3 Reasons Why Bitcoin is in the Red Today

3 reasons for bitcoin price weekend rally
Bitcoin is trading below USD $10,000 for the fifth consecutive day. Causes for this price correction can be tied to a series of predictable factors, none of which present a long-term threat to the overall crypto market. BITCOIN INVESTORS ARE TAKING PROFITS When commodities experience rapid spikes in value, some investors will always sell to secure their profits. Thus, retracements are a common and expected component of any appreciating asset.  The move above $10k represented a significant psychological milestone for Bitcoin, which prompted a notable correction on February 20th. Since then, however, the price has remained relatively stable, and even moved close to the 10k mark more than once. Whereas there is no clear indication that the 10k mark will be broken again over the next few days, there are also no signs that the price will fall much further. CORONAVIRUS FEARS ARE SLOWING MARKETS Over the past two days stock and commodities markets around the world have tumbled. Analysts point to uncertainty over the coronavirus as the chief cause. The crypto markets appear to be no exception. Predictably, the price of gold has spiked. Of note is the fact that the Bitcoin hash rate has flatlined. In fact, it has declined slightly since the beginning of the month. As  most mining now takes place in China, it is clear that mining farms have quit adding to their inventory. This fact is not surprising given the chaos the virus is causing across China’s economic and industrial sectors. Until this problem is resolved, Bitcoin prices will likely remain subdued. PRICE FOLLOWING A PREDICTABLE TREND Although highly volatile, the crypto market is beginning to demonstrate patterns as it matures. The current Bitcoin correction fits similar movements that have taken place since 2016. Each year the price begins to slide in late February, with a recovery toward the end of March.  It is thus not surprising that the price has declined, yet a recovery could come at any moment. The block reward halving is a new factor that has not taken place in five years. Analysts have long expected the price to move up as a result. This fact adds to the belief that the current dip in value is, in fact temporary.  Regardless of the present market condition, the overall outlook for cryptocurrency is tied to adoption of blockchain technology, which continues to accelerate. Thus, is strong reason to be optimistic for long-term growth. Why do you think Bitcoin is in the red again today? Add your thoughts below! Images via Shutterstock

A Look Into Recent Binance Trading Performance Issues

An in-depth analysis of the recent malfunction and performance issues suffered by the Binance crypto exchange.

As Cointelegraph reported on Feb. 19, Binance temporarily suspended most of its crypto trading platform activities due to unscheduled system maintenance. For several hours the exchange’s users were unable to perform most basic functions including deposits, withdrawals, spot trading, margin trading, P2P trading, lending, redemption, as well as asset transfers from sub-accounts, margin accounts, futures accounts, and fiat wallets on the platform.

During the outage, Binance CEO Changpeng Zhao explained that the root cause of the trading halt was a technical issue with one of the market data pushers. In the end the exchange solved the issue the same day, waived the day’s margin trading interest, and resumed trading after allowing a thirty minute window for canceling orders. The firm reassured Cointelegraph that no malicious activity was involved in the malfunction.

Binance’s maintenance allegedly caused a market downturn

An experienced trader who found himself unable to access the platform during the stoppage told Cointelegraph that the unscheduled maintenance proved to be a major issue. He pointed out that shortly after trading on the platform resumed after the halt, a major market downturn took place:

“While I have to admit that I prefer to trade on Binance rather than on the other exchanges, starting unscheduled maintenance caused turmoil in the market since traders encountered unexpected difficulties in position management. In fact, I noticed that after a few hours the market has seen a downturn. I hope that in the future Binance won't encounter such problems and will maximize its performance.”

Binance proved unable to manage the increased traffic

According to a Feb. 17 Binance report, the week before the unscheduled maintenance took place the exchange also reported “a number of performance issues.” The firm suggests that the reason is the higher-than-usual number of users active on the trading platform:

“The difference between BTC at $10,000 this time around and the previous times is, there are a lot more users now. While this is a solid sign of strong recovery for the crypto market, it also puts on significant load for our systems.”

The exchange’s users ran into user interface errors and trading API timeouts because of the middle-layer service being overloaded. Users that were unable to have their orders carried out also often retried right away, resulting in overloading Binance’s infrastructure even further.

Binance’s short-term solution was to increase the computing resources, but the firm admits that the impact of this approach was limited. The firm also attempted to scale up the performance in other ways, but the improvements were not ready for implementation before the traffic spike.

The performance issues also caused a delay in data, order and balance updates. Per the report, Binance is working on longer-term solutions for this issue that should multiply the throughput of the system more than tenfold. Overall, Zhao claims that all those issues can be solved, and promises:

“We will solve these issues quickly, short, mid and long term fixes. I won’t be able to guarantee all smooth sailing from here. We are bound to run into issues in the future as well, and we are confident we will solve them quickly.”

Binance expands its operations aggressively

Earlier this month, Binance added Hong Kong dollar support shortly after adding 15 additional fiat currency options for Visa and Mastercard purchases on its platform. Shortly before those announcements, the firm also added Russian ruble pairs for its peer-to-peer trading platform.

The increase in traffic claimed by Binance in its report apparently suggests that this approach is working — and the company clearly intends to scale its infrastructure to match.

Mystery Miner Sweeps 9,000 Bitcoin Cash from SegWit Addresses

Mystery Miner Sweeps 9,000 Bitcoin Cash from SegWit Addresses
Over the course of two years, an unknown mining entity managed to sweep addresses for lost Bitcoin Cash (BCH), taking the coins as their own instead of returning them to owners. Lost Coins Grew Since 2017 Bitcoin Cash Hard Fork Bitcoin Cash (BCH) stepped into a problem soon after its launch in August 2017. Due to address format similarities, over the years, BCH users mistakenly sent out coins to SegWit addresses, which are not supported on the Bitcoin Cash network. Over the years, the possibility to send coins was not fixed, and up to 18,000 BCH was sent mistakenly. Mistaken transactions picked up in 2018 and 2019, due to the relative novelty of SegWit addresses. The newest data from Coinmetrics shows that known pools through their coin recovery programs managed to claw back about half of the coins and return them to the owners. But one “unknown” miner managed to mine enough blocks to sweep about 9,000 BCH. Jameson Lopp, Bitcoin supporter, tweeted on the so-called “BCH jackpot”: An unknown miner has swept up nearly 9,000 BCH that were mistakenly sent to SegWit addresses (which are only redeemable on Bitcoin.) Over $3M as of today. H/T @khannib @coinometrics https://t.co/wrBGhYOa3o pic.twitter.com/Xug5e6fLq1 — Jameson Lopp (@lopp) February 25, 2020 Coinmetrics tracked the problem from its initial days, when the lost coins were in the hundreds. Miners like BTC.com even opened a form for small claims, though the service was only temporary. Later, the pool decided to discontinue recoveries for smaller sums, setting a minimum of 10 BCH recovery fee for a minimum recovery of 100 BCH. 51% Attack in May 2019 Prevented “Unknown” Miner from Coin Clawback So far, BTC.com and BTC.top are the biggest movers of lost coins. But an “Unknown” miner has a total score of 8,763.16 coins so far, with the potential to gain more. At this point, not all recoverable coins are known, and more can be discovered. The condition to gain access to the coins is to be a miner, or contact a miner willing to include a non-standard script transaction which will be propagated. Regular users cannot send the required type of transaction to the blockchain. At one point, BTC.com and BTC.top managed to forestall another attempt to claim lost coins, by actually performing a unified 51% attack on the Bitcoin Cash blockchain. This stopped the propagation of the transactions mined by “Unknown”, orphaning a specially prepared block that would have given the miner access to the lost BCH. BCH changed its address format toward the end of 2018, and the number of misplaced coins decreased significantly since April 2019. Mistaken transactions can be avoided by sending a small test amount of coins to see if the address is viable and no mistake has been made. The search for lost coins continues, and owners may find it more difficult to organize the clawback of small-scale transactions. What do you think about the claiming of lost BCH through targeted block mining? Share your thoughts in the comments section below! Images via Shutterstock, Twitter @lopp

