Crypto Scams on Twitter: Hold on to Your Bitcoin!

traffic sign - SCAM!The most widely advertised feature of the decentralized cryptocurrency is the symbiosis of trust and unbiassed verification within the blockchain technology.

However, as the recent crypto scams that have been pulled off on Twitter show, trust needs to be applied with great caution.

A Chain of Scandals

Bitcoin wars on Twitter have been going on for some time now. The factions supporting various types of crypto have been engaged in a full-scale flame war, bombarding each other with angry messages and accusations. As if that wasn’t enough, Twitter was all but buried under a landslide of fake verified accounts and a swelled number of copycat accounts.

Once the breaches in the defenses were found, more and more scammers started using the photo ID to trick Twitter into giving their accounts the “verified” badge and go on impersonating real, unsuspecting people and entities. The end goal is, of course, to swindle the users out of as much money as possible before anyone suspects fraud.

The notorious account “Protafield” (verified, of course) pretended to be a crypto exchange and staged the non-existent Ether giveaways.

Another verified profile, “seifsbei”, managed to impersonate six different accounts, such as Bitfinex, a crypto exchange, and even went as far as impersonating Vitalik Buterin, the creator of Ethereum.

These incidents make it more than obvious that Twitter’s verification process falls short of protecting its users and sifting the honest ones from the wrongdoers. Simply put, the “verified” badge no longer guarantees anything. As the founder of start-up Tim Pastoor stated, “People at home see this as a stamp that Twitter sees this as a good account, which can be very subjective”. He also said that scams are made even more dangerous because it is not the intent that is vetted, but merely the identity that is behind the account.

looks like someone is about to steal my bitcoin?A representative of Bitfinex, one of the larges Bitcoin trading platforms, says that fighting the influx of fake accounts takes a considerable amount of time and effort: “We dedicate a lot of resources towards combating illegitimate Twitter accounts and educating our users on how to spot them. However, our impact on certain sites is limited”.

Lethal Patterns

The situation with the restless crypto segment of Twitter is anything but simple.

The false information that the fake account holders present to the users is camouflaged by impeccable terminology. The well-applied technical language does not only make the information look trustworthy, but also makes the standard scam detection processes that Twitter uses, such as language analysis, insufficient.

On the other hand, systematic fraud can be spotted due to the scammers’ tendency to promote the tokens in packs, boosting each other’s reputation and visibility.

Another factor to consider is, well, human. It is commonly known that people rather trust acquaintances more that strangers, and acquaintances less than close friends. Thus, to filter the information, Twitter could allow users to have more control over their feed, the way that Facebook does it. Tim Pastoor believes there are going to be iterations: “I would probably recommend starting with allowing people to filter based on people that they already trust, and to maybe make more use of your second or third-degree networks”.

The mess gets even worse because the accounts can pass to other owners, and not necessarily through hacks, and the new owners’ motives can be very different.

An example of such stray account is the suspended @bitcoin. It started with tweeting the information supporting bitcoin, changed hands many times over the years, and ended up tweeting controversial and misleading information. Finally, it caused so much disapproval, that Twitter had it suspended, and then divested of the verification mark.

The Power of a Tweet

Despite the apparently unreliable verification process, it is a fact that Twitter has a great influence on the crypto markets. Regular users can have as much impact on the price swings of a particular crypto enterprise as the scammers.

The founder of CoinTrend, Nick Lucas, says that there is “basically a lot of influence on Twitter when John McAfee or someone mentions a specific coin.” For example, the price of the Safe Exchange Coins spiked within 24 hours after McAfee tweeted about it.

Naturally, the tweets can just as well have a negative effect. As Lucas puts it, “If everyone is talking negatively about something that is getting pushed into a core repo coin, that can also have an impact. If someone with a big following tweets something, it can cause a scare”.

