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Don’t Believe the FUD: Ethereum Can Scale

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Hunter Hillman is the pinnacle of enlargement at Connext. Steven McKie is a co-founder of Amentum Capital. Eric Olszewski is an ethereum developer.


Over the previous few months, we now have spotted a vital collection of articles proclaiming the upcoming failure and cave in of the ethereum platform because of its incapability to scale and its general loss of consumer traction. This is rarely a marvel; with many new rising applied sciences, we see a an identical hype cycle. In Gartner’s well-known type, the “Peak of Inflated Expectations” is adopted hastily through the “Trough of Disillusionment.”

In the case of ethereum, we now have handed the previous and are neatly on our means throughout the latter.

The considerations raised in those articles are reputable, however in most cases forget about the staggering growth being made day by day with reference to scalability. No, ethereum can not scale to turn into a global pc in its present state. The throughput is low and the associated fee is exorbitant. However, those problems had been expected and feature been neatly understood, since prior to the release of ethereum as a blockchain. In this text, we will be able to speak about the more than a few answers that have been created the previous few years to handle those boundaries.

In the midst of the ICO bubble, prime transaction volumes crowded the community and raised the cost of gasoline, the small quantity of ether required to energy transactions. This introduced scaling demanding situations, which ethereum builders had been neatly conscious about and had already begun addressing, even though to the media’s consideration would make you assume another way.

While ethereum scaling is also a courageous new international for some, the choices for addressing throughput had been on builders’ radars for years:

  1. Scale ethereum itself so to deal with the higher transaction load (e.g., throughout the upgrades referred to as Serenity and Casper).
  2. Reduce the weight at the primary chain through transferring the majority of transactions to a moment layer an best the use of the bottom layer all over transaction agreement (e.g., Payment Channels, State Channels, Plasma, and Sidechains)

“Layer One” answers like sharding and Casper had been at the ethereum roadmap for a couple of years, however had been plagued through more than one setbacks that experience averted important growth at the implementation and construction entrance. Even after those enhancements, there’ll nonetheless be a necessity for “Layer Two” scaling mechanisms which offer even upper throughput, non-public transactions, and decrease transaction charges.

Before diving into the more than a few Layer Two answers, we ask that you simply bring to mind ethereum as an international agreement layer moderately than a holistic international pc. This implies that ethereum serves to settle any and all transactions that have been carried out off the primary chain and put into effect worth transfers accordingly. It is that this use case of the blockchain serving as an impartial 1/3 occasion for arbitration on which all moment layer answers perform.

At a prime stage, any layer two answer follows this formulation, or some variation of it:

  1. Two or extra events conform to a algorithm wherein they’ll be to sign up for and go out a Layer Two answer.
  2. These events then encode the ones laws into a sensible contract which calls for that every occasion put down a safety deposit.
  3. After hanging down their safety deposits, all events can perform between every different off-chain whilst filing intermittent updates to the on-chain sensible contract.
  4. When a number of events wanted to go out the layer two answer, they’ll usually supply some cryptographic evidence this is a correct illustration of every events’ final safety deposit.
  5. There is a problem duration the place the evidence will also be disputed and thrown away. If the problem duration elapses, then the similar events will go out the layer two answer with their up to date balances

Layer Two inventions like Plasma and Payment Channels/State Channels, a few of which might be already processing actual bills in manufacturing, will facilitate the majority of ethereum transactions. Scaling a public blockchain (specifically one with this sort of tough consensus mechanism) is tricky, to make sure. But it’s certainly not inconceivable; in reality, sensible contract make stronger and the ethereum digital device (EVM) permit for novel scaling answers and bigger extensibility than different chains making an attempt to scale by way of a moment layer with scripts founded strictly on unspent transaction outputs (UTXOs), which aren’t as extendable, through design (a unique set of trade-offs and advantages, like the whole lot in pc science).

The struggles of disbursed programs (dapps) to retain customers are neatly publicized. But years of scaling analysis and implementation are enabling the consumer enjoy and occasional latency essential to make stronger dapps with prime numbers of per month energetic customers (MAU).

In quick, ethereum’s Layer Two answers are just about waiting for top time – with companies like Cent and Spankchain (caution: NSFW), and others, already serving customers at the reside blockchain – and are poised to upend the narrative that ethereum can’t scale. The following sections speak about boundaries of highly-touted conventional scaling strategies and make the case for ethereum’s suite of sturdy, generalizable answers.