Mystery Miner Sweeps 9,000 Bitcoin Cash from SegWit Addresses

Mystery Miner Sweeps 9,000 Bitcoin Cash from SegWit Addresses
Over the course of two years, an unknown mining entity managed to sweep addresses for lost Bitcoin Cash (BCH), taking the coins as their own instead of returning them to owners. Lost Coins Grew Since 2017 Bitcoin Cash Hard Fork Bitcoin Cash (BCH) stepped into a problem soon after its launch in August 2017. Due to address format similarities, over the years, BCH users mistakenly sent out coins to SegWit addresses, which are not supported on the Bitcoin Cash network. Over the years, the possibility to send coins was not fixed, and up to 18,000 BCH was sent mistakenly. Mistaken transactions picked up in 2018 and 2019, due to the relative novelty of SegWit addresses. The newest data from Coinmetrics shows that known pools through their coin recovery programs managed to claw back about half of the coins and return them to the owners. But one “unknown” miner managed to mine enough blocks to sweep about 9,000 BCH. Jameson Lopp, Bitcoin supporter, tweeted on the so-called “BCH jackpot”: An unknown miner has swept up nearly 9,000 BCH that were mistakenly sent to SegWit addresses (which are only redeemable on Bitcoin.) Over $3M as of today. H/T @khannib @coinometrics https://t.co/wrBGhYOa3o pic.twitter.com/Xug5e6fLq1 — Jameson Lopp (@lopp) February 25, 2020 Coinmetrics tracked the problem from its initial days, when the lost coins were in the hundreds. Miners like BTC.com even opened a form for small claims, though the service was only temporary. Later, the pool decided to discontinue recoveries for smaller sums, setting a minimum of 10 BCH recovery fee for a minimum recovery of 100 BCH. 51% Attack in May 2019 Prevented “Unknown” Miner from Coin Clawback So far, BTC.com and BTC.top are the biggest movers of lost coins. But an “Unknown” miner has a total score of 8,763.16 coins so far, with the potential to gain more. At this point, not all recoverable coins are known, and more can be discovered. The condition to gain access to the coins is to be a miner, or contact a miner willing to include a non-standard script transaction which will be propagated. Regular users cannot send the required type of transaction to the blockchain. At one point, BTC.com and BTC.top managed to forestall another attempt to claim lost coins, by actually performing a unified 51% attack on the Bitcoin Cash blockchain. This stopped the propagation of the transactions mined by “Unknown”, orphaning a specially prepared block that would have given the miner access to the lost BCH. BCH changed its address format toward the end of 2018, and the number of misplaced coins decreased significantly since April 2019. Mistaken transactions can be avoided by sending a small test amount of coins to see if the address is viable and no mistake has been made. The search for lost coins continues, and owners may find it more difficult to organize the clawback of small-scale transactions. What do you think about the claiming of lost BCH through targeted block mining? Share your thoughts in the comments section below! Images via Shutterstock, Twitter @lopp

Tezos (XTZ) & Chainlink (LINK) Prices Slide 10% — More Pain or Buy the Dip?

Tezos and Chainlink have retraced from their nearly parabolic gains of the last few weeks, possibly presenting a buying opportunity for investors.

The most energetic performers from the past period, Tezos (XTZ) and Chainlink (LINK), are now showing a heavy retracement. Tezos corrected 32% since its local high at $3.96, while Chainlink also corrected 25% since reaching a top at $4.87. 

Do the current pullbacks provide buy the dip opportunities, or will the altcoins slide further in the coming weeks? Let’s look at the charts. 

Crypto market daily performance

Crypto market daily performance. Source: Coin360 

Tezos tops out at $4 resistance

The resistance at $4 was discussed in a previous analysis focused on Tezos and Chainlink and since then Tezos rallied towards this resistance and swiftly rejected it at this level.

XTZ USD 3-day chart

XTZ USD 3-day chart. Source: Cointrader.Pro

A rejection is not necessarily the wrong signal during such an impressive uptrend. Assets never move upwards in a straight line and they go through waves and corrective movements before continuing. Thus, a rejection at $4 is standard and was expected by many investors. Since breaking through $1.75, Tezos rallied 120% without any corrective moves. 

Significant support levels can be found at $2.50 and $1.75 which is the previous resistance level. However, a retracement towards $1.75 would be a 50% retracement and this type of pullback is unexpected during strong bullish trends. 

XTZ USD 1-day chart

XTZ USD 1-day chart. Source: Cointrader.Pro

The daily chart of Tezos is showing a similar perspective as the 3-day chart. A clear bearish divergence confirming a temporary trend reversal, after which the price started to trend downwards. 

As the chart is showing, that’s not a bad thing. The price of Tezos retraced from $1.75 to $1.20 in December 2019, after which a new higher low was found, and the trend continued. 

The daily chart is showing similar support levels as the 3-day chart shows, primary support to be found at the $2.50-2.70 area. If that support doesn’t hold, continuation towards $1.80 is likely to occur.

XTZ/BTC looks for a retest 

XTZ BTC 3-day chart

XTZ BTC 3-day chart. Source: Cointrader.Pro

The Bitcoin (BTC) pair of Tezos also shows a rejection at the small target around 0.0003700-0.0004100 satoshis. Such a rejection is not a bad sign, given that Tezos broke above a significant resistance. The price of Tezos couldn’t break above 0.0002500 satoshis for 18 months, after which a breakout led to a substantial volume increase and upward trend. 

What would be the most likely scenario here? A retest of the previous resistance at 0.0002500 satoshis would confirm the breakout if buyers are stepping in at this level.

