In the past few years, you must have seen topics such as blockchain and cryptocurrency trend on the internet a lot. It is believed that these two terms are poised to revolutionise information technology and banking as we know them.

Also referred to as Distributed Ledger Technology (DLT), blockchain is a system which helps in recording information. The information is recorded in such a way that it makes it difficult for anyone to hack or cheat the system. The technology makes the system transparent and unchangeable.

The system is basically a digital ledger of transactions that is distributed with the entire network of computer systems and servers on the blockchain. Every block in the chain contains information of transactions made and every new transactions information is added to each participants ledger. In this way, the database is managed by multiple participants and is decentralised (there is no central agency managing the system). The system uses an immutable cryptographic signature called a hash to record every transaction and helps in linking every new block created to the previous block.

This makes it difficult to hack the system as even if one block was tampered with, participants will come to know that someone is trying to hack the system. To successfully hack the system, the hacker will have to tamper with all the blocks which will be impossible.

Bitcoin and other digital currencies such as Ethereum use blockchain technology to function. As more and more people start using these digital currencies, the number of blocks will also grow, making the whole system more secure. The system is more efficient and has no transaction cost making the system cheaper too.

Stuart Haber and W Scott Stornetta, in 1991, described a cryptographically secured chain of blocks for the first time. In 1998, computer scientist Nick Szabo started working on a decentralised digital currency. The technology became big in 2008 when a developer with the pseudonym of Satoshi Nakamoto (No one knows yet who this person is. Some speculate the pseudonym represents a group of people) released a white paper establishing the model. After releasing the white paper and launching the initial code, Nakamoto created bitcoin to be a form of cash which can be sent peer-to-peer without the need of a central agency or a bank as is the case for physical cash.

Read this article:
What is a Blockchain Technology? - Working, Uses, Cryptocurrency - Business Standard

What happened

Many investments with hooks into the cryptocurrency market fell hard on Friday, following an 11.6% drop in bitcoin prices in 24 hours.

Company

Relation to bitcoin

Max price drop on 1/15/2021

Riot Blockchain (NASDAQ:RIOT)

Bitcoin mining

15.2%

CleanSpark (NASDAQ:CLSK)

Bitcoin mining

15.1%

Grayscale Bitcoin (OTC:GBTC)

Investment trust holding bitcoin assets

12.4%

Ebang International (NASDAQ:EBON)

Makes specialized bitcoin mining computers

11%

Marathon Patent Group (NASDAQ:MARA)

Cryptocurrency mining

10.6%

MicroStrategy (NASDAQ:MSTR)

Converted $1.13 billion of long-term cash reserves into bitcoin

9.0%

Data source: Yahoo! Finance.

Bitcoin prices have largely been skyrocketing since early October 2020, rising from roughly $11,000 to more than $40,000 per token in a three-month span. Since reaching a peak on Jan. 9, bitcoin prices have meandered over the last week and a half. There was a big drop on Monday, Jan. 11, and a fairly steady climb back up during the rest of this week. Token prices nearly reached the $40,000 benchmark again before tumbling again today.

Cryptocurrencies have gained the attention of large investment firms this year, a major reason behind bitcoin's big gains in recent months. At the same time, the big names can cause sudden price drops from time to time. Today, investment firm UBS Global Wealth Management reminded investors that the bitcoin rally could end in tears. Cryptocurrencies are risky and volatile, and investors could end up losing everything they put into this unproven asset class.

"There is little in our view to stop a cryptocurrency's price from going to zero when a better designed version is launched or if regulatory changes stifle sentiment," UBS analyst Michael Bolliger wrote.

That was enough to cause a sobering price drop that also hamstrung many stocks that had been following bitcoin upward.

Image source: Getty Images.

Bolliger is right, of course. The regulatory framework for cryptocurrencies is still evolving, which adds to the market uncertainty. Investing everything in a single cryptocurrency is a very bad idea, because a better version really could replace bitcoin at the top of the heap. I'm not saying that this will happen but the risk is not zero percent. If you're investing in cryptocurrencies today, it's probably best to divide your holdings between bitcoin and a few other respectable names such as Ethereum and Litecoin. All the major names happen to be falling today, but their performance can vary widely from time to time.

