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Cointelegraph is a completely independent publication covering cryptocurrency, the blockchain, decentralized applications, the internet of finance and the next gen web. They offer the latest news, prices, breakthroughs and analysis with emphasis on expert opinion and commentary from the digital currency community.

The world of digital currencies flourishes with the greater fervor with each passing day. With an increasing number of businesses, entrepreneurs, startups and consumers adopting this technology, they Cointelegraph team is proud to spend every day at work and play increasing awareness of the many intricacies and advantages offered by these innovations.

Cointelegraph was founded in 2013 when cryptocurrency was about to hit a peak. They could see clearly the market for information in this vertical would be growing and understood the potential for their media group to establish themselves as the trusted information source for this niche. In 3 years, they have become a known leader in the cryptocurrency information market.

Ethereum Will Have Visa-Scale Transaction Capacity in 2 Years

Ethereum Will Have Visa-Scale Transaction Capacity in 2 Years

Bitcoin, Ethereum and other high-profile cryptocurrencies are embroiled in debate these days, as companies and individuals seek other sources for transactions outside of simple fiat currency.

Ethereum, the Blockchain technology-based application platform, has gained increasing popularity with developers and individuals alike. The platform is being utilized especially heavily with the ICO boom that has occurred in recent months.

Buterin on the power of Ethereum

Vitalik Buterin, speaking at TechCrunch Disrupt 2017, indicated that the platform has the capacity to change much of what is known about data and security. His comments included a strong indication that Ethereum will have the transactional power to equal Visa in the next two years. Buterin said:

“Bitcoin is processing a bit less than three transactions per second. Ethereum is doing five a second. Uber gives 12 rides a second. It will take a couple of years for the Blockchain to replace Visa.” 

Gaming platforms

The Ethereum inventor also indicated that Blockchain technology will likely provide platforms for gaming and other data-intensive applications in the future, where security is an important aspect.

“You could run StarCraft on the Blockchain. Those kinds of things are possible. High level of security and scalability allows all these various other things to be built on top. Ethereum is a secure base layer that doesn’t have too many features.”

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Why is There a 1 MB Limit to Bitcoin Block Size

Why is There a 1 MB Limit to Bitcoin Block Size

Anybody familiar with Bitcoin is aware of the vexing problem caused by the 1 MB blocksize limit and the controversy that arose over how to scale the network. It’s probably worthwhile to look back on how that limit came to exist, in hopes that future crises can be averted by a solid understanding of the past.

A long time ago, in a land far away

In 2010, when the blocksize limit was introduced, Bitcoin was radically different than today. Theymos, administrator of both the Bitcointalk forum and /r/bitcoin subreddit, said, among other things:

  • “No one anticipated pool mining, so we considered all miners to be full nodes and almost all full nodes to be miners.

  • I didn’t anticipate ASICs, which cause too much mining centralization.

  • SPV is weaker than I thought. In reality, without the vast majority of the economy running full nodes, miners have every incentive to collude to break the network’s rules in their favor.

  • The fee market doesn’t actually work as I described and as Satoshi intended for economic reasons that take a few paragraphs to explain.”

 

It seems that late in 2010, Satoshi realized there had to be a maximum block size, otherwise some miners might produce bigger blocks than other miners were willing to accept, and the chain could split. Therefore, Satoshi inserted a 1 MB limit into the code.

And he kept it a secret.

Secret squirrels

Yes, Satoshi kept this change a secret until the patch was deployed, and apparently asked those who discovered the code on their own to keep quiet. He likely kept things quiet to minimize the chances that an attacker would figure out how to use an unlimited blocksize to DOS the network.

Theymos puts it:

“Satoshi never used IRC, and he rarely explained his motivations for anything. In this case, he kept the change secret and told people who discovered it to keep it quiet until it was over with so that controversy or attackers wouldn’t cause havok with the ongoing rule change.”

