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IOTA and Tangle discussion/info, scam or not?

In the past weeks I heard a lot pros and cons about IOTA, many of them I believe were not true (I'll explain better). I would like to start a serious discussion about IOTA and help people to get into it. Before that I'll contribute with what I know, most things that I will say will have a source link providing some base content.
 
The pros and cons that I heard a lot is listed below, I'll discuss the items marked with *.
Pros
Cons
 

Scalability

Many users claim that the network infinitely scales, that with more transactions on the network the faster it gets. This is not entirely true, that's why we are seeing the network getting congested (pending transactions) at the moment (12/2017).
The network is composed by full-nodes (stores all transactions), each full-node is capable of sending transactions direct to the tangle. An arbitrary user can set a light-node (do not store all transactions, therefore a reduced size), but as it does not stores all transactions and can't decide if there are conflicting transactions (and other stuff) it needs to connect to a full-node (bitifinex node for example) and then request for the full-node to send a transaction to the tangle. The full-node acts like a bridge for a light-node user, the quantity of transactions at the same time that a full-node can push to the tangle is limited by its brandwidth.
What happens at the moment is that there are few full-nodes, but more important than that is: the majority of users are connected to the same full-node basically. The full-node which is being used can't handle all the requested transactions by the light-nodes because of its brandwidth. If you are a light-node user and is experiencing slow transactions you need to manually select other node to get a better performance. Also, you need to verify that the minimum weight magnitude (difficulty of the Hashcash Proof of Work) is set to 14 at least.
The network seems to be fine and it scales, but the steps an user has to make/know are not friendly-user at all. It's necessary to understand that the technology envolved is relative new and still in early development. Do not buy iota if you haven't read about the technology, there is a high chance of you losing your tokens because of various reasons and it will be your own fault. You can learn more about how IOTA works here.
There are some upcoming solutions that will bring the user-experience to a new level, The UCL Wallet (expected to be released at this month, will talk about that soon and how it will help the network) and the Nelson CarrIOTA (this week) besides the official implementations to come in december.
 

Centralization

We all know that currently (2017) IOTA depends on the coordinator because the network is still in its infancy and because of that it is considered centralized by the majority of users.
The coordinator are several full-nodes scattered across the world run by the IOTA foundation. It creates periodic Milestones (zero value transactions which reference valid transactions) which are validated by the entire network. The coordinator sets the general direction for the tangle growth. Every node verifies that the coordinator is not breaking consensus rules by creating iotas out of thin air or approving double-spendings, nodes only tells other nodes about transactions that are valid, if the Coordinator starts issuing bad Milestones, nodes will reject them.
The coordinator is optional since summer 2017, you can choose not implement it in your full-node, any talented programmer could replace Coo logic in IRI with Random Walk Monte Carlo logic and go without its milestones right now. A new kind of distributed coordinator is about to come and then, for the last, its completely removal. You can read more about the coordinator here and here.

Mining-Blockchain-based Cryptocurrencies

These are blockchain-based cryptocurrencies (Bitcoin) that has miners to guarantee its security. Satoshi Nakamoto states several times in the Bitcoin whitepaper that "The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes". We can see in Blockchain.info that nowadays half of the total hashpower in Bitcoin is controlled by 3 companies (maybe only 1 in the future?). Users must trust that these companies will behave honestly and will not use its 50%> hashpower to attack the network eventually. With all that said it's reasonable to consider the IOTA network more decentralized (even with the coordinator) than any mining-blockchain-based cryptocurrency
You can see a comparison between DAG cryptocurrencies here
 

IOTA partnerships

Some partnerships of IOTA foundation with big companies were well known even when they were not officialy published. Some few examples of confirmed partnerships are listed below, others cofirmed partnerships can be seem in the link Partnerships with big companies at the pros section.
So what's up with all alarming in social media about IOTA Foundation faking partnerships with big companies like Microsoft and Cisco?
At Nov. 28th IOTA Foundation announced the Data Marketplace with 30+ companies participating. Basically it's a place for any entity sell data (huge applications, therefore many companies interested), at time of writing (11/12/2017) there is no API for common users, only companies in touch with IOTA Foundation can test it.
A quote from Omkar Naik (Microsoft worker) depicted on the Data Marketplace blog post gave an idea that Microsoft was in a direct partnership with IOTA. Several news websites started writing headlines "Microsoft and IOTA launches" (The same news site claimed latter that IOTA lied about partnership with Microsoft) when instead Microsoft was just one of the many participants of the Data Marketplace. Even though it's not a direct partnership, IOTA and Microsoft are in close touch as seen in IOTA Microsoft and Bosch meetup december 12th, Microsoft IOTA meetup in Paris 14th and Microsoft Azure adds 5 new Blockchain partners (may 2016). If you join the IOTA Slack channel you'll find out that there are many others big companies in close touch with IOTA like BMW, Tesla and other companies. This means that right now there are devs of IOTA working directly with scientists of these companies to help them integrate IOTA on their developments even though there is no direct partnership published, I'll talk more about the use cases soon.
We are excited to partner with IOTA foundation and proud to be associated with its new data marketplace initiative... - Omkar Naik
 

IOTA's use cases

Every cryptocurrency is capable of being a way to exchange goods, you pay for something using the coin token and receive the product. Some of them are more popular or have faster transactions or anonymity while others offers better scalablity or user-friendness. But none of them (except IOTA) are capable of transactioning information with no costs (fee-less transactions), in an securely form (MAM) and being sure that the network will not be harmed when it gets more adopted (scales). These characteristics open the gates for several real world applications, you probably might have heard of Big Data and how data is so important nowadays.
Data sets grow rapidly - in part because they are increasingly gathered by cheap and numerous information-sensing Internet of things devices such as mobile devices, aerial (remote sensing), software logs, cameras, microphones, radio-frequency identification (RFID) readers and wireless sensor networks.
 
It’s just the beginning of the data period. Data is going to be so important for human life in the future. So we are now just starting. We are a big data company, but compared to tomorrow, we are nothing. - Jack Ma (Alibaba)
There are enormous quantities of wasted data, often over 99% is lost to the void, that could potentially contain extremely valuable information if allowed to flow freely in data streams that create an open and decentralized data lake that is accessible to any compensating party. Some of the biggest corporations of the world are purely digital like Google, Facebook and Amazon. Data/information market will be huge in the future and that's why there so many companies interested in what IOTA can offer.
There are several real world use cases being developed at the moment, many of them if successful will revolutionize the world. You can check below a list of some of them.
Extra
These are just few examples, there are a lot more ongoing and to explore.
 

IOTA Wallet (v2.5.4 below)

For those who have read a lot about IOTA and know how it works the wallet is fine, but that's not the case for most users. Issues an user might face if decide to use the current wallet:
Problems that could be easily avoided with a better understand of the network/wallet or with a better wallet that could handle these issues. As I explained before, some problems during the "congestion" of the network could be simply resolved if stuff were more user-friendly, this causes many users storing their iotas on exchanges which is not safe either.
The upcoming (dec 2017) UCL Wallet will solve most of these problems. It will switch between nodes automatically and auto-reattach transactions for example (besides other things). You can have full a overview of it here and here. Also, the upcoming Nelson CarrIOTA will help on automatic peer discovery for users setup their nodes more easily.
 

IOTA Vulnerability issue

On sept 7th 2017 a team from MIT reported a cryptographic issue on the hash function Curl. You can see the full response of IOTA members below.
Funds were never in danger as such scenarios depicted on the Neha's blogpost were not pratically possible and the arguments used on the blogpost had'nt fundamentals, all the history you can check by yourself on the responses. Later it was discovered that the whole Neha Narula's team were envolved in other concurrent cryptocurrency projects
Currently IOTA uses the relatively hardware intensive NIST standard SHA-3/Keccak for crucial operations for maximal security. Curl is continuously being audited by more cryptographers and security experts. Recenlty IOTA Foundation hired Cybercrypt, the world leading lightweight cryptography and security company from Denmark to take the Curl cryptography to its next maturation phase.
 
It took me a couple of days to gather the informations presented, I wanted it to make easier for people who want to get into it. It might probably have some mistakes so please correct me if I said something wrong. Here are some useful links for the community.
This is my IOTA donation address, in case someone wants to donate I will be very thankful. I truly believe in this project's potential.
I9YGQVMWDYZBLHGKMTLBTAFBIQHGLYGSAGLJEZIV9OKWZSHIYRDSDPQQLTIEQEUSYZWUGGFHGQJLVYKOBWAYPTTGCX
 
This is a donation address, if you want to do the same you might pay attention to some important details:
  • Create a seed for only donation purposes.
  • Generate a address and publish it for everyone.
  • If you spend any iota you must attach a new address to the tangle and refresh your donation address published before to everyone.
  • If someone sends iota to your previous donation address after you have spent from it you will probably lose the funds that were sent to that specific address.
  • You can visualize how addresses work in IOTA here and here.
This happens because IOTA uses Winternitz one-time signature to become quantum resistent. Every time you spend iota from a address, part of the private key of that specific address is revealed. This makes easier for attackers to steal that address balance. Attackers can search if an address has been reused on the tangle explorer and try to brute force the private key since they already know part of it.
submitted by mvictordbz to CryptoCurrency [link] [comments]

An extensive guide for cashing out bitcoin and cryptocurrencies into private banks