Don't cry for the bitcoin specialists, though. With the exception of the micro-cap Ebang International, all of them have performed extremely well during the current bitcoin boom. Grayscale Bitcoin Trust gained 347% over the last 52 weeks and MicroStrategy rose 331% over the same period. CleanSpark's stock posted a 614% gain. And if you thought those results were impressive, we haven't even talked about Riot Blockchain's 1,964% return or Marathon's crushing 2,374% gains. All of that is after going through Friday's significant haircuts.

Cryptocurrencies can be fun, exciting, and profitable -- but you can also lose sleep over their risky nature and sudden price drops. You can't bet on these promising assets without accepting a large serving of risk. Today was simply not a good day for bitcoin and friends.

Excerpt from:
Why Cryptocurrency Stocks Crashed Today - Motley Fool

Theres never been a lack of skepticism surrounding cryptocurrency. And its fair to say the jury still wavers at times. But with 2021 just a week old, the worlds most polarizing and misunderstood currency is making a strong case for its staying power.

On Thursday, the price of a single Bitcoin, the oldest virtual currency, topped $40,000 for the first time, according to Business Insider. The 12 percent increase on the day pushed the total value of Bitcoin to over $700 billion and all cryptocurrency to over $1 trillion for the very first time.

The surge continued into Friday, with Bitcoin valued at over $41,000 as of press time. That means that value of Bitcoin has risen by over 400 percent over the last year. Interest in the virtual currency has been especially high over the last month, during which time its value has more than doubled. The interest has reportedly been driven by investors desire for an alternative asset not tied to a central bank, unlike the dollar or euro. Of course, that interest may or may not last. If nothing else, cryptocurrency has proven itself to be quite volatile in recent years. The value of Bitcoin, for example, crashed from $19,000 to $3,200 between 2017 and 2018.

For now, the news is good. With a market cap of over $1 trillion, cryptocurrencies are now worth almost half as much as Apple, the worlds most valuable company, reports Business Insider. It also makes cryptocurrency more valuable than the entire Swiss economy.

While the recent surge in Bitcoin value is great news investors, this is especially true for Satoshi Nakamoto. The creator of the virtual currency is believed to own one million Bitcoin. If true, Ars Technica reports that the investment would put his net worth at more than $40 billion. That would make him one of the 35 richest people in the world, according to the Bloombergs Billionaire Index.

Bitcoin may be the currency that has most benefited from the recent surge in interest, but other virtual currencies have also seen their value rise as well. By the end of trading on Thursday, Ether, which is used by the Ethereum network, was valued at $140 billion Meanwhile, other notable currencies arent doing too shabby either. Tether is now worth $22 billion, Litecoin sits at $11 billion, and Bitcoin Cash checks in at $8 billion.

Follow this link:
Bitcoin Tops $40,000 for the First Time, Pushing the Value of the Worlds Cryptocurrency Over $1 Trillion - Robb Report

The U.K. Treasury has released a consultation paper to gather feedback from stakeholders concerning the governments regulatory approach to cryptocurrencies and stablecoins.

The consultation solicits opinions on how the U.K. can make sure its regulatory framework is equipped to harness the benefits of new technologies, supporting innovation and competition, while mitigating risks to consumers and stability, and incorporates advice from the Cryptoassets Task Force.

With a large proportion of crypto assets falling outside regulatory oversight, the Treasury says they may pose a risk to consumers and lack financial safeguards.

The U.K. is planning a a staged and proportionate approach to new crypto asset developments, taking a focus in the paper on stablecoins cryptocurrencies that generally aim to have a stable value by being backed by assets such as the U.S. dollar.

[T]he landscape is changing rapidly. So-called stablecoins could pave the way for faster, cheaper payments, making it easier for people to pay for things or store their money. There is also increasing evidence that [distributed ledger technology] could have significant benefits for capital markets, potentially fundamentally changing the way they operate, said John Glen, M.P., the Treasurys economic secretary, said in the papers introduction.

