One of the most important (yet somehow quiet) narratives of 2019 has been the financialization of bitcoin and the emergence of a robust market for derivative products. That was reinforced today as Binance announced a significant investment in derivatives exchange FTX.

How will key events coming up in 2020 like the bitcoin halving be impacted by the presence of derivatives?One of the most important (yet somehow quiet) narratives of 2019 has been the financialization of bitcoin and the emergence of a robust market for derivative products.

At the same time, not all crypto projects are trying to change money. Some, like the Saint Fame DAO, a fashion house-slash-human coordination experiment, are simply trying to do interesting things that people think are cool.

Show notes and links for December 20th, 2019

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

See the article here:
Art Haus Ethereum Meets Bitcoin Financialization - CoinDesk

For the first time in history, the US is about to finish an entire decade without a recession, and some of the stock market darlings had enormous returns during the dawning 2010s.

According toBloomberg's anchor Jon Erlichman, Netflix leads the pack, gaining an eye-popping 4,177 percent since 2010. Amazon and Mastercard have also generated stellar returns for its investors, proving stock market doomsayers wrong.

However, none of these companies came even close to Bitcoin whose monstrous growth turned out to be one of the biggest stories of the 2010s. The top cryptocurrency is up by around 8.9 mln percent. As reported by U.Today, BTC was named the best-performing assets of the entire decade byBank of American Merrill Lynch (BAML).

While the future of Bitcoin remains murky, it's not far-fetched to predict that BTC could potentially outperform US stocks in the 2020s as well. Trader Josh Rager believes that even those who buy Bitcoin in the $7,000 region could potentially see their investment rise by more than 1,000 percent in a couple of years. Bitcoin would need to reach $100,000 to become the success story of the next decade.

Peter Brandt, Tim Draper, and even Ross Ulbrichthave all predicted that Bitcoin could surge above the aforementioned level after the halvening.

Read the original:
Bitcoin Could Be Better Investment Than Top Stocks in 2020s: Trader - U.Today

Tis the season for introspection. And this year, my thoughts are on bitcoin.

As Jewish people around the world celebrate Hanukkah this week, inspired by the ancient miracle that a sacred flame lasted for eight days although the oil supply was dangerously low, Im pondering how the hell Ill keep experimenting with this technology without burning the metaphorical candle at both ends.

I spent 2019 trying a variety of products and services to test how easy it is to actually use cryptocurrency. I ran a Casa bitcoin-lightning node, used decentralized exchanges (DEXs), moved bitcoin from mobile apps to a hardware wallet (a Ledger) then transacted straight from the hardware wallet.

Beyond just running the node, I used the Casa device to send invoices for a small product (a poetry book) to learn more about the challenges independent merchants might face. Lastly, I set up a BTCPay store, which is the stage of this experiment Ill end the year on.

And after a year of educational tinkering what is my takeaway?

Its this: Theres no way this technology is ready for prime time.

The most common refrain used to deflect from the technologys obvious shortcomings is that its still too early to build for usability. Precisely because I agree it is still very early, here are some lessons Ive learned about money that fellow bitcoiners might want to keep in mind before evangelizing to the moon to the masses any time soon.

1. Bitcoins usability relies on social capital

Lets start with what it took to sell a few poetry books using a bitcoin node.

There was an issue with my router, which I am terrible at describing other than saying something had to be configured with a port of sorts although the general internet connection worked fine. I clicked all the buttons.

If I didnt have experienced engineers in my rolodex of sources, I wouldnt have gotten past that first hurdle. I called up two of the smartest engineers I know. We opened up the raw code and shared screens so they could see. They cursed vigorously, assuring me I was doing everything right according to the Casa tutorial blog. We updated the node with a wee bit of manual configuration and they graciously opened up a channel to me. (Lightning access doesnt automatically offer two-way liquidity.)

Seasoned bitcoiners are generally able to find workarounds to overcome technical challenges (hardware wallet malfunction or incompatibility, incorrect updates, etc.). To be fair, the devices listed above are those I got to work (mostly) on my own. (I tried a few others and failed, which I wont list because this isnt a grouchy Yelp review.)

However, most command-line-only mountain men with their own custom setups dont realize how fickle some products are at this stage. If you actually rely on bitcoin for business, many non-custodial products and services are so experimental that you need tech support to operate them reliably. And why go the service-provider route at all with bitcoin? Be your own bank, remember?

Venmo works great. So does Stripe. Bitcoin needs to offer something different. (It does, of course. It might allow you to choose who you trust and what you trust them with, like bouncing a message across a mesh network, but well get to that later.)