Hey guys.
Merry Xmas !
I am coming back to you with a follow up post, as I have helped many people cash out this year and I have streamlined the process. After my original post, I received many requests to be more specific and provide more details. I thought that after the amazing rally we have been attending over the last few months, and the volatility of the last few days, it would be interesting to revisit more extensively.
The attitude of banks around crypto is changing slowly, but it is still a tough stance. For the first partial cash out I operated around a year ago for a client, it took me months to find a bank. They wouldn’t want to even consider the case and we had to knock at each and every door. Despite all my contacts it was very difficult back in the days. This has changed now, and banks have started to open their doors, but there is a process, a set of best practices and codes one has to follow.
I often get requests from crypto guys who are very privacy-oriented, and it takes me months to have them understand that I am bound by Swiss law on banking secrecy, and I am their ally in this onboarding process. It’s funny how I have to convince people that banks are legit, while on the other side, banks ask me to show that crypto millionaires are legit. I have a solid background in both banking and in crypto so I manage to make the bridge, but yeah sometimes it is tough to reconcile the two worlds. I am a crypto enthusiast myself and I can say that after years of work in the banking industry I have grown disillusioned towards banks as well, like many of you. Still an account in a Private bank is convenient and powerful. So let’s get started.
There are two different aspects to your onboarding in a Swiss Private bank, compliance-wise.
*The origin of your crypto wealth
*Your background (residence, citizenship and probity)
These two aspects must be documented in-depth.
How to document your crypto wealth. Each new crypto millionaire has a different story. I may detail a few fun stories later in this post, but at the end of the day, most of crypto rich I have met can be categorized within the following profiles: the miner, the early adopter, the trader, the corporate entity, the black market, the libertarian/OTC buyer. The real question is how you prove your wealth is legit.
1. Context around the original amount/investment Generally speaking, your first crypto purchase may not be documented. But the context around this acquisition can be. I have had many cases where the original amount was bought through Mtgox, and no proof of purchase could be provided, nor could be documented any Mtgox claim. That’s perfectly fine. At some point Mtgox amounted 70% of the bitcoin transactions globally, and people who bought there and managed to withdraw and keep hold of their bitcoins do not have any Mtgox claim. This is absolutely fine. However, if you can show me the record of a wire from your bank to Tisbane (Mtgox's parent company) it's a great way to start.
Otherwise, what I am trying to document here is the following: I need context. If you made your first purchase by saving from summer jobs, show me a payroll. Even if it was USD 2k. If you acquired your first bitcoins from mining, show me the bills of your mining equipment from 2012 or if it was through a pool mine, give me your slushpool account ref for instance. If you were given bitcoin against a service you charged, show me an invoice.
2. Tracking your wealth until today and making sense of it. What I have been doing over the last few months was basically educating compliance officers. Thanks God, the blockchain is a global digital ledger! I have been telling my auditors and compliance officers they have the best tool at their disposal to lead a proper investigation. Whether you like it or not, your wealth can be tracked, from address to address. You may have thought all along this was a bad feature, but I am telling you, if you want to cash out, in the context of Private Banking onboarding, tracking your wealth through the block explorer is a boon. We can see the inflows, outflows. We can see the age behind an address. An early adopter who bought 1000 BTC in 2010, and let his bitcoin behind one address and held thus far is legit, whether or not he has a proof of purchase to show. That’s just common sense. My job is to explain that to the banks in a language they understand.
Let’s have a look at a few examples and how to document the few profiles I mentioned earlier.
The trader. I love traders. These are easy cases. I have a ton of respect for them. Being a trader myself in investment banks for a decade earlier in my career has taught me that controlling one’s emotions and having the discipline to impose oneself some proper risk management system is really really hard. Further, being able to avoid the exchange bankruptcy and hacks throughout crypto history is outstanding. It shows real survival instinct, or just plain blissed ignorance. In any cases traders at exchange are easy cases to corroborate since their whole track record is potentially available. Some traders I have met have automated their trading and have shown me more than 500k trades done over the span of 4 years. Obviously in this kind of scenario I don’t show everything to the bank to avoid information overload, and prefer to do some snacking here and there. My strategy is to show the early trades, the most profitable ones, explain the trading strategy and (partially expose) the situation as of now with id pages of the exchanges and current balance. Many traders have become insensitive to the risk of parking their crypto at exchange as they want to be able to trade or to grasp an occasion any minute, so they generally do not secure a substantial portion on the blockchain which tends to make me very nervous.
The early adopter. Provided that he has not mixed his coin, the early adopter or “hodler” is not a difficult case either. Who cares how you bought your first 10k btc if you bought them below 3$ ? Even if you do not have a purchase proof, I would generally manage to find ways. We just have to corroborate the original 30’000 USD investment in this case. I mainly focus on three things here:
*proof of early adoption I have managed to educate some banks on a few evidences specifically related to crypto markets. For instance with me, an old bitcointalk account can serve as a proof of early adoption. Even an old reddit post from a few years ago where you say how much you despise this Ripple premined scam can prove to be a treasure readily available to show you were early.
*story telling Compliance officers like to know when, why and how. They are human being looking for simple answers to simple questions and they don’t want like to be played fool. Telling the truth, even without a proof can do wonders, and even though bluffing might still work because banks don’t fully understand bitcoin yet, it is a risky strategy that is less and less likely to pay off as they are getting more sophisticated by the day.
*micro transaction from an old address you control This is the killer feature. Send a $20 worth transaction from an old address to my company wallet and to one of my partner bank’s wallet and you are all set ! This is gold and considered a very solid piece of evidence. You can also do a microtransaction to your own wallet, but banks generally prefer transfer to their own wallet. Patience with them please. they are still learning.
*signature message Why do a micro transaction when you can sign a message and avoid potentially tainting your coins ?
*ICO millionaire Some clients made their wealth participating in ETH crowdsale or IOTA ICO. They were very easy to deal with obviously and the account opening was very smooth since we could evidence the GENESIS TxHash flow.
The miner Not so easy to proof the wealth is legit in that case. Most early miners never took screenshot of the blocks on bitcoin core, nor did they note down the block number of each block they mined. Until the the Slashdot article from August 2010 anyone could mine on his laptop, let his computer run overnight and wake up to a freshly minted block containing 50 bitcoins back in the days. Not many people were structured enough to store and secure these coins, avoid malwares while syncing the blockchain continuously, let alone document the mined blocks in the process. What was 50 BTC worth really for the early miners ? dust of dollars, games and magic cards… Even miners post 2010 are generally difficult to deal with in terms of compliance onboarding. Many pool mining are long dead. Deepbit is down for instance and the founders are MIA. So my strategy to proof mining activity is as follow:
*Focusing on IT background whenever possible. An IT background does help a lot to bring some substance to the fact you had the technical ability to operate a mining rig.
*Showing mining equipment receipts. If you mined on your own you must have bought the hardware to do so. For instance mining equipment receipts from butterfly lab from 2012-2013 could help document your case. Similarly, high electricity bill from your household on a consistent basis back in the day could help. I have already unlocked a tricky case in the past with such documents when the bank was doubtful.
*Wallet.dat files with block mining transactions from 2011 thereafter This obviously is a fantastic piece of evidence for both you and me if you have an old wallet and if you control an address that received original mined blocks, (even if the wallet is now empty). I will make sure compliance officers understand what it means, and as for the early adopter, you can prove your control over these wallet through a microtransaction. With these kind of addresses, I can show on the block explorer the mined block rewards hitting at regular time interval, and I can even spot when difficulty level increased or when halvening process happened.
*Poolmining account. Here again I have educated my partner bank to understand that a slush account opened in 2013 or an OnionTip presence was enough to corroborate mining activity. The block explorer then helps me to do the bridge with your current wallet.
*Describing your set up and putting it in context In the history of mining we had CPU, GPU, FPG and ASICs mining. I will describe your technical set up and explain why and how your set up was competitive at that time.
The corporate entity Remember 2012 when we were all convinced bitcoin would take over the world, and soon everyone would pay his coffee in bitcoin? How naïve we were to think transaction fees would remain low forever. I don’t blame bitcoin cash supporters; I once shared this dream as well. Remember when we thought global adoption was right around the corner and some brick and mortar would soon accept bitcoin transaction as a common mean of payment? Well, some shop actually did accept payment and held. I had a few cases as such of shops holders, who made it to the multi million mark holding and had invoices or receipts to proof the transactions. If you are organized enough to keep a record for these trades and are willing to cooperate for the documentation, you are making your life easy. The digital advertising business is also a big market for the bitcoin industry, and affiliates partner compensated in btc are common. It is good to show an invoice, it is better to show a contract. If you do not have a contract (which is common since all advertising deals are about ticking a check box on the website to accept terms and conditions), there are ways around that. If you are in that case, pm me.
The black market Sorry guys, I can’t do much for you officially. Not that I am judging you. I am a libertarian myself. It’s just already very difficult to onboard legit btc adopters, so the black market is a market I cannot afford to consider. My company is regulated so KYC and compliance are key for me if I want to stay in business. Behind each case I push forward I am risking the credibility and reputation I have built over the years. So I am sorry guys I am not risking it to make an extra buck. Your best hope is that crypto will eventually take over the world and you won’t need to cash out anyway. Or go find a Lithuanian bank that is light on compliance and cooperative.
The OTC buyer and the libertarian. Generally a very difficult case. If you bought your stack during your journey in Japan 5 years ago to a guy you never met again; or if you accumulated on https://localbitcoins.com/ and kept no record or lost your account, it is going to be difficult. Not impossible but difficult. We will try to build a case with everything else we have, and I may be able to onboard you. However I am risking a lot here so I need to be 100% confident you are legit, before I defend you. Come & see me in Geneva, and we will talk. I will run forensic services like elliptic, chainalysis, or scorechain on an extract of your wallet. If this scan does not raise too many red flags, then maybe we can work together ! If you mixed your coins all along your crypto history, and shredded your seeds because you were paranoid, or if you made your wealth mining professionally monero over the last 3 years but never opened an account at an exchange. ¯_(ツ)_/¯ I am not a magician and don’t get me wrong, I love monero, it’s not the point.
Cashing out ICOs Private companies or foundations who have ran an ICO generally have a very hard time opening a bank account. The few banks that accept such projects would generally look at 4 criteria:
*Seriousness of the project Extensive study of the whitepaper to limit the reputation risk
*AML of the onboarding process ICOs 1.0 have no chance basically if a background check of the investors has not been conducted
*Structure of the moral entity List of signatories, certificate of incumbency, work contract, premises...
*Fiscal conformity Did the company informed the authorities and seek a fiscal ruling.
For the record, I am not into the tax avoidance business, so people come to me with a set up and I see if I can make it work within the legal framework imposed to me.
First, stop thinking Switzerland is a “offshore heaven” Swiss banks have made deals with many governments for the exchange of fiscal information. If you are a French citizen, resident in France and want to open an account in a Private Bank in Switzerland to cash out your bitcoins, you will get slaughtered (>60%). There are ways around that, and I could refer you to good tax specialists for fiscal optimization, but I cannot organize it myself. It would be illegal for me. Swiss private banks makes it easy for you to keep a good your relation with your retail bank and continue paying your bills without headaches. They are integrated to SEPA, provide ebanking and credit cards.
For information, these are the kind of set up some of my clients came up with. It’s all legal; obviously I do not onboard clients that are not tax compliant. Further disclaimer: I did not contribute myself to these set up. Do not ask me to organize it for you. I won’t.
EU tricks
Swiss lump sum taxation Foreign nationals resident in Switzerland can be taxed on a lump-sum basis if they are not gainfully employed in our country. Under the lump-sum tax regime, foreign nationals taking residence in Switzerland may choose to pay an expense-based tax instead of ordinary income and wealth tax. Attractive cantons for the lump sum taxation are Zug, Vaud, Valais, Grisons, Lucerne and Berne. To make it short, you will be paying somewhere between 200 and 400k a year and all expenses will be deductible.
