could Reveal What’s True Today and Tomorrow”, WIRED writer Cade Metz discusses how blockchain-enabled prediction markets such as Augur, Gnosis, Bitcoin Hivemind are providing economic incentives for accurately predicting future events. Companies like Microsoft and Google are already using prediction markets internally to test forecasting.
With a mission intended to “give every person in the world economic freedom,” the company behind Zcash is looking to create an independent, inclusive, non-profit body to steward the technology in the interests of all users. The Zcash Foundation looks to be that body. A portion of the Zcash Founder’s Reward will fund the foundation. The initial board of directors has been selected by Zooko Wilcox but none of the directors are employees of the Zcash Company nor can the Zcash Company defund the foundation.
Related listening: On episode 186 of the Neocash Radio podcast, we discussed zkSNARKs, the “zero-knowledge proofs” that power Zcash. Zero-knowledge proofs allow someone to prove knowledge of facts about hidden information, without ever revealing the actual information to any other party. On episode 180 of the Neocash Radio podcast, we covered the launch of Zcash as well as their planned “Zcash over Ethereum” capability.
Related viewing: The Zcash team did have a very complex ceremony for generating the keys that launched Zcash:
Co-founder of now-defunct Bitcoin exchange BitInstant, Charlie Shrem, has announced plans to create a Dash-branded and Dash-accepting debit card. Rather than seeking traditional financing, Shrem created a proposal for funding from the DASH Treasury, a decentralized autonomous organization that provides funding for development, marketing, and other community-directed projects.
With Bitcoin, the entire block reward is given to miners. With Dash, 45% goes to miners, 45% goes to Masternode stakeholders (who’ve staked 1000+ DASH tokens to help secure the network), and 10% is set aside for the DASH Treasury. Proposals for funding are voted on by Masternodes and self-fund projects like the DASH: Detailed YouTube channel and soon-to-be Charlie Shrem’s DASH debit card.
Pedro covers new Ethereum tools: “ETH Gas Station” & Matchpool
- ETH Gas Station “is an effort to increase the transparency of gas prices, transaction confirmation times, and miner policies on the ETH network to enable a more efficient gas market.” Pedro also discusses what “gas” is and how gas works in the Ethereum protocol.
- Matchpool “is a decentralized matchmaking protocol which uses group dynamics to help participants match with each other.” Matchpool may have interesting economic incentives for the “connection economy,” in particular with dating.