Major American Magazine Time Column Reports About Bitcoin’s Liberating Potential

Bitcoin (BTC) has a substantial liberating potential, American mainstream newspaper Time reports on Dec. 28.

The aforementioned article claims that “speculation, fraud, and greed in the cryptocurrency and blockchain industry have overshadowed the real, liberating potential of Satoshi Nakamoto’s invention.”

According to the article’s author, Bitcoin “can be a valuable financial tool as a censorship-resistant medium of exchange.”

Alejandro Machado, a cryptocurrency researcher at the Open Money Initiative, reportedly said that the fee on a wire transfer from the United States to Venezuela can be as high as 56 percent.

To circumvent such conditions, Venezuelans have reportedly turned to cryptocurrency, receiving Bitcoin from their relatives abroad. The main alternative is to wire money to Colombia, withdraw and bring cash to Venezuela, which according to the article, “can take far longer, cost more, and be far more dangerous than the Bitcoin option.”

Times suggests that Bitcoin is a good way to protect oneself from fiat currency inflation. Venezuela is prime example of that, with the inflation of their native currency projected to top 1 million percent. But there are also other similar examples, like Zimbabwe, where former president Robert Mugabe “printed endless amounts of cash.” But the author points out:

“His successors can’t print more Bitcoin.”

Bitcoin is also, according to the article, a tool to evade mass surveillance in places like China. That being said, as Cointelegraph reported in March, according to U.S. whistleblower Edward Snowden, Bitcoin isn’t optimal for avoiding government coercion, and he believes that the world needs a better option.

Times also points out the advantage given by the inability of governments to censor transactions or freeze Bitcoin wallets. In fact, Cointelegraph reported in April that WikiLeaks’ Coinbase account has been suspended due to a term of service violation.

Still, nobody can prevent WikiLeaks from using cryptocurrency wallets where the organization controls the private keys. In fact, WikiLeaks is still accepting cryptocurrency donations and also added support for Snowden’s favorite crypto Zcash in August 2017.

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A Small Crypto Coin Is Making Big Claims About a Private Proof-of-Stake

If any coin is going to fly under the radar, it makes sense for a privacy coin to do so.

Spectre (not be confused with a separate project called SPECTRE), created two crypto tokens – the aptly named spectre token and the xspec token – in 2016, but hasn’t received much notice from the crypto community so far. Sure enough, its tokens rank in the 500s according to data provider CoinMarketCap, with a total market capitalization of $5.7 million – paltry by many crypto standards.

But that might soon change, as the project is taking a growing interest in a technology called staking.

A number of alternative proof-of-stake systems have launched recently (EOS, Tezos, Neo, Tron), with varying degrees of success, though all of which have commanded large market caps buoyed by big investors.

These systems assign the task of verifying blockchain transactions to a certain number of delegates, representatives of sorts which are voted in by the token holders. While token holders don’t necessarily identify themselves, according to Spectre’s pseudonymous founder, Mandica, there’s a huge privacy problem within these systems.

“All the UTXOs [unspent transaction outputs] spent to generate staking transactions are traceable on the blockchain and all the staking transactions can be linked and your balances are visible to anyone who knows how to analyze the blockchain,” Mandica told CoinDesk.

But the Spectre team, which has been tinkering away on various privacy tools for blockchains for the past couple years, thinks it’s found a way to make staking stealthy as well.

While the technology isn’t ready yet, the team hasn’t been reserved about its ambitions.

“From a user point of view you will be able to keep your entire balance of anonymous coins safe from any observer and you will just need to stake your wallet to receive further anonymous coins that nobody can attribute to you,” Mandica said, continuing:

“This is a unique proposition, and no other cryptocurrency, as far as I know, has a system to stake anonymous coins and generate fresh anonymous coins.”

Entropy in open wallets

While the full picture of how this all works isn’t clear yet (the group hasn’t put out a white paper, though, on social channels, it’s promising one soon), the basic premise is borrowed from another privacy-oriented coin: monero, specifically its ring signature technology.

Ring signatures allow anyone in a particular group to sign a transaction, making it impossible to determine exactly which participants’ keys signed the transaction.

But that still leaves the nodes, which aren’t invisible, able to see the transactions. As such, the Spectre team went to work designing a fix.

“The ‘anonymous’ coins are created using stealth address technology and one-time key pairs, and [they] reside on the blockchain as un-linkable UTXOs that can only be spent by proving ownership through the use of ring signatures and key-images based on the Cryptonote protocol,” Mandica said.

While that’s a bit challenging to parse – and the Spectre team was cautious about explaining in too much detail – there are some clues as to what the system entails.