Switzerland has adopted a very friendly attitude towards crypto currency in general. There is a whole crypto valley in Zug now. 30% of ICOs are operated in Switzerland. The reason is that Switzerland has thrived for centuries on banking secrecy, and today with FATCA and exchange of fiscal info with EU, banking secrecy is dead. Regulators in Switzerland have understood that digital ledger technologies were a way to roll over this competitive advantage for the generations to come. Switzerland does not tax capital gains on crypto profits. The Finma has a very pragmatic approach. They have issued guidance- updated guidelines here. They let the business get organized and operate their analysis on a case per case basis. Only after getting a deep understanding of the market will they issue a global fintech license in 2019. This approach is much more realistic than legislations which try to regulate everything beforehand.
Italy new tax exemption. It’s a brand new fiscal exemption. Go to Aoste, get residency and you could be taxed a 100k/year for 10years. Yes, really.
Portugal What’s crazy in Europe is the lack of fiscal harmonization. Even if no one in Brussels dares admit it, every other country is doing fiscal dumping. Portugal is such a country and has proved very friendly fiscally speaking. I personally have a hard time trusting Europe. I have witnessed what happened in Greece over the last few years. Some of our ultra high net worth clients got stuck with capital controls. I mean no way you got out of crypto to have your funds confiscated at the next financial crisis! Anyway. FYI
Malta Generally speaking, if you get a residence somewhere you have to live there for a certain period of time. Being stuck in Italy is no big deal with Schengen Agreement, but in Malta it is a different story. In Malta, the ordinary residence scheme is more attractive than the HNWI residence scheme. Being an individual, you can hold a residence permit under this scheme and pay zero income tax in Malta in a completely legal way.
Monaco Not suitable for French citizens, but for other Ultra High Net worth individual, Monaco is worth considering. You need an account at a local bank as a proof of fortune, and this account generally has to be seeded with at least EUR500k. You also need a proof of residence. I do mean UHNI because if you don’t cash out minimum 30m it’s not interesting. Everything is expensive in Monaco. Real Estate is EUR 50k per square meter. A breakfast at Monte Carlo Bay hotel is 70 EUR. Monaco is sunny but sometimes it feels like a golden jail. Do you really want that for your kids?
Dubaï
  1. Set up a company in Dubaï, get your resident card.
  2. Spend one day every 6 month there
  3. ???
  4. Be tax free
US tricks Some Private banks in Geneva do have the license to manage the assets of US persons and U.S citizens. However, do not think it is a way to avoid paying taxes in the US. Opening an account at an authorized Swiss Private banks is literally the same tax-wise as opening an account at Fidelity or at Bank of America in the US. The only difference is that you will avoid all the horror stories. Horror stories are all real by the way. In Switzerland, if you build a decent case and answer all the questions and corroborate your case in depth, you will manage to convince compliance officers beforehand. When the money eventually hits your account, it is actually available and not frozen.
The IRS and FATCA require to file FBAR if an offshore account is open. However FBAR is a reporting requirement and does not have taxes related to holding an account outside the US. The taxes would be the same if the account was in the US. However penalties for non compliance with FBAR are very large. The tax liability management is actually performed through the management of the assets ( for exemple by maximizing long term capital gains and minimizing short term gains).
The case for Porto Rico. Full disclaimer here. I am not encouraging this. Have not collaborated on such tax avoidance schemes. if you are interested I strongly encourage you to seek a tax advisor and get a legal opinion. I am not responsible for anything written below. I am not going to say much because I am so afraid of uncle Sam that I prefer to humbly pass the hot potato to pwc From here all it takes is a good advisor and some creativity to be tax free on your crypto wealth if you are a US person apparently. Please, please please don’t ask me more. And read the disclaimer again.
Trust tricks Generally speaking I do not accept fringe fiscal situation because it puts me in a difficult situation to the banks I work with, and it is already difficult enough to defend a legit crypto case. Trust might be a way to optimize your fiscal situation. Belize. Bahamas. Seychelles. Panama, You name it. At the end of the day, what matters for Swiss Banks are the beneficial owner and the settlor. Get a legal opinion, get it done, and when you eventually knock at a private bank’s door, don’t say it was for fiscal avoidance you stupid ! You will get the door smashed upon you. Be smarter. It will work. My advice is just to have it done by a great tax specialist lawyer, even if it costs you some money, as the entity itself needs to be structured in a professional way. Remember that with trust you are dispossessing yourself off your wealth. Not something to be taken lightly.
“Anonymous” cash out. Right. I think I am not going into this topic, neither expose the ways to get it done. Pm me for details. I already feel a bit uncomfortable with all the info I have provided. I am just going to mention many people fear that crypto exchange might become reporting entities soon, and rightly so. This might happen anyday. You have been warned. FYI, this only works for non-US and large cash out.
The difference between traders an investors. Danmark, Holland and Germany all make a huge difference if you are a passive investor or if you are a trader. ICO is considered investing for instance and is not taxed, while trading might be considered as income and charged aggressively. I would try my best to protect you and put a focus on your investor profile whenever possible, so you don't have to pay 52% tax if you do not have to :D
Full cash out or partial cash out? People who have been sitting on crypto for long have grown an emotional and irrational link with their coins. They come to me and say, look, I have 50m in crypto but I would like to cash out 500k only. So first let me tell you that as a wealth manager my advice to you is to take some off the table. Doing a partial cash out is absolutely fine. The market is bullish. We are witnessing a redistribution of wealth at a global scale. Bitcoin is the real #occupywallstreet, and every one will discuss crypto at Xmas eve which will make the market even more supportive beginning 2018, especially with all hedge funds entering the scene. If you want to stay exposed to bitcoin and altcoins, and believe these techs will change the world, it’s just natural you want to keep some coins. In the meantime, if you have lived off pizzas over the last years, and have the means to now buy yourself an nice house and have an account at a private bank, then f***ing do it mate ! Buy physical gold with this account, buy real estate, have some cash at hands. Even though US dollar is worthless to your eyes, it’s good and convenient to have some. Also remember your wife deserves it ! And if you have no wife yet and you are socially awkward like the rest of us, then maybe cashing out partially will help your situation ;)
What the Private Banks expect. Joke aside, it is important you understand something. If you come around in Zurich to open a bank account and partially cash out, just don’t expect Private Banks will make an exception for you if you are small. You can’t ask them to facilitate your cash out, buy a 1m apartment with the proceeds of the sale, and not leave anything on your current account. It won’t work. Sadly, under 5m you are considered small in private banking. The bank is ok to let you open an account, provided that your kyc and compliance file are validated, but they will also want you to become a client and leave some money there to invest. This might me despicable, but I am just explaining you their rules. If you want to cash out, you should sell enough to be comfortable and have some left. Also expect the account opening to last at least 3-4 week if everything goes well. You can't just open an account overnight.
The cash out logistics. Cashing out 1m USD a day in bitcoin or more is not so hard.
Let me just tell you this: Even if you get a Tier 4 account with Kraken and ask Alejandro there to raise your limit over $100k per day, Even if you have a bitfinex account and you are willing to expose your wealth there, Even if you have managed to pass all the crazy due diligence at Bitstamp,
The amount should be fractioned to avoid risking your full wealth on exchange and getting slaughtered on the price by trading big quantities. Cashing out involves significant risks at all time. There is a security risk of compromising your keys, a counterparty risk, a fat finger risk. Let it be done by professionals. It is worth every single penny.
Most importantly, there is a major difference between trading on an exchange and trading OTC. Even though it’s not publicly disclosed some exchange like Kraken do have OTC desks. Trading on an exchange for a large amount will weight on the prices. Bitcoin is a thin market. In my opinion over 30% of the coins are lost in translation forever. Selling $10m on an exchange in a day can weight on the prices more than you’d think. And if you trade on a exchange, everything is shown on record, and you might wipe out the prices because on exchanges like bitstamp or kraken ultimately your counterparties are retail investors and the market depth is not huge. It is a bit better on Bitfinex. It is way better to trade OTC. Accessing the institutional OTC market is not easy, and that is also the reason why you should ask a regulated financial intermediary if we are talking about huge amounts.
Last point, always chose EUR as opposed to USD. EU correspondent banks won’t generally block institutional amounts. However we had the cases of USD funds frozen or delayed by weeks.
Most well-known OTC desks are Cumberlandmining (ask for Lucas), Genesis (ask for Martin), Bitcoin Suisse AG (ask for Niklas), circletrade, B2C2, or Altcoinomy (ask for Olivier)
Very very large whales can also set up escrow accounts for massive block trades. This world, where blocks over 30k BTC are exchanged between 2 parties would deserve a reddit thread of its own. Crazyness all around.
Your options: DIY or going through a regulated financial intermediary.
Execution trading is a job in itself. You have to be patient, be careful not to wipe out the order book and place limit orders, monitor the market intraday for spikes or opportunities. At big levels, for a large cash out that may take weeks, these kind of details will save you hundred thousands of dollars. I understand crypto holders are suspicious and may prefer to do it by themselves, but there are regulated entities who now offer the services. Besides, being a crypto millionaire is not a guarantee you will get institutional daily withdrawal limits at exchange. You might, but it will take you another round of KYC with them, and surprisingly this round might be even more aggressive that the ones at Private banks since exchange have gone under intense scrutiny by regulators lately.
The fees for cashing out through a regulated financial intermediary to help you with your cash out should be around 1-2% flat on the nominal, not more. And for this price you should get the full package: execution/monitoring of the trades AND onboarding in a private bank. If you are asked more, you are being abused.
Of course, you also have the option to do it yourself. It is a way more tedious and risky process. Compliance with the exchange, compliance with the private bank, trading BTC/fiat, monitoring the transfers…You will save some money but it will take you some time and stress. Further, if you approach a private bank directly, it will trigger a series of red flag to the banks. As I said in my previous post, they call a direct approach a “walk-in”. They will be more suspicious than if you were introduced by someone and won’t hesitate to show you high fees and load your portfolio with in-house products that earn more money to the banks than to you. Remember also most banks still do not understand crypto so you will have a lot of explanations to provide and you will have to start form scratch with them!
The paradox of crypto millionaires Most of my clients who made their wealth through crypto all took massive amount of risks to end up where they are. However, most of them want their bank account to be managed with a low volatility fixed income capital preservation risk profile. This is a paradox I have a hard time to explain and I think it is mainly due to the fact that most are distrustful towards banks and financial markets in general. Many clients who have sold their crypto also have a cash-out blues in the first few months. This is a classic situation. The emotions involved in hodling for so long, the relief that everything has eventually gone well, the life-changing dynamics, the difficulties to find a new motivation in life…All these elements may trigger a post cash-out depression. It is another paradox of the crypto rich who has every card in his hand to be happy, but often feel a bit sad and lonely. Sometimes, even though it’s not my job, I had to do some psychological support. A lot of clients have also become my friends, because we have the same age and went through the same “ordeal”. First world problem I know… Remember, cashing out is not the end. It’s actually the beginning. Don’t look back, don’t regret. Cash out partially, because it does not make sense to cash out in full, regret it and want back in. relax.
The race to cash out crypto billionaire and the concept of late exiter. The Winklevoss brothers are obviously the first of a series. There will be crypto billionaires. Many of them. At a certain level you can have a whole family office working for you to manage your assets and take care of your needs . However, let me tell you it’s is not because you made it so big that you should think you are a genius and know everything better than anyone. You should hire professionals to help you. Managing assets require some education around the investment vehicles and risk management strategies. Sorry guys but with all the respect I have for wallstreebet, AMD and YOLO stock picking, some discipline is necessary. The investors who have made money through crypto are generally early adopters. However I have started to see another profile popping up. They are not early adopters. They are late exiters. It is another way but just as efficient. Last week I met the first crypto millionaire I know who first bough bitcoin over 1000$. 55k invested at the beginning of this year. Late adopter & late exiter is a route that can lead to the million.
Last remarks. I know banks, bankers, and FIAT currencies are so last century. I know some of you despise them and would like to have them burn to the ground. With compliance officers taking over the business, I would like to start the fire myself sometimes. I hope this extensive guide has helped some of you. I am around if you need more details. I love my job despite all my frustration towards the banking industry because it makes me meet interesting people on a daily basis. I am a crypto enthusiast myself, and I do think this tech is here to stay and will change the world. Banks will have to adapt big time. Things have started to change already; they understand the threat is real. I can feel the generational gap in Geneva, with all these old bankers who don’t get what’s going on. They glaze at the bitcoin chart on CNBC in disbelief and they start to get it. This bitcoin thing is not a joke. Deep inside, as an early adopter who also intends to be a late exiter, as a libertarian myself, it makes me smile with satisfaction.
Cheers. @swisspb on telegram
submitted by Swissprivatebanker to Bitcoin [link] [comments]