It’s also likely that Satoshi never expected the 1 MB blocksize to be a problem. At the time, the average blocksize was orders of magnitude smaller than 1 MB, and it looked like there would be time enough to devise a solution. Satoshi himself said, of the blocksize limit:

“We can phase in a change later if we get closer to needing it.”

And again:

“It can be phased in, like:

if (blocknumber > 115000)

   maxblocksize = largerlimit

It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don’t have it are already obsolete.

When we’re near the cutoff block number, I can put an alert to old versions to make sure they know they have to upgrade.”

It’s apparent that Satoshi foresaw the removal of the blocksize limit as trivial and had no idea that such a minor code change would generate a firestorm.

Foreseeable problems

Bitcointalk user “kiba” presciently commented, shortly after the cap was created:

“If we upgrade now, we don’t have to convince as much people later if the bitcoin economy continues to grow.”

In response to Satoshi’s comment that the limit could always be removed if necessary to support higher transaction capacity, Jeff Garzik pointed out:

“IMO it’s a marketing thing.  It’s tough to get people to buy into a system, if the network is technically incapable of supporting high transaction rates.”

Clearly the warnings were present.

Why not bigger?

Many have asked why Satoshi didn’t create a larger blocksize, like 8 MB. The answer is three-fold:

  • It wasn’t needed, as even 1 MB was far larger than the largest blocks that had ever been mined.

  • It was technically easy to change, simply substituting one value in the code for another.

  • Larger blocks create technical challenges.

Back in 2010, Internet technology was such that larger blocks would not have propagated properly. In 2015, Theymos recalled:

“One obvious and easy-to-understand issue is that in order to be a constructive network node, you need to quickly upload new blocks to many of your 8+ peers. So 8 MB blocks would require something very roughly like (8 MB * 8 bits * 7 peers) / 30 seconds = 15 Mbit/s upstream, which is an extraordinary upstream capacity. Since most people can’t do this, the network (as it is currently designed) would fall apart from lack of upstream capacity: there wouldn’t be enough total upload capacity for everyone to be able to download blocks in time, and the network would often go “out of sync” (causing stales and temporary splits in the global chain state).”

Segregated Witness and Lightning Network

Today’s Bitcoin uses a piece of code called Segregated Witness (SegWit) to separate signatures from transaction data, effectively allowing the network to “cheat” by creating larger blocks than 1 MB, yet still counting them as being below the cap. SegWit also fixes a vulnerability called transaction malleability, enabling the creation of something called the lightning network.

The lightning network is envisioned as a way for Bitcoin users and/or merchants to open payment channels with one another in a secure and trustless fashion. Funds can be exchanged between these parties without the transactions being written to the Blockchain. This keeps the Blockchain small, capable of being served by reasonably powerful computers. The lightning network would periodically need to “anchor” to the main Bitcoin Blockchain, but would allow enormous increases in transaction capacity with very small increases in the size of the Blockchain.

So far there is no working implementation of lightning network on mainnet, although there are versions on test net. Lightning network will be entirely optional, and users can choose to send ordinary transactions instead, if they so choose.

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Overstock CEO Patrick Byrne Answers Jamie Dimon’s Bitcoin Criticism

Overstock CEO Patrick Byrne Answers Jamie Dimon’s Bitcoin Criticism

Overstock CEO Patrick Byrne answered some of the issues that Jamie Dimon recently expressed regarding Bitcoin on an interview with Fox Business News.

The head man at Overstock reminded viewers that Dimon is scared of Bitcoin, and has a vested interest in its failure. Byrne said:

“Remember that a year-and-a-half ago, Jamie Dimon wrote a letter to shareholders saying ‘this is going to come eat our lunch.’ He was scared to death of it. I think what they thought was they could get in front of it and they are realizing they can’t get in front of it.” 

Byrne’s comments reflect a growing sentiment that traditional banking platforms are frightened by the explosive growth and stability of Bitcoin. Other banking institutions have responded in similar ways, while businessmen in other markets have embraced the cryptocurrency. 

Overstock leads

The CEO also commented on the power of Blockchain technology for business, stating that Overstock has sought to be a front runner in adopting the disruptive technology.

