Daily Byte: Wednesday, October 31, 2018 (Bitcoin 10th Anniversary Edition)


In this very special bitcoin-heavy edition of the Daily Byte: a stable bitcoin, Yellen’s not buying, a bitcoin exchange gone wrong, and the Feds are in the bitcoin business. Plus, private transactions on the main Ethereum blockchain.

It’s the 10th anniversary of the Bitcoin white paper. Here’s some of what’s happening in Bitcoin news a decade later:

Bitcoin Is Now the Least Volatile Since 2016

Bloomberg is reporting that bitcoin’s price is currently the most stable it has been since late 2016. The 30-day volatility of the coin has hit levels last seen in December 2016, with volatility projected to get lower still.

Per CoinMarketCap, the 24-hour trading volume has been largely stable for the last 15 days, at approximately $3.4 billion, with bitcoin showing stable pricing before suffering a downturn Monday.

There are contrasting theories to what this means. Some feel that bitcoin’s current stability means that the coin has finally hit “the floor” – its theoretical absolute minimum price – or is close to finding it. Others feel that the flat pricing may be a staging period to a possible price rally, as those investors trigger-shy about jumping into a turbulent bitcoin market might find appeasement in the current calm.

Regardless, as the reserve currency of the crypto market, bitcoin pricing will affect the trading performance of most other coins, including Ether. So. Here’s to the best.

Yellen Not Buying Bitcoin

Not everyone sees stability in the market. Janet Yellen, US Federal Reserve chair from 2014 to 2018, spoke Monday at the Canada Fintech Forum, and said she still thinks price volatility is an issue: “[F]or something to be a useful currency, it needs to be a stable source of value, and bitcoin is anything but.”

Yellen had more to say about Satoshi’s invention: “Very few transactions are actually handled by bitcoin, and many of those [that] do take place on bitcoin are illegal, illicit transactions.”

We don’t know where she’s getting her numbers, but speaking of illegal transactions….

American Man Faces 5 Years In Prison for Illegally Selling Bitcoin

A United States citizen has pleaded guilty to operating an unlicensed money-transmitting business. The man – according to the United States Attorney’s Office for the Southern District of California – admitted to selling “hundreds of thousands of dollars in Bitcoin to over 1,000 customers throughout the United States from January 2015 to April of 2016.”

Jacob Burrell Campos acknowledged that he ran a crypto exchange without registering the operation with the Financial Crimes Enforcement Network of the U.S. Department of Treasury (FinCEN) and without applying the necessary anti-money laundering and know-your-customer protections. Burrell advertised his exchange on Localbitcoins.com – a site for P2P bitcoin trading – and communicated with customers via encrypted email and text messages. He also charged a five percent fee above the prevailing exchange rate.

In addition, Burrell violated international money transfer rules by transferring the currency gathered – which he stashed in Mexico – with a US precious metal trader. Despite transferring over a million dollars USD daily, he avoided having to report it by sending it in parcels under $10,000.

Burrell will be sentenced on February 11, 2019, and faces up to five years of imprisonment. He will forfeit more than $800,000 as part of his plea agreement.

“Unlicensed money transmitting businesses, especially those operating at or near the border, pose a serious threat to the integrity of the US banking system, and provide an ‘open door’ for criminals to utilize such businesses to launder the proceeds of their illicit activities,” said U.S. attorney Adam Braverman via a press release. “The Department of Justice will continue to investigate and prosecute all individuals and businesses that seek to evade the licensing and anti-money laundering requirements under federal law.”

US Government Maintains Its Own Bitcoin Fork

From the “Did you know?” file, the United States government has been maintaining its own fork of the Bitcoin Core software.

To research the potential of a government-controlled blockchain, the National Institute of Standards and Technologies (NIST) launched a project to explore if modest modifications to the Bitcoin blockchain would be enough to create an open blockchain that could support a national cryptocurrency. Using a permissioned blockchain, for example, would give users a coin that must be verified by its “owner,” while a fully decentralized blockchain would be governed by consensus and not the needs of the nation.

In a paper published by NIST in September, Peter Mell argues that a public blockchain can be used for national crypto use, provided that changes are made to the mining and authorization processes. The fear is that using the current bitcoin model would open the system up to a potential “51 percent attack” from a hostile nation. The NIST model introduces the concept of “roles” to bitcoin transactions, allowing control over how the protocol can be changed and how the pool of coins can be spent:

“In our system, only accounts with roles can issue transactions and only accounts with the currency manager role can create other accounts with roles (with one important exception, discussed later). Thus, the genesis transaction is the transaction that enables all other transactions.”

To test this out, NIST created and maintained its own bitcoin fork. The fork is marked purely for research and is not currently traded on.

EY Unveils Zero-Knowledge Proof Solution for Ethereum

We couldn’t leave you without at least one Ethereum story today, even if it is Bitcoin’s birthday. Accounting firm EY has announced that it has developed a tool that would allow private transactions on the public version of the Ethereum blockchain.

Such a technology would make it unnecessary for enterprise users to establish permissioned versions of the blockchain to safeguard their data.

In a press release Tuesday, the firm announced that its EY Ops Chain Public Edition prototype would be “the world’s first implementation of zero-knowledge proof (ZKP) technology on the public Ethereum blockchain.”

Paul Brody, EY global innovation leader, said:

“Private blockchains give enterprises transaction privacy, but at the expense of reduced security and resiliency. With zero-knowledge proofs, organizations can transact on the same network as their competition in complete privacy and without giving up the security of the public Ethereum blockchain.”

The protocol would allow for the enterprise use of Ethereum transactions and tokens, while cloaking the transaction data. The protocol will support tokens “similar” to the ERC20 and ERC721 standards.

Included with the ZKP prototype is the EY Blockchain Private Transaction Monitor, which records transaction history. The privacy tools will be released in 2019.

We will return to our regular programming tomorrow. Happy birthday, Bitcoin.


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