Traditional scaling strategies

Most conventional scaling strategies boil right down to the commentary that many interactions don’t require rigorous consensus to be regarded as ultimate through the events concerned. For instance, if a store and a buyer agree {that a} carrier used to be rendered satisfactorily in trade for a specified cost, there’s no explanation why for third-, fourth-, and fifth-party affirmation to happen.

What issues are two elements: (i) sure bet that the payer will satisfy their facet of the cut price, and (ii) that neither payer nor payee has to believe {that a} 1/3 occasion will faithfully execute the transaction on their behalves.

This framework lets in us to believe off-chain scaling, during which transactions are carried out off the primary blockchain and later settled at the chain. To agree to (i), payers will have to cryptographically and irrevocably decide to switch budget; to agree to (ii), the ones budget will have to be transferred in a trustless method and the transaction will have to be enforceable on-chain if want be.

These standards underpin bitcoin’s lightning community, which has (rightly) been the topic of well-liked media protection. Think of it like a bar tab: individuals conform to pay small quantities over the process a night however best settle up on the finish of the evening. This is an oversimplification of lightning community in fact; a extra detailed clarification will also be discovered here.

Lightning is undeniably excellent for bitcoin and holds nice doable for Layer Two bitcoin scaling. Due partly to in depth media protection, lightning is ceaselessly considered as a panacea for bitcoin’s scaling problems. Meanwhile, there’s been a slew of articles hailing “Ethereum-killer blockchains” and opining that ethereum is incapable of scaling. In a couple of phrases, that is incorrect.

First, ethereum is greater than able to scaling cost quantity in an excessively an identical method to lightining. Hashed time-lock contract (HTLC)-based cost channels are simply as possible on ethereum as they’re on bitcoin, and in reality, ethereum allows extra leading edge and user-friendly multi-hop methods than bBitcoin can, and they are able to be deployed way more simply.

Because bitcoin makes use of a UTXO type, budget will have to if truth be told be handed using conventional cryptographic messaging how you can habits transactions (even the ones off-chain). In distinction, ethereum’s account stability machine lets in for more effective and not more expensive off-chain stability updates.

For instance, Connext’s implementation of payment channels (which has been processing payments in production for Spankchain for just about a couple of months) makes use of “threads,” a multi-hop implementation that permits events to at once cross stability updates among themselves moderately than depending on hash-locked cost routing. This is a computationally inexpensive, similarly speedy, and similarly safe method that’s most probably higher suited for many transaction patterns than lightning.

Moreover, advanced contract interactions are somewhat extra overhead extensive to deploy, as bitcoin scripting is fairly restricting. The UTXO type, even though a very good way for sending and receiving signed transactions to be verified on a blockchain-based community, method you must increase your scripts for extra novel use instances (i.e. escrows).

With the generalizability of ethereum, and the aptitude to create tokens, registries, non-fungible property (like CryptoKitties, or digital identifiers for luxury goods) and different community-accepted sensible contract requirements, construction modular and interoperable contracts that concentrate on the EVM is solely extra seamless.

Generalized state channels

Smart contract and EVM make stronger on ethereum allows all kinds of programs that don’t seem to be lately possible on non-Turing-complete platforms like bitcoin, because of its structure and design choices – which decrease its general assault floor, which in flip places larger center of attention on its permissionless peer-to-peer bills use case as its maximum touted function.

Because Turing-complete scripts are extra difficult to execute than easy transactions, alternatively, those features building up the total congestion on ethereum (and reasons the dimensions of the state to develop at a far quicker tempo).

We’ve already mentioned how cost channels can lower charges and latency for peer-to-peer bills, however ethereum helps a lot more advanced transaction common sense that cost channels don’t cope with.

Generalized State Channels, alternatively, suggest one option to scaling problems related to advanced contract interactions. Right now, stateful contract interactions that allow the use instances that ethereum is understood for will have to be accomplished at the blockchain. The pondering of many ethereum bears is that as increasingly contracts are deployed, function calls will slowly crush the community and pressure gasoline costs throughout the roof.

Layer One scaling, which has won nearly all of media protection, asks how we will accommodate extra of those advanced interactions at the reside blockchain, or mainnet; Layer Two answers like Generalized State Channels and Plasma (extra in this later) ask how we will transfer extra of those purposes off-chain, whilst conserving the protection and integrity we’re supplied through the mainnet (given sure trade-offs).