“What people are realizing about Blockchain is that you can take out about 90 percent of the back office costs of all kinds of mechanisms and banks and stock markets and such. That’s why Overstock has been sort of pioneering the application of Blockchain to Wall Street. You cannot only take out the cost, but you can also create a version of Wall Street where no one can cheat.” 

Overstock has been one of the first companies to allow users to buy merchandise online with Bitcoin, and the company has even disclosed that it keeps funds in reserve in Bitcoin.

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Mexico to Join Club of Countries with Bitcoin Regulation

Mexico to Join Club of Countries with Bitcoin Regulation

Mexico, this month, will unveil proposed legislation aimed at regulating its fast-growing financial technology sector, including firms that use cryptocurrencies like Bitcoin.

The bill seems to be aimed at protecting customers, as well as spurring competition in this burgeoning industry. Mexico is also hoping, in this bill, to ensure financial stability and defend against money laundering and financing of extremists.

Massive potential growth in Latin America

Mexico will be joining a small list of countries, which include the UK and the US who have actively sought to regulate not only cryptocurrencies, but also fintech companies.

The hope for fintech companies is to try and crack a massive potential market as over half of Mexico’s 120 mln strong population are bank account-less.

“This legislation recognizes the need that a sector as dynamic as that of technological innovation needs a regulatory framework that allows authorities to mitigate risks and allow for growth in a competitive environment,” the bill draft says.

What’s in the Bill?

The Bill proposes to set out a clear set of rules pertaining to the running of fintech companies which will help reduce costs and drive competition in a sector that includes crowd-funders and payment firms.

Additionally, there will be a section aimed at regulating companies that operate with digital currencies, such as Bitcoin. There is not too much detail on this, but it does say a lot of it will fall to the central bank to referee such actions.

“The regulation is good news for all companies in this sector because … growth will be greater with clear rules,” said Luis Ruben Chavez, the founder of Mexican crowdfunding firm Yotepresto.

Massive Mexican growth

Mexico is a huge untapped market globally, and especially in Latin America where it leads the way.

In 2015, the number of fintech companies came in at about 50, while year to date in 2017 there are already 2401 known companies in the new industry.

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First Bitcoin-Only Real Estate Transaction Completed in Texas

First Bitcoin-Only Real Estate Transaction Completed in Texas

Use cases for Bitcoin have been popping up everywhere, with new ‘Accepts Bitcoin’ signs on everything from coffee carts to retail stores in South Africa.

These adoption cases are important as the continued use of Bitcoin will only increase the adoption and price cycle, commonly referred to as a Satoshi cycle.

In a new and interesting twist, an entire real estate transaction has taken place via Bitcoin. In other words, you can now buy your house with Bitcoin…at least in Texas. The transaction was for the purchase of a newly built custom home, and the full purchase price was transferred to the seller/builder via Bitcoin. The seller then converted the coin into USD. The broker for the purchase said:

“In all of my 33 years of closing transactions, I honestly couldn’t have expected something so unique to go so smoothly. In a matter of 10 minutes, the Bitcoin was changed to US Dollars and the deal was done!”

The purchase of the home as an agreement between buyer and seller represents another step toward widespread acceptance of the currency. Other companies are seeking to use tokenization of assets to allow smaller-scale real estate investment via Blockchain technology as well.

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SEC Will Stream Online Advisory Committee Meeting on Blockchain Technology

SEC Will Stream Online Advisory Committee Meeting on Blockchain Technology

The SEC has been much in the news of late for it’s strong stance on Blockchain technology and tokenization schemes. The government body notoriously issued a statement labeling the DAO token as a security, while at the same time the CFTC created a means for trading Bitcoin futures for LedgerX.

The most recent announcement from the governing commission indicates that their investor advisory board will meet to discuss the ramifications of Blockchain and distributed ledgers and their impact on the securities markets. 