Behold the Golem: New Ethereum App Released

Golem, and ambitious new project released on the 10th of April, 2018, allows the users to rent the CPU power that they are not using for creating digital imagery. Essentially, it’s a platform that lets others make use of the compute’s excess power.

A Market for Swapping Power
It took three years and fourteen implementations for the Golem project to go live. In 2016, the project rose 280 000 ETH (approximately, $340 million), and its GNT token was sold out in 20 minutes. There was a significant amount of interest on behalf of the investors since this ethereum app project was among the earliest generations of its kind.

The long delay in delivering the app, however, received some inevitable criticism. Golem’s founder, Julian Zawistowski, says it’s typical for the development of software, and, in particular, for blockchain, to underestimate the complexity of what needs to be done. Zawistowski says, “You always underestimate how difficult it is, and this was obviously the case with us.”

Golem has still not reached its final shape. However, the mainnet launch demonstrates that the app is, finally, very much alive. Currently, the CGI is created with the open-source software Blender that allows creating visual effects, animated films, interactive applications as well as video games. Golem exchanges the computational power for GNT via an interface that is directly connected to Blender.

The current release was named Golem Brass Beta. It aims at trying out the technology in the conditions of a real market, using the real money. As Zawistowski put it, “We have to see how it behaves in the wild,”

Piotr “Viggith” Janiuk, Golem’s co-founder and the CTO of the company, says “The release is there to prove to us and everyone that we can actually deliver something that can run on mainnet and that’s really usable. And, well, it is.”

From Brass to Machine Learning
Golem Brass Beta functions through a software client, connecting the “providers” (the ones that are selling the CPU power) and “requestors” (the ones who want to rent it) in the network.

Golem“Providers” receive small subtasks, which make a complete computational picture when put together. These subtasks are sent via the peer-to-peer network. After the users have computed their subtasks, they return the results which are molded together. The “Requestors” then pay for using other’s power. All of these interactions occur on the network between the nodes.

Golem is not actually built on the blockchain, but it uses Ethereum for GNT (its token), and for agreeing on the token transactions.

The app’s creators hope to see it develop “to a point where we have the Golem which is perfect and self-contained and modular”, so that the computations would be done “in a matter of seconds”.

In future, the company plans to build a dedicated Blender plugin to eliminate an extra step. An even bigger ambition is to let the network provide the resources for machine learning. AS Jainuk stated, “We definitely need to move in the direction of machine learning. This is something that is suited to Golem pretty well,”

Long Road to Perfection
The long time it took to release the Golem is explained y the difficulties in production that could not be entirely anticipated when the project was first conceived. The development team had to venture into the yet uncharted territories, and, of course, extra attention needed to be paid to security. As Jainuk put it, “There can be no holes because you’re risking someone else’s money.”

project golem, an ethereum appDividing the computational tasks into subtasks and reconnecting them later presented some of the greatest difficulties. Also, verifying the correctness of computation was particularly tricky to develop for certain kinds of computations, while with some cryptocurrencies it went easily.

The fact that platform apps cause Thereum transaction backlogs and the growth of the fees was not helping either. Vitalik Buterin, Ethereum’s creator, commented on the issue when speaking to an audience in South Korea, that the scaling challenges “screwed” the makers of the applications.

Jainuk also acknowledged the problem, saying that the decentralized solutions are still some steps away from even beginning to resemble the production-grade solutions. Zawinowski, in turn, compared the situation which we have regarding infrastructure and web development today is to what it was like in the nineties, noting that now there is a huge number of tools that the developers can choose from, while some decades ago people had no choice but to start from scratch.

However, sometimes starting from the very beginning is exactly what needs to be done. According to Zawinowski, often it is necessary to actually invent the wheel to solve the problems at hand.

Banks Banned from Trading Crypto and ICO in Pakistan

Pakistan Bitcoin Crypto ICOState Bank of Pakistan (SBP) has officially banned the country’s financial firms from cooperating with cryptocurrency companies. SBP has thus become the latest organization of its class to ban the crypto-related activities.