2. Failure to transact

Some people are surely using bitcoin today to improve their financial self-sovereignty. The idea that anyone could do so, however, is laughable.

Even when the wallet-node-DEX setup was working smoothly, just a few of my (relatively tech-savvy) customers could find their transaction data with blockchain explorers. Bitcoin is only transparent to people with the skills to read this data. Without that knowledge, there is no benefit added by the public ledger. (There may even be risks associated with this ledger.)

For the time being, Id recommend any non-developer consider private consulting with an engineer (or membership to a startup service like Casas) as part of a crypto products price. That means you better expect to earn a pretty penny from bitcoiners as consumers (or savings liquidators) to make this worth it.

The trouble is, bitcoiners rarely want to spend their crypto. Herein lies the essential dilemma of bitcoin: It cant be money without payments, it is seen as too valuable to spend (unless you are facing censorship) and official payment systems require compliance.

Some of the sharpest engineers I know in places like Iran still struggle to use bitcoin because there arent enough people to transact with. Skills alone dont solve their legal problems. They also need a robust network of parties, both at home and abroad, who arent subject to the same compliance risks and government woes that caused their isolation in the first place.

3. Money is never trustless

Sanctions aside, all of these experiments reminded me of what it was like to get money in India during demonetization. Much like some token traders these days, when I was backpacking across India in 2016 my daily commerce relied on arbitrage. In short, social networks still control liquidity, whether its bitcoin or paper rupees.

I was at a camel festival in Rajasthan the first time I heard about demonetization. Indian businesses wouldnt accept my bills any more.

Instead, travelers were told to exchange them for new bills at the sole local bank. But the government didnt print enough new bills to cover the limited allotment each person was allowed per day (under $70).

When security guards came out with sticks to close the empty bank, the sunburnt and thirsty crowd grew rowdy. One guard grabbed a protester next to me by the face and shoved him toward the ground.

So I turned to the black market. In the next town, a middle-aged man with a moustache and a mobile-phone shop had a secret stash of new rupees. He would swap dollars at a steep premium, despite the best efforts of a teenage boy from a nearby village who haggled in the local language on my behalf, for a small fee.

Sometimes even my dollars didnt entice the currency dealer. This is the same issue Iranian bitcoiners face. Your currency is only valuable to people who believe they can also spend it in turn.

Like some bitcoiners in Venezuela who use cryptocurrency to get dollars today, foreigners turned to arbitrage during demonetization in India. Some businesses in 2016 charged foreigners less in euros than in dollars (with new rupees getting the lowest price of all), so we swapped among ourselves and developed relationships with business owners who would extend us short-term credit. Some banks and ATMs only had cash once a week. Premiums might fluctuate based on rumors of cash shipments on the horizon.

I started obsessively asking people how they managed their finances. Demonetization broke down stigmas around such topics, especially considering I was a petite traveler who could hardly bench press a housecat. From Pushkar to Varanasi and down south past Mumbai, most Indians told me they pooled their families wealth together with a single elder at the helm.

This echoes what is going on today in Lebanon and Iraq. In fact, the Indian outlet Economic Times referred to bitcoin as the new hawala, an ancient brokerage system often used for remittances. This social system almost resembles a mesh network.

Even in 2019, family networks are still the most popular financial networks. My bitcoin experiments got easier when I started treating cryptocurrency like black market rupees. It wasnt about going trustless as much as it was compartmentalizing trust across a network of social ties.

Who could I trust to get me to the next step of my bitcoin experiment? Theyd probably be exposed to my security setup if they helped circumnavigate some technical problems, but not others. Where was there opportunity for safe arbitrage?

Book buyers often trusted me with personal information too, which I could have connected to their wallet addresses or online aliases if I was nefarious. How does one lawfully and privately get a book to a buyer living in rural Latin America? Can bitcoin really connect people to the global economy, including but not limited to digital products? If so, that process requires trust on both ends.

Conclusions, for now

None of this is to say bitcoin isnt a global currency. The technology is already being used in this way. Transacting with wallets, especially European book-buyers, was the easiest part of my experiments.

Can cryptocurrency be used in a self-sovereign way, with minimal personal risks, to connect people who dont already have access to safer, more robust financial products?

That I cant say yet. It may depend on who burns the midnight oil in these early days, before prime time hits. Perhaps bitcoiners will be able to overcome the social challenges of money: Compliance, access, liquidity, usability. By comparison, the technical shortcomings are almost trivial.