The meeting is scheduled for October 12 from 9:30 AM to 3:10 PM at the SEC headquarters in Washington DC. The event will also be live streamed on the website, www.sec.gov. Those interested can visit and watch the events.

The SEC has been influential in slowing the adoption of ICOs in the US, as their statements regarding the DAO have led to substantial concern over what is and is not a security in the token world. Other governments have recently followed suit, especially China, which has gone much further and banned all ICOs.

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JP Morgan Hates Bitcoin But Seeks Bitcoin, Blockchain Pros

JP Morgan Hates Bitcoin But Seeks Bitcoin, Blockchain Pros

The scathing comments by Jamie Dimon regarding Bitcoin’s status as a ‘fraud’ were met with general disgust among the Bitcoin community. Others though agreed, embracing the commentary, as Bitcoin prices corrected sharply.

However, later news sources indicated that, even as Dimon was spilling his anti-Bitcoin rhetoric, the company was ‘buying the dip’ as the price dropped to month lows.  

Now, in another humorously ironic twist, the company has posted a job opening for a Blockchain professional as a ‘Technical Project Execution Manager’ dealing with distributed ledgers. The posting details included this interesting comment: 

“The Blockchain Center of Excellence (BCOE) leads efforts for applications of distributed ledger technology (DLT) within J.P. Morgan. We are exploring Blockchain use cases and piloting solutions across business lines.  We are active in the Blockchain ecosystem: developing technology, investing in strategic partnerships and participating in industry consortia.” 

Bitcoin has been variously hailed as a distributed and decentralized currency for the future and decried as a complete fraud. Nevertheless, in spite of recent negative news like Dimon’s comments and the Chinese Exchange ban, the cryptocurrency has continued to show stability, with prices climbing off the recent lows to settle around $4,000.

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Key Findings From Cambridge Cryptocurrency Study

Key Findings From Cambridge Cryptocurrency Study

Cambridge University has put out a comprehensive 114-page study on cryptocurrencies that digs deep into empirical data of the digital currency world as it appears across the globe.

Key highlights of the study include the number of users and wallets, the burgeoning cryptocurrency industry sectors and the impact the technology is having, as well as interesting information about exchanges, payments and mining.

The cryptocurrency industry

As a nascent industry, information was needed to determine how much of an impact digital currencies are producing. New companies and services have emerged to facilitate the workings of cryptocurrencies, and their data shows that it really is a virgin market.

The study found that 1,876 people work full-time in the cryptocurrency industry. Of those, the most find work in Asia-Pacific with 720. Behind that is North America with 676 employees.

Information about exchanges

Information on exchanges offers insight into users of digital currencies, as most people who are involved in crypto have some sort of online wallet. However, the study stated it is nearly impossible to put a figure on how many people actually use cryptocurrency.

The study showed that Europe had the highest number of exchanges, followed by Asia-Pacific. As of March 2017, Bitfinex had the highest market share of all exchanges, coming in with 16 percent. However, 25 percent of the overall market share came from a combination of smaller exchanges.

Overall, the US Dollar was the most widely supported national currency, appearing on 65 percent of exchanges. Euro came in second with 49 percent prevalence.

On the exchanges examined, every single one of them traded in Bitcoin with Ethereum and Litecoin was the next most popular. Ripple, Ethereum Classic, Monero, Dogecoin and Dash were also widespread.

What is interesting to note is that these exchanges that see millions of dollars through them can have as little as 11 employees working on them. 49 percent of exchanges have less than 11 employees.

These online exchanges also predominantly operate by holding onto their users’ private keys. In fact, 73 percent of exchanges take custody of users’ cryptocurrency funds by controlling the private keys.

Information about wallets

According to the study, the number of active wallets is estimated between 5.8 mln and 11.5 mln. The large discrepancy between the range must perhaps have something to do with the difficulty in defining what an active wallet is, as many users are actively storing cryptocurrencies.

The highest number of active wallet users comes from North America and Europe with both sitting at just about 30 percent.

Continents

Of the active wallets, only 32 percent of them use closed source software while the other 68 are all open source with mobile wallet apps being the most widely offered to users at 65 percent.