On the 6th of April, 2018, SBP issued the following statement: “All Banks/ DFIs/ Microfinance Banks and Payment System Operators (PSOs)/Payment Service Providers (PSPs) are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in Virtual Currencies/Tokens. Further, banks/DFIs/Microfinance Banks and PSOs/PSPs will not facilitate their customers/account holders to transact in VCs/ICO Tokens. Any transaction in this regard shall immediately be reported to Financial Monitoring Unit (FMU) as a suspicious transaction.”

The bank also announced the news on its Twitter.

So far, SBP has not issued any comments on this statement, while the announcement of the news has already set the wheels of change in motion and has had an immediate effect on Pakistan’s cryptocurrency market.

Pakistan’s first cryptocurrency exchange, Urdubit, said, after the SBP statement was issued, that it is going to shut down. The exchange was launched in 2014 and was meant to lay foundations to the wider adoption of cryptocurrency in the country. Urdubit’s goal was also to raise the people’s awareness and understanding of cryptocurrency and enable them to use bitcoin in their everyday lives. Zain Tariq, one of the exchange’s founding partners, said: “You have to realize that even wealthy Pakistani people fear what they don’t understand, and English being second language – it creates a small understanding barrier.”

However, after SBP has announced its decision, Urdubit published an announcement via Facebook, urging the users to withdraw their funds as soon as possible, because it will be closing soon, “due to the current stance on Virtual Currencies by SBP”. The exchange also attached a link to a notification from SBP stating that “SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.” The notification also contains a warning that “Any transaction in this regard shall immediately be reported to Financial Monitoring Unit (FMU) as a suspicious transaction”.

Rodrigo Souza, co-founder of BlinkTrade, the provider of open-source software used by the Urdubit exchange, stated that SBP’s objective is to undermine the investment in cryptocurrency in Pakistan. According to Souza, the banks and the governments will inevitably fight Bitcoin because Bitcoin investment causes large number of people to remove their funds from the bank. Regarding the future plans, Souza added: “We are working hard to return all PKR to all our customers before our bank shutdown our accounts.”

Interestingly, Bank of Pakistan’s ban was announced the very next day after the Reserve Bank of India (RBI), the country’s main banking institution, announced its decision to stop working with the crypto exchanges and other services related to cryptocurrency. India’s cryptocurrency exchanges, however, have decided to challenge RBI’s edict. Ajeet Khurana, the chief executive of Zebpay, India’s leading cryptocurrency exchange, posted on his Twitter: “No way I am stopping. We will continue to do what is best for our customers, and what is best for our country. Am studying the present situation and will react shortly. And we will emerge stronger.”






Ether Goes Downhill

ethereum logo 1The start of 2018 has not been too good a time for Ether, to say the least. In the first three month of the new year, it went down as much as 47,5%, which is the steepest quarterly decline that has yet been recorded.

Granted, cryptocurrency rates in general have been going down the slope. However, Ether stand out among the other afflicted cryptos, and not in a good way, crashing down after it has gained a fantastic 9382% during 2017.

Ether’s previous “worst performance ever” record occurred at the end of the year 2016, when the cryptocurrency dropped by 39,6%, to $7.97 instead of $13.2. These numbers, however, do not look half as bad compared to the situation currently at hand.

Let’s look at the historical data to try to understand what exactly went wrong.

On the Rise in January
The beginning of 2018 was strong for Ether: on January 13, the rate was $1,432. This, however, got pushed under $1,000 towards the end of the month. January was closed with the more or less optimistic number of $1,118.

2017, 2018, crashing down ethereum, alternative cryptocurrencyAt that time, Ether was still considered a safe asset by the investors. Since most of the ICOs are built on top of Ethereum platform, the fees that the creators need to pay are in Ether, which keep the demand to the cryptocurrency stable. Steemit named Ethereum “the most reliable and widely used network in all of cryptocurrency”, and went on to explain: “It is used as the basis for hundreds of tokens and is the foundation for much of the cryptocurrency market. It isn’t going anywhere. It has steadily climbed in value, and when it has dropped in value, it has not been as dramatic of a drop as competing currencies such as Bitcoin”.