For instance, users that contribute to the network by leaving their wallets connected to the internet can earn a minimum of a 5 percent annual income on their tokens. Although the fewer people that have their wallets open and online, the higher this yield goes (providing an incentive to others to do it).

Mandica declined to explain in detail what these wallets are doing, but he did say that the “proof-of-stealth” algorithm the team is employing is designed to take advantage of the creation of new tokens with no prior history to increase entropy used to mask the true transactions.

He told CoinDesk:

“Entropy is key in a system using ring signatures to create a large pool of mixins or ‘dummy’ coins that can be used in the ring signature protected anonymous transactions.”

Based on other descriptions of ring signature schemes, protocols need a steady stream of unspent transactions to mask the real transactions. And this may be what those open wallets are doing.

Anonymous to the core

According to the team, in its next major release, the new proof-of-stealth staking mechanism for anonymous coins – the spectre coin is the anonymous one – will complement the proof-of-stake version 3 (PoSv3) algorithm the blockchain already uses.

But this work is just the latest privacy-centric tooling the Spectre team has come up with.

Even those without an unusually high privacy consciousness will be familiar with Tor, an acronym for “The Onion Router,” a scheme for masking internet users’ activity online and even accessing sites intentionally invisible to search engines like Google. Spectre has already built Tor into its systems and even went further, implementing Tor product, “OBSF4,” which allows users to skirt national firewalls, such as those in China and Iran.

The team itself functions anonymously too. In fact, a spokesperson for the Spectra team told CoinDesk that the developers themselves don’t even know each other’s real names.

And even though, with this kind of anonymity it would have been easy to just walk away, the team didn’t give up – even when it’s initial coin offering (ICO) flopped and its project was lacking vitality, while all around them crypto projects, some without serious intent, raised millions by selling tokens.

“We started out in 2016 with a very unsuccessful ICO that raised only 16 BTC at a time when the BTC price was around $600-$700, so we didn’t make it far on those funds,” Mandica said.

Spectre did secure private funding (amount undisclosed) earlier this year, but still the project remains just an after-hours project for the team. Instead of building with the monetary encouragement of the free market, Mandica and his team are building because they believe in the mission.

And that mission is all about one of crypto’s favorite ideas: unbridled privacy.

In a newsletter from June, Mandica explains how best to think about the project:

“The best way to understand Spectre today is to think of bitcoin + Proof-of-Stake.v3 + anonymous transactions (using similar technology to monero) + Tor to hide your IP.”

Venetian mask image via Shutterstock

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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Is Blockchain About to Become a Patent War Battleground?

Last week, news of at least three major players applying for blockchain-related patents emerged: Bank of America sought to legally protect its blockchain-based system allowing the external validation of data, Barclays filed two patent applications relating to the transfer of digital currency and blockchain data storage, while MasterCard’s application mentioned a form of a public blockchain-based method for linking assets between blockchain and fiat accounts.

As blockchain technology continues to be one of the most discussed things in 2018 and a subject for mass adoption, the number of crypto-related patents is steadily growing — and with patent trolls joining the game, a legal war over blockchain might occur in the future.

Why do institutions need blockchain patents?

A blockchain patent, like any other patent, is a set of exclusive rights issued by an official authority — a sovereign state or intergovernmental organization — that an inventor or assignee gets in exchange for revealing their invention to the public. For instance, in the U.S., patents are granted by the U.S. Patent and Trademark Office (USPTO). Although there are no “international patents,” per se, according to the Patent Cooperation Treaty (PCT) signed by 152 countries, by filing one international patent application under the PCT, applicants can simultaneously get protection for their inventions in many countries.

As Bloomberg explains, business-wise blockchain patents “are an essential ingredient for companies looking to reshape the financial services industry or spawn profitable cryptocurrency-related businesses.” Essentially, patents help companies attract investment, protect property rights and collect monopoly profits from other companies using their inventions.

The first mentions of blockchain and cryptocurrency-related patents appeared around 2012, according to USPTO database. During the 2012-2015 period, in the U.S. alone, institutions had amassed at least 83 patent applications that contained words like “cryptocurrency” and “blockchain” in their forms. Consequently, that number has escalated even further since, as Bitcoin became the market’s favorite buzzword and ascended into the mainstream: In 2017, there were 97 blockchain patents filed in the U.S., as per the Financial Times (FT), which is more than all the previous years combined. Bloomberg Law data suggests that the patent office has published about 700 blockchain-related applications it received between January 2011 and April 2018. It is worth noting that it takes about 18 months for the patent office to issue a received application.