In 2020, hopefully more people will try to transact outside their established networks and see what challenges they face in deliberately applying trust, rather than eliminating it. Can we trust in the bitcoin network? This crazy idea should have failed long ago. And yet, for over a decade bitcoin has already proven to be the experiment that flickers but never goes dark, almost like a candle.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Read more from the original source:
Hanukkah Reflections on My Year of Toying With Bitcoin - Coindesk

At first, you didnt even need a pickax. The earliest prospectors of the California gold rush ventured into the Sierra foothills as solo travelers, sloshing through streams in search of nuggets dislodged by the current. That, at least, is the prevailing image: The individual renegade who headed west to strike it rich by his own initiative. But soon there were too many prospectors and too little easy gold. The task became more resource-intensive, requiring water to blast away the hills. That meant size and scale, to build pipes and aqueductsout of reach to all but a few.

I thought of that history while reporting, earlier this month, on an alleged pyramid scheme involving the digital gold rush of the 2010s, in which people were sold on the idea that mining bitcoin was a path to self-won bounty. Early in this decade, had I possessed the foresight, I might have set up my home computer as a bitcoin miner and reaped healthy rewards. The key was openness. Bitcoin wasnt worth all that much then, but anyone could do it. The underlying technology, blockchain, seemed to make sure of that, by eliminating the need for intermediaries. The platform would maintain our independence, our state of decentralization.

Then bitcoin went the way of gold. Why? Because it started making people rich.

With more miners competing, mining got more expensive. Higher demand for electricity meant you needed more efficient servers to yield a profit and, soon, economies of scale. Corporations took an interest. Today mining farms are a massive, government-subsidized business. Bitcoin, in turn, became a financial instrument. The banks invested, along with the pension funds. The Commodity Futures Trading Commission declared it a commodity, just like gold. How do you get bitcoin these days? When I bought a tiny fraction of one bitcoin the other day, after years of stubborn resistance, I did it through a popular investing app that sells my data to hedge funds who use it to better inform their bets. Governments can trace bitcoin transactions with ease, so you cant even use it for crime or political dissent.

But still the myth endures. The message is that bitcoin, by virtue of its technical underpinnings, is something that sits outside of our worlda tool for people left out of the system. That, at least, was the pitch of the pyramid scheme scammers, who preyed on vulnerable people with the message that shares in a fraudulent bitcoin mining operation would save them when the traditional financial system could not. Many were taken in by that promise.

So Bitcoin has strayed a bit from its cypherpunk origins. But not blockchain, right? The underlying platform offers a Platonic form of decentralization, the cryptographic guarantee of trusting no one, of shrugging off central authority. It looked like the perfect antidote to the centralized internet, a weapon of war against Big Tech.

This year, Big Tech made its move into blockchain, in what may ultimately look like a hostile takeover. It was convenient, just as our national conversation moved, threateningly, to antitrust and privacy. Earlier this month, Twitter announced it was (maybe) decentralizing with (maybe) blockchain, despite long ignoring the cries of people asking it to do just that (with readily available, non-blockchain technology). Critics noted that more private tweeting would help it dodge concerns about content moderation. Facebook has developed a cryptocurrency, Libra, that it claims it doesnt control, but which will certainly entrench its power. That move helped spark China to accelerate its own push into digital currency, which would become a handy surveillance tool. Its unclear what role blockchain will play in that effort, but in any case, Xi Jinping is trumpeting public investment in the technology for other purposes.

The co-opting of blockchainits inevitable centralizationshould not have come as a surprise. Its a lesson weve learned again and again: We bestow our social values upon technology, not the other way around. Weve been through this before. Take the internet. First came the promise that it would unlock knowledge and make us all freeuntil a dictator cuts the cord and companies track and manipulate our behavior. For blockchain, using words like decentralization and self-sovereignty doesnt simply make it so. That takes work: protections for privacy and safety, assurances that networks operate as intended. Like the internet, that doesnt mean the initial hope and promises were untrue; we were just blind, at first, to alternate interpretationsto manipulations of certain ideals.

See the rest here:
Bitcoin's Path From Insurgents Talisman to Tool of Big Tech - WIRED

Bitcoin Cash (BCH) focused firm BitcoinBCH has potentially misled the public into believing that Bitcoin (BTC) double spends can be easily carried out.

On Dec. 18, BitcoinBCHs CEO Hayden Otto published a video on YouTube allegedly showing how TravelByBits Bitcoin Point of Sale (PoS) wallet misleads merchants into believing that they were paid before a transaction is actually concluded. Hayden Otto also runs a competing BCH-based PoS solution called Hula.