In the following months, however, this advantage proved to be not so great after all.

ICO Fraud Concerns in February
On the 6th of February, the prices dropped to approximately $650. That also was the day on which a U. S. Senate hearing took place. During this hearing, the Securities and Exchange Commission discussed the problems of ICO status and fraud. Jay Clayton, Securities and Exchange Commission chairman, very emphatically said that he wants “to go back to separating ICOs and cryptocurrencies. ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”

This was when Ether started wavering: it dropped to $574, then began recovering, but stopped after reaching around $1,000, and, finally, finished the month at the $850 mark.

Investigations and Bans in March
On the 18th of March, after he Securities and Exchange Commission verified that multiple investigations of ICOs were under way, the price immediately fell under $500. co-director of the SEC’s Enforcement Division Stephanie Avakian confirmed that the agency was “seeing a lot in the crypto space.”

It also didn’t improve the situation that such titans as Facebook, Google, and Twitter, decided to altogether ban the cryptocurrency ads.

Thus, in March, Ether, afflicted by many sorrows, tanked 53% overall. However, it remains up more than 700% compared to the previous year, so, while caution is advised, it is probably far too early to give up on it.


A New Fork on the Block(chain)

bitcoin forkThis month, A. Zamyatin and W. J. Knottenbelt, of the Imperial College of London, together with N. Stifter, A. Judmayer, P. Schindler, and E. Weippl, of SBA Research, have published a paper “A Wild Velvet Fork Appears! Inclusive Blockchain Protocol Changes in Practice”, re-introducing the “velvet” fork. According to the paper, this type of fork modifies the given protocol both “backward compatible and inclusive to legacy blocks.” In this case, “new protocol rules are not enforced by upgraded consensus participants, and any valid block adhering to the new rules is also a valid block in terms of the old rules.”

An Introduction to Velvet
Up to now, there have been just two types of forks in the blockchain: the soft and the hard ones. Soft fork is backward-compatible, as only the previously valid blocks are made invalid, and the new blocks are recognized by the old nodes as valid. The hard fork, on the other hand, is a permanent split from the previous blockchain version, which makes the previously invalid blocks valid, so that the old nodes are no longer accepted.

The new forking mechanism has already raised some hype in the crypto community because it just might help overcome the issue of politics slowing down the significant code changes. Aleksei Zamyatin, the research assistant at the Imperial College London, says that the most curious part about the velvet fork concept is that “you can introduce some new concepts to permissionless blockchains without necessarily having a majority of consensus participants agree to do so”.

In essence, the velvet fork means that the developers no longer need to ensure the complete support of the whole ecosystem to update the blockchain.

According to the “Wild Velvet Fork” paper, the fork is potentially capable of preventing the dissent before it occurs: “The velvet fork […] does not require support of a majority of participants and can potentially avoid rule disagreement forks from happening altogether.”

A Brief History of Fork
The first divisive fork in Bitcoin history was Bitcoin XT, launched in December 2014 by Mike Hearn. It was run by more than 1000 nodes in August 2015. Bitcoin XT was aiming to increase the overall block size to 8 MB to achieve twenty-four transactions per second. The project pretty much died by 2016. Though is still maintained, there are barely 30 Bitcoin XT nodes that are still running.

In December 2015, Bitcoin Unlimited was released. It used a unique strategy: though the code was released, there was no direction provided on the type of fork that should be used. Its main features included the miners’ ability to configure the size of the blocks that they would validate. Also, the nodes could set the limit for the size of the blocks that they would accept. Despite some serious problems with reliability, there are currently about 650 nodes running Bitcoin Unlimited.