The safety of cost channels is dependent upon the power of every occasion to “go on-chain” and use a sensible contract to adjudicate and rectify disputes. That is, cost channels let two events behave as even though they’re transacting on-chain despite the fact that they aren’t.

Because they be capable to cross on-chain at any time (because the stability updates that they ship from side to side lift the burden of on-chain transactions) in a dispute the contract merely comes to a decision whose stability replace is more moderen through polling the mainnet chain. On-chain dispute solution is expensive, even though, in the case of time and gasoline, so rational actors would steer clear of this state of affairs. And, if maximum state channels are the use of safe and audited requirements, we will create interoperable techniques with speedy finality which might be sure through the similar cryptographic assurances as mainnet interactions, with enormously decreased, virtually 0 gasoline value.

Counterfactual instantiation

This method raises the query: if we will incentivize events to act as even though a easy contract exists on-chain, are we able to do the similar for extra advanced common sense? One technique is referred to as counterfactual instantiation.

There are a couple of other implementations, however they revolve round the similar theory: state is handed into the generalized framework as soon as on the onset and will also be manipulated in keeping with a freelance specified (however no longer deployed) when the channel is opened. Dispute instances are adjudicated through the contract as neatly. Because individuals be capable to cross on-chain and invoke the contract, even though, all are incentivized to act as even though it exists.

The results of production-ready Generalized State Channels that leverage counterfactual instantiation will likely be two-fold:

  1. Operations involving contracts that may now be counterfactually instantiated will all happen off-chain; the sheer quantity of deployed contracts will lower relative to the established order. This will cut back community congestion, benefitting contracts that will have to be deployed on-chain.
  2. Operations that happen off-chain in Generalized State Channels don’t incur affirmation occasions or gasoline charges; this may radically reinforce consumer enjoy and make allowance ethereum (as a complete) to house orders-of-magnitude-larger transaction quantity.

Connext, Counterfactual, Perun, and others are actively operating against Generalized State Channel frameworks which is able to at once cope with the community congestion, consumer enjoy, and value problems that many cite as ethereum’s Achilles’ heels. These answers are enabled through sensible contract capability, are considerably extra extensible than UTXO-based scaling answers, retain the protection of the underlying blockchain, and feature the possible to unencumber the brand new markets and industry alternatives promised through ethereum. We consider that Generalized State Channels have the possible to be as transformative for ethereum as Serenity; whether or not because of deficient knowledge accessibility or insufficient exposure efforts, they have got no longer gotten their due consideration.

Lightning

Lightning used to be the beginning floor for UTXO-based cost channels, atomic swaps, and extra. The paintings that has accomplished through the Olaoluwa Osuntokun, Joseph Poon, and all of the ecosystem lightning researchers and engineers is spectacular.

There are a couple of operating implementations of the lightning protocol and specification, together with the LND challenge (through Lightning Labs, headed through its leader scientist, Olaoluwa and written within the Go programming language), and the C-lightning project (written in C).

On best of thrilling additions like “Watchtowers” (products and services that watch your cost channels for fraud, and stay on-line so your node does no longer should be – in go back for a price), the Neutrino wallet (Lightning Labs’ experimental mild shopper, additionally written in Go), there are a slew of alternative enhancements within the pipeline because the lightning specification and developer community matures and grows.

Some of the exhausting analysis is lately curious about: Splicing (partial deposit/withdraw and parallel channel deployment); Wumbo (removing of the channel capability restrict); Multi-Path Payments (breaking a cost into a number of, bearing in mind it to be routed over more than one routes – assume sharding); Hidden Destinations (public routes for bills to non-public channels) and extra exhausting paintings is being accomplished time and again at meetings and through unbiased groups far and wide the sector.

The paintings through the lightning group and scaling UTXO-based chains – using some bleeding-edge implementations of crypto – is not any small feat, and can’t be downplayed. Often, the issue is that individuals search to at once examine lightning and ethereum’s Layer Two scaling measures the use of an identical methodologies that don’t believe the trade-offs and distinctive features the 2 various answers be offering, because of the original structure of the underlying root chain (i.e. UTXO type as opposed to the account type in ethereum).

Plasma

Generalized state channels are a ways from the best choice for scaling ethereum. Plasma is a second-layer scaling answer that, in tandem with state channels, seeks to supply further throughput, and finality, however with some further trade-offs.