However, he said, such developments could pose a range of risks to consumers and, depending on their uptake, to the stability of the financial system.

The consultation focuses particularly on developing a sound regulatory environment for stablecoins, which the U.K. government considers have most urgent risks and opportunities.

Since the announcement of the Facebook-backed libra project (now rebranded as diem), regulators and governments worldwide have raised concerns over the potential effects of so-called global stablecoins on financial stability and even monetary sovereignty.

The U.K.s Financial Conduct Authority has already issued guidance on crypto assets including exchange tokens like bitcoin, ether and XRP setting out which do and dont fall under its jurisdiction in July 2019.

This new consultation will focus on the roles of crypto assets and stablecoins in payments and investment, as well as the use of blockchain or distributed ledger technology in financial markets. It will also look at additional regulatory actions that might be required in the space.

The paper marks the second Treasury-led crypto consultation. The first, announced last summer and concluded in October, set out plans to increase oversight into cryptocurrency promotions in order to protect investors. The results will be published in due course, the Treasury said in the new paper.

The FCA recently banned the sale of derivatives and exchange-traded notes, saying it considers the products to be ill-suited for retail consumers due to the potential harm they pose.

Responses to the consultation paper are being accepted until March 21.

Excerpt from:
UK Treasury Calls for Feedback on Approach to Cryptocurrency and Stablecoin Regulation - CoinDesk - CoinDesk

Stefan Thomas, a German-born programmer living in San Francisco, has two guesses left to figure out a password that is worth, as of this week, about $220 million.

The password will let him unlock a small hard drive, known as an IronKey, which contains the private keys to a digital wallet that holds 7,002 Bitcoin. While the price of Bitcoin dropped sharply on Monday, it is still up more than 50 percent from just a month ago, when it passed its previous all-time high of around $20,000.

The problem is that Mr. Thomas years ago lost the paper where he wrote down the password for his IronKey, which gives users 10 guesses before it seizes up and encrypts its contents forever. He has since tried eight of his most commonly used password formulations to no avail.

I would just lay in bed and think about it, Mr. Thomas said. Then I would go to the computer with some new strategy, and it wouldnt work, and I would be desperate again.

Bitcoin, which has been on an extraordinary and volatile eight-month run, has made a lot of its holders very rich in a short time, even as the coronavirus pandemic has ravaged the world economy.

But the cryptocurrencys unusual nature has also meant that many people are locked out of their Bitcoin fortunes as a result of lost or forgotten keys. They have been forced to watch, helpless, as the price has risen and fallen sharply, unable to cash in on their digital wealth.

Of the existing 18.5 million Bitcoin, around 20 percent currently worth around $140 billion appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis. Wallet Recovery Services, a business that helps find lost digital keys, said it had gotten 70 requests a day from people who wanted help recovering their riches, three times the number of a month ago.

Bitcoin owners who are locked out of their wallets speak of endless days and nights of frustration as they have tried to get access to their fortunes. Many have owned the coins since Bitcoins early days a decade ago, when no one had confidence that the tokens would be worth anything.

Through the years I would say I have spent hundreds of hours trying to get back into these wallets, said Brad Yasar, an entrepreneur in Los Angeles who has a few desktop computers that contain thousands of Bitcoin he created, or mined, during the early days of the technology. While those Bitcoin are now worth hundreds of millions of dollars, he lost his passwords many years ago and has put the hard drives containing them in vacuum-sealed bags, out of sight.

I dont want to be reminded every day that what I have now is a fraction of what I could have that I lost, he said.

The dilemma is a stark reminder of Bitcoins unusual technological underpinnings, which set it apart from normal money and give it some of its most vaunted and riskiest qualities. With traditional bank accounts and online wallets, banks like Wells Fargo and other financial companies like PayPal can provide people the passwords to their accounts or reset lost passwords.

