Category: Bitcoin

Getting to the other side of Bitcoin

On By mehranmuslimiblogIn Bitcoin, BlockchainLeave a comment

Bitcoin is undoubtedly the best known digital asset, cryptocurrency, whatever you want to call it, but it is “just one asset class among many that are here to evolve financial services globally,” in the opinion of Julian Sawyer.

As Sawyer points out, blockchain technology has brought the finance sector to a crossroads, and we must now consider what the future of money is going to look like. Of course, this is a topic that has been contemplated since the birth of Bitcoin, but things have moved along since then. He says, “a myriad of outcomes is possible but one thing is for certain: The efficacy and innovation of the technology will influence well beyond traditional financial sectors.”

Arriving at maturity

Blockchain offers a faster, more efficient and more secure structure for financial transactions compared with the traditional financial system. The Harvard Business Review said, “The old financial structures] are like rush-hour gridlock trapping a Formula 1 race car. In a digital world, the way we regulate and maintain administrative control has to change.”

We have witnessed other types of technology cause big shifts in finance. For example, the credit card emerged in the 1950s, while PayPal was founded in 1998, and was very novel then. And since Satoshi Nakamoto started the blockchain revolution in 2008, around 55 out of the 100 biggest banks in the world use blockchain to some extent.

Sawyer also believes the language used around digital assets will change, because “Regulation and broad adoption will change the way the media and public perceive and talk about digital assets.” He suggests that although the ‘pop culture’ language of the crypto market, e.g. HODL, FUD etc, will stay, there will be a fusion of the languages of crypto and institutional finance that will make “a broader cohort of blockchain investors feel comfortable within the space.”

Furthermore, the industry must stop focusing on one particular use case for the technology, i.e. Bitcoin, and start talking more about money, investments, financial management and smart payments in relation to blockchain and crypto. We already know that customers are increasingly drawn to assets that have utility and can solve complex problems, not just those offering a payments platform (Bitcoin again!).

As a more sophisticated and broader audience understand the diverse applications of blockchain technology, this will instil greater confidence in it across industries, and lead to “the adoption of blockchain technology to unravel issues that no one ever dreamed could be addressed with blockchain.”

Kraken issues warning about Bitcoin ATMs

On By mehranmuslimiblogIn Bitcoin, cryptoLeave a comment

A recent report from Kraken Security Labs reports that a “large number” of Bitcoin ATMs are vulnerable to hacking. They say it is because the admin have never changed the default admin QR code.

The ATMS in question are those in the General Bytes BATMTwo ATM range, which the report says have “multiple hardware and software vulnerabilities.” The Kraken blog post added, “Multiple attack vectors were found through the default administrative QR code, the Android operating software, the ATM management system and even the hardware case of the machine.”

All a wannabe hacker needs to do, according to Kraken, is find the administrative QR code, then they can approach any of the ATMs and compromise it. The blog also looks at BATMtwo’s lack of secure boot mechanisms, as well as “critical vulnerabilities” in the ATM’s management system.

The Kraken team also discovered that they were able to gain full access to the Android operating system behind the BATMTwo ATM by simply attaching a USB keyboard to the machine, and warned that “anyone” could “install applications, copy files or conduct other malicious activities.”

To be fair to General Bytes, they have reportedly already alerted ATM owners to the vulnerabilities, due to the fact that Kraken alerted them about the vulnerabilities back in April 2021. In a statement General Bytes said, “Kraken Security Labs reported the vulnerabilities to General Bytes on April 20, 2021, they released patches to their backend system (CAS) and alerted their customers, but full fixes for some of the issues may still require hardware revisions.”

General Bytes ATMs have 6391 ATMs installed worldwide. The majority are in the USA and Canada (5,300), with Europe only having 824 of their machines. The Czech-based company has around 22.7% of the crypto ATM market, which is significant.

As we know there are people in this world who will try any type of scam, and Bitcoin ATMs have featured previously. In Toronto, the police alerted the public to a series of “double-spending” transactions at crypto ATMs in the city that fetched $150,000 worth of funds over a 10-day period. This is a scam where the perpetrator cancels a transaction before the ATM can confirm it, but as the machine has already dispensed the money anyway, the scammer gets to keep it.