Coin-a-Year: Nyancoin

Hello cryptocurrency lovers! Welcome to Coin-a-Year, the laziest series yet in the Coin-a-Day publishing empire. This year's coin is Nyancoin (NYAN). I originally covered Nyancoin in an article here in /cryptocurrency published January 4th, 2015.
Without (much) further ado, I'm going to include the original report next, unmodified. This is unlike my Coin-a-Week series, where I use strikeout and update in-text. Because this is going to be a longer update, I'll just make all further comments and updates below, just realize that all information below is as of January 4th, 2015 and thus is more than a year out of date as of posting now, at the end of February 2016.
Since I use horizontal rules as internal dividers in the original post, I'll use a double horizontal rule to divide the original text from this prelude and the following update.
Coin-a-Day Jan 4th
Welcome to the fourth installment of Coin-a-Day! To see convenient links to the introduction and the previous entries, please see /coinaday. Today's coin is Nyancoin (NYAN).
Summary
• ~173.6 million available currently [1]; 337 million limit [2]
• All-time high: ~0.000024 BTC on February 16, 2014 [1]
• Current price: ~3 satoshi [1]
• Current market cap: ~$1,275 [1]
• Block rate (average): 1 minute [1] [3]
• Transaction rate: ~25? / last 24 hours; estimated $3-4 [4]
• Transaction limit: 70 / second [5]
• Transaction cost: 0 for most transactions [6]
• Rich list: ??? [7]
• Exchanges: Cryptsy [8]
• Processing method: Mining [10]
• Distribution method: proof-of-work block rewards and 1% premine for "bounties, giveaways & dev support" [2] [10]
• Community: Comatose [9]
• Code/development: https://github.com/nyancoin-release/nyancoin ; there hasn't been a released code change in 10 months. The new developer has talked about some changes, but has not made a new release. He has given advice about how to keep the network running and operate the client. [10]
• Innovation or special feature: First officially licensed cryptocurrency (from Nyancat) [2]; "zombie"-coin [11]
Description / Community:
So you're probably wondering why in the world we're talking about a coin which has been declared dead and already written off. I actually first selected this coin to illustrate a "deadcoin", but the more I dug into it, the more I was amazed at the shambles I discovered. I am combining the description and community sections for this coin, because the community (or lack thereof) is the central issue for Nyancoin.
Substantially all, if not literally all, of the original infrastructure is gone. From the announcement post, the original website has expired. The nyan.cat site itself survives, but has no reference to the coin. The github repo remains, but then there was never much changed from the bitcoin/litecoin original. In fact, the COPYING file doesn't even list "Nyancoin Developers". None of the original nodes seem to be running anymore. @Nyan_Coin hasn't tweeted since July 6th. And that was just to announce posting an admittedly cute picture to facebook which makes a claim for a future which seems never to have developed. Of the original 15 pools, I think all are dead except p2pool, for which at least one node still supports NYAN. The original blockchain explorer, nyancha.in, is still running. The faucet is dead or broken. The original exchanges no longer list it (two of the three having died; SwissCEX having ended its trading as of the first of this year). And so forth.
And yet:

I'm not dead! I'm getting better!