XTZ BTC 6-hour chart

XTZ BTC 6-hour chart. Source: TradingView

The 6-hour chart shows a heavy retracement since the local top at 0.0004000 satoshis. The 0.0003400 satoshis level couldn’t provide support, through which continuation of the downward trend happened. 

The primary support levels to watch are the 0.0002950-0.0003000 satoshis level and the 0.0002500-0.0002550 satoshis level. Personally, I’d be mainly watching the lowest one, given that the 0.0002500 satoshis level used to be massive resistance. 

However, if the 0.0002950 provides sustainable support, a potential bounce towards 0.0003450 is likely to occur. This test will determine whether Tezos is continuing the upward trend or whether this level confirms resistance, and then downward continuation towards 0.0002500 satoshis is on the table.

Chainlink retracing for a potential support/resistance flip

LINK USDT 1-day chart

LINK USDT 1-day chart. Source: TradingView

Chainlink retraced heavily in the past week, as it couldn’t break above the previous high at $4.58. An additional reason for the retracement could be the weak movements with Bitcoin (BTC), which doesn’t provide a bullish market sentiment. 

However, the chart is not bearish at all. Tezos was heavily due for a retracement, through which Chainlink is showing a similar structure as it rallied 180% in 2020. 

The price of Chainlink is looking for support in this retracement. The next primary support level is the $3.50 level.

Flipping the $3.50 level for support would mean another support/resistance flip and likely continuation to the upside, or at least a retest of the $4.58 resistance area. Traders should also watch the daily close today. 

If Chainlink closes above the $3.75 level, the resistance from June 2019 is flipped support, and the retracement could be over.

LINK USDT 4-hour chart

LINK USDT 4-hour chart. Source: TradingView

The 4-hour chart shows an apparent support loss at the $4.00 level. Losing this support level caused the price to drop further downwards, through which the $3.50 level is the primary support level.

Over the short term, the resistances are found through the $3.85 and $4 levels. A bearish rejection at either of these levels would mean continuation downwards, through which the $3.50 level is the main support level. 

However, breaking these levels to the upside would mean that the retracement could be done. It is essential that these levels become support, which could trigger continuation upwards.

LINK/BTC at crucial support

LINK BTC 1-day chart

LINK BTC 1-day chart. Source: TradingView

The daily timeframe shows a definite retracement since the local top, which means that it’s approaching a significant level. Two support areas can be determined from this chart, through which 0.00039000 satoshis is the first level. 

The primary support is found at the 0.00037000 satoshis level as that’s previously found to be the resistance. This level was broken to the upside earlier this year, meaning a retest could trigger buyers to step in and provide a ‘buy the dip’ opportunity. 

However, losing that level would trigger a continuation of downwards pressure and classify as a weak move. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Caitlin Long Doesn’t Trust Trust Companies

Caitlin Long believes that banks will offer superior custodial services to those offered by trust companies.

Caitlin Long announced yesterday that she is launching Avanti Bank, and seeking a charter for it to become the first bank in the U.S. to offer crypto custody services. Today, in an exclusive interview with Cointelegraph, she elaborated on why trust companies as crypto custodians are insufficient for institutional investors.

Long explains “There’s a reason why the big custodians for institutional investors in securities markets are banks – two reasons, actually – 1) unlike trust companies, banks have direct access to the Fed for liquidity purposes, and 2) the treatment of a bank in bankruptcy is clear, while the treatment of a trust company in bankruptcy is unclear.”

In addition to providing its clients with greater certainty in case of bankruptcy, “banks face MUCH higher capital requirements than trusts”, noted Long. Higher capital requirements also lower the risk of default.

She notes that “pensions/endowmts/foundtns/corps/sov wealth” need this level of financial security before entering the crypto space.

Long concludes:

There’s not a bank in the US that can custody crypto right now – so this means trust company custodians are the only alternative at present. But trust companies can’t offer the risk reduction benefits of direct access to the Fed.”

Digital custody

There is no lack of players in the digital custody space, from corporate giants like Fidelity to crypto-native companies such as itBit, Coinbase, Gemini, and Xapo. There is even a bank that offers digital custody -- Bank Frick, based in Liechtenstein. 

Why custody matters?

For big institutional players to allocate some of the trillions of dollars they have under management to cryptocurrency, they need to have custodians that they — and their investors — can trust. To instill this trust, a crypto custodian must demonstrate technical expertise, legal clarity, and financial soundness.

Long refers to the missing piece as “a regulated bank that can act as a bridge to Fed for payments + custody crypto for BIG institutional money”. 

If Avanti Bank fills this void, it may lead to the next phase of exponential growth for crypto, and some of the outlandish bitcoin price predictions may come true.

France, Austria Join Forces to Combat Crypto Crime

France, Austria Join Forces to Combat Crypto Crime
Blockchain analysis offers a glimpse into potentially illegal behavior. Now, French and Austrian technology experts are joining forces to tackle crypto-based money laundering. Visualized Blockchain Connections Reveal Potential Illegal Usage The French blockchain security company NIGMA Conseil, and the Austrian Institute of Technology (AIT), have signed an agreement of cooperation on tracking crypto crime. The two organizations are working on the e-NIGMA platform, built using the AIT GraphSense technology. The organizations will cover the niche of startups like CipherTrace, which already provide services for multiple assets to exchanges. The possibility to trace and chart blockchain connections and transactions are a part of stricter KYC rules, which also require the tracking of coin origins. The tool may be suitable for any business exposed to digital assets. Fabien Tabarly, CEO of NIGMA Conseil, stated, The synergy between a leading European academic research institute and our team of developers has been instrumental in implementing the most innovative tools to fight financial crime in virtual currencies. Tracking wallet clusters has become essential to discover darknet usage and funds with dubious origins. The e-Nigma ecosystem will be able to discover the entities behind crypto wallets, and also track for suspicious transactions. With the addition of blockchain security, AIT expands its general portfolio of data and security services. The Austrian organization already advises on general cybersecurity, systems engineering, camera and video analytics, as well as physical layer security. EU Attempts to Crack Down on Illegal Crypto Usage AIT is also a part of the Titanium cybersecurity project, investigating darknet activity alongside Interpol and other government or academic partners. The EU has been one of the regions with stricter rules against anonymous crypto usage, and a special focus on darknet wallets, as well as coin mixers. Crypto exchanges have also shown they are ready to track the usage of coin mixers, going as far as to suspend accounts. Blockchain connections already known to belong to mixers are being traced by Binance and other cryptocurrency firms. European authorities have also cracked down on the mixing business, closing Bestmixer and exploring it for Bitcoin connections to dark web sites. European businesses will thus have access to an affordable platform that performs multiple actions to possibly satisfy the stricter AMLD5 requirements that came into force at the start of 2020. Europe is also the home of multiple fully transparent exchanges, which will add to their tools for accountability and compliance. What do you think about the e-NIGMA blockchain tracking system? Share your thoughts in the comments section below! Images via Shutterstock

ConsenSys Spins Off Health Division to Tackle US Healthcare Issues

ConsenSys is spinning off its healthcare division into ConsenSys Health, seeking to solve the issues in U.S. healthcare by applying technological solutions.