As with any ATM, users need to be ever vigilant, because the more crypto ATMs there are, the harder they will work on trying to rob them, and in ways we haven’t even seen yet.

Bitcoin is ‘safer’ in a stock market crisis

On By mehranmuslimiblogIn Bitcoin, EconomyLeave a comment

Apart from the fact that Bitcoin is not integrated with traditional finance, it also has another trick up its sleeve: it can’t be forcibly sold to cover your financial losses in other markets. This is very good news should there global stock markets collapse.

We know that Bitcoin’s price is volatile. This is because there is what Marcel Pechman calls “the discrepancy of its use cases.” Some see it as a store of value, others as a tech project or a type of software and network.

The stories about Bitcoin’s potential change over time. El Salvador’s BTC adoption should show us how the Lightning Network performs, with the Layer 2 scaling solution allowing instant and very cheap transfers. Pechman says, “As these narratives about Bitcoin shift over time, so does BTC’s correlation to traditional assets,” gold being one that has attracted special mentions. For example, the March 2020 crash caused devastation in almost every asset class, but during the six or seven months that followed, recovery was virtually identical for gold and Bitcoin.

BTC also appeared to “mimic the Hong Kong stock market”, Pechman points out, if you follow the Hang Seng Index. However, will it succumb to the Hang Seng downward movement seen in the past 90 days? Pechman suggests it might be better to decouple it from the Hang Seng now and allow Bitcoin to continue being “a safe haven amid a general correction.”

Due to the recent disastrous results for China’s Evergrande Group that forced the company to postpone payments over its debt, which is in the range of $300 billion, analysts are concerned this could severely impact the broader market. As we have seen over the weekend, almost all cryptocurrencies have taken a dive. The crash in May this year was also due to China, in this case the banning of crypto mining.

Bitcoin has never faced a major economic crisis, largely because it was created in response to the previous one. Now there could be one that puts the $250 trillion-plus global debt markets at risk. Could Bitcoin survive this?

Pechman says: “Until Bitcoin becomes fully entrenched in financial markets and accepted as collateral and deposits, the mid-term systemic risk for the cryptocurrency is lower than the traditional market.”

In this case, having Bitcoin could save the day if the global stock markets crash, and because it has an edge over traditional markets like commercial real estate, stocks, and bonds. That’s worth thinking about.

Will Lightning Network be the answer to Bitcoin’s problems?

On By mehranmuslimiblogIn Bitcoin, cryptoLeave a comment

Bitcoin may have been in existence since 2009, but the search for a solution to its scaling problems continues. If Bitcoin is to become a reliable payment option, then it needs to enable faster payments option without sacrificing security, privacy and availability. The answer, many believe, is the Lightning Network.

When Bitcoin arrived, it was introduced as a “purely peer-to-peer version of electronic cash” that “would allow online payments to be sent directly from one party to another without going through a financial institution.” But that idea is largely dead, unless there is a means to scale Bitcoin and thus resurrect it.

The Lightning Network is an overlay network powered by Bitcoin smart contracts that enable instantaneous Bitcoin payments. It was launched in 2018 and has been growing steadily since, with the node count and network capacity steadily increasing. Without a tool like Lightning, Bitcoin is too slow and expensive to be used for everyday spending, which is exactly what it is supposed to be used for. Furthermore, as more users join the Bitcoin ecosystem, the more expensive using Bitcoin becomes. This is a scalability problem that needs to be overcome.

What a Coindesk Research Study says

A recently published Coindesk Research Study provides an in-depth view of the Lightning Network and its capabilities. It looks at the Lightning technology, the node capacity, and especially its weaknesses, including the different forms of attack it may be vulnerable to, as explained by developers interviewed for the report. It also asked developers about their prime concerns for the network and what needs to happen in order for Lightning to be adopted going forward. Although many had different answers, there were some common themes, such as methodical and careful development of the network, the need for more users to test the network and a need to consider the fact that in the end, Lightning may not end up working at very large scale, because in its present form, it may not scale to billions of users.