No you're not, you'll be stone dead in a moment.
[Of course, that scene finishes with knocking out the "recovering" patient so he can be taken away...not to mention the absurdity of including Monty Python in a financial article, but moving right along.]
There is still just enough left to Nyancoin to keep it twitching, even if it is on life-support. Whether it's an individual node or whether it's a pool, there are blocks being produced at a steady rate as intended. Transactions are being processed. There is still a market. There is still a block explorer. And there is a dev. It is like a case study in the absolute minimum necessary to keep a coin alive. The most likely outcome is almost certainly a final collapse when one critical piece or another of the infrastructure goes away. And yet in the meantime, a person can own a million NYAN for $8 [12], and then move this coin quickly and easy, albeit with no particular external demand. It's like the world's most hyped testnet.
I think this case presents an interesting example of what happens to an altcoin when its initial support dries up. NYAN coin is more fortunate than some, actually, as there are some where there are no longer any nodes running it nor the original announcement thread (in fact, there was actually a second Nyancoin launched around the same time. But it died hard and its original announcement thread was deleted and at this point I would have no idea how to access it; so "Nyancoin" thus illustrates how hard a coin can die (Nyancoin 2) as well as how it can hang around despite being proclaimed dead, with far more justification behind that pronouncement than there has been for bitcoin (NYAN) ).
Footnotes
[1] http://coinmarketcap.com/currencies/nyancoin/
[2] https://bitcointalk.org/index.php?topic=402085.0 Regarding the premine, it's unclear to me where this money is now, since the original poster hasn't been active on BCT since May and the original site is down. However, given that it's only 1%, and about $25 in value right now, there seem to be more significant concerns for NYAN.
[3] http://nyancha.in/chain/Nyancoin - Nyan blockchain explorer; blocks are somewhat inconsistent but somewhere around the 1 minute average
[4] There doesn't seem to be anything automatically doing these stats, so I did visual inspection on about 1500 blocks (about one day) excluding the block generation reward (~250k/day). Most blocks are otherwise empty. I counted about 24 transactions or so scrolling through, with an outlier around 300k NYAN and another around 100k NYAN. In total, about 500k NYAN, excluding the block rewards. This is very approximately $3-4.
[5] Nyancoin is a basically unmodified, slightly out-of-date bitcoin as far as code goes, and ignoring the change in block rate and total coin supply, as well as the difficulty retarget after every block. So for purposes of estimating maximum possible transaction throughput, I start with bitcoin's estimated 7 transactions per second, and multiply by 10 for having a block on average every minute rather than every 10 minutes. In any event, this limit is not likely to be reached in the foreseeable future.
[6] Like bitcoin, transaction fees appear to be optional in Nyancoin. Unlike bitcoin, there is almost no transaction volume, and coins tend to sit for a relatively long time before being moved. So zero-fee transactions appear to be the norm from looking at a couple transactions on the block explorer.
[7] I couldn't find one. See the disclosure section of this article: your humble correspondent is likely represented in some way on a top 100 if one were to be made or if one exists, despite not holding it directly, depending on how the exchange holds it.
[8] I could not find any other exchanges still listing Nyancoin. SwissCex appears to have disabled it as of a couple days ago. Cryptsy has a notice that the NYAN/BTC market will be closing, but its NYAN/LTC market appears strong.
[9] Essentially all of the original sites, pools, faucets, etc. are dead and there has been very little to replace it. There is basically a single node, or perhaps a very few, which are running the blockchain. However, there is a developer still trying to hold things together, maxvall_dev, maxvall on BCT. He is the last hope for the NYAN.
[10] https://bitcointalk.org/index.php?topic=597877.0 This is the thread where maxvall took over as dev, and it also discusses switching to PoS, which hasn't happened as far as I know.
[11] "zombie"-coin: Not to be confused with ZMB (my god, does it ever end?). This is my term to describe a coin which is "undead": by rights it should be dead. And yet it's still walking around and acting like it's alive. What is it? What's going on? It's quite debatable whether this gives it any special value, but I find it an interesting state, and it's why this was chosen for early coverage. There are plenty of actually popular and successful coins, and we will go onto covering more normal selections; we're looking for variety rather than repetition. But I think this is an interesting example for what can go wrong, and yet in the midst of that, how little it takes for a coin to survive. In fact, it's almost like an alternate history bitcoin to me; this shows the concept that "it was run on one computer before; it can be run on one computer again" to some extent. And there are even some strange pragmatic benefits as well, like having no competition for getting a transaction into a block and thus zero transaction fees.
[12] And, in fact, the author chose to do so today, spending about 0.03 BTC for about 1 million NYAN.
Additional Reading
/nyancoins - Like NYAN: mostly dead, but not quite
http://nyan-coin.org/ - new official website
BCT thread listing nodes, xpool (p2pool), for mining information.
americanpegasus predicting in February that NYAN will hit $1; always an entertaining read
Giveaway
Instead of a challenge today, since NYAN has enough challenges, I decided I would give away 10,000 NYAN to at least the first ten people who ask for it. This still remains at my discretion, but honestly, if you really want, say, 50,000 NYAN and create four new accounts to do so, I'll probably be too amused to say no. I don't expect to get ten requests. If I get more, I'll probably still fulfill them, but as with everything else, this is left to my whim.
Donations and Disclosure
Okay, this is an important one today because of the tiny market here. I actually hold less USD value in NYAN than in BTC, DOGE, and PPC (although my value in PPC might be about equivalent actually), but I hold more of the total market in NYAN than any of those three. And I'll probably be buying more. So I have a conflict of interest in writing this article.
I am not providing financial advice and I do not make any recommendations of any sort on any matters. Make your own decisions; do your own research. Please, I do not want to hear about anyone doing anything "on my advice." I am not offering advice.
I personally hold just over 1 million NYAN on Cryptsy right now.
Perhaps it would be better if I didn't write any articles about anything I were invested inspeculating on, but I started this series for my own education to further my speculation, so unfortunately, dear reader, your needs come second to my own. tanstaafl; you get what you pay for, and I'm giving you my thoughts.
If by some strange quirk of fate you actually own NYAN and enjoyed this article and wished to donate some to me, K7Ho9HghBF6xWwS6JsepE6RAEPyAXbsQCV is mine (first non-empty account I've posted; transferred 1000 NYAN into here earlier from Cryptsy to test that the network and my wallet were actually working).
Thank you all for reading and commenting! I've already learned a lot from this process and I look forward to more!
Upcoming coins:
• January 5th: Nxt
• January 6th: Darkcoin
• January 7th: Namecoin
I'll use alphabetic labeling for footnotes in the updates to avoid any confusion with the footnotes in the original. For simplicity, unchanged items, like the 337 million limit and the 1 minute will not be mentioned, and we'll start with the summary changes.
Updates:
Summary
  • ~263.7 million NYAN currently exist [a]
  • Current price: ~7 satoshi [b]
  • Current market cap: ~$8,000 [c]
  • Transaction rate: ~185 / last 24 hours; ~3,300,000 NYAN (~$100) [d]
  • Exchanges: Cryptopia [e]
  • Community: We're not quite dead yet; in fact, I think we're getting better! [f]
  • Code/Development: I have an early draft of NYAN2, but I'm about six months past my initial goal for having it available to use. Life/work/lack of build machine/procrastination. NYAN2 will be a rebase onto a modern LTC codebase which will soft fork to fix a current vulnerability to a fork bug. For now, the network still runs on the same code that it did when I wrote the first article.
Discussion
I'm going to consider the community first, since I pointed it out as the weakness and central topic in the last one, then talk about the technical situation briefly, and then review the financial results.
The community has been excellent, if I do say so myself. We've got working infrastructure going thanks to the contributions of many Nekonauts (see [f]). Some original Nekonauts have returned or at least popped in from time to time, and new ones like myself have found Nyancoin (I would say given what I wrote in the original, I was still a skeptic of it at that point. Not that skeptics can't be Nekonauts, but I think I'd put my conversion to the cult of nyan shortly after writing that, even though I was already a nillionaire then for the heck of it.)
While I do look forward to seeing the community continue to grow in future years and consider that important, I don't think the community is our weakest point any longer; I think it's now our strongest point. I've tried to encourage the community's revival as best I could, including giving away tens of nillions in total, and lots of long rambling articles on my views on ethics and philosophy and frankly it's worked better than I would've really expected (or at least it has coincided with an effective recovery of the community). The community also helped me through at least a couple hard times personally in there as well.
The technical situation in Nyancoin is mostly unchanged but slightly improved, although with two additional known vulnerabilities. It's unchanged in that it's the same client. It's improved in that we have an active nyanchain explorer host (nyan.space), and we have a public draft of a plan for a soft forking security fix update in the near future (hopefully by the end of March (although I've slipped these deadlines before and may well miss March for release by a bit, I do think I'm inching closer now and then)).
The most serious vulnerability is to forking. This is the bug which hit Peercoin if I recall correctly. NYAN2 is intended to solve this through its soft fork from the LTC fix upstream (from the BTC fix upstream). In the meantime, we've been lucky we haven't been attacked. The tiny marketcap probably helps with not being a particularly attractive attack target. We're not exactly about to pay ransom to move faucet outputs. But that's no excuse; we want this fixed and should have it finally done "soon" (tm).
The less serious vulnerability is to a time warp attack in the difficulty function (Kimoto Gravity Well), which relates to general weaknesses it has and issues we've had with large gaps in the block chain because of spikes in the difficulty function causing it to be unprofitable and driving away most of the hash, and then low difficulty and price rise making it attractive to more hash, creating a spike and causing it again. While this is irritating, the chain still works, even if there are fits and starts at times. An important part of the reason I can get away with this is because there is at least one Nekonaut-supporting miner, CartmanSPC, who rescues us from time to time, and did so during the course of this article being written. We have a bunch of pools, but sometimes the hash just isn't there to get us unstuck when the difficulty goes high enough. Another part of the reason I consider it not an especially serious issue is because there's a workaround which works for me (classic bad developer logic): I use a large transaction fee (generally 337 NYAN, although I might have halved it after the most recent halving, I'll probably use 337 again) on my personal wallet by default. If necessary, I use a couple of them. It can make NYAN profitable to mine again despite the higher difficulty and "unstick" the chain. The difficulty function can go back down again in the next block if the gap has been long enough, so that can be enough to keep it going again for a while (although it can also get stuck again irritatingly fast at times). A fix for this will be putting in a better difficulty function for NYAN3, which will require a hard fork. This is tentatively scheduled for feature freeze around the middle of this year, coding to follow, activation sometime early 2017.
Financial has been our most disappointing performance. A graph of the 1 year performance right now on coinmarketcap looks pretty sad, showing our fall from a little over 60 satoshi down to around 7 satoshi now.
We rose too high, too fast, and I didn't stick with the safe high paying job like a sane person. Instead I hit the road, went to jail, and worked minimum wage. That doesn't sound like a sentence from a cryptocurrency financial review, does it? But the performance of NYAN since the article has been the story of my personal finances, which is the story of my life since then.
So, autobiographical coinaday interlude, trying to keep it generally to the most salient points. Well, in 2014 I had been on my way home to Minnesota from California when I was pulled over leaving Eureka, Nevada for speeding (got sloppy and went 45 approaching the 45 sign and thus technically still in the 35; bored cop seeing out-of-state plates). My vehicle reeked of weed, what with having been in Mendocino County previously with no intention of traveling out of the county much less state anytime soon but family emergency brought me back, and the end result was a citation for possession of cannabis and paraphernalia along with the speeding.
Fast forward to the beginning of 2015, I'm settled into a good software position and start looking more at cryptocurrency in my spare time. I write the coin-a-day series for a bit and then got annoyed and quit after a while when trying to do one a day on top of an actual job was too much for me (along with some annoyance over criticism; I can be rather thin-skinned at times). But I had gotten interested in Nyancoin, and started buying it up more and more with extra money I was making.
And then comes the crash. I had to stop putting as much in as I realized that where I was living and what I was working on wasn't going to work out for me and I needed to figure something else out. So, as I seem wont to do, I went on a roadtrip. I quit my job. And I went back for the court date for my citations and refused to pay, instead spending 10 days in jail rather than pay ~$1400 (I actually had the money in cash available to me if I chose to pay as a backup if I chickened out, but the judge annoyed me enough that I really preferred to be jailed instead of paying, as stupid as that sounds since I'm quite sure the judge didn't care in the least one way or another).
After that, I went back to roadtrip lifestyle for a while. It was a nice period. A lot of beautiful scenery; a lot of reading. Eventually, I busted up my car pretty badly...a couple times actually, the second time for good. Fast forwarding through the rest of the year, I worked a couple minimum wage jobs to pay bills and avoid cubicle life and kill some time until I figured out what I was going to do next. Just recently I quit as delivery boy after getting a speeding ticket (I swear, I'm not as horrible of a driver as this makes me sounds, although I have had a bad tendency to speed in the past, which I really have curbed to almost nothing; but I'm clearly not good enough) and am currently writing a Coin-a-Year article with a friend's incentive and applying to do documentation and development with the Nu project.
Okay, so what did any of that have to do with NYAN? Well, it's the mess of a life that has led to the fall of the price from 60 satoshi to 7 satoshi. If instead my life history for the time since the article had been simply "I was happily employed writing software", then I don't believe we would have dropped below 20 satoshi. It's easy to see in hindsight. If anyone can lend me a time machine, I'm sure I can get some condensed instructions which should improve performance significantly. Otherwise, just going to have more chalked up for the "character building" tally.
So, lessons learned if you are the major buy support for your coin: you need long-term reserves. Whatever you put in bids can be taken out in a moment by a dump for no apparent reason. This is particularly true if you may be quitting your cushy, high-paying job and wandering around without income for an extended period of time. Rather obvious, but hey, maybe someone else can learn from my mistakes. If I'd been bidding as cautiously as I am now from the beginning, I think the price would probably be somewhere from 10-20 satoshi now instead of around 7 satoshi.
It's especially unfortunate given that I wanted to be able to demonstrate the more consistent growth possible building a stable store of value, as opposed to the pump and dumps common in altcoins. And instead we had a pump-and-dump looking graph ourselves after I bid up higher than I was able to sustain, and a large (10+ nillion) instadump crashed the market all the way back down to 1 satoshi momentarily. We've had a few large (2+ nillion) dumps since, but nothing that large. We haven't generally had that large of bids though either.
It's hard to know when I've exhausted the supply at a price level, when it sometimes waits for a couple weeks or even more and then fills all the bids at once. But I want to maximize the minimum price paid because I think that's important for building confidence in a store of value long-term, which is one of my core goals for NYAN.
At the same time, we're still up from the lowest parts of the floor and where I found it. Since I own about 30% [g], the very cheapest supply has been taken off the market. I plan to keep on buying up "cheap NYAN" as much as I can. I've bought up to 60 satoshi before, I'll probably buy up that high this time around. I've got a token 100,000 NYAN ask at 300 satoshi; I hope never to sell lower.
Conclusions
Now I try to wrap it all together as if I saw this all coming and am the wise expert, despite having had about 90% drop in price in the last year after bidding too high. My original concept was taking the "minimum viable coin" and reviving it to a powerhouse as a textbook example in how to do it.
Part of my core concept in this is the arbitrariness of value: throughout history, humans have chosen any number of things as a store of value for the time: salt, large rocks, certain metals, disks, marked sticks, and so forth. While there has generally been a certain logic in the choice, in that there is a locally restricted supply in one way or another, and so forth, from the perspective of other centuries or cultures the choices can seem quite strange. Growing up, I was always struck by how strange the notion of salt being limited and valuable seemed in a world where people were trying to reduce intake and large amounts could be bought for trivial sums. And yet, a key nutrient necessary for life fundamentally makes more sense as being valuable than notched sticks or printed paper or a piece of plastic with some encoded information.
Humans have perpetually come up with stranger and stranger ways of storing and transferring value. Each new step, as always, comes with its own disadvantages and, frankly, has generally appeared nonsensical at best and fraudulent at worst to the status quo. Which doesn't mean that each new attempt is valuable. The gold bugs always like to point out that every fiat currency ultimately returns to its true value of zero. And the skeptics of cryptocurrency argue that all cryptocurrencies will eventually return to their true value of zero.
It's certainly possible. And it's possible the USD will hyperinflate someday. I tend to try the moderate view for a plausible guess of the future. By that type of logic, I would guess that over the course of decades, USD will in general lose value, and cryptocurrency will tend to slowly gain value. That might not seem the moderate view, but USD not losing value over decades would be truly shocking. And hyperinflation has been predicted since the USD went off the gold standard, or before. So some amount of inflation less than hyperinflation seems like the safe guess (but then, the Titanic arriving would also have seemed like the safe guess to me). And with cryptocurrency, I think it's clear by now the technology will continue to survive. So my first question is with what overall value as a market? It could go down, of course, but that seems unlikely in an already small, young market. Even if all the current crop die off and are replaced, whatever cryptocurrencies are around should be able to do better than a handful of billion in market cap in my view.
I believe that cryptocurrency has a bright future ahead of it. The best coins should ultimately survive and thrive. But I've been wrong on most of my major calls so far, like for instance when I thought BTC was over-priced around $5-$10.
I think Nyancoin can have an important role to play in the future of cryptocurrency in the years and decades to come, but it's a massively speculative long-shot. See also Nyancoin risks document. But like Linus Torvalds' autobiography, I try to keep "Just for Fun" as a core motto and principle. It's makes for a good hobby project because there will always be more to work on, with a core community motto of
TO INFINITY AND BEYOND!
Disclaimers / Sponsorship:
As I said before:
I am not providing financial advice and I do not make any recommendations of any sort on any matters. Make your own decisions; do your own research. Please, I do not want to hear about anyone doing anything "on my advice." I am not offering advice.
And I'll reiterate that I own about 30% [g] of the current supply of NYAN, which makes me by definition maximally biased.
Also, I'm not sure what's up with the address from the first post. It doesn't show up in my current wallet as a recognized address. So, anyhow, don't send there. :-) If you'd like to donate, please consider sponsoring a coin-a-day or coin-a-week article.
This is the first sponsored article. This Coin-a-Year article has been brought to you by spydud22 's generous patronage. I'd been meaning to do a Coin-a-Week article on Nyancoin for a while, but between wanting to "wait until the price recovered a bit" and general procrastination, then it seemed like it would make a good Coin-a-Year article, and then I wanted to wait until the price recovered a bit more...anyhow, so thank you spydud22, for causing me to finally do this. :-)
Footnotes
  • [a] nyan.space/chain/Nyancoin ; as of block 1091430, 263738786.71890615 NYAN outstanding. This is slightly over 50% more than the last report, which is what we would expect, since it had existed for about a year then, and has approximately annual halvings. The first year generated about 50% of total supply; the second year generated about 25% of total supply. We should expect in a year to have about 17% (one-sixth) more than we have now.
  • [b] https://www.cryptopia.co.nz/Exchange?market=NYAN_BTC ; this is the only market reflected in coinmarketcap and it is the primary one on which I trade. Cryptopia also has other base pairs which operate at significantly higher spreads (lower bids; higher asks) and have minimal volume. In the time since the last report, NYAN has traded as high as 60 satoshi (and briefly a little higher at times), but over the last almost twelve months since a peak about a year ago, the price has been generally declining overall, as a gross oversimplification of a lot of movements. This has been an effect of me not being able to keep buying as much and there being large dumps I wasn't expecting from time-to-time. Now I'm taking the approach of building large (one or more nillion (million NYAN)) bids on each price as I slowly work my way back up again in order to be able to handle possible dumps with less price shock.
  • [c] coinmarketcap.com/currencies/nyancoin/ ; as noted in [b], this only reflects the /BTC basepair on Cryptopia but that's where most of the volume is anyhow. Of course, the market is also not particularly liquid since I'm the primary buyer and have rather limited means currently.
  • [d] I haven't setup a script to count this yet, among many things on my to-do list for someday, so I went through by hand from what was the then-latest block of 1091430 on nyan.space back to 1089766 which was the first block generated less than 24 hours before. There was actually a three and a half hour block gap at that point, such that the next prior block was about 24 hours and 15 minutes before 1091430 while 1089766 was only about 20 hours and 45 minutes prior, and has a disproportionate number of transactions and value compared to a typical block (8 and ~313,000 NYAN respectively) from the build-up during the gap. But since that gap conveniently started right about at the start of the 24 hour period, doesn't really skew our results here.
Note that there are often times where the UTXO created during one transaction during the day is spent during a later transaction in the day. This can be considered the "same" Nyancoin being "spent" twice in the same day in our total. But in practice, I believe what's happening here is the faucet is breaking off small (10-50 NYAN) pieces from a larger (~40,000 NYAN) chunk, and so that pops up a bunch of times. So the total NYAN blockchain volume as counted for this topline number should not be interpreted as "NYAN spent in the day" but "NYAN moved on the chain", where the "same coin" can move many times. So it's a very easily gamed metric and not a strong / resistant metric like the market price tends to be (at least relatively speaking), but it's a fun number to calculate and provides a little bit of information.
The transaction count can also be easily inflated and certainly, for instance, having the faucet does generate transactions which are a very common transaction.
And this is also just an arbitrary 24 hour period compared to a previous arbitrary 24 hour period. Nonetheless, I do think there's clearly a bit more activity on the Nyanchain, even though the typical block is still empty and the number of transactions and volume is still tiny compared to the major cryptocurrencies.
Here's an arbitrary example of the faucet transactions Note the zero transaction fee, which I love that the miners support (the defaults are all quite low as well).
Here's an example of what may be the smallest transaction by NYAN volume of the day; but no, I followed its small, spent output, and it led to this gem which also links to this. I have no idea what's going on here, but it's hilarious and I love it. How's that for microtransaction support? :-)
  • [e] Obviously Cryptsy went down. We had had more than enough red flags with Cryptsy (including one time where I was able to withdraw 6 nillion more than I had in my balance) and got onto Cryptopia. spydud22 basically accomplished that for us, although I helped out in the tail end of the campaigning.
  • [f] Our community is still small (I wish there were literally dozens of us!) but we've had valuable activity from multiple people, including, just as highlights, vmp32k who hosts nyan.space, a clone of the original nyancha.in, jwflame who created the excellent nyancoin.info intro site, with the awesome status page (which currently notes that "the last 500 blocks actually took 111 minutes, which is approaching the speed of light, causing the universe to become unstable"), KojoSlayer who runs the faucet and dice, spydud22 who got us on Cryptopia, and many other Nekonauts have made worthy contributions, and the Nekonauts mentioned have done more than just that listed. So while we are small, we are active at least from time to time and technically capable.
Even though our posting rate is still around 1 post a day or so on average, and so still a relatively quiet subreddit (and it is our main (only?) hub), it's still a very noticeable and significant difference from how /nyancoins looked when I was reviewing it for the original piece here. Here's an attempt to approximate what was there using Reddit search ; archive.org has a snapshot on January 19th, 2015, which is well into the early revival mania and one from August 14th, 2014, before four and a half months of little to no activity. Apparently archive.org unsubscribed to /nyancoins in that interval itself...
  • [g] Maybe up to around 35% by now; maybe still around 30%. I haven't updated hodling report lately; it was 30% last time I recall, but I've bought more and more has been made since.
submitted by coinaday to CryptoCurrency [link] [comments]