The next attempt to increase the block size and speed up the transactions was made in December 2016, when the Bitcoin Classic fork was created. Its goal was to increase the block size by 2MB, which was changed to a market-driven block size only 8 months after the launch. Bitcoin Classic achieved the number of 2000 nodes, but, after a rapid decline, there are about 100 nodes running it today.

Segregated Witness (SegWit) was activated in August 2017. It was, essentially, a hack that removed signatures to another data structure, the “extended block”, to reduce the size of individual bitcoin transactions. It was accepted with enthusiasm and received 95% approval from the miners.

Bitcoin Cash branched off in August 2017, when the Bitcoin Cash wallets started rejecting the bitcoin transactions. Some of the major influencers in the industry actively supported it, and several big exchanges (Kraken, among others) decided to provide their bitcoin holders with Bitcoin Cash. Bitcoin Cash miners have the ability to switch to bitcoin mining, which has created the so-called “opportunistic mining”, which means miners jumping between BTC and BCH, as the profitability of these coins changes. Currently, Bitcoin Cash is run by approximately 800 nodes.

October 2017 saw the forking of Bitcoin Gold, a BTC implementation aiming to lower the importance of the big-scale miners on the network. Potentially, Bitcoin Gold’s mining framework allows anyone who has a powerful enough GPU to mine the coins on a competitive level.

All the forks listed previously were either hard (Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, Bitcoin Cash) or soft ones (SegWit). The term “velvet fork” was mentioned for the first time in a December 2017 paper by Aggelos Kiayias (University of Edinburgh), Andrew Miller (University of Illinois at Urbana-Champaign), and Dionysis Zindros (National and Kapodistrian University of Athens), “Non-Interactive Proofs of Proof-of-Work”. In this paper, the velvet fork is said to be a “less disruptive update mechanism” compared to the soft and hard forks. In the case of velvet update, the updated (“forked”) clients still remain fully compatible with the un-updated ones. As a result, “in a velvet fork, the blockchain system can remain supported by a diverse software codebase indefinitely, while it can still enjoy, at least in proportion, some of the […] benefits of the update without any of the security downsides”.

Despite it presenting some interesting opportunities, the velvet fork still has not come into wide use. An example of a velvet fork would be the P2pool, a decentralized BTC mining pool that allows blocks to coexist together without splitting.

A Velvety Threat
Velvet forks present a lot of opportunities, yet unexplored, but they can also be a vulnerability.

Wrongdoers could potentially use the velvet fork to their advantage. For example, the recently published paper describes a situation in which a number of “velvet miners” have upgraded to the new set of rules, while the others have not. In this case, the un-upgraded miners can be persuaded to accept the upgraded over the legacy blocks, and this, in turn, “can have an unclear impact on the security assumptions of such systems, as current attack models mostly do not assume a variable utility of blocks”.

Another threat described by Zamyatin is the “selfish mining”. “Selfish mining” means that, when the miners find a block, they conceal it and start searching for the new block, while everyone else is busy looking for the block that has actually been found. This way, the dishonest miners would get a head start in the quest for the next block. As Zamyatin himself said, “I can bribe people to work on my chain. There’s no guarantee that I’ll win, but it could potentially offer an incentive to deviate from the protocol rules.” However, there is still no real clarity regarding how serious these threats really are.

Velvet is Worth a Try
Despite the potential vulnerabilities of the velvet fork and the fact that it “doesn’t work for something like SegWit”, it might come in very handy.

Currently, Zamyatin is searching for a way of implementing the velvet fork to bring the Ethereum’s GHOST protocol to the bitcoin realm. This kind of project is unlikely to gain enough support for either a hard or a soft fork because of it completely restructuring the system, so that the reconciling velvet fork could be the perfect solution in this case.

According to Zamyatin, the velvet fork could have an even bigger potential: “You could even have multiple versions running in parallel, perhaps even compatible to each other, and all this without necessitating often controversial soft or hard forks.”

