[header date=”26 October 2018″]Algorand secures funding and an executive team, Steve Wozniak dabbles in blockchain, and Square opens up about its Subzero crypto storage.[/header]
What you need to know—and why
Bitcoin mining giveth, and taketh away. Earnings for AMD, one of this year’s top performers in the S&P 500, fell short of expectations. Graphics processing units—the hardware used for cryptocurrency mining—are no longer selling like hotcakes. “Blockchain-related GPU sales in the third quarter were negligible,” the company said.
[takeaway]Over the past month, AMD shares have dropped from $32 to $22. Mining cryptocurrencies and securing blockchains, it appears, will no longer prop up GPU sales. As crypto developers discuss ways to cut down on energy consumption, expect the GPU slide to continue. ↘️[/takeaway]
Algorand scores $62 million in funding. Earlier this month, the newly flush company released its first open-source code, which is centered on a novel consensus algorithm (the code that confirms records between nodes) created by MIT professor Silvio Micali, winner of the Turing Award and co-inventor of zero-knowledge proofs (the magic behind Zcash). Early experiments show that the new algorithm could help scale blockchain throughput—or how many transactions are processed per second—to be 125 times faster than bitcoin’s.
[takeaway]The genius of Algorand is its simplicity. By establishing consensus through local and randomized samples of the coin-holding community, the algorithm is faster, more scalable, and possibly even more secure than the energy-consuming proof-of-work predecessors. Micali has spent a good deal of time explaining his project on the conference circuit. However, if the technical details are a little over your head, check out this simplified Algorand explainer from Dogecoin creator Jackson Palmer. ↗️[/takeaway]
Wrong way, Woz? Earlier this month, Apple co-founder Steve Wozniak signed on as a co-founder of EQUI Global, a project trying to combine venture capital with the blockchain. The company held a disappointing ICO, then received a wave of bad press as bounty hunters complained that they were underpaid for their bug-finding services, and EQUI brazenly threatened legal action against a number of participants. Now, Baroness Michelle Mone, one of the project’s founders along with her boyfriend, businessman Doug Barrowman, is waging a war against the Financial Times (which poked fun at her).
[takeaway]How many red flags do you have to see before you realize a project’s probably not in great shape? To set aside EQUI’s financial woes for a moment, it seems like the company’s trying to connect venture capitalists with tech entrepreneurs, but it’s not clear what the firm actually does (its white paper is behind a password-protected login). Altogether, if EQUI Global is supposed to be a second act for Woz, things are looking… weird. ↘️[/takeaway]
“Good job, David.” On Wednesday, Bitfinex used Twitter to sarcastically call out CoinDesk reporter David Floyd, who rightly questioned the accuracy of the exchange’s US dollar tether (USDT) and US dollar trading pair listed on CoinMarketCap. Although USDT/USD had a reported trading volume of $48 million, it turns out Bitfinex doesn’t offer the trading pair at all.
[takeaway]The phantom USDT/USD trading pair accounted for approximately 2% of global USDT volume, which is small but not nothing for such a high-profile stablecoin. Seriously, good job, David. ➡️ [/takeaway]
Crypto news sites are taking bribes. An investigation by Breaker found that 12 out of 22 crypto media websites were willing to publish paid content without identifying it as such, a gross violation of journalistic standards. Names to beware of include NewsBTC, Bitcoinist, and Coinintelligence.
[takeaway]When crypto media disregards basic principles, it’s hard to judge which projects are promising and which just have big marketing budgets. You can always keep an eye out for content that is marked as “paid” or “sponsored.” But, beyond that, if a story seems like a paean, you might want to cross-reference sources or read original documentation to reach your own conclusions. “Trust, but verify” has become common parlance in the blockchain business, but even that might be too optimistic. ↘️[/takeaway]
[supplemental headline=”Chart interlude”]
AMD is really embracing the fall season.
[img src=”https://cms.qz.com/wp-content/uploads/2018/10/2018.10.25-AMD-share-price-draft-2.png”]
[/supplemental]
Crypto meets finance
Square, which offers bitcoin trading through its Cash App, is open-sourcing the code for its cold-storage service, “Subzero.” Cold storage is a wallet whose private keys aren’t connected to the internet. To protect its tokens, Square uses something called an “onion model” for its security, which means its security is like Shrek—it has layers.
Breaking into Square’s bitcoin sounds pretty challenging. The company has an elaborate process where a person would need to generate QR codes from an online server and participate in a multi-party signing ceremony just to move funds out of cold storage. A cool twist on the cold storage solution is that Square has limited which wallets those funds can be moved to—the funds can only go to Square-controlled hot wallets.