2018 might turn out to be even more fruitful in terms of blockchain patent applications, as blockchain has been widely branded as the most discussed technology of the moment: Indeed, according to Fortune’s sources, the overall number of blockchain-related patents and applications for the next year “is expected to be around 1,245.”

However, the U.S. isn’t even the leader in that area. In 2017, China filed 225 of the blockchain patents (half of all the 406 blockchain-related patent applications made that year, according to the World Intellectual Property Organization database, cited by FT) having severely outnumbered the rest of the world — after all, China made it a national priority.

Patent trolls are hopping on the bandwagon

The majority of international blockchain patents applications are filed by EITC — also known as nChain — Bank of America, Alibaba, Coinplug and IBM, according to data obtained from bitcoinpatentreport.com.

EITC — perhaps the least popular out of five for a casual reader — is affiliated with Craig Wright, an imposter of Bitcoin creator Satoshi Nakamoto and a rather controversial figure in the industry. It’s been argued that Wright is gathering patents without the intent of actually using them, but instead to demand large payouts from companies who might entail similar technologies in their line of work. As Marc Kaufman, an attorney who co-chairs the Blockchain Intellectual Property Council at the U.S. Chamber of Digital Commerce, told Fortune:

“His tactics and activities have all the marks of being a patent assertion entity or what’s pejoratively known as a troll. I’m not aware of his companies having any products.”

Indeed, blockchain has become a brand new target for patent trolls. In December 2017, Erich Spangenberg — an entrepreneur despised in Silicon Valley for challenging tech patents and turning a $1 million tech patents portfolio he bought in the 1990s into $150 million — created a company called IPwe, comprised of 20 full-time employees and ‘consultants.’ Its goal is to “apply blockchain, artificial intelligence and predictive analytics to improve patents,” as Spangenberg put it in a comment for CNBC. He elaborated:

“It is a curious path how a collection of misfit trolls, geeks and wonks ended up here — but we are going to crush it and make a fortune.”

James Bessen, an economist and executive director of the Technology & Policy Research Initiative at the Boston University School of Law told CNBC that “Spangenberg has made out well”:

“You want to go into a new field like blockchain because there won’t be a lot of patents, and the original stuff was open source.”

Bessen argues that patent trolls proved to be a legit threat to the software industry during its first boom, when numerous “crap patents” were issued for various digital payment methods. Trolls provoked lawsuits against numerous businesses who incorporated any form of e-commerce transaction, and the court would take the former’s side. According to Bessen:

“Some trolls are bottom feeders and send out thousands of letters — can be tens of thousands of letters — for a few thousand bucks each, and lots of people paid up in those cases.”

Somewhat similarly, Bank of America — another top patent applicant — seems to prioritize having a registered technology over actually using it. In 2016, Catherine Bessant, chief operations and technology officer at Bank of America, told CNBC that having blockchain-related patents is “very important[…] to reserve our spot even before we know what the commercial application might be.” Notably, Bank of America doesn’t appear to be positive about cryptocurrencies either. For instance, in May, the bank called Bitcoin ‘troubling’ and uplifted its decision to ban customers from purchasing crypto.  

The process of receiving a patent is complex

Bessen argues that — according to his own review of the USPTO search database — by the end of 2017, the office has granted 265 patents related to Bitcoin and 53 patents related to the blockchain, with the earliest blockchain patent being acquired in April 2015.

Thus, getting a patent is a time-consuming process. As the Wall Street Journal writes, the patent office “publishes applications up to 18 months after they are filed and can take years to examine an application to decide whether to grant patent protection.” Bloomberg cites a similar timeframe and provides the example of Bank of America’s application for a crypto exchange system to convert one virtual currency into another: It was submitted in 2014, published in 2015 and granted in 2017. However, blockchain patents are being granted, at least to some extent — For instance, Bank of America reportedly has at least two at this point.

Nevertheless, the outcome of a blockchain patent filing is often unclear. While there’s little information on the exact amount of denied applications, it is worth noting that in 2014, the U.S. Supreme Court ruled that software apps dealing with abstract and non-inventive ideas can’t be patented under existing law, mainly due to the patent troll-induced fiasco mentioned above. Since then, it has become considerably more complex for a software company to pass the eligibility test.

Additionally, the open-source model that was once crucial to blockchain’s philosophy — and could prevent the potential patent war — is reportedly becoming less prominent in the industry: A 2017 collaborative research of the open-source blockchain efforts conducted by Deloitte and GitHub suggested that a majority of such experiments had failed. According to their report, while more than 26,000 open-source blockchain projects were started on GitHub in 2016, merely 8 percent of those projects remained active in 2017. Another retreat for open-source blockchain projects, R3 consortium, has seen large players such as J.P. Morgan and Goldman Sachs drop out last year. Still, there are different examples: for instance, IBM uses the Hyperledger platform — an open-source blockchain framework overseen by the Linux Foundation — for its many blockchain initiatives, from cross-border payments to stablecoins.