The PHANTOM Technical Whitepaper[Version 0.1] The PHANTOM Team PHANTOM Technical Whitepaper V2 pass1

Abstract: PHANTOM software introduces a new blockchain structure that aims to increase transaction rates. Please note that Phantom's design allows it to double its transaction rate, adding hundreds of nodes to its network. As of this article, the Phantom network has multiple nodes. Copyright © 2018 Phantomblock No one may use, copy, or distribute any material in the White Paper without permission. Disclaimer: This Phantom Technical White Paper v2 is for reference only. The accuracy or conclusions of this white paper are not guaranteed, but this white paper (1) does not make or expressly waive all express, implied, statutory or other forms of representations and warranties, including but not limited to: marketability, suitable for a particular purpose, suitability, purpose, title, or non-infringement; (2) the contents of this white paper are error-free; and (3) they do not infringe the rights of third party. The block and its affiliates shall not be liable for any kind of damages resulting from the use, reference or reliance on this white paper or any content. It is excluded even if you are informed of the possibility of such damage. In no case will it be blocked. Any person or its affiliates are responsible for any damages, losses, liabilities, expenses or any prior individuals or entities. Any kind of purse, whether direct, indirect, consequential, compensatory, incidental, actual, exemplary, punitive or special, for the use, citation or reliance of this white paper or any content contained in this document including but not limited to any business loss, income, profit, data, use, goodwill or other intangible losses. Phantom is a redesign from scratch and has been researching and developing for more than 2 years. The cornerstone of Phantom's design is to divide the mining network into smaller parts. The agreed-upon group is called as fragment and each group can process transactions in parallel. If Phantom's network is 8,000 nodes, Phantom will automatically create 10 sub-networks, each with a size of 800, in a decentralized manner without a trusted coordinator. Now, if a subnetwork can agree on a set of (for example) 100 transactions at a time, then 10 subnetworks can agree on a total of 1 transaction and there are a total of 1,000 transactions. The key to secure aggregation is to ensure that sub-networks handle different transactions (without overlapping) without the need for double spending. These assumptions are similar to existing blockchain-based solutions. We assume that the mining network will have a small number of malicious nodes/identifiers with a total computational power of frac, which is(<1/4) of the entire network. It is based on a standard scheme, but it has a new two-level block chain structure. The algorithm has a highly optimized consensus algorithm. Phantom also provides an innovative, special-purpose smart contract language and execution environment that leverages the underlying architecture to provide large-scale and highly-efficient complications to the orbital platform. The smart contract language in Phantom follows the data flow programming style, in which smart contracts can be represented as directed graphs. The node is an operation or func. The arc between the two nodes represents the output of the first node and the input to the second node. Once all the inputs to the node are in effect, and therefore become a data stream, the nodes are activated (or operated). w Contracts are essentially parallel and suitable for decentralized systems, including simple calculations such as search, sorting, and linear algebraic calculations. Complex calculations such as training neural networks, data mining, financial modeling, scientific calculations, and general MapReduce tasks. The smart contract language in Phantom follows the data flow programming style, in which smart contracts can be represented as directed graphs. The node is an operation or func. The arc between the two nodes represents the output of the first node and the input to the second node. Once all the inputs to the node are in effect, and therefore become a data stream, the nodes are activated (or operated). w contracts are essentially parallel and suitable for decentralized systems, including simple calculations such as search, sorting, and linear algebraic calculations, and complex calculations, such as training neural networks, data mining, financial modeling, scientific calculations, and general MapReduce tasks. Background System settings and assumptions Smart contract layer Free Usage Easy to upgrade and failback Low latency Sequential performance Parallel performance Transaction confirmation Proof of transaction as a bet (Tapos) Named permission levels Permission mapping Evaluation privilege Default privilege group Privilege calculation Forced procrastination Parallel execution of application certainty Minimum communication delay Completeness and integrity Conclusion Background Blockchain technology was introduced in 2008 with the introduction of Bitcoin. Since then, entrepreneurs and developers have been trying to promote this technology to support a wider range of applications. Applications on f single blockchain platform. Although many blockchain platforms have difficulty in supporting decentralized applications, application-specific blockchains such as Bitshare Distributed Exchange (2014) and Steem's social media platform (2016) have become the heavily used blockchains for thousands of active users every day. They do this by increasing performance to thousands of transactions per second. The delay was reduced to 1.5 seconds, eliminating the cost per transaction and providing a user experience similar to that provided by existing centralized services. The existing blockchain platform has a huge burden and limited computing power, which hinders widespread adoption of blockchain. System settings and assumptions Entities in Phantom. There are two main entities Phantom: Users. Users are external entities that use Phantom's infrastructure to transfer funds or run smart contracts. Nodes of the Phantom consensus project running in the network are rewarded for their services. In the rest of this white paper, we used the terms miner and nodes interchangeably. Phantom's mining network is further divided into several smaller networks called fragments. A group called a DS node is assigned to a fragment, and this group of ds nodes is also referenced. As a DS committee, each fragment and DS committee has a leader. Leaders play an important role in Phantom's consensus agreement and the overall operation of the network. Each user has a public private key pair for a digital signature scheme. Each node in the network has a related IP address and a public key that is used as an identifier. Phantom has an intrinsic token called payings, or pays for short. Payings grants platform usage rights to users when it is used to pay for transactions or smart running. Regarding the contract in this white paper, any reference to amount, value, balance, or payment should be assumed to be pays antagonistic model. We assume that the mining network has a small fraction of Byzantine nodes/identities at any point in time. Its total computational power is at most a part of the entire network, where 0≤f<1 and n is the total size of the network. The factor is an arbitrary constant that is bounded by the selected parameter to obtain a reasonable constant parameter. We further assume that the honest node S is reliable during the operation of the protocol, and failed or disconnected nodes are calculated in the Byzantine fraction. The Byzantine node can deviate from the protocol, delete or modify the message, and send different messages to the honest node. In addition, all Byzantine nodes can be collocated. We assume that the total computational power of the Byzantine opponent is still limited to the standard cryptographic hypothesis of the probability polygon, nominally the opponent. However, we believe that information of honest node (in the case of network partitions) can be delivered to honest destinations after a certain constraint δ, but δ may change. The bound δ is used to ensure activity but not safe. If this timing and connection assumption is not satisfied, the Byzantine node may significantly delay the message (simulation c gain), or worse, "eclipse" the network. In the case of network partitions, according to the requirements of the CAP theorem, one can only choose between consistency and availability. In Phantom, we OOSE must be consistent and sacrifice usability. Smart contract layer Phantom provides an innovative, special-purpose smart contract language and execution environment that leverages the underlying architecture to provide large-scale and efficient computing. Platform, in this section, we will introduce the smart contract layer using data flow programming architecture. A. Using Data Flow Paradigm to Calculate Fragments Phantom's smart contract language and its execution platform are designed to take advantage of the underlying network and transactional segmentation architecture. The segmentation architecture is ideal for running calculations. Efficient work, the key idea is as follows: Only a subset of the network (such as fragmentation) can perform calculations. We call this method computational sand. Compared with existing smart contract architectures (such as Islien), ding requires a very different approach to handle contracts when Phantom calculates the fragments. In Phantom, each complete N requires ODE to perform the same calculation to verify the calculation results and update the global state. Although safe, this completely redundant programming model is a daunting e for running large-scale computations that can be easily parallelized. Examples include simple calculations such as search, sort, and linear algebra calculations, as well as more complex calculations. UCH is used to train neural networks, data mining, and financial modeling. Phantom's computational segmentation method relies on a new smart contract language. It is not Turing-complete, but for many applications, scalability is much better. The smart contract language Liqa follows the data flow programming style. In the data flow execution model, the contract is represented by a directed graph. The nodes in the figure are primitive instructions or operations. Tedarcs between two nodes of Derek represent data dependencies between operations, which is the output to the first operation and the input to the second operation. A node is activated when all its i are activated (or operated). Nput is available. This is in stark contrast to the classic von Neumann execution model (as used in Phantom), where instruction, regar is executed only when the program counter reaches it, regardless of whether it can be executed earlier. The main advantage of using the data flow method is that multiple instructions can be executed at the same time. Therefore, if several nodes in the graph are activated at the same time, they can be executed, d parallel. This simple principle offers possibilities for massively parallel execution. To see this, we show a simple sequential program in Figure 1a, which has three instructions, 1b, w and e, rendering the data stream variants. Under the Von Neumann execution model, the program will run in three time units: first calculate A, then B and finally C. The model does not capture the fact that the DB can be calculated independently. On the other hand, the data flow program can calculate these two values in parallel. Once A and B are available, the node that performed the addition is activated. When running on Phantom's slicing network, each node in the data flow program can ultimately be attributed to a fragment, or even a subset of nodes in a fragment. Therefore, the architecture is id. The EAL is used for any MapReduce-style computational task, where some nodes perform mapping tasks and another node can act as a reducer to aggregate the work done by each mapper. To facilitate the execution of data flow programs, Phantom's SMART contract language has the following features: Operate globally shared virtual memory space across the entire blockchain. The middle unit is locked in the virtual shared memory space during execution. In the process of submitting to the block chain, check the results of the middle point. B. Smart security budgeting In addition to providing the benefits of parallelism from the data flow computing model, Phantom also provides a flexible security budgeting mechanism for computing sharding. This feature is Ena. Computational resources in a blockchain network are segmented by coverage over a consensus process. Calculation fragment allows Phantom users and application running on Phantom specifies the size of the negotiation group to be calculated for each subtask. Then, each consensus team will be assigned to calculate the same subtask and produce results. User specified conditions. After accepting the results, for example, all members of the consensus group must produce the same result, or 3/4 of them must produce the same result, and so on. Users of applications running on Phantom can budget for how much she wants to spend on computing and security. In particular, users running a particular deep learning application may choose sp. When running more different neural network tasks, more gas costs will be ended instead of repeating the same calculations for too many nodes. In this case, she can specify a smaller consensus group to run each neural network calculation. On the other hand, complex financial modeling algorithms that require higher accuracy may require a consensus group consisting of more nodes to compute the critical values. Some algorithms are better protected against potential tampering and manipulation. C. Extensible application Phantom aims to provide a platform to run highly scalable calculations in multiple areas such as data mining, machine learning, and financial modeling. Self-supporting effective s intensive Turing-complete programs are very challenging, and there are public blockchains that support Turing-complete smart contracts (eg, Etal um), and Phantom focuses on specific applications, but today it did not meet the requirements. Calculations with parallel computational load: Scientific calculations of big data are a typical example where a large amount of distributed computing power is required. Moreover, these calculations have a high degree of parallelism, such as linear algebra operations on large matrices, searches for massive data, and simulations on large datasets. Phantom PRO calculation tasks are a cheap and short-term turnaround option. In addition, Phantom can be used as an off-the-shelf, highly reliable resource with a large amount of computation if appropriate incentive mechanism, computational segmentation and security budgets are available. Training of neural networks: With the increasing popularity and use of machine learning (especially deep learning), an infrastructure must be established that allows for deep learning models of trai. n is about large data sets. As we all know, the training of large data sets is crucial to the accuracy of the model. For this reason, Phantom's computational segmentation and streaming languages will be particularly useful for building machine learning applications. It will serve as a basic structure. You can run tools like TensorFlow by performing different calculations independently on the task group of the Phantom node, to calculate gradients, apply activation functions, calculate training losses, etc. The application of high complexity and high accuracy algorithms: Unlike the above applications, some applications, such as calculations on financial models, may require high-precision calculations. Any slight deviation in a part of the calculation may result in a significant loss of investment. Such an application can be in the consensus group with more task nodes in Phantom to allow them to cross. Giving each other's calculation results, the key challenge of offloading the computational tasks of such financial modeling algorithms to a common platform, such as Phantom is the concern of dat. About the privacy and intellectual property of the algorithm, first of all, we envisage that some of the well-known parts of this calculation can be placed in Phantom for efficient and secure calculations first, and future research and development of wh ILE will further strengthen the protection of data privacy and intellectual property rights for such applications.. One of the concepts we need is the cumulative weight of a transaction: it is defined as the sum of its own weight for a particular transaction plus the own weight for all transactions directly or in Indir. Approval of transaction: the algorithm of cumulative weight calculation. These boxes represent transactions, and the small numbers in the SE corner of each box represent their own transactions. Weights: bold numbers indicate cumulative weights. For example, transaction F is approved directly or indirectly by transactions A, B, C, and E. The cumulative weight of F is 9 = 3 1 31 1, w HICH is the sum of the self-weight of F and the sum of the weights of A, B, C, and E. D. More We define the weights and related concepts of the transaction. The proportion of the weight of the transaction and the node to which the issuing node invests: in current IM for Phantom, the weight may only assume a value of 3n, where n is a positive integer and belongs to a non-empty interval of acceptable values. In fact, I do not know how Wei has achieved good results in practice. The important thing is that each transaction has a positive integer whose weight is attached to it. In general, the idea is that the transactions with greater weight are more "i". It's more important than a small weight deal. To avoid spam and other attack patterns, it is assumed that no entity can generate a large number of transactions with “acceptable” weights in the sho. One of the concepts we need is the cumulative weight of a transaction: it is defined as the sum of its own weight for a particular transaction plus its own weight for all transactions directly or in Indir. Approve this transaction. The algorithm for calculating cumulative weights is shown below. These boxes represent transactions, and the small number in the SE corner of each box represents its own transaction. Weights, bold numbers indicate cumulative weights. For example, transaction F is approved directly or indirectly by transactions A, B, C, and E. The cumulative weight of F is 9 = 3 1 31 1, w HICH is the sum of the self-weight of F and the sum of the weights of A, B, C, and E. Let's define "hint" as an unapproved transaction in a confusion graph. In the top chaotic snapshot, the only hints are A and C, when new transaction X arrives and approves A and C in b. Tottom snapshot, X becomes the only hint. The cumulative weight of all other transactions has increased by 3, and the weight of X itself has increased its own weight. We need to introduce two additional variables to discuss the approval algorithm. First of all, for the entangled business site, we will introduce its: Height: The length of the longest directional path leading to creation; Depth: The length of the longest reverse path pointing to some tip. There is a height of 1 and a height of 4 because of the reverse path F, D, B, A, and D has a height of 3 and a depth of 2. In addition, let us introduce the concept of scores. By definition, a transaction is the sum of its own weights for all transactions approved by the transaction, plus the transaction's own weight. The only tips are A and C. Transaction A approves transaction B, D, F, and G directly or indirectly, so A's score is 1+3+1+3+1=9. Similarly, the score for c is 1+1+1+3+1=7. In order to understand the arguments presented in this article, one can safely assume that all transactions have their own weight equal to one. From now on, we insist on this assumption. Under this assumption, Transaction X's cumulative weight is 1 plus the number of transactions that directly or indirectly approve X, with a score of 1 plus direct or the transactions of I, being recognized indirectly by X-rays. We note that in the definitions of this section, cumulative weight is the most important measure, although height, depth, and score will be briefly entered in some discussions. E. Splitting attack The following attack scheme for the Phantom algorithm. Under high load conditions, an attacker can try to split kelp into two branches and balance them. This will allow these two branches to continue to grow. The attacker must place at least two conflicting transactions at the beginning of the split to prevent the honest node from effectively connecting, while referring to the branches. Then, the attackers hope that about half of the networks can contribute to each branch so that they can "compensate" for randomization. Volatility means a relatively small personal computing power. If this technique works, the attacker will be able to spend the same money on both branches. To defend against such attacks, we need to use a "sharp threshold" rule, which makes it too difficult to maintain the balance between the two branches. An example of such a rule is to select the longest chain on the bitcoin network. Let us turn this concept into an entanglement that is suffering from a splitting attack. Assume that the total weight of the first branch is 537 and the total weight of the second branch is 8528. If an honest node selection probability is very close to the first branch of 1/2, then the attacker is likely to be able to maintain the balance between these branches. However, if the probability of the first branch of an honest n ODE selection is much greater than 1/2, the attacker may not be able to maintain balance. It is not possible to maintain balance e between two branches. The latter case is due to the fact that after inevitable random fluctuations, the network will quickly select one of the branches and give up the other. In order for the Phantom algorithm, it is necessary to choose a very fast decay function f and initiate random walks at deeper nodes, making it very likely to start walking before branching. In this case, the random walk will select the “heavy” branch with a higher probability, even if the cumulative weights between the competing branches are very small. It's worth noting that due to network synchronization issues, the attacker's mission is very difficult: they may not know much of the recently released transactions. Another effective MET defense against splitting attacks is to allow a powerful entity to publish a large number of transactions on one branch at a time, thus rapidly changing power balance. Make it difficult for attackers to handle this change. If an attacker manages to keep the split, then the nearest transaction will have only about 50% of the confirmed trust (SectSect). The branches will not grow. In this case, the "honest" node may decide to start approving transactions that occurred before the fork, bypassing t. It has the opportunity to approve conflicting transactions on separate lines. One can consider other versions of the hint selection algorithm. For example, if two large subtle points are seen in a node, it will select a node with a larger sum of its own weights before performing the Phantom prompt according to the above selection algorithm. For the future implementation, the following ideas may be worth considering. We can make the transition probability defined in (13) depend on both hx-hy and hx, so that the next step of the third stage can be changed. Markov chains are almost deterministic when the walkers are in deep consensus, and become more random when the walkers approach the end. This will help to avoid entering weaker branches, while ensuring that when these two hints are selected, there is an uncertainty of randomness. End (plural of conclusion):
submitted by phantomusa to 195 [link] [comments]

The Nexus FAQ - part 1

Full formatted version: https://docs.google.com/document/d/16KKjVjQH0ypLe00aoTJ_hZyce7RAtjC5XHom104yn6M/
 

Nexus 101:

  1. What is Nexus?
  2. What benefits does Nexus bring to the blockchain space?
  3. How does Nexus secure the network and reach consensus?
  4. What is quantum resistance and how does Nexus implement this?
  5. What is Nexus’ Unified Time protocol?
  6. Why does Nexus need its own satellite network?
 

