Tag: Blockchain

Cybercriminals hijack major cryptocurrencies

On By mehranmuslimiblogIn Bitcoin, BlockchainLeave a comment

Cyber Stock

There is a common misconception in the mainstream media that cryptocurrency, especially Bitcoin, is primarily used by criminals as a means of payment. However, the real scenario is that cryptocurrency is a target for criminal hackers. As a result, they have unwittingly created a new market for cyber security firms.

Since cryptcurrencies emerged almost a decade ago, about $1.2 billion of Bitcoin and Ether have been stolen by hackers, according to Lex Sokolin, global director of fintech strategy at Autonomous Research LLP. And as crypto values keep rising, it is more likely that crypto hacking is an ‘industry’ worth $200 million per annum.

It also costs governments and companies a substantial amount in lost revenues and illegal transactions. Susan Eustis, CEO at WinterGreen Research estimates that this figure is around $11.3 billion and she points out that the blockchain ecosystem is also at risk. Eustis also believes that his criminal activity could skyrocket as more investors and businesses enter the cryptocurrency market, especially if they do so without adequate protection.

Setting up for super security

There is a perception that the blockchain is innately secure because its records are shared and hard to alter. But, blockchain security company Comae Technologies says it is no safer than any other form of software. Indeed, its experts argue that because the blockchain is still in its infancy, it may be even less secure than software that has existed for some time. And when you factor in the issue of there being so many cryptocurrencies, each with its own particular bugs, it is a challenge to make them all secure. The answer to this will be to whittle the sector down to a few key players it seems.

Andras Cser at Forrester Research adds:” So while hacking a blockchain may be harder than breaking into a retailer’s database, the rewards are greater and you have much more information you can steal.”

A business opportunity

The situation is good news for cyber security firms. Quantstamp plans to release an automated tool that searches smart contracts for bugs, and established security firms such as McAfee Inc. may also repurpose their products for the blockchain community.

The market for software, services and hardware to secure blockchain activity was $259 million in 2017 and WinterGreen estimates it will grow to $355 billion as the digital economy expands and banks and financial institutions adopt it.  No doubt they will be keeping those funds secure.

 

From strip clubs to FOMO: has the blockchain become too exciting?

On By mehranmuslimiblogIn Bitcoin, Blockchain, FintechLeave a comment

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It is probably fair to say that if you were thinking of attending the North American Bitcoin Conference you’d probably envisage being seated in one of those enormous, and typically anonymous looking conference centres. But that wasn’t the case with this particular meeting of crypto enthusiasts and experts, because the organisers of this event chose instead to host it at one of the top strip clubs in Miami.

The invite said: “Join us at E11even for some networking and R&R. Or dancing.” Surely it must have looked like a scene from “The Big Bang Theory,” with several Sheldon-like Bitcoiners awkwardly busting some moves. At least, if the perception that Bitcoin is the preserve of ‘nerds & geeks’, that is the kind of scene that comes to mind.

The crypto crowd has changed

But what this event and its chosen location signalled is this; that crypto is no longer just for those nerds who went to Stanford or MIT and can write code that the average person needs a new form of the Rosetta Stone to decipher. There is a new flock of investors who want to be a part of the crypto scene and to hell with the coding. As long as someone understands it, we don’t all need to. Nothing wrong with that: after all, since the idea of investing in other people’s enterprises began, investors haven’t necessarily understood all the nuts and bolts of how a product works; they see the big picture and the overall potential, and that is what propels them into putting money into it.

It has changed the ‘cryptosphere’ from one populated by cyberpunks and anarcho-techies, to one where those who want to make money fast, buy Lamborghinis and hold conferences in strip clubs dominate. Ariel Deschapell writing in Coindesk calls it: “this newer, shinier, get-rich-quick crypto culture.”

And so, the conversation about crypto drifted away from a serious, adult discussion about real use cases for the blockchain, how to overcome its limitations and identifying the key challenges. Instead, the mainstream media, and crypto community publications to some extent, ran the more exciting stories about the newly minted blockchain millionaires and billionaires; the luxury properties being bought for Bitcoin and of course, the inevitable scare stories about the perils of putting your money into crypto.