In a recent interview, a TravelByBit representative said that merchants using its service are insured against fraud and will not lose money. The firms founder Caleb Yeoh also said that if many users begin to exploit their systems design the firm will drop support for Bitcoin and Bitcoin Cash on-chain transactions in its PoS solution.

Overall, Yeoh admitted that accepting on-chain payments in in-store settings is not practical and requires a compromise between security and convenience. The main reason is that no one will want to wait in line for at least 10 minutes for a transaction to be confirmed before being able to get hold of the product. While accepting unconfirmed transactions is a major security concern, it is the only way to accept Bitcoin or Bitcoin Cash on-chain payments in time-sensitive situations.

Yeoh points to the Lightning Network as a potential solution, noting that it can address the impracticality of waiting for transaction finality when paying with cryptocurrency inside physical stores. He told Cointelegraph that Lightning Network transactions also constitute a significant portion of the payments facilitated by its PoS system:

If we remove the online travel booking transactions and you look at the number of transactions purely from a retail perspective we, over 47% of transactions around Australia the last 3 months was done over the lightning network.

Instead of pointing out that unconfirmed transactions as the name suggests are not final, the video suggests that the wallets flawed design is, in fact, a Bitcoin security flaw that enables double-spends. Hayden Otto, the person in the video, says merchants should immediately cease accepting Bitcoin and switch to Bitcoin Cash.

In the demonstration, Otto first sends the lowest transaction possible 1sat/byte to another wallet that he controls with replace-by-fee (RBF) enabled. As Bitcoin users will know, a transaction with such a low fee will be confirmed and placed in a block on Bitcoins blockchain after a notoriously long time, often multiple hours or even over a day if the network is severely congested.

RBF is a function that allows a user to replace a non-final not yet confirmed on the blockchain transaction with another one which has a higher fee. This Bitcoin functionality raised criticism because it enables unconfirmed transaction double spends.

Still, those concerns have no basis given that unconfirmed transactions can be double-spent without this feature as well. An in-depth analysis of how this can be done was published in 2015 by the author of the BitTorrent protocol, Bram Cohen. Overall, unconfirmed transactions are not final and should not be accepted as payment.

BCH-centric website Bitcoin.com recently reported that Bitcoin Cash removed the RBF feature from its code. The website also claims that as a consequence Bitcoin Cash unconfirmed transactions are not safe to use. The article reads:

The Bitcoin Cash community believes that zero-confirmation transactions are reliable and secure.

After sending the first low-fee RBF-on transaction in the video, Otto performs a Bitcoin payment to a merchant in a store without RBF. At this point, the merchants wallet shows a big green checkmark on the screen, misleading the user into believing that she received the payment.

Because of the wallets user interface, the merchant cedes the goods when the transaction is still unconfirmed. Right after, Otto bumps (increases) the transaction fee on the first transaction, ensuring that all the funds are moved to another address he controls before they are sent to the merchant.

This way, the funds do not reach the merchant who accepted the unconfirmed transaction, while Otto ends up holding both the good and the Bitcoin minus the transaction fees.

Later in the video, Otto says that the ability to reverse Bitcoin transactions is dangerous. This statement erroneously implies that a transaction was reversed. The transaction that was changed was unconfirmed which makes it non-final and the protocol acted as it was intended to.

Otto is also suggesting in the video that Bitcoin Cash fixes this, referring to unconfirmed transaction double-spends. While Cointelegraph was unable to definitely establish that BCH unconfirmed transactions are also non-final, Yeoh suggested so:

Nothing stops BCH miners from replacing transactions right now, as it's more of a gentlemen's agreement, but once in a while "RBF-like" double spends do happen on the BCH network. It's important to note RBF is not a protocol consensus feature, it's a node policy that any Bitcoin or Bitcoin cash miner can choose to run and it does not affect the reliability of payments.

Furthermore, Yeoh pointed out that the hashrate distribution gap between Bitcoin and Bitcoin Cash also influences the security, and plays in Bitcoins favour. Overall, he also said that tribalism in cryptocurrency hinders innovation in the space:

Honestly, I think the community should focus on helping build and grow wider adoption across the various ecosystems and not focus on running attacks on each others bitcoin projects. It creates a tit for tat scenario which erodes the entire space as a whole. People should be free to transaction in any crypto they want and help contribute to the ecosystems as builders.

This is not the first time that the Bitcoin Cash community is accused of spreading misleading information. As Cointelegraph reported in April last year, Bitcoin.com was accused of misleading buyers into purchasing Bitcoin Cash instead of Bitcoin by presenting the crypto assets in an unusual way.

Go here to read the rest:
Real Bitcoin Double Spends Are Hard, Looking Into Alleged Issue - Cointelegraph