Think of Plasma as a kind of “proto-chain,” person who seeks to imitate as a lot of the foundation chain’s integrity and safety as conceivable, simply with a various value part, which is usually upper than when in comparison to state channels (because of replicating extra of the primary chain’s capability onto a brand new substrate above it).

Plasma takes the whole thing of the off-chain state, and maintains a complete state of it, hashed to the foundation mainnet chain (which has its personal set of possibility trade-offs, even though that’s continuously being progressed via further analysis).

Though throughput will also be more than the primary chain’s, not like state channels the place there’s no formal consensus set of rules, Plasma chains can convey their very own distinctive consensus set of rules, whole with its customized block occasions, too (which possess their own series of trade-offs). Although throughput and finality don’t seem to be as speedy, they’re way more available when in comparison to state channels, as any individual can get entry to the foundation chain’s state that’s been broadcasted and sign up for – while state channels are best to be had to their agreed upon counterparties (in most modern implementations). And, state channels are now not to be had after a channel closes, making them financial machines with finite lifespans, as they’re purposely constructed to be extra semi-permanent.

However, in Plasma, since you must save each state interplay into the foundation chain, out of your kid chain, those prices are upper relying on which model of Plasma you decide to enforce. With breakthroughs in highest enforce Plasma taking place ceaselessly at many groups unfold globally, we’re certain a not unusual usual will stand up with a smart set of trade-offs that may be carried out to a wide selection of use instances.

Power of interoperable requirements

Non-custodial liquidity – and maximum successfully and securely transmit it in plenty of other eventualities involving more than one individuals – is an ongoing discovery that continues to enlarge at the rising science of crypto-economics and the way more than a few mechanisms perform in opposed stipulations.

Standards like ERC-20 (for tokens) and ERC-721 (for non-fungible property) make ethereum Layer Two scalability tech and dapps extra socially safe, for the reason that there are network accredited norms and highest practices round which requirements to enforce for sure use instances. This is particularly necessary when those more than a few requirements – which in the end search to have interaction with one every other fluidly to allow “decentralized finance” – can communicate and keep up a correspondence interoperably, with minimum friction and value.

Those frictionless interactions and economies that spring up from the radical interoperability between tokens, non-fungible property, and Layer 2 scalability create additional safety for the larger ethereum community, as a result of all individuals at the moment are intertwined in advanced financial task at the further layers above it; all being constructed on safe requirements, that had been audited and accredited through the larger technical network.

The significance of non-custodial structure, mixed with the trail of least resistance to essentially the most extendable and generalizable capability, can’t be understated. These are an important parts and primitives to bringing new and novel financial machines to lifestyles, that due to expense, legislation, and computational limitation, had been as soon as idea inconceivable to enforce into the actual international.

Time for a brand new narrative

Scaling blockchains is tricky, and ethereum is not any exception. But lionizing “ethereum-killer” blockchains, or its pre-existing possible choices, all as a result of ethereum supposedly can’t scale, minimizes the exceptional paintings that the ethereum network is doing on Layer Two generation. Layer One answers are within the works and can most probably turn out transformative for the community down the street, however Layer Two answers are hitting the marketplace now.

The narrative that ethereum can’t scale and the concept that Layer One answers are the one plans to scale the community are tiresome and are being actively disproven in manufacturing environments every day. Today, ethereum is a sluggish and unstoppable platform for programmable cash; the possibility of this sort of machine is self-evident. An solely novel monetary machine might be constructed on best of ethereum, and Layer Two answers will pave the way in which for radical new markets that leverage this decentralized monetary stack.

Value switch, governance, new forms of markets and incentive constructions, network coordination, or even correct implementation of tax coverage are conceivable on ethereum. Ethereum builders see this long term and are construction the dapps to make it occur. Other Ethereum builders are construction the protocols to make the community usable at a big sufficient scale to herald that long term.

This article isn’t meant as a knock on choice blockchain implementations, lots of which might be pushing ahead the bleeding fringe of cryptographic analysis as said above. Nor is it a case for ICOs, shilling, and erroneous hype.

Rather, this can be a case for ethereum scalability, for a decentralized financial long term that makes use of the ethereum blockchain as a agreement layer and facilitates the majority of transactions with Layer Two applied sciences.

It is a case for the ethereum that we see, and that we are hoping gets its due within the public eye, and spot the sunshine of day.