ConsenSys, the Ethereum-focused company founded by Joseph Lubin, announced on Feb. 25 that it will spin off its health division. The new ConsenSys Health company will develop blockchain use cases to tackle issues in the U.S. healthcare industry.

The announcement is part of ConsenSys’ strategy shift of favoring products such as Codefi and Infura, which led the company to spin out several internal projects into independent entities.

ConsenSys Health focuses on applying blockchain to the health industry, citing issues such as rising costs and access to care as some of the areas where blockchain can contribute. Co-founder of Ethereum (ETH) Joseph Lubin commented on the news, saying:

“Spinning off a separate company in this area is an opportunity for us to combine the powerful technology built by ConsenSys with a team of domain leaders to solve the biggest challenges in healthcare.”

The new company will be headed by Heather Leigh Flannery, who was the Global Lead for healthcare at ConsenSys. She is deeply involved in many initiatives combining blockchain with healthcare, serving on the chair of associations such as HIMSS Blockchain in Healthcare Task Force, Blockchain in Healthcare Global and the Healthcare Special Interest Group in the Ethereum Enterprise Alliance.

The blockchain solution for healthcare

ConsenSys Health will be specifically targeting the U.S. healthcare market as the most ripe for disruption, citing its high per-capita cost — by far the highest among OECD countries.

According to ConsenSys, blockchain can improve on this by addressing the rising costs of research and administration. Making data sharing safer and faster, expanding access to care and engaging patients directly are some of the initiatives where blockchain can help. Flannery is confident that the use of technology can improve the situation:

“The convergence of many emerging innovations, such as blockchain and machine learning, enables us to approach old problems in new ways. This opens up the possibility for improved patient and provider experiences, new business models, and ultimately, a sustainable and value-based healthcare system.”

Healthcare is one of the central themes of the upcoming 2020 U.S. presidential election. As the primaries for the Democratic presidential nomination continue, most candidates are proposing political approaches to the problem, such as Bernie Sanders’ “Medicare for All.” Though he is currently leading the polls, the proposal is generating immense criticism due to its radical approach.

A technological solution spearheaded by blockchain may become a more acceptable alternative for the public. Of the remaining candidates, only Michael Bloomberg has shown some interest in the cryptocurrency and blockchain space.

Starkware Wants to Bring Security and Scalability to Crypto Exchanges

Starkware, led by Zcash founding scientist, hopes to bring security and scalability to crypto exchanges.

An Israeli startup Starkware believes it can solve two of the most pressing issues in crypto trading — the inherent vulnerability of centralized exchanges and the low transactional capacity of decentralized ones. 

The venture was co-founded by professor Eli Ben Sasson, who was a founding scientist for Zcash (ZEC). Besides raising almost $40 million from prominent investors that include Sequoia and Intel Capital, it also received a grant from the Ethereum Foundation.

Starkware for exchanges

Oren Katz, VP of engineering at Starkware, explained their approach in an exclusive interview to Cointelegraph:

“We basically provide a scalability engine for exchanges (or marketplaces). The exchange keeps the order book and does the matching. The users post orders to the exchange. The exchange matches orders and sends the ones to be settled to us (StakWare's service). We batch a large number of trades together (could be tens of thousands) and prepare a single STARK proof, which attests to the validity of the entire batch. The proof is sent to an on-chain verifier (e.g. once every 15 mins). Once verified, the root state (of all user balances) is updated on-chain.”

For decentralized exchanges, the tradeoff is that decentralization decreases. For the centralized ones, it’s the loss of custody over users’ deposits. This may lead to lower revenue, as they will not be able to trade, lend nor stake users’ crypto. 

Therefore, the system becomes self-custodial which almost completely eliminates the risk of an exchange mismanaging users’ deposits. Its first use-case is the Deversify exchange, an Ether DEX, launched by Bitfinex

“We have spoken with all the major crypto exchanges, some get very excited about our solution, some don’t. For some, it’s a bug, for others, it’s a feature. They say ‘people trust us, we have a good reputation’”.

Why should we trust you?

In response to the concern that by implementing Starkware’s technology, an exchange is just moving the burden of responsibility to another centralized entity, Katz explained:

“Ask yourself what is the worst thing that can happen if we become malicious? We can’t steal your crypto since we don’t have your keys, all we can do is stop processing transactions.”

Katz summed the value proposition of Starkware: “What we want to provide users is with the user experience, volume and cost of a centralized exchange, but without the counterparty risk.”

Whether major crypto exchanges will embrace this technology is unclear. Holding millions of dollars in cryptocurrency is burdensome, but also is highly profitable. Much will depend on the users’ appetite for risk.

Tornado Ethereum Privacy Tool Is Okay With USDC Stablecoin Creators

Tornado

Chris Blec is a content creator on YouTube whose channel specializes in Ethereum decentralized finance, or DeFi, topics.

In recent months, Blec has earned a reputation for holding various Ethereum projects to account in the interest of users, particularly on the issues of decentralization, privacy, and beyond.

The decentralized exchange Uniswap is completely decentralized, for instance — no admin can manipulate it.

However, Blec has recently focused a beacon on other top DeFi projects like Compound Finance, which currently has an admin structure that could be abused in worst-case scenarios, however unlikely.

One of Blec’s latest beacons came on February 20th, when he publicly asked Circle, the payments company behind the USDC stablecoin, whether using the Tornado.cash privacy tool on Ethereum was grounds enough to violate that stablecoin’s terms of service.

Within a few days, Joao Reginatto, the Product Lead with the USDC team, responded with some interesting clarifications. 

First, What’s Tornado?

Tornado is a mixer system built on Ethereum that is underpinned by zk-SNARKS privacy tech, or “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” transactions.

This dApp allows users to have a non-custodial interface through which they can mix their ether (ETH) so as to make anonymize their activities on Ethereum.

And of course, it’s not that everyone has something to hide, but rather that everyone has a reasonable expectation to financial privacy. Industry publication Decrypt just published an investigation into the Ethereum Name Service (ENS), for example, which showed how these names made it extremely easy to track users’ activity on Ethereum.

Tornado is an early and promising solution on the flip side, which allows users to obscure their ETH payments in order to maintain privacy.

Yes, You Can Use USDC With Tornado

Blec’s aforementioned query was picked up on February 24th by USDC’s Reginatto, who responded on Twitter with a series of comments to provide context on how Circle’s leadership was approaching this nuanced privacy issue. 

For context, some cryptocurrency companies have recently moved against users they’ve determined have used mixers, particularly via bitcoin; accordingly, some users in the Ethereum space have been concerned that activities on Tornado might similarly draw ire.