Crypto Developers to Train at Platypus Labs

Jimmy Song, one of the most experienced and respected developers in the field of cryptocurrency, has joined Blockchain Capital in January, as a venture partner, and this month he has already announced a new project: the so-called Platypus Labs for open-source developers.

New Opportunities
Jimmy is known for his detailed and comprehensible analysis of the technical aspects of cryptocurrency. He recently joined Blockchain Capital to render technical assistance in the areas related to investment and research and establish connections between the company and the developers working with crypto.

When describing the new initiative, Jimmy has stated that he wants to reward the developers, because they bring great benefit to the ecosystem, and the company would like to see them compensated for it.

As part of this bridge-building process, Jimmy has announced a new project that aims at providing the open-source developers with a revenue stream and supporting them with a number of fellowships and residencies. The project, informally nicknamed “Platypus Labs”, will first of all focus on those working on Bitcoin Core, which is currently the most widely-used version of bitcoin software.

cryptovoyage coinWhile the project is still in the early stages of development, some of the Blockchain Capital’s portfolio firms and investors have already shown interest and bought into the funds of the company. This hardly comes as a surprise, considering that the numbers of posted blockchain jobs are skyrocketing; for example, in the U.S., the number has increased by mind-boggling 207% in the course of 2017. Bart Stephens, the co-founder of Blockchain Capital, has confirmed that all the companies in the venture capital’s portfolio (62 in total) are in need of the engineering talent, and gladly welcome Song’s project which comes at just the right time. In the following two months, Song, avidly supported, already plans to launch a residency or fellowship program.

The Labs are located in San Francisco. The first objective is to create the developer ecosystem that is focused on the bitcoin, but in future the project will grow to support other types of cryptocurrency.

Not All Developers Agree
Despite all the enthusiasm and support, convincing the developers to take part in the project might turn out to be a bigger challenge than it seems at first.

Initially, when bitcoin was still a novelty known only to a relatively small number of crypto enthusiasts, the developers who worked with it were either fans working on the code for free, as a hobby, or owners of bitcoin (sometimes, fairly large numbers of it) who were eager to improve the code to protect their assets. Jimmy Song himself belonged to the latter group: he says that is was owing a lot of bitcoin that made him begin contributing to Bitcoin Core.

As bitcoin grew in rate and popularity, the developers started to get hired by various companies, from startups, such as BitPay, to educational institutions (for example, MIT). However, some of the developers declined these job offers, feeling that working for an organization would compromise the concept of altruistic work done autonomously, to contribute to the common good. Those who have chosen to work on bitcoin code for other reasons than monetary reward, are difficult, if not impossible, to catch for the project.

Train, Repair, Hunt for the Best Ones
Another focus of Song’s Platypus Project is to provide support and training for the developers who are interested in the blockchain technology but do not have sufficient resources to get the training on their own.

Jimmy, who has committed a total of fourteen changes to the bitcoin codebase, is first of all known as a tutor. He made himself known to the wider public through the two-day Programming Blockchain seminar that was aimed at teaching Python developers how to write code for the bitcoin apps. He is now planning to continue his educational activities at the Platypus Labs and teach the developers the skills of updating the core infrastructure (something that has been neglected for a while).

Song points out that there are many old open-source bitcoin libraries, such as bitcoin (already old when Mike Hearn, who had created it, stopped working with bitcoin in 2016), that are in a very poor state. These need to be repaired and maintained, for the good of the whole ecosystem, as well as for the sake of Blockchain Capital’s portfolio companies. Currently, Jimmy is contacting every one of these 62 companies to ask them which are the coding libraries that they use, what new instruments they need, and how the Platypus Labs may be of use to them altogether. After these interviews are over, he expects to be able to announce the official criteria for the developers who want to join the Labs.

Additionally, he plans to investigate which companies it would be advisable for Blockchain Capital to invest in. These companies are expected to be run by the business people who can code the basics “really well”. As Jimmy himself says, he likes seeing companies that are “innovating, not rent-seeking”.