Ethereum symbol by way of CoinDesk archives.

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Crypto exchange BTCNEXT seeking Japan license

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BTCNEXT, an Asian based cryptocurrency exchange, earlier this month announced it received notification from the Japan Financial Services Agency (FSA) that it must suspend services for Japanese residents.

As part of Noah Ark Technologies Ltd., BTCNEXT operates with a Virtual Currency Exchange license issued by the Cagayan special economic zone and Freeport Philippines.

The BTCNEXT team says that its legal department is currently working with the FSA in regards to getting a Japanese license and will take necessary steps to ensure full compliance with all FSA requests.

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NEO Price Prediction: Long-term (NEO) Value Forecast – June 2

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  • The long-term outlook is in a bullish trend.
  • The 1.618 in the fibs at $19.17 is the bulls target in the long-term.

NEO/USD Long-term Trend: Bullish

Supply zone: $20.00, $30.00, $40.00
Demand zone: $2.00, $1.00, $0.50

NEO continues in the uptrend in its long-term outlook. The strong pressure on the cryptocurrency by the bulls’ comeback at the 61.8 on 18th May has kept price up with new high each week. $12.59 and $15.04 in the supply area were the highs on 20th and 30th May respectively.

The new week is started on a bullish note with today’s opening candle at $13.72 higher than last week opening price at $11.45, an indication that the bulls are more in the market.

Price is above the two EMAs that are fanned apart which suggest strength in the trend and in this case the uptrend.

The journey to 1.618 of the fib extension with price at $19.17 in the supply area is the bulls target in the long-term as the bullish momentum increase and more bullish candle open and closed above the two EMAS.

The views and opinion as expressed here do not reflect that of BitcoinExchangeGuide.com and do not constitute financial advice. Always do your own research.

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Why Bitcoin’s ‘Culture War’ Matters

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Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.


Let’s talk about bitcoin, toxicity and inclusiveness.

(Boy, my Twitter feed is going to have fun over the next few days.)

To start with, let me take a position: I stand with those people, especially women, who’ve lately been calling out maltreatment from members of the bitcoin community and citing rude and abusive behavior as proof of that community’s lack of inclusiveness. These are people who believe in cryptocurrency technology’s potential but feel discouraged to believe that they belong to the community’s dominant white-male subculture. If this technology is to fulfill its global potential, the community associated with it must confront this problem.

But the real point of this column is not to just defend these critics. It’s to debunk one of the more common positions adopted by those who take issue with their complaints, particularly on Twitter. In doing so, I hope to emphasize just how important the concepts of “community” and “culture” are to the healthy development of crypto technology and the ecosystem growing around it.

Hammer culture?

The line that’s most often thrown back at those calling out incivility is that bitcoin is nothing more than a technology, a tool, and that it’s meaningless to attach to it value judgments relating to human behavior. Bitcoin is amoral, apolitical and a-cultural, the argument goes, and like any technology it is used by good and bad people alike.

These pundits, warning of a political correctness-based threat to free speech, will then advise the injured party to take issue directly with the bad actors but refrain from agitating for community-wide change.

A perfect example of the genre came from outspoken lawyer Preston Byrne.

Clever, yes. But it’s extremely unhelpful, because the examples given do not share equivalent terms of reference.

Byrne’s “hammer” refers solely to the steel implement that tradesmen use. By contrast, people complaining about “bitcoin” are clearly using the word in a much wider context than in merely a reference to the code, to the ones and zeros that comprise the bitcoin protocol. They are inherently talking about the wider ecosystem and community gathered around the idea of bitcoin.

So, let’s equalize the terms, shall we? We can turn each of these nouns into a modifier of the word “community.”

While it might sound silly to talk about a “hammer community,” there may well be groups of hammer-obsessed souls who debate questions of design and ease of use at meetups and in chat rooms. If so, I’m going to guess that that community would probably also be predominantly male.

But the real issue is that such a hammer community is going to be far less important to the future design and evolution of hammer technology than bitcoin’s community is to its. I’m no expert, but I don’t see a great deal of change in hammer technology having occurred over the centuries and I’m not sure people expect much in the future. As such, we don’t see much jockeying among users to ensure that proposals for hammer upgrades are implemented and standardized to their preferred design.