As such, Reginatto made a major clarification to USDC users when he followed up with Blec, saying:

“I can tell you that to date, we have not considered any Circle USDC customer using the current TornadoCash tool to be in breach for the single reason of interacting with TornadoCash. We of course assess every customer’s compliance with our terms on a case by case basis.”

At least as things stand then, that’s a major win for USDC users and a score for Blec’s advocacy efforts. In a separate and related comment, Reginatto noted that while USDC’s smart contract did have a blacklist function, that function had never been used to date, with the suggestion being that USDC’s centralized backers had been provably conservative so far. On that point, he added:

“As the ecosystem and the technology evolve, blacklisting in its current form might likely prove too blunt or simply impractical. Believe me, we think a lot about this topic and are always engaged in collaboration with regulators around the world to conceive better solutions.”

Accountability Is Good for Everyone

It’s not easy to ask the tough questions, but when done in good faith, the results can be extremely productive. Blec’s query to the USDC team and Reginatto’s responses are just one such example. 

Furthermore, beyond Blec and USDC, Tornado is a big winner from this episode. A major crypto company just revealed that it had no direct qualms with the privacy tool, which is obviously legitimizing, and other firms may follow suit in kind.

The post Tornado Ethereum Privacy Tool Is Okay With USDC Stablecoin Creators appeared first on Blockonomi.

Lebanese Turn to Bitcoin as Economy Sinks

A landmark in Beirut, Lebanon, the monument in Martyrs Square still bears the scars of Lebanon's Civil War (1975-90). The Lebanese economy is in deep trouble – leading citizens to embrace Bitcoin (BTC) and altcoins in an attempt to escape the banking system and protect their savings from dwindling as the Lebanese pound continues to struggle. Lebanese banks have

Non-Fungible Report: NFT Market Cap Could Hit $315 Million This Year

Ethereum

Non-fungible tokens, or NFTs, are a blooming sector of the cryptoeconomy. They can be understood as digital collectibles, like CryptoKitties, which are verifiably unique and can be deployed in a multitude of ways, for example as art, ad space, gaming pieces, and beyond.

Like crypto’s decentralized finance arena, most of the NFT activity happening today is happening on Ethereum. And like DeFi, the promising NFT ecosystem seems to be on track for solid growth in 2020. But how much growth might we reasonably expect?

Here, cue in NonFungible, a tracker site for all things crypto-collectibles and blockchain gaming, whose team just published their “Non-Fungible Tokens Yearly Report: 2019,” an excellent trove of information covering last year’s happenings.

Therein, the experts at NonFungible notably estimated that the market capitalization of the NFT economy could reach a valuation over $315 million USD in 2020. If that projection pans out, the NFT market would be bigger than it’s ever been before.

Breaking Down the Numbers

At the end of 2017, the NFT market had a market cap just over $30 million, per NonFungible. One year later, and despite a bear market sinking its teeth into the cryptoeconomy throughout 2018, the NFT market grew some 480 percent to $180 million.

Image via NonFungible

In 2019, the market saw steady growth, rising around 17 percent on the year to just short of $211 million. As the sector has seemingly been heating up in recent weeks, the NonFungible team has estimated that 2020 will more than double the previous year’s growth, with their target being a 50 percent rise to $315 million.

The rise in NFT users over the last few years roughly tracks that market cap trajectory. Per NonFungible, the number of addresses that owned NFTs was 58,000 in 2017. That number rose to 111,640 in 2018, and then growth acutely evened out as NFT addresses peaked at 113,287 in 2019. With the fresh uptick in activity in the space, the tracker site projects a 30 percent climb in addresses for 2020, toward the 147,000 mark.

What Could Drive the Growth?

There are a few factors that appear to be playing into a hotter NFT market in 2020. For one, the wider cryptoeconomy seems to have been tilting bullishly in general in recent weeks, so that increased interest and activity around Ethereum and ETH spills over into niche arenas like NFTs.

Beyond that macro point, there are more focused trends to watch. The launch of the virtual world Decentraland on the Ethereum mainnet on February 20th was a huge development that was years in the making. An associated $100,000 prize campaign has drawn in plenty of new users that are partaking in NFTs for the first time.

These dynamics help explain why Decentraland’s NFT parcels and wearables have been among the best-selling NFTs in recent weeks. But the project isn’t the only virtual world that’s been heating up.

For instance, Cryptovoxels is another like-minded project that has become the de facto gallery world for the cryptocurrency arena’s digital artists on SuperRare — Ethereum’s biggest art platform right now — as Zima Red‘s Andrew Steinwold noted in his latest NFT Data Dump:

“SuperRare is continuing its strong growth streak. Wallets up 6.67% last month and breaking over 1,000 holders of SuperRare art. Again we see SuperRare stats highly correlated with Cryptovoxels. The reason being that Cryptovoxels has become the defacto NFT art platform so SuperRare artists and collectors will make their galleries inside Cryptovoxels.”

Beyond digital worlds and digital art, the rise of Ethereum’s top digital games — namely Gods Unchained, CryptoKitties, and Axie Infinity — is another key dynamic to watch as this year proceeds.

There’s still plenty of room to grow, to be sure, but with so many trends coming together in rapid fashion, an NFT market cap of $315 million seems reasonable in 2020. Let’s see what happens from here.

The post Non-Fungible Report: NFT Market Cap Could Hit $315 Million This Year appeared first on Blockonomi.

FinCEN Rehires Chainalysis Exec to ‘Confront Emerging Threats’

FinCEN Rehires Chainalysis Exec to 'Confront Emerging Threats'
Chainalysis chief technical counsel Michael Mosier will return to the Financial Crimes Enforcement Network in a new role as Deputy Director and Digital Innovation Officer. According to FinCEN Director Kenneth Blanco, Mosier is the “right person with the right skills, at exactly the right time.” FinCEN Seeks Help Engaging Industry and Government Partners As per the official release on the FinCEN website, the bureau of the U.S. Department of the Treasury is hiring Mosier back on its leadership team to better liaise between different parties. Blanco stated: He brings a range of public and private sector experience that will help FinCEN proactively engage with industry and government partners to confront emerging threats and to capitalize on diverse opportunities in the financial and national security spaces. Mosier was working with FinCEN as the agency’s chief of strategic advancement prior to joining crypto analytics firm Chainalysis in June 2019. He has spent the last few months serving as the company’s chief technical counsel. In his new role, he will be helping the bureau with its work: to protect the financial integrity and national security of the United States. Moving Toward Major Reform? Beyond his technical and strategic capabilities, Mosier brings with him extensive knowledge of blockchain technology as well as a wealth of legal experience. He previously served as deputy chief in the U.S. Department of Justice’s Money Laundering and Asset Recovery Section as well as associate director of the Treasury’s Office of Foreign Assets Control.  In addition, Mosier worked as director for transnational organized crime on the White House National Security Council and carved out his early career with the Manhattan District Attorney’s Office. According to Law360, with Mosier’s guidance, FinCEN is potentially readying for an “array of reforms.” These include the possible enforcement of bills introduced to the U.S. House and Senate last year which would obligate new corporations to reveal their ultimate human owners. They would also have to update their information periodically with FinCEN. This would mark the “first substantial anti-money laundering reforms in nearly two decades.” If incorporated, the bills would help to strengthen the bureau’s position by giving it tougher AML penalties to enforce along with improved ease of information sharing with financial institutions. They would also open the door to further modifications in the AML framework such as adjustments to the requirements when reporting suspicious activity. What do you make of FinCEN’s latest hiring? Add your thoughts below! Images via Shutterstock