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Is India About To Reverse Its Crypto Trade Ban?

On July 20, the Supreme Court of India will hold a hearing regarding the state of cryptocurrencies in the country. It is a decisive date for the local crypto industry that has been significantly suppressed in the past month by the Reserve Bank of India’s (RBI) ban on all banks’ dealings with crypto-related businesses.

The hope for an overview of the hardline approach lives on, however, as last week a report citing anonymous sources in the government suggested that cryptocurrencies might be viewed as commodities in the future, and hence become regulated by relevant authorities rather than remain mostly banned.

Brief history of cryptocurrencies in India

India has not been perfectly cohesive in its stance toward crypto. The relationship between the two dates back to December 2013, when the RBI first issued a general public announcement to potential crypto users, warning them about typical risks involved — volatility, security and ties to illicit activities. Since then, the agency has been putting out similar notes in response to crypto’s gaining popularity, with the last one being issued on December 2017.

Those kind of warnings, however, failed to address the legal status of Bitcoin (BTC) and altcoins in the country — as Dr. S.P. Sharma, Chief Economist, opined in an interview with the Economic Times of India in October 2017, “neither has the government formally brought Bitcoin under the definition of currency, nor has it made it illegal.” According to some experts, the state chose the passive role simply due to not having a coherent plan in mind. Thus, Anirudh Rastogi, managing partner at the law firm TRA, told Quartz India:

“[Not having a concrete strategy] is the reason why they have been reiterating similar comments and warning the common investors to not go overboard.”

Nevertheless, as cryptocurrencies gained even more extreme momentum in December 2017 — when Bitcoin was infamously trading for $20,000 — the government stepped in with straightforward action, as India’s Income Tax Department began its major sweep. According to Business Standard, by December 13, the watchdog had visited nine virtual currency exchanges in Bengaluru, Hyderabad, Mumbai, Delhi and Kochi on the matter of tax evasion. Further, the agency reportedly sent tax notices to as many as 400,000-500,000 investors, based on their transaction history.

The situation became even less optimistic for cryptocurrencies after India’s Ministry of Finance compared Bitcoin to a ponzi scheme and local banks — including State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Yes Bank — began taking strong action against crypto exchanges by either closing their accounts altogether or significantly curtailing operation.

In April 2017, the RBI announced that the bank would no longer provide services to any person or business that deals with cryptocurrencies, and that decision essentially became law on July 5, when the deadline expired. That means that Indian citizens are currently not able to buy and sell cryptocurrencies on exchanges. Instead, they need to use peer-to-peer networks, where mainly crypto-to-crypto operations are allowed. If an Indian citizen wants to exchange crypto to fiat, then they will need to turn to marketplace exchanges or the black market, the Times of India explains. Additionally, crypto exchanges and companies cannot receive loans from banks in India, according to the legislative.

New reality: outlawed crypto

It would be fair to argue that the Indian government’s hardline regulatory action thus far has only prompted the crypto industry to go underground, and has therefore become even less regulated. At this point, a significant number of local exchanges have either closed shop or partly ceased their operation: The first victims were BTCXIndia and ETHEXIndia, who chose to shut down back in March, when the RBI ban hadn’t been announced yet. BTCXIndia cited the Indian government’s “discouraging cryptocurrency trading” as the primary reason for closure at the time. Both of them are inactive to this day.

The largest remaining players, namely Zebpay and Unocoin — Coinsecure is still offline due to the recent cyberattack — now warn their clients that rupee withdrawal processes can be compromised at any time due to the RBI ban deadline. In its announcement regarding the matter, Unocoin mentions that they are “in the process of deploying new mechanisms for INR deposits and withdrawals,” and has introduced Unodax — a peer-to-peer solution bypassing the RBI ban. Similar services have been rolled out by other Indian exchanges, such as WazirX and Koinex.

Meanwhile, as the Times of India reports, a number of opportunists used the RBI ban for their advantage by cashing in on the panic sales in India via “arbitrage” — a strategy that implied buying BTC within the Indian market on the cheap, transferring it to a middleman in another country, who would then sell it there for a better rate and share the profit among the both parties involved.