And along came FOMO

And then there was FOMO. People were terrified of missing out on the “next Bitcoin.” With Bitcoin’s price soaring at the end of 2017, new arrivals at the party were seeking new coins that could be bought for cents, just like Bitcoin at its inception. The problem with this was that the FOMO encouraged more than just a few bad actors to get involved, selling crypto tokens on the back of ICOs that had no sound technological basis. The problem of course was one of ignorance about the blockcahin. Having skipped the basic ‘Blockchain 101’, it looked like every new blockchain-based business had the potential to be the next Bitcoin. Only the experienced investors with technological know-how knew which projects were likely to have longevity and technological integrity.

The speed at which the new crypto enthusiasts rushed headlong into putting money into fraudulent ICOs stunned seasoned blockchain investors. The flow of money into them was like a torrential river that threatened to burst its banks. With the result that the ‘real banks’ started to clamp down on people using credit cards to purchase crypto, with a kind of “it’s for your own good” message.

Deschappell provided a neat illustration of the recklessness involved, saying: “Even more alarming than a simple lack of education or due diligence, however, is the fact that perhaps many new cryptocurrency investors don’t actually care,”  and illustrated the point with the example of Ponzicoin, a self proclaimed scam set up as a joke raised $25,000 in a few hours, proving that people really didn’t care, even when it actually said “this is a scam.

It’s time to learn about the blockchain

The upshot of all this is something pretty critical to the continued success of the blockchain: it is not a shiny, new exciting plaything and if you want to invest in it, do it because you understand the potential of a specific project. No cryptocurrency is a magic bean that will grow you a beanstalk or show you the way to the pot of gold at the end of the rainbow, yet, that is what we have been witnessing. It is not about hosting parties at strip clubs in the Magic City, nor will everyone have a Walt Disney ending with their crypto investments.

It is time for all of us to learn more about blockchain technology, to read the whitepapers of ICOs and do proper due diligence. In the end, that will play an integral role in the evolution of the blockchain. It might not be quite as sexy approach as the ‘get rich quick’ one, but it’s the one that will ensure the blockchain’s survival.

 

 

 

Will advertising regulators kill the ICO star?

On By mehranmuslimiblogIn Bitcoin, Blockchain, ICOLeave a comment

ico points

When Facebook announced it would not publish paid posts for ICOs, this was a strike at the heart of most ICO marketing campaigns and their social media teams had to quickly rethink their approach. However, Jonathan Keane, writing for Coindesk points out that there may be an even more “intimidating threat” around the corner, coming from global regulators.

Facebook’s statement said that it was banning “misleading or deceptive” adverts about financial products and services, with the emphasis being on anything related to Bitcoin and ICOs. In effect it was a blanket ban on all adverts for crypto startups, because Facebook can’t distinguish between the fair offer and the fake one.

This is just one marketing avenue but Keane quotes Johanna R. Collins-Wood of legal group Pepper Hamilton. She is a member of the law firm’s blockchain group, and she said: “The regulators will look at advertisements put out by the company. That’s always something they’re going to look at.”

Others are concerned about the large amount of suspect adverts for ICOs and crypto exchanges amongst others, and there are many who see it as an “immensely popular Wild West” where the legitimate business vies with the scammers for the same space. And, as Keane points out, “all the issuers and entrepreneurs in the space are still grappling with just what kinds of claims they can make in their marketing.” It is also certain that the blockchain industry needs to police itself before the regulators do the job for them and impose more stringent rules than is strictly necessary.

For example, on 22nd February, France’s stock market regulator, the L’Autorite Des Marches Financiers (AMF), released a statement about possibly curbing advertising on cryptocurrency-tied derivatives. This is not the only regulatory financial authority looking at the claims made in advertising; the SEC and CFTC are also examining the public statements made by companies in the sector.