By contrast, the open-source technology behind bitcoin is in a constant state of evolution. It is, by definition, under development, which is why we talk about the engineers who work on it as “developers,” not “custodians.” As such, there is a constant battle of interests over who gets to modify the code. Exhibit A: the block-size debate.

Counter-arguing that those who don’t like the process can just fork the code, as the large-blockers did, and set up their own new community, doesn’t cut it for me. Bitcoin is the brand that matters. Any newcomer will struggle to achieve the same network effects. Secession just isn’t viable for anyone who likes its current design but doesn’t like how its future is being defined.

Also, is there a “hammer ecosystem?” Maybe. But beyond producers of nails, and perhaps steel and rubber or wood suppliers, you can hardly call it a complex ecosystem.

Bitcoin, by contrast, which purports to reinvent the global system of money, has attracted an inherently vast array of different technology providers, all of whom have competing interests in how it is designed, managed and marketed to the world. I’m not just talking about businesses applications built on top of it, but also the developers of related encryption, payment channel, smart contract and other vitally important technologies, all of which are themselves in a constant state of flux.

(I’m guessing that the exhibition halls at hammer conventions don’t have quite the same spread of offerings as cryptocurrency events such as Consensus.)

Saying that bitcoin is nothing but a tool, is like saying that music is nothing but a system for ordering different audible tones.

Money = community

When Paul Vigna and I wrote The Age of Cryptocurrency, we spent a lot of time chronicling the emergence of the community that had formed around bitcoin, which we saw as fundamental to its success. It struck us that the notion of a bitcoin community was so prominent — the “c” word was always being bandied about — because bitcoin embodied a profound and sweeping social idea. It offered nothing less than a reinvention of money, a revolution in the entire system for coordinating human value exchange.

Money only works to the extent that there is widespread belief in it, that people buy into its core myth. Money, Felix Martin says, is a social technology, by which he means that its functionality and usability depend far less on the physical qualities of the token that represents it than on the collective agreement among large communities of people that their token captures, represents and communicates transferable value. This is true whether we’re talking about gold, dollar bills, entries in a bank account, or cryptocurrency.

By extension, then, for any form of money to succeed, it must sustain a vibrant, growing community.

Communities = culture

The thing about communities is that they inevitably develop cultures. In self-defining their boundaries of belonging, they develop shared ways of seeing and language — akin to a kind of social protocol – that regulate (in a very unofficial, and quite subconscious way) their members’ behavior.

As they evolve, cultures can become more or less open, more or less inclusive, more or less abrasive in their treatment of outsiders. And inevitably, these cultural features will either encourage or impede the growth of the community.

All this should hardly be a revelation. Anthropology, the study of culture, is a globally widespread and influential field (one that is now appropriately turning its attention to cryptocurrency communities.)

Studies of U.S. culture, from Alexis de Tocqueville down, have rightly pointed to the inclusiveness of the founding fathers’ ideas as a key driver of its economic expansion. In fact, American culture is arguably its most important ingredient for success, a social manifestation of Joseph Nye’s notion of the United States’ “soft power.”

So, yes, bitcoin culture really, really matters. If the compelling ideas behind permissionless, peer-to-peer exchange and censorship-resistant money that attract people of all stripes to it are to retain those people’s interest and grow in influence, the bitcoin community needs to evolve a more inclusive culture.

The only way to do that is to spur the kind of open debates that have always driven the progress of human culture — those which shifted norms and mores to the point that it became unacceptable to own slaves, to spit in public, or to jump a queue.

So, listen up, bitcoin. It’s time to confront your toxicity.

Hazard drums image via Shutterstock

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Holiday Spending up 14.6% as E-Commerce Beats Brick-and-Mortar

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E-commerce sales hit record highs this year as Americans continue to move their holiday shopping online.

According to Mastercard’s SpendingPulse report, online retail grew 18.8% over last year’s holiday season. That’s enough to make online sales a record 14.6% of holiday shoppers total spend, the report says.

Online consumers this year spent 17% more on apparel, 8.8% more on jewelry, 10.7% more on electronics, and 6.9% more at department stores. 

Overall, holiday spending jumped 3.4% compared to 2018.

The strong numbers came in spite of 2019’s unusually short holiday season, commonly defined as the period between Thanksgiving and Christmas. Shoppers had six days fewer than they had in 2018.

Steve Sadove, an advisor for MasterCard, said in a press release that retailers adapted to the shortened season. 