How to Build an Ethereum Mining Rig at Home in 2020

Ethereum gpu mining
Ethereum (ETH) has become more appealing in 2020, with prices rising above $270. Mining has also picked up, awarding 2 ETH each 15 seconds, or 8 ETH per minute. Ethash Still Accessible to Home-Based Mining Rigs In 2020, the Ethash algorithm is still amenable to home-based mining, and it is possible to build a rig and compete for block rewards. An Ethereum mining rig is best built using GPU. Currently, there are specialized rigs with about 200 million hashes per second. However, the Ethereum community favors a potential hard fork to disable any Ethash-optimized ASIC. Would you support a hard fork that obsceletes ETH ASICs? (Just wondering, this is not a proposal) — Vlad (–support-dao-fork) Zamfir (@VladZamfir) March 28, 2018 Thus, it is safer to still use GPU, which is more agile and in a cinch, can be directed at new networks. Yet, some GPUs are optimized and achieve better performance with Ethash. At-home mining necessarily uses consumer electricity, which may affect profitability. However, mining is also a risky game and in cases of rising market prices for ETH, it may have a more significant payout further down the line. How to Build an Ethereum Mining Rig Building up sufficient hashing power is a matter of connecting more GPUs to achieve the rig’s final setup. Currently, AMD Radeon VII is the most powerful card, producing 90 MH/s, with ProgPoW reaching 30 MH/s. Combining several video cards will quickly raise the price of the rig, as the AMD Radeon VII retails for above $500. Building a rig also requires side components, including a power supply, a CPU, LAN components, as well as a physical crate for holding and ventilating as many GPUs as desired. Experts at the EthereumMiningBot also recommend a smart power plug, to track electricity usage. Essentially, an Ethereum mining rig would resemble an entire computer, a dedicated machine to avoid overloading consumer electronics. A basic Intel i3 CPU is recommended, as well as just basic 4GB RAM and a solid-state drive. Assembling the actual rig can be easier with custom-designed racks or cases, allowing the connection of six GPUs (or 540 MH/s potential). To connect the GPUs, a motherboard with six slots and possibly an additional power button to make switching on technically easier also go into the building of an Ethereum mining rig. For more than three GPUs, a set of connectors may be needed to place the GPUs conveniently and connect them to the motherboard. An SSD memory completes the machine, with the potential to add a hardware wallet, or another basic tool to operate mining pools and receive ETH into a wallet. The power connector will be extremely important for an efficient rig, and the recommendation is to use a model with platinum connectors, to avoid losses. The 1.2 kW Corsair CP-9020140-UK HX1200 allows for maximum power efficiency, to which a smart outlet may be added for tracking. Assembling the computer components may pose difficulties, but an instructional video may help with the task. Ethereum Mining Continues to Grow Mining ETH at home is also a matter of achieving sufficient hashing power and joining the right pool to get a part of the daily rewards. The Ethereum network currently rewards 2 ETH per block each 15 seconds, down from as high as 5 ETH per block in previous reward periods. After the latest hard fork, only 2 ETH will be awarded, leading up to the intentional switch to ETH 2.0, which will rely on staking. But because the Ethereum network has been so slow in introducing staking, mining is still growing. In the past month, mining expanded again above 180 TH/s. At current competition levels and difficulty, ETH mining is once again favorable. Until January 2020, ETH difficulty increased and made some miners give up. After a small emergency hard fork, miners were once again invited to join in, showing a clear pickup in mining activity in the past few weeks. The advantage of a home-based rig is that it is possible to mine while the process shows good profits, disabling the rig in cases of increased difficulty. Mining 1 ETH May Also Cost 1 ETH Building a mining rig for Ethereum may be comparable to buying an Antminer S17 ASIC price-wise. With a price tag of close to $2,000 for a two-GPU setup, mining ETH is also an expensive bid. During times of scarcity, and depending on the supplier, GPU may be scarce or more expensive than expected. Still, it is possible to spend $500 on a GPU with high Ethash performance. With such a setup, producing 180 MH/s, the expected payout would be 4.21 ETH per year. This cost is close to the mining of Bitcoin (BTC), where there is a very thin breakeven. It would, once again, cost 4.21 ETH to mine 4.21 ETH. There is currently one advantage to at-home mining in comparison to cloud mining. A Genesis contract will require about $1,500 to mine at 75 MH/s for a year. Having an at-home setup at 180 or even 200 MH/s is not much more expensive, and will have a longer lifetime. Downtime is also a decision that does not depend on Genesis mining, but on the rig’s owner. Currently, Ethermine and f2Pool mine about 47% of all ETH blocks. Smaller pools manage to gather around 2 to about 10% of the daily reward, but the final daily gain will only be seen in hindsight. Joining a pool is necessary, as solo mining at this stage is impossible and the chances of discovering a block are astronomical. But a pool like Ethermine has a 24% chance of discovering a block and sharing the reward. As of February 2020, ETH reached $266.32, still up more than 100% since the lows last December. Mining ETH profitably is still a dynamic bet, depending on whether the rally continues, and on mining competitors adding hashing power. What do you think about ETH mining in 2020? Share your thoughts in the comments section below! Images via Shutterstock, Twitter @VladZamfir, Youtube @Jobe 