The Nexus Currency:

  1. How can I get Nexus?
  2. How much does a transaction cost?
  3. How fast does Nexus transfer?
  4. Did Nexus hold an ICO? How is Nexus funded?
  5. Is there a cap on the number of Nexus in existence?
  6. What is the difference between the Oracle wallet and the LLD wallet?
  7. How do I change from Oracle to the LLD wallet?
  8. How do I install the Nexus Wallet?
 

Types of Mining or Minting:

  1. Can I mine Nexus?
  2. How do I mine Nexus?
  3. How do I stake Nexus?
  4. I am staking with my Nexus balance. What are trust weight, block weight and stake weight?
 

Nexus 101:

1. What is Nexus (NXS)?
Nexus is a digital currency, distributed framework, and peer-to-peer network. Nexus further improves upon the blockchain protocol by focusing on the following core technological principles:
Nexus will combine our in-development quantum-resistant 3D blockchain software with cutting edge communication satellites to deliver a free, distributed, financial and data solution. Through our planned satellite and ground-based mesh networks, Nexus will provide uncensored internet access whilst bringing the benefits of distributed database systems to the world.
For a short video introduction to Nexus Earth, please visit this link
 
2. What benefits does Nexus bring to the blockchain space?
As Nexus has been developed, an incredible amount of time has been put into identifying and solving several key limitations:
Nexus is also developing a framework called the Lower Level Library. This LLL will incorporate the following improvements:
For information about more additions to the Lower Level Library, please visit here
 
3. How does Nexus secure the network and reach consensus?
Nexus is unique amongst blockchain technology in that Nexus uses 3 channels to secure the network against attack. Whereas Bitcoin uses only Proof-of-Work to secure the network, Nexus combines a prime number channel, a hashing channel and a Proof-of-Stake channel. Where Bitcoin has a difficulty adjustment interval measured in weeks, Nexus can respond to increased hashrate in the space of 1 block and each channel scales independently of the other two channels. This stabilizes the block times at ~50 seconds and ensures no single channel can monopolize block production. This means that a 51% attack is much more difficult to launch because an attacker would need to control all 3 channels.
Every 60 minutes, the Nexus protocol automatically creates a checkpoint. This prevents blocks from being created or modified dated prior to this checkpoint, thus protecting the chain from malicious attempts to introduce an alternate blockchain.
 
4. What is quantum resistance and how does Nexus implement it?
To understand what quantum resistance is and why it is important, you need to understand how quantum computing works and why it’s a threat to blockchain technology. Classical computing uses an array of transistors. These transistors form the heart of your computer (the CPU). Each transistor is capable of being either on or off, and these states are used to represent the numerical values 1 and 0.
Binary digits’ (bits) number of states depends on the number of transistors available, according to the formula 2n, where n is the number of transistors. Classical computers can only be in one of these states at any one time, so the speed of your computer is limited to how fast it can change states.
Quantum computers utilize quantum bits, “qubits,” which are represented by the quantum state of electrons or photons. These particles are placed into a state called superposition, which allows the qubit to assume a value of 1 or 0 simultaneously.
Superposition permits a quantum computer to process a higher number of data possibilities than a classical computer. Qubits can also become entangled. Entanglement makes a qubit dependant on the state of another, enabling quantum computing to calculate complex problems, extremely quickly.
One such problem is the Discrete Logarithm Problem which elliptic curve cryptography relies on for security. Quantum computers can use Shor’s algorithm to reverse a key in polynomial time (which is really really really fast). This means that public keys become vulnerable to quantum attack, since quantum computers are capable of being billions of times faster at certain calculations. One way to increase quantum resistance is to require more qubits (and more time) by using larger private keys:
Bitcoin Private Key (256 bit) 5Kb8kLf9zgWQnogidDA76MzPL6TsZZY36hWXMssSzNydYXYB9KF
Nexus Private Key (571 bit) 6Wuiv513R18o5cRpwNSCfT7xs9tniHHN5Lb3AMs58vkVxsQdL4atHTF Vt5TNT9himnCMmnbjbCPxgxhSTDE5iAzCZ3LhJFm7L9rCFroYoqz
Bitcoin addresses are created by hashing the public key, so it is not possible to decrypt the public key from the address; however, once you send funds from that address, the public key is published on the blockchain rendering that address vulnerable to attack. This means that your money has higher chances of being stolen.
Nexus eliminates these vulnerabilities through an innovation called signature chains. Signature chains will enable access to an account using a username, password and PIN. When you create a transaction on the network, you claim ownership of your signature chain by revealing the public key of the NextHash (the hash of your public key) and producing a signature from the one time use private key. Your wallet then creates a new private/public keypair, generates a new NextHash, including the corresponding contract. This contract can be a receive address, a debit, a vote, or any other type of rule that is written in the contract code.
This keeps the public key obscured until the next transaction, and by divorcing the address from the public key, it is unnecessary to change addresses in order to change public keys. Changing your password or PIN code becomes a case of proving ownership of your signature chain and broadcasting a new transaction with a new NextHash for your new password and/or PIN. This provides the ability to login to your account via the signature chain, which becomes your personal chain within the 3D chain, enabling the network to prove and disprove trust, and improving ease of use without sacrificing security.
The next challenge with quantum computers is that Grover’s algorithm reduces the security of one-way hash function by a factor of two. Because of this, Nexus incorporates two new hash functions, Skein and Keccak, which were designed in 2008 as part of a contest to create a new SHA3 standard. Keccak narrowly defeated Skein to win the contest, so to maximize their potential Nexus combines these algorithms. Skein and Keccak utilize permutation to rotate and mix the information in the hash.
To maintain a respective 256/512 bit quantum resistance, Nexus uses up to 1024 bits in its proof-of-work, and 512 bits for transactions.
 
5. What is the Unified Time protocol?
All blockchains use time-stamping mechanisms, so it is important that all nodes operate using the same clock. Bitcoin allows for up to 2 hours’ discrepancy between nodes, which provides a window of opportunity for the blockchain to be manipulated by time-related attack vectors. Nexus eliminates this vulnerability by implementing a time synchronization protocol termed Unified Time. Unified Time also enhances transaction processing and will form an integral part of the 3D chain scaling solution.
The Unified Time protocol facilitates a peer-to-peer timing system that keeps all clocks on the network synchronized to within a second. This is seeded by selected nodes with timestamps derived from the UNIX standard; that is, the number of seconds since January 1st, 1970 00:00 UTC. Every minute, the seed nodes report their current time, and a moving average is used to calculate the base time. Any node which sends back a timestamp outside a given tolerance is rejected.
It is important to note that the Nexus network is fully synchronized even if an individual wallet displays something different from the local time.
 
6. Why does Nexus need its own satellite network?
One of the key limitations of a purely electronic monetary system is that it requires a connection to the rest of the network to verify transactions. Existing network infrastructure only services a fraction of the world’s population.
Nexus, in conjunction with Vector Space Systems, is designing communication satellites, or cubesats, to be launched into Low Earth Orbit in 2019. Primarily, the cubesat mesh network will exist to give Nexus worldwide coverage, but Nexus will also utilize its orbital and ground mesh networks to provide free and uncensored internet access to the world.
 

The Nexus Currency (NXS):

1. How can I get Nexus?
There are two ways you can obtain Nexus. You can either buy Nexus from an exchange, or you can run a miner and be rewarded for finding a block. If you wish to mine Nexus, please follow our guide found below.
Currently, Nexus is available on the following exchanges:
Nexus is actively reaching out to other exchanges to continue to be listed on cutting edge new financial technologies..
 
2. How much does a transaction cost?
Under Nexus, the fee structure for making a transaction depends on the size of your transaction. A default fee of 0.01 NXS will cover most transactions, and users have the option to pay higher fees to ensure their transactions are processed quickly.
When the 3D chain is complete and the initial 10-year distribution period finishes, Nexus will absorb these fees through inflation, enabling free transactions.
 
3. How fast does Nexus transfer?
Nexus reaches consensus approximately every ~ 50 seconds. This is an average time, and will in some circumstances be faster or slower. NXS currency which you receive is available for use after just 6 confirmations. A confirmation is proof from a node that the transaction has been included in a block. The number of confirmations in this transaction is the number that states how many blocks it has been since the transaction is included. The more confirmations a transaction has, the more secure its placement in the blockchain is.
 
4. Did Nexus hold an ICO? How is Nexus funded?
The Nexus Embassy, a 501(C)(3) not-for-profit corporation, develops and maintains the Nexus blockchain software. When Nexus began under the name Coinshield, the early blocks were mined using the Developer and Exchange (Ambassador) addresses, which provides funding for the Nexus Embassy.
The Developer Fund fuels ongoing development and is sourced by a 1.5% commission per block mined, which will slowly increase to 2.5% after 10 years. This brings all the benefits of development funding without the associated risks.
The Ambassador (renamed from Exchange) keys are funded by a 20% commission per block reward. These keys are mainly used to pay for marketing, and producing and launching the Nexus satellites.
When Nexus introduces developer and ambassador contracts, they will be approved, denied, or removed by six voting groups namely: currency, developer, ambassador, prime, hash, and trust.
Please Note: The Nexus Embassy reserves the sole right to trade, sell and or use these funds as required; however, Nexus will endeavor to minimize the impact that the use of these funds has upon the NXS market value.
 
5. Is there a cap on the number of NXS in existence?
After an initial 10-year distribution period ending on September 23rd, 2024, there will be a total of 78 million NXS. Over this period, the reward gradient for mining Nexus follows a decaying logarithmic curve instead of the reward halving inherent in Bitcoin. This avoids creating a situation where older mining equipment is suddenly unprofitable, encouraging miners to continue upgrading their equipment over time and at the same time reducing major market shocks on block halving events.
When the distribution period ends, the currency supply will inflate annually by a maximum of 3% via staking and by 1% via the prime and hashing channels. This inflation is completely unlike traditional inflation, which degrades the value of existing coins. Instead, the cost of providing security to the blockchain is paid by inflation, eliminating transaction fees.
Colin Cantrell - Nexus Inflation Explained
 
6. What is the difference between the LLD wallet and the Oracle wallet?
Due to the scales of efficiency needed by blockchain, Nexus has developed a custom-built database called the Lower Level Database. Since the development of the LLD wallet 0.2.3.1, which is a precursor to the Tritium updates, you should begin using the LLD wallet to take advantage of the faster load times and improved efficiency.
The Oracle wallet is a legacy wallet which is no longer maintained or updated. It utilized the Berkeley DB, which is not designed to meet the needs of a blockchain. Eventually, users will need to migrate to the LLD wallet. Fortunately, the wallet.dat is interchangeable between wallets, so there is no risk of losing access to your NXS.
 
7. How do I change from Oracle to the LLD wallet?
Step 1 - Backup your wallet.dat file. You can do this from within the Oracle wallet Menu, Backup Wallet.
Step 2 - Uninstall the Oracle wallet. Close the wallet and navigate to the wallet data directory. On Windows, this is the Nexus folder located at %APPDATA%\Nexus. On macOS, this is the Nexus folder located at ~/Library/Application Support/Nexus. Move all of the contents to a temporary folder as a backup.
Step 3 - Copy your backup of wallet.dat into the Nexus folder located as per Step 2.
Step 4 - Install the Nexus LLD wallet. Please follow the steps as outlined in the next section. Once your wallet is fully synced, your new wallet will have access to all your addresses.
 