The situation is made worse by the fact that there are no formal guidelines in place about what an ICO can claim in its marketing messages, and none of the advertising industry regulators have yet to formulate a policy. This leaves the blockchian-based startups in the dark, yet they are being penalised by platforms like Facebook. So, why not apply the existing rules for false and misleading adverts to the blockchain industry?

Here is what Keane discovered: “New Zealand’s Advertising Standards Authority told CoinDesk it had not received any crypto-related ad complaints, and the UK’s ad standards body said they had received less than 10 cryptocurrency-related ad complaints so far. A spokesperson from the UK Advertising Standards Authority responded to this by saying, “And none have resulted in us finding grounds for an investigation.”  The FCA, which does have a responsibility for financial advertising said, “it has no position on crypto ads.”

Currently the answer lies with lawyers who are telling ICO clients to comply with securities laws, and the expectation is that this compliance will eliminate any issues over misleading advertising. Google and Twitter also seem to believe that their existing advertising rules are robust enough to cover ICO adverts.

Meanwhile, many ICOs are policing their own messaging and have internal procedures that guard against any outrageous claims about low risk and large returns.

Will other channels follow Facebook, or like the advertising regulators, will they continue to take a ‘wait and see’ approach. I suppose we will also have to wait and see.

 

 

The importance of decentralization

On By mehranmuslimiblogIn Bitcoin, Blockchain, Ethereum, ICO, Initial Coin OfferingsLeave a comment

blockchain-decentralize

If you cast your mind back to the early days of the Internet, many of the services were built on open protocols owned by the Internet community. Big platforms like Yahoo, Google and Amazon started during this era, and it meant that centralised platforms, like AOL, gradually lost their influence.

During the Internet’s second growth phase, which largely started in the mid-2000s, the big tech companies like Google, Apple, Facebook and Amazon built software and services that left open protocols trailing behind. The skyrocketing adoption of smartphones helped propel this as mobile apps started to dominate the way we used the Internet. And, even when people did access the open protocol that is the worldwide web, they usually did it through the medium of Google and Facebook etc.

On the one hand, people worldwide benefited from free access to cutting edge technology, but on the downside, startups couldn’t grow their Internet presence without worrying that one of the centralised platforms, like Google, would simply change the game plan and take away any chance of growing an audience and making a profit. This has stifled innovation and in many ways made the Internet less interesting. And, there is a global political aspect to the dominance of centralisation, which we have seen most clearly in the emergence of ‘fake news’ that has turned some social hubs into battlegrounds.

The third age of the Internet

And so we arrive at the third age of the Internet. And as Chris Dixon says in his incisive article on Medium, crypto-economic networks, which in turn owe their existence to the networks developed by Bitcoin and Ethereum, will enable its further evolution. Dixon says: “Cryptonetworks combine the best features of the first two Internet eras: community-governed, decentralized networks with capabilities that will eventually exceed those of the most advanced centralized services.”

The case for decentralisation

First let’s look at the problem with centralised platforms. They have a predictable modus operandi, such as a big drive to recruit users, adding third-party developers and media organisations, and as they grow, so does their power over users. Dixon quite rightly says that when they hit the top of the S curve, “their relationships with network participants change from positive-sum to zero-sum.” And for the third-party platforms, the game has changed from cooperation to competition. So, all the entrepreneurs n the third-party community start to shun the centralised platform.

Now enter the decentralised cryptonetworks. Dixon defines them as:  “networks built on top of the internet that 1) use consensus mechanisms such as blockchains to maintain and update state, 2) use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants.”

Cryptonetworks are also able to maintain a level of neutrality that the centralised platforms can’t offer, and don’t want to either. Plus participants and users are given a voice through the community governance of these decentralised networks. This is available, “both “on chain” (via the protocol) and “off chain” (via the social structures around the protocol). Participants can exit either by leaving the network and selling their coins, or in the extreme case by forking the protocol.”

To sum it up: cryptonetworks align network participants to work together toward a common goal — the growth of the network and the appreciation of the token. That’s why they just can’t keep Bitcoin and Ethereum down, no matter how much they try, because there is a community that believes in it.