[takeaway]Making its storage solution open for scrutiny means that the public will have a chance to test and improve upon Square’s system, and it offers an intriguing look at how companies are protecting their crypto customers. ↗️[/takeaway]
[supplemental headline=”Hacks, scams, and capers”]
Call of Crypto. A group of gamers—who apparently enjoy playing “Call of Duty”—are suspected of masterminding a cryptocurrency hacking effort which netted them more than $3 million, reports the Chicago Sun-Times. One of the men involved in the alleged theft claims to have been coerced into participation after he was threatened by the group after they met him online playing the game.
Employees and investors in Augur—a decentralized prediction market that uses cryptocurrency—were targeted by the scheme. As much as $800,000 worth of Augur’s REP tokens may have been stolen at the time.
[/supplemental]
Regulatory watch
Japan’s Financial Services Agency has granted self-regulatory status to the Japan Virtual Currency Exchange Association. “It’s a very fast moving industry,” said a senior regulatory official, who spoke with Reuters. “It’s better for experts to make rules in a timely manner than bureaucrats do.”
[takeaway]Although the FSA has been among the world’s leaders in setting crypto-regulatory standards, Japan’s cryptocurrency exchanges have been victimized by some of the world’s most devastating hacks. Since government oversight hasn’t been sufficient, maybe self-regulation by exchanges will encourage improved security. ➡️ [/takeaway]
Indian authorities seize a bitcoin ATM. The device, which was installed at a mall, wasn’t yet functional, but the Bengaluru police took the ATM. They also arrested a co-founder of Unocoin, the exchange which set it up.
[takeaway]The Indian government has taken a hard line toward cryptocurrency, cutting off access to banking services, and now preventing even smaller efforts for customers to get their hands on tokens. Indian crypto exchanges have been all but extinguished. ↘️[/takeaway]
FATF to set crypto oversight rules by June 2019. The Paris-based intergovernmental body that addresses money-laundering issues said recently that licensing-based regimes should be implemented in all jurisdictions, which should also introduce regulations to combat money laundering and the financing of terrorism.
[takeaway]While FATF can make recommendations, it’s incumbent upon its member jurisdictions to turn those recommendations into effective policies. The upcoming rules could help shape international attitudes toward blockchain-based crowdfunding, however much longer that trend persists. Regardless of FATF’s impact on crypto (and ICOs), it will be fascinating to see how the language the organization uses might apply to future digital assets. ↗️ [/takeaway]
[supplemental headline=”Reasonable doubt”]
A blockchain takedown from Down Under. In an Australian Senate committee hearing this week, the chief digital officer for the nation’s Digital Transformation Agency seemed wary of blockchain technology, though he expressed interest in continued observation. “I think it would be fair to say a lot of big vendors, and technology vendors, are pushing blockchain very hard, they see sales opportunity in it,” he said. “So internationally, most of the hype around it is from vendors and companies, not from governments, or users and deliverers of services who are saying ‘blockchain is the solution to our problem.’”
The officer, Peter Alexander, also noted that “for every use of blockchain you would consider today, there is a better technology—alternate databases, secure connections, standardized API engagement.”
[/supplemental]
Crypto calendar
🗣 Oct. 29: D1Conf. Covering everything from oracles to social security, this one-day event will bring together incumbents and innovators to discuss blockchain-based insurance and potential improvements for “insurtech.” If you’re already in Prague for Devcon, D1Conf could be a worthwhile opening act.
🗣 Oct. 30-Nov. 2: Devcon 4. This year, the premier Ethereum conference takes place in Prague, Czech Republic. Talks are aimed at a deeply technical audience.
🗣 Nov. 5-8: DC FinTech Week. Hosted by Georgetown’s Institute for International Economic Law and the International Monetary Fund, the event includes two days of discussions regarding cryptocurrencies. At last year’s conference, US CFTC commissioner Brian Quintenz suggested that tokens may require different regulatory classifications over time.
[mailto filter=”Calendar” subject=”This is happening”]Tell us about your upcoming news and events.[/mailto]
Please send news, tips, and Sub-Zero refrigerators to privatekey@qz.com. If this email was forwarded to you, click here to sign up for your own subscription, which includes a free two-week trial. Today’s Private Key was written by Matthew De Silva and edited by Oliver Staley and Jason Karaian. Poor Richard says, “a stitch in time saves nine.”