But Bitcoin has no company to provide or store passwords. The virtual currencys creator, a shadowy figure known as Satoshi Nakamoto, has said Bitcoins central idea was to allow anyone in the world to open a digital bank account and hold the money in a way that no government could prevent or regulate.

This is made possible by the structure of Bitcoin, which is governed by a network of computers that agreed to follow software containing all the rules for the cryptocurrency. The software includes a complex algorithm that makes it possible to create an address, and associated private key, which is known only by the person who created the wallet.

The software also allows the Bitcoin network to confirm the accuracy of the password to allow transactions, without seeing or knowing the password itself. In short, the system makes it possible for anyone to create a Bitcoin wallet without having to register with a financial institution or go through any sort of identity check.

That has made Bitcoin popular with criminals, who can use the money without revealing their identity. It has also attracted people in countries like China and Venezuela, where authoritarian governments are known for raiding or shutting down traditional bank accounts.

But the structure of this system did not account for just how bad people can be at remembering and securing their passwords.

Even sophisticated investors have been completely incapable of doing any kind of management of private keys, said Diogo Monica, a co-founder of a start-up called Anchorage, which helps companies handle cryptocurrency security. Mr. Monica started the company in 2017 after helping a hedge fund regain access to one of its Bitcoin wallets.

Mr. Thomas, the programmer, said he was drawn to Bitcoin partly because it was outside the control of a country or company. In 2011, when he was living in Switzerland, he was given the 7,002 Bitcoin by an early Bitcoin fanatic as a reward for making an animated video, What is Bitcoin?, which introduced many people to the technology.

That year, he lost the digital keys to the wallet holding the Bitcoin. Since then, as Bitcoins value has soared and fallen and he could not get his hands on the money, Mr. Thomas has soured on the idea that people should be their own bank and hold their own money.

This whole idea of being your own bank let me put it this way: Do you make your own shoes? he said. The reason we have banks is that we dont want to deal with all those things that banks do.

Other Bitcoin believers have also realized the difficulties of being their own bank. Some have outsourced the work of holding Bitcoin to start-ups and exchanges that secure the private keys to peoples stashes of the virtual currency.

Yet some of these services have had just as much trouble securing their keys. Many of the largest Bitcoin exchanges over the years including the onetime well-known exchange Mt. Gox have lost private keys or had them stolen.

Gabriel Abed, 34, an entrepreneur from Barbados, lost around 800 Bitcoin now worth around $25 million when a colleague reformatted a laptop that contained the private keys to a Bitcoin wallet in 2011.

Mr. Abed said this did not dim his enthusiasm. Before Bitcoin, he said, he and his fellow islanders had not had access to affordable digital financial products like the credit cards and bank accounts that are easily available to Americans. In Barbados, even getting a PayPal account was almost impossible, he said. The open nature of Bitcoin, he said, gave him full access to the digital financial world for the first time.

The risk of being my own bank comes with the reward of being able to freely access my money and be a citizen of the world that is worth it, Mr. Abed said.

For Mr. Abed and Mr. Thomas, any losses from mishandling the private keys have partly been assuaged by the enormous gains they have made on the Bitcoin they managed to hold on to. The 800 Bitcoin Mr. Abed lost in 2011 were a small fraction of the tokens he has since bought and sold, allowing him to recently buy a 100-acre plot of oceanfront land in Barbados for over $25 million.

Mr. Thomas said he also managed to hold on to enough Bitcoin and remember the passwords to give him more riches than he knows what to do with. In 2012, he joined a cryptocurrency start-up, Ripple, that aimed to improve on Bitcoin. He was rewarded with Ripples own native currency, known as XRP, which rose in value.

(Ripple has recently run into legal troubles, in part because the founders had too much control over the creation and distribution of the XRP coins.)

As for his lost password and inaccessible Bitcoin, Mr. Thomas has put the IronKey in a secure facility he wont say where in case cryptographers come up with new ways of cracking complex passwords. Keeping it far away helps him try not to think about it, he said.

I got to a point where I said to myself, Let it be in the past, just for your own mental health, he said.

Read the rest here:
Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes - The New York Times