More than half of surveyed wallet providers offer integrated currency exchange services; additionally, 20 percent offer linked credit card services.

However, what is more worrying is that nearly half of wallets providing currency exchange services integrate a third-party exchange, which raises questions about security.

Looking at the recent crackdown on digital currencies it is interesting to note that 76 percent of incorporated wallet providers do not have a license.

Information on mining

Mining and large mining pools have a big part to play in shaping the digital currency landscape, and because of their importance, many of them are aware of their influence and power.

Over half of miners consider their ability to influence protocol development to be high or very high. This comes after recent developments with the SegWit protocol that was implemented on Aug. 1.

Mining

Miners and users battled to enact different protocols, and despite half of these big mining pools thinking they have influence, they were probably outdone by the power of the individual users.

However, with that, it is the bigger mining pools that still maintain that they have a larger influence on the protocols.

It also makes sense to see that 58 percent of the large mining pools are based in China, and that is why it is often believed that China is the key to the Bitcoin mining operations, as well as protocol updates. The US comes in second with 16 percent.

Mining revenue, despite the growth of digital currencies, has been up and down. The total Bitcoin mining revenues per year (block reward + transaction fees) if immediately converted to USD was far higher in 2014, than it was in 2016.

In 2014, the total came in at $786 mln dollars while 2016 only saw $563, probably due to the increase in difficulty of mining, especially with Bitcoin.

However, what did shoot up was Bitcoin transaction fees, as they topped out at $13.6 mln for the year in 2016 while the previous three years combined barely made $7 mln.

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China Will Heavily Crack Down on All Bitcoin Trades

China Will Heavily Crack Down on All Bitcoin Trades

It’s been a tumultuous couple of weeks in the Bitcoin community, as negative news spread throughout, driving prices lower. News of a China Exchange Ban, as well as negative rhetoric from the CEO of the world’s largest bank (JP Morgan Chase), knocked the legs out from under the Bitcoin price. 

However, a recent article in the Wall Street Journal indicates that the negative news still isn’t done. According to undisclosed sources, the Chinese government has officially decided to crack down on all Bitcoin and cryptocurrency trading, not just commercial exchanges. According to the WSJ:

“A broader clampdown will likely include blocking mainland access to websites of foreign Bitcoin exchanges such as Coinbase in the US and Bitfinex in Hong Kong, say people familiar with the matter.”

Sources?

Whether this crackdown is a further addition to the already rumored exchange closures remains to be seen. The WSJ article did not provide sources for the disclosure, saying only:

“Officials communicated the message to several industry executives at a closed-door meeting in Beijing on Friday, according to people who were at the meeting.” 

However, regardless of the Chinese government’s position, the Bitcoin community has already reacted, transferring much of the action to Japan, where regulations are more lax. The Bitcoin price has rebounded, even as the negative news continues.

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Malta Unveils Blockchain Advisory Committee

Malta Unveils Blockchain Advisory Committee

Blockchain technology is fast being adopted by governments and businesses alike. The small island nation of Malta has already made news for hosting Bitcoin meetups and offering to legalize the cryptocurrency wholesale.

Recent news from the country indicates that its embrace of Blockchain technology will continue, as the government has formally announced the formation of a Blockchain Taskforce which will provide the roadmap for implementation of the National Blockchain Strategy.

Malta an ‘ideal ecosystem’?

The news was shared via a press release from the government, which stated, among other things:

“Apart from exploiting the opportunities that Blockchain technology offers for added efficiency in public sector processes and services, the government is ambitiously looking into the setting up of a new regulatory function with the primary objective of harnessing the technology with a legal operational framework, serving as a bold initiative leading to the formation of an ideal ecosystem for those willing to invest in Blockchain technology.

Even as China appears to be retreating from its Bitcoin dominance, other countries appear to be willing to take up the baton and run. The Taskforce will be in charge of evaluating proposals sent by private entities seeking government contracts for Blockchain implementation.

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