Just In: Warren Buffett Gave Away His Bitcoin From Justin Sun

warren buffett bershire hathaway bitcoin
Yesterday, Warren Buffett doubled down on his anti-crypto stance. He came out on air in a CNBC interview stating that he didn’t own cryptocurrency and he never will. But that claim was disputed today by Justin Sun, who provided the blockchain explorer details to prove it. So, who’s right? Warren Buffett’s Brutal Rebuff of Cryptocurrency Yesterday, Bitcoinist reported that Justin Sun had failed to convince the Berkshire Hathaway CEO on the virtue of cryptocurrencies. The TRON founder infamously bid a whopping $4.6mn to have lunch with the world’s most famous investor to show him the error of his ways. Sun even brought some allies with him including Litecoin creator Charlie Lee and eToro’s Yoni Assia. Alas, for as “well behaved” as the young men were, Buffett maintains his bearish stance on Bitcoin. He said (among many other things): Cryptocurrencies basically have no value and they don’t produce anything… In terms of value, zero. When CNBC reporter Becky Quick pointed out that Justin Sun had gifted him some BTC and asked what it was like “being a Bitcoiner,” he replied in no uncertain terms that, no, he did not own any Bitcoin–which caused an immediate tweetstorm. Justin Sun Proves That Buffett Owns BTC In response, Justin Sun took to the social media platform to share the block explorer information proving that Buffett did, in fact, own both BTC and TRX. That’s the “beauty of blockchain”, he said. The cryptos $BTC/ $TRX Mr. Buffett owns remain intact w/ #blockchain proof which is the beauty of blockchain. I won’t interpret Mr.Buffett as a crypto investor, which he’s not. He only has the $BTC/ $TRX I gifted him in his @Samsung Galaxy Fold, which is a 20% return thus far! — Justin Sun (@justinsuntron) February 25, 2020 Sun’s tweet caused a flurry of replies that apparently spilled over to Quick’s Twitter feed. She said: My Twitter feed blew up because people were either saying that Warren Buffett was a lier or Justin Sun was a lier. So, she called Buffett to find out what happened. The 89-year-old billionaire confirmed that he did receive the cryptocurrency on the Samsung Galaxy phone from Justin Sun. However, it turns out that he really does think as little as he says he does about crypto. Yesterday, Warren Buffett said: "I don't own any cryptocurrency. I never will." @justinsuntron gave cryptocurrency to Buffett at their meeting, and afterwards Buffett turned the wallet over to GLIDE Foundation as a donation, @BeckyQuick reports. pic.twitter.com/cciYHIohll — Squawk Box (@SquawkCNBC) February 25, 2020 Warren Buffett gave the phone with the BTC and TRX straight to the charity GLIDE Foundation. Since the $4.6mn went to GLIDE, he thought it was only fitting that the bitcoin went there as well. The whole bizarre episode served to uncover a few things. I will support WARRENCOIN on #TRON! WARRENCOIN would be a great crypto & I would support it wholeheartedly! 7 billion WARRENCOIN will be issued without monetary value, which means everyone should have one and be Mr. Buffett's fan. WARRENCOIN to the moon! 🚀😆 — Justin Sun (@justinsuntron) February 25, 2020 Warren Buffett will never invest in crypto. And the chances of a WarrenCoin on the TRON network look equally unlikely as well. Do you think Warren Buffett really gave away his Bitcoin? Add your thoughts below! Images via Shutterstock, Twitter @justinsuntron @SquawkCNBC 

Bitcoin May Crash With the Stock Market as Economic Crisis Looms: Analyst

Bitcoin is not a hedge against traditional finance, according to Mati Greenspan, analyst and founder of Quantum Economics. On Monday, Greenspan tweeted a chart showing Bitcoin, crude oil, and US stocks bouncing in unison following mass market sell-offs over coronavirus fears. This evidence suggests that Bitcoin is a risk asset, as opposed to a safe haven. And so may suffer during an economic crisis as a result. Check out this short term graph showing #bitcoin getting a critical bounce at the exact same moment as the US stock market and crude oil. If anything, it's really showing signs of behaving like a risk asset. pic.twitter.com/jILohCtFC6 — Mati Greenspan (@MatiGreenspan) February 24, 2020 The spread of Coronavirus Is Fueling Economic Panic Monday’s stock market plunge, over fears of the spread of coronavirus, saw a 1000 point drop (-3.6%) on the Dow Jones Industrial Average. With many companies warning that disruption to supply chains could result in more suffering in the months ahead. Dow Jones 5 day chart. (Source: google.com) Up until yesterday, the US economy seemed largely unaffected by concerns over coronavirus. But as South Korea and Italy confirm a number of new cases, fears of a worldwide spread finally caught up. While the number of confirmed US cases has been relatively low, Diane Swonk, Chief Economist at Grant Thornton said the fallout from coronavirus may force the US Federal Reserve to cut interest rates as soon as next month. “It may not be called a health pandemic yet but it is an economic pandemic.” And as markets panic, some maximalists point to an impending economic crisis as an opportunity for Bitcoin to truly succeed. But based on recent form, it has not risen to the task in hand. Bitcoin May Not Be a Safe Haven Asset And with that, the flight to safety has seen gold at a seven-year high, closing in $1,700/ounce. Whereas, for the past week or so, Bitcoin has stagnated following another rejection at $10k. Bitcoin daily chart. (Source: tradingview.com) As such, the lack of correlation with gold means the case for Bitcoin being a safe haven asset grows weaker. This would suggest that an economic crisis would hit the number one cryptocurrency hard. Indeed, in a recent interview on BlockTV, Andreas Antonopoulos spoke about how he sees cryptocurrency being affected by an economic crisis. And he believes a slow down in the economy would see investors shunning riskier, unproven asset classes. “I think there’s just as much chance that a slow down in economic activity, especially in the tech sector, will reduce the economic investments in the crypto space as well.” On that note, Antonopoulos slated the attitude of Bitcoin investors who look forward to economic turmoil. Saying that cryptocurrency is currently unfit to serve the transaction needs of the planet. “This could cut both ways. And we shouldn’t be gleefully expecting to test the security of the lifeboats by sinking the ship. We’re not ready for that kind of test. Cryptocurrency is not capable of supporting the scale of millions or even billions of people who might need to use it during an economic crisis.”

The Revival of General Partnerships in the Age of Tokenomics, Part 2

Find out how to sign a partnership agreement using blockchain and how to manage cryptoassets and fiat revenue.

What should be written in a partnership agreement, and how should a general partnership be run? How can an agreement be concluded remotely using the blockchain? Four business models to manage cryptocurrency and cash flows are outlined below.

Relations between partners

To draft a partnership agreement, partners should identify themselves, their shares and membership interests. They need to define the project and its goals as well as key tasks. Furthermore, attaching the business plan, presentations, and technical requirements or specifications for the project are also a necessary part of this step.

An important decision is determining whether all or several partners are going to act on behalf of the general partnership, or if a managing partner will be assigned. Whether alternatively or additionally, partners may wish to hire a CEO. A legal entity can also be the managing representative.

If the agreement does not specify such, all partners may act on behalf of the general partnership independently, thus being able to acquire new rights and duties for the general partnership. The managing partner(s) may be restricted to certain rules and conditions, such as which transaction amounts require a collective decision, the size of a deal that the managing partner can enter on behalf of the general partnership at his or her sole discretion, and so on. For instance, the managing partner may not close supply contracts for over $10,000 without the consent of the other partners.

As mentioned in the first article of this series, a general partnership can act as a business entity. However, many people are unaware of them, which can cause some issues when dealing with external counterparties.