Even more confusion was caused by a Bloomberg article quoting anonymous parties with “direct knowledge” of the government plans to impose an 18 percent goods and services tax (GST) on crypto, as it could hardly coincide with the RBI ban — how can cryptocurrencies be taxed, when one can’t even trade them? Nevertheless, such news indicate that more positive regulation might be on the way, or merely that different government agencies take varying approaches toward crypto, not coordinating their moves among each other.

New hope: the commodity route

On July 11, Quartz India published an article dubbed “India may not ban cryptocurrency after all” — the piece cited an anonymous source and claimed that “a finance ministry panel set up to study [virtual currencies] may even suggest that they be treated as commodities.” Thus, a senior government official privy to the matter told the news outlet:

“I don’t think anyone is really thinking of banning [cryptocurrencies] altogether. The issue here is about regulating the trade and we need to know where the money is coming from. Allowing it as [a] commodity may let us better regulate trade and so that is being looked at.”

Viewing cryptocurrencies as commodities resembles the U.S. Commodity Futures Trading Commission’s (CFTC) approach. The U.S. agency that fully controls commodity derivatives transactions in the country claims that tokens are commodities: Essentially, in their view, Bitcoin is closer to gold than to conventional currencies or securities, as it is not backed by the government and doesn’t have a liability attached to it.

Shubham Yadav, co-founder of Coindelta — an Indian cryptocurrency exchange — agrees with that viewpoint:

“Though cryptocurrencies belong to a new class of financial assets, we can still welcome them as commodities and not currencies because of their high volatile prices.”

The cryptocurrency panel cited was set up in December 2017 with the purpose of understanding the expanding crypto industry, and it includes Subhash Chandra Garg, secretary in the department of economic affairs; BP Kanungo, deputy governor of the RBI; and Ajay Tyagi, chairman of market regulator Securities and Exchange Board of India. It is the second cryptocurrency panel in India, while the first panel — established by the Narendra Modi government in April 2017 — recommended “slowly choking” the industry: It couldn’t be stopped in one day, as people would lose a lot of money, they argued, which is why a more timely approach was needed.

In June, Subhash Chandra Garg, the head of the newer — and more crypto friendly — panel, told local news outlet ET news that his task force was almost ready to introduce a draft for a crypto regulatory framework and promised to deliver it within the first two weeks of July — no such announcements have been made by press time, however.

“We are fairly close to developing a template [for the cryptocurrency industry] that might be in the best interests of our country. We have moved pretty far in this regard, and we have prepared a draft that entails what parts of this businesses should be banned and what should be preserved.”

Local cryptocurrency firms are open for negotiations with the government, and, as Quartz points out, “have already agreed to be open for more scrutiny.” Additionally, they assure that solid Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures are already implemented, while they are willing to introduce other suggestions. Shubham Yadav, co-founder of Coindelta, told the publication:

“We are also ready to work with the government and assist them on creating a regulatory framework. We can help them in designing a monitoring system for blockchain where it can remotely monitor all transactions.”

The central bank’s controversial ban has prompted both public and industry-led petitions, with some appealing to the courts on the grounds that the decision is unconstitutional.

Thus, the community awaits July 20, when the Supreme Court of India will come up with a clear-cut position regarding the RBI blockade. However, it is worth noting that on July 3, the court ruled not to grant interim relief to those affected by the ban at a hearing of the Internet and Mobile Association of India (IAMAI) — organization comprised of members of several crypto exchanges that are challenging the RBI’s stance.

At a previous petition hearing on May 17, IAMAI was reportedly requested to submit a representation against the central bank.

In any case, blockchain is welcome

Similar to China, the Indian crypto ban — although it is objectively less harsh than the Chinese one — coexists with the government positive stance toward blockchain technology. For instance, on the same day as it introduced the crackdown measures, the RBI announced its plans for issuing a central bank-backed digital currency (CBDC). The RBI Deputy Governor BP Kanungo told the Times of India at the time:

“Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.”

Nevertheless, India is home to existing blockchain adoption initiatives as well. In May, seven of India’s largest banks joined a blockchain-powered trade finance initiative led by local IT giant InfoSys. The alliance, known as India Trade Connect, includes participants such as Axis Bank, ICICI and South Indian Bank. It was reportedly formed to conduct tests of InfoSys’ Finacle Trade Connect, a blockchain platform designed to “address the trade finance process requirements of banks.”

Moreover, in June, the government of the south Indian state of Kerala announced that it will use blockchain for food supply and distribution in a new project headed by Keralan think tank the Development and Innovation Strategic Council (K-DISC). It will use blockchain and Internet of Things (IoT) technology to make the state’s supply network for dairy products, vegetables and fish more efficient, further establishing blockchain as a viable tool for the local economy.

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