“Due to a later than usual Thanksgiving holiday, we saw retailers offering omnichannel sales earlier in the season, meeting consumers’ demand for the best deals across all channels and devices.”

Interestingly – or ominously – retailers who accepted crypto or managed crypto payments were slow to respond when we asked them how their holiday shopping season went. eGifter, a gift card trading service, noted that it had not yet “crunched the numbers” on holiday sales but that “We saw growth in overall crypto sales,” said Bill Egan, the site’s VP of Marketing.

“We saw more gifting with crypto in 2019, compared to buy-for-self use cases in prior years,” he said.

Payment processor BitPay found the holidays quite inspiring as well.

“We saw twice our daily averages of processed volume leading up to the holiday,” said BitPay’s CMO, Bill Zielke.

It will be interesting to see what kind of statistics surface over the next few seasons as e-commerce becomes king and crypto payments come to the fore.

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Crypto Custodians Grapple With Germany’s New Rules

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Crypto firms in Germany are getting ready to exist under a new regime. 

Under a law going into effect Jan. 1 requiring digital asset custodians to be licensed, each company that currently custodies crypto and targets German clients must announce to Germany’s Financial Supervisory Authority (BaFin) its intention to get a license before April 1 and submit an application before Nov. 1.  

A clause allows current crypto custodians to keep serving German customers without being penalized if they declare their intent to apply, but those same companies are waiting on BaFin to release final regulations around the law.

“As long as the legislation is not in place, BaFin is not going to think about how to cope or how to deal with the legislation,” said BaFin press officer Norbert Pieper. The regulator declined further comment and Germany’s Federal Ministry of Finance did not respond to request for comment by press time.

Pieper added: “There is no date foreseeable [yet] by which we’ll be able to communicate the results of our assessment. We will certainly communicate that on our website.” 

While the final regulations haven’t been set yet, the new license requirement may not produce the same kind of exodus of crypto firms that New York saw after the BitLicense requirement, said Miha Grčar, head of business development at Bitstamp.

London-based Bitstamp, one of Europe’s largest crypto exchanges, plans to continue operating in Germany but declined to say whether it would apply for a license, said Grčar. Crypto firms could also use a white-labeled custody service to operate in Germany. 

Because the law is an “updated version of the existing banking regulation,” banks will likely have the most to gain from it, Grčar added. Companies that get the license will be German financial institutions, but not classified as banks.

The law also means that German regulators now see crypto as a “legitimate” industry, he said. 

Ulli Spankowski, chief digital officer and managing director of the crypto custody subsidiary of German stock exchange Boerse Stuttgart, called Blocknox, sees the license as a step forward for “the professionalism of the industry.” The subsidiary has already advised BaFin that it plans to apply.  

“There are other countries that won’t go for a full-fledged license,” he said. “If you want to get traditional, established players from the banking side, you need to give them this environment to feel safe.” 

DLC group is taking advantage of the new regulatory framework by offering consulting services for firms interested in applying, and its own white-labeled crypto custody service. 

Sven Hildebrandt, head of Distributed Ledger Consulting Group, is concerned some exchanges won’t understand the nuances of the new law.

“The law is only in German and no English translation of the law is out there,” he said. “What’s going to happen to exchanges? [Operating without a licence] is actually a felony and not a misdemeanor so that’s jail time.”

Hildebrandt predicts the costs of licensing will be similar to other German financial services licenses where firms will need two managing directors, an established German entity and 125,000 euros of starting capital. He also estimates installation will cost 250,000 to 350,000 euros and recurring yearly costs will be 350,000 euros. 

Switzerland-based Crypto Storage AG, a subsidiary of Crypto Finance AG, is opening a branch in Germany to offer crypto custody to banks and then financial technology startups. 

“Large banking houses will do custody business in the future,” Stijn Vander Straeten, CEO of Crypto Storage AG, said. “They are moving slowly, though. We’ll build it up now for a premium.” 

Berlin-based solarisBank this month opened a subsidiary called solaris Digital Assets to offer crypto custody as a service. So far, the bank has a handful of customers testing the service with more than 40 companies in the pipeline, said Alexis Hamel, managing director of solaris Digital Assets.

In addition to waiting for details from BaFin, crypto firms are also waiting to see if the law can be passported to other European Union states. 

“Germany is definitely at the forefront with the clearer regulation,” Hamel said. “We still need to see how other European countries level up.”

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