Therefore, I recommend finding a friendly legal entity in order to present your project to other business entities and individuals. In the beginning, partners may choose a trustworthy company that serves as an authorized representative of the general partnership with the right to enter into agreements with third parties for the convenience of the general partnership. Such relations are governed by an agency agreement between the general partnership (the appointor) and the legal entity (the authorized representative).

In my case, my partners and I decided the following: I was chosen to be a managing partner and had the right to conduct business relations with other entities in the market.

All deals of more than $30,000 had to be approved by a remote simple majority voting of partners. In order for partners to communicate with each other, we created a channel on Telegram messenger and agreed that all discussion within that chat is legally binding on the partners — one of whom is a legal entity.

This entity represents our business project in deals with external counterparties, and has a written agent agreement and power of attorney for situations in which the legal entity must confirm its authorization. The agent acts on behalf of our general partnership (the appointor), and all acquired assets belong to the general partnership, including money, intellectual rights and other properties. By doing so, we were able to solve bank-related issues. The authorized representative as a legal entity had a bank account, so the partnership could send or receive money through this agent.

At the same time, this is not the only possible model. The following chart represents other types of interactions between partners, clients and agents.

Business models with fiat and crypto

General partnership business models

In reality, all types of relations can be developed based on specific financial flows. The diagram above consists of four figures which may be applied solely or in combination with each other:

Model 1. An individual as the managing partner

An individual can manage the project, but there is almost no possibility that the individual will be able to open a bank account for entrepreneurial activities. From a financial point of view, such a partner will only be able to work with cryptocurrency. This method can be used as a single financial tool only in the case when all revenue is generated in cryptocurrency. Otherwise, one needs to combine it with other solutions and methods. 

The managing partner distributes cryptocurrency profits between the partners, while they have to declare it and pay taxes in accordance with the legislation of their residency.

Model 2. An agent company owned by partners

Partners incorporate a legal entity — for example, a limited liability company, or LLC — that will act as an agent of the general partnership. 

In this case, a general partnership is not needed. However, one could prove useful as an additional element of the model, when a general partnership works with cryptocurrencies and its partners do not want to show it in the accounts of the legal entity. 

Furthermore, partners of a company dealing with crypto will face problems in many countries, as banks are likely to refuse dealing with tokens and cryptocurrencies. Hence why combining this model with Model 1 is inevitable in such cases.

Model 3. An agent company co-owned with a local partner

Partners incorporate their company, which includes all members of the general partnership plus their local partner, in one chosen jurisdiction. Let’s call it a regional representative model. Such a legal entity will work with the general partnership on the basis of an agent agreement. This is a great choice if partners need to create a local presence for their business. The local partner will be the head of the company and develop the business in the designated area. It also solves all financial problems, as the company can now open bank accounts and distribute profit among its partners.

Model 4. Independent agent

A legal entity or an individual entrepreneur appointed as an agent of the general partnership. This option is also useful, because both the legal entity and individual entrepreneur can open a business account in a bank to receive payments from clients. According to the agent agreement, agents in such cases receive company revenue that they are authorized to use to pay off current expenses and debts on behalf of the general partnership. Agents take a fee from this money for their services, and eventually distribute the rest among partners.

How to sign a partnership agreement using blockchain technology

This is an alternative manner of establishing a business partnership, as there are many different ways to enter into such an agreement. In our case, all partners were located in different countries and it was difficult to meet each other in one location.

We decided to use modern technology. In fact, we drafted the text of the agreement on an electronic form. We wrote the cryptocurrency addresses of each partner, indicating that the agreement will become effective when each partner publishes the hash sum (checksum) of the agreement file in the blockchain from the mentioned addresses. 

We decided to use the Emercoin blockchain and the “carousel” method for contract signing: The first signatory creates an NVS record (short for Name-Value storage, a kind of token in Emercoin) with the hash sum of the contract, and sends it to the next signatory. The record needs to be sent one-by-one to all the partners in the circle, and the contract becomes effective when the NVS returns to the wallet of the first signatory. Partners (and all viewers of the file) are able to verify addresses in the carousel. If they correspond with the announced addresses, the contract is considered duly signed by all parties. In our case, we use the same addresses to distribute profit.

Conclusions

  • Relationships between partners and managing partners are regulated by the partnership agreement (general partnership) in the chosen jurisdiction.
  • English common law is a better solution if partners are located in different countries.
  • The company’s CEO can be a third party. Partners may wish to authorize one among themselves to sign a contract with a CEO — otherwise, all partners must sign it.
  • The managing partner or a hired CEO is allowed to make decisions related to the project with a clearly defined maximum amount of the deal. However, all other decisions must be made collectively. Mutual consensus is also needed in the following cases: changing the list of partners, changing the number of investments, goals and key tasks of the project, and the share of each partner in investments, profit, voting power, and others.
  • Relations with an agent are governed by the agent agreement. When the agent is a legal entity or an individual entrepreneur, they may control the general partnership’s fiat money.
  • A general partnership may be useful when partners work with cryptocurrencies and tokens but local banks refuse to do so.
  • If partners make their decisions remotely, they should legitimize this condition in their agreement, for instance, by agreeing that all decisions made in their chat are legally binding. The project can be transformed into a legal entity at any given moment, e.g., when it becomes profitable.

The business model of a general partnership has both advantages and disadvantages — some people may think that it will not protect their interests, and it may not suit everyone’s needs. However, based on my own long-term experience in legal practice, I can say that there are no 100% safe legal instruments.

In conducting their business, partners may face a huge number of legal actions and courts, which require a significant amount of time and resources. And even then, one could come away with nothing after winning the case, because the debtor simply has no assets (they could sell them, re-register them in their grandmother’s name or simply disappear). Common sense dictates that the main issue is not the legal model, but trustworthiness of partners. One needs to remember the following: Reputation is the most important asset.

Nowadays, when information is distributed at the speed of light, a scammer can face serious consequences such as nobody wanting to deal with them after a couple of bad cases. And that’s why we need an agreement — not for court (although it can be used there), but as a guarantee of good behavior lest partners become bad actors and are not held accountable.

This is part two of a two-part series on general partnerships, read part one here.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Oleksii Konashevych is the author of the Cross-Blockchain Protocol for Government Databases and a protocol of smart laws for property rights. Oleksii is a Ph.D. fellow in the international program funded by the EU government — Joint International Doctoral (Ph.D.) Degree in Law, Science and Technology (LAST-JD). Oleksii is visiting RMIT University in Melbourne, Australia, and collaborates with the RMIT Blockchain Innovation Hub researching the use of blockchain technology for e-governance and e-democracy. He works on tokenization of real estate titles, digital IDs, public registries and e-voting. Oleksii is the co-author of the law on e-petitions in Ukraine, collaborating with the Presidential Administration of Ukraine as manager of e-Democracy Group, NGO (2014–2016). In 2019, Oleksii participated in drafting the bill on Anti-Money Laundering and taxation issues for crypto assets in Ukraine.