8. How do I install the Nexus Wallet?
You can install your Nexus wallet by following these steps:
Step 1 - Download your wallet from www.nexusearth.com. Click the Downloads menu at the top and select the appropriate wallet for your operating system.
Step 2 - Unzip the wallet program to a folder. Before running the wallet program, please consider space limitations and load times. On the Windows OS, the wallet saves all data to the %APPDATA%\Nexus folder, including the blockchain, which is currently ~3GB.
On macOS, data is saved to the ~/Library/Application Support/Nexus folder. You can create a symbolic link, which will allow you to install this information in another location.
Using Windows, follow these steps:
On macOS, follow these steps:
Step 3 (optional) - Before running the wallet, we recommend downloading the blockchain database manually. Nexus Earth maintains a copy of the blockchain data which can save hours from the wallet synchronization process. Please go to www.nexusearth.com and click the Downloads menu.
Step 4 (optional) - Extract the database file. This is commonly found in the .zip or .rar format, so you may need a program like 7zip to extract the contents. Please extract it to the relevant directory, as outlined in step 2.
Step 5 - You can now start your wallet. After it loads, it should be able to complete synchronization in a short time. This may still take a couple of hours. Once it has completed synchronizing, a green check mark icon will appear in the lower right corner of the wallet.
Step 6 - Encrypt your wallet. This can be done within the wallet, under the Settings menu. Encrypting your wallet will lock it, requiring a password in order to send transactions.
Step 7 - Backup your wallet.dat file. This can be done from the File menu inside the wallet. This file contains the keys to the addresses in your wallet. You may wish to keep a secure copy of your password somewhere, too, in case you forget it or someone else (your spouse, for example) ever needs it.
You should back up your wallet.dat file again any time you create – or a Genesis transaction creates (see “staking” below) – a new address.
 

Types of Mining or Minting:

1.Can I mine Nexus?
Yes, there are 2 channels that you can use to mine Nexus, and 1 channel of minting:
Prime Mining Channel
This mining channel looks for a special prime cluster of a set length. This type of calculation is resistant to ASIC mining, allowing for greater decentralization. This is most often performed using the CPU.
Hashing Channel
This channel utilizes the more traditional method of hashing. This process adds a random nonce, hashes the data, and compares the resultant hash against a predetermined format set by the difficulty. This is most often performed using a GPU.
Proof of Stake (nPoS)
Staking is a form of mining NXS. With this process, you can receive NXS rewards from the network for continuously operating your node (wallet). It is recommended that you only stake with a minimum balance of 1000 NXS. It’s not impossible to stake with less, but it becomes harder to maintain trust. Losing trust resets the interest rate back to 0.5% per annum.
 
2. How do I mine Nexus?
As outlined above, there are two types of mining and 1 proof of stake. Each type of mining uses a different component of your computer to find blocks, the CPU or the GPU. Nexus supports CPU and GPU mining on Windows only. There are also third-party macOS builds available.
Please follow the instructions below for the relevant type of miner.
 
Prime Mining:
Almost every CPU is capable of mining blocks on this channel. The most effective method of mining is to join a mining pool and receive a share of the rewards based on the contribution you make. To create your own mining facility, you need the CPU mining software, and a NXS address. This address cannot be on an exchange. You create an address when you install your Nexus wallet. You can find the related steps under How Do I Install the Nexus Wallet?
Please download the relevant miner from http://nexusearth.com/mining.html. Please note that there are two different miner builds available: the prime solo miner and the prime pool miner. This guide will walk you through installing the pool miner only.
Step 1 - Extract the archive file to a folder.
Step 2 - Open the miner.conf file. You can use the default host and port, but these may be changed to a pool of your choice. You will need to change the value of nxs_address to the address found in your wallet. Sieve_threads is the number of CPU threads you want to use to find primes. Ptest_threads is the number of CPU threads you want to test the primes found by the sieve. As a general rule, the number of threads used for the sieve should be 75% of the threads used for testing.
It is also recommended to add the following line to the options found in the .conf file:
"experimental" : "true"
This option enables the miner to use an improved sieve algorithm which will enable your miner to find primes at a faster rate.
Step 3 - Run the nexus_cpuminer.exe file. For a description of the information shown in this application, please read this guide.
 
Hashing:
The GPU is a dedicated processing unit housed on-board your graphics card. The GPU is able to perform certain tasks extremely well, unlike your CPU, which is designed for parallel processing. Nexus supports both AMD and Nvidia GPU mining, and works best on the newer models. Officially, Nexus does not support GPU pool mining, but there are 3rd party miners with this capability.
The latest software for the Nvidia miner can be found here. The latest software for the AMD miner can be found here. The AMD miner is a third party miner. Information and advice about using the AMD miner can be found on our Slack channel. This guide will walk you through the Nvidia miner.
Step 1 - Close your wallet. Navigate to %appdata%\Nexus (~/Library/Application Support/Nexus on macOS) and open the nexus.conf file. Depending on your wallet, you may or may not have this file. If not, please create a new txt file and save it as nexus.conf
You will need to add the following lines before restarting your wallet:
Step 2 - Extract the files into a new folder.
Step 3 - Run the nexus.bat file. This will run the miner and deposit any rewards for mining a block into the account on your wallet.
For more information on either Prime Mining or Hashing, please join our Slack and visit the #mining channel. Additional information can be found here.
 
3. How do I stake Nexus?
Once you have your wallet installed, fully synchronized and encrypted, you can begin staking by:
After you begin staking, you will receive a Genesis transaction as your first staking reward. This establishes a Trust key in your wallet and stakes your wallet balance on that key. From that point, you will periodically receive additional Trust transactions as further staking rewards for as long as your Trust key remains active.
IMPORTANT - After you receive a Genesis transaction, backup your wallet.dat file immediately. You can select the Backup Wallet option from the File menu, or manually copy the file directly. If you do not do this, then your Nexus balance will be staked on the Trust key that you do not have backed up, and you risk loss if you were to suffer a hard drive failure or other similar problem. In the future, signature chains will make this precaution unnecessary.
 
4. I am staking with my Nexus balance. What are interest rate, trust weight, block weight, and stake weight?
These items affect the size and frequency of staking rewards after you receive your initial Genesis transaction. When staking is active, the wallet displays a clock icon in the bottom right corner. If you hover your mouse pointer over the icon, a tooltip-style display will open up, showing their current values.
Please remember to backup your wallet.dat file (see question 3 above) after you receive a Genesis transaction.
Interest Rate - The minting rate at which you will receive staking rewards, displayed as an annual percentage of your NXS balance. It starts at 0.5%, increasing to 3% after 12 months. The rate increase is not linear but slows over time. It takes several weeks to reach 1% and around 3 months to reach 2%.
With this rate, you can calculate the average amount of NXS you can expect to receive each day for staking.
Trust Weight - An indication of how much the network trusts your node. It starts at 5% and increases much more quickly than the minting (interest) rate, reaching 100% after one month. Your level of trust increases your stake weight (below), thus increasing your chances of receiving staking transactions. It becomes easier to maintain trust as this value increases.
Block Weight - Upon receipt of a Genesis transaction, this value will begin increasing slowly, reaching 100% after 24 hours. Every time you receive a staking transaction, the block weight resets. If your block weight reaches 100%, then your Trust key expires and everything resets (0.5% interest rate, 5% trust weight, waiting for a new Genesis transaction).
This 24-hour requirement will be replaced by a gradual decay in the Tritium release. As long as you receive a transaction before it decays completely, you will hold onto your key. This change addresses the potential of losing your trust key after months of staking simply because of one unlucky day receiving trust transactions.
Stake Weight - The higher your stake weight, the greater your chance of receiving a transaction. The exact value is a derived by a formula using your trust weight and block weight, which roughly equals the average of the two. Thus, each time you receive a transaction, your stake weight will reset to approximately half of your current level of trust.
submitted by scottsimon36 to nexusearth [link] [comments]

Here is a transcript from the Ripple Consensus Presentation (May 22nd)

https://www.xrpchat.com/topic/5203-ripples-big-demo-and-why-you-missed-the-big-deal/?do=findComment&comment=49659
MY TRANSCRIPTION... 0:19
PATRICK GRIFFIN: All right I think we're gonna get started. There's total capacity. People at the door - there's a little room over here inside. There's chairs here - there’s chairs over here don't be shy. All right in case you don't know this, you are in “XRP In Action,” a live demo and expert Q & A.
I’m Patrick Griffin [with] David Schwartz and Stefan Thomas. We've got an hour today. We'll walk you through, we’ll do a quick round of introductions. Stefan is going to do a demo. We have a self-guided Q&A where I basically tee up some questions for these guys that will all be softballs don't worry! Then we'll turn it over to you guys to ask questions for the technical experts. Maybe we'll do it the quick round of intros, starting with Stefan:
1:07 STEFAN THOMAS: Yeah so, my name is Stefan Thomas I am CTO with Ripple. Before Ripple I was involved with BitCoin for several years and now I work on the vision and technical direction for Ripple.
1:22 DAVID SCHWARTZ: My name is David Schwartz. I'm the chief cryptographer at Ripple. I’ve been working on Ripple since 2011 and public ledger tech. Before that I was working on cryptographic messaging systems and cloud storage for government and military applications.
1:35 PATRICK GRIFFIN: I am Patrick Griffin. I’m the head of business development. I don’t know why I’m up here, but there’s our CTO and our head of cryptography, but actually I think we are the, to be honest here, I think we are the, we are the one two and three first employees of Ripple. Well, two one and three. We've been here for quite some time and it's been a long journey. So why don't we first start off with the demo and I think I'll tee it up: This is a demo that demonstrates our technical our technology start of the inter ledger protocol, moving payments in and out of XRP and Stefan will do a better job of articulating what you are about to see.
2:22 STEFAN THOMAS: All right thanks Patrick. So here we're gathered to have a quick round table on XRP. I want to go through the demo pretty quickly so we can get to the actual discussion Q&A which I thin is the meat of this session. Basically, what we're trying to do at Ripple is we're trying to make money move like information. This has been our mission since day one, and it has never changed and so we're building a number of different technologies that all integrate to make this vision a reality. And so what we think about how information actually moves I think it's really it's really this chart that captures it.
So what's happened is that the cost of moving information has really declined over the last couple decades and very strongly so. And as a result the volume of information that’s been moving has exploded. And so, very often you know, our customers will be talking to me about, you know:
Oh are you focused on corporate payments? Are you focused on consumer payments?
I think what you have to realize is that we're somewhere down here in that curve and so you know when you say like two-thirds of all payments are corporate payments you're really talking about two-thirds of almost nothing. I think what we're focused on is this growth that you can create if you increase the efficiency of the system enough.
And so the way that we're kind of approaching that is we want to streamline the way that liquidity works today. So today you have 27 trillion dollars in float sitting around the world that is essentially there to facilitate real-time payments when the underlying systems are not real time.
3:59 STEFAN THOMAS: So, for instance, I swipe my credit card somewhere there has to be an actual creditor or money available to pay that merchant if that's supposed to happen instantly if the underlying money can't move in real time. And so that's been the case ever since we were using gold and fiat currencies in order to move money internationally, but with digital assets there's actually opportunity to improve upon that and actually move real assets in real time.
So if you have something like XRP you don't need to pre-fund float all around the world. You can actually just have this digital asset and if you want to transfer value to somebody, you want to transfer value internationally, you can just transfer that asset and that moves instantly okay?
4:40 STEFAN THOMAS: So that's really the improvement. So with that I want to give you sort of a case example in a demo. This is something that already happens on blockchains today where there are money sources business that are using, businesses they're using block chain in order to move funds so they might sort of offer this as a service to small and medium businesses where if I want to let's say pay somebody in a different country I can go to one of these companies and they will move that money for me.
5:09 STEFAN THOMAS: So, in this example, we're kind of pretending that we're a publisher, we have a reporter in the field. and we’d like to pay them. And so, you know we don't really build apps, but we enable banks and other money service businesses to build apps on top of our platform. So this is kind of a mock-up that we’ve developed where, you can imagine, this would be just built into the the particular app of that company. And so I can basically pick any amount, so let’s say I want to send, say $7, and what happens is that you can see is that amount updates so what happens during that time is that we actually try to find the cheapest path from where the sender is to which are provided at the recipient uses and then once we found that cheapest path, we figure out what the exact cost is going to be, so we have that transparency upfront. What is the cost of this payment and this is all powered by the open source protocol InterLedger. Now, when I send this payment, it goes through right away. I don't have to wait for a ton of confirmations and so on.
6:11 STEFAN THOMAS: So let's talk a little bit about what is happening there in the background. So first, we basically look at the topology of the network and then we try to find a path. So say it found a path through XRP. Once we select the path, we basically send a code request to figure out what we think that cost is going to be and then we send the money through in two phases as per InterLedger Protocol, and that's enabled on XRP using a feature called escrow that we just launched earlier this year and so now XRP is it's fully InterLedger enabled.
6:50 STEFAN THOMAS: So, if we look at the kind of a cost calculation, this is kind of some fictional numbers but it's correct in terms of order of magnitude, right. So you have Bitcoin, you have Theory, we have XRP, we have Swift, and so our algorithm basically goes in and it tries to select the best option and so people often ask me like why does InterLedger help XRP? or why are you guys working on InterLedger as a completely neutral protocol when you actually have this vested interest in XRP?
7:18 STEFAN THOMAS: Well, because the reason is that XRP is right now by far the best digital asset but it's not being used as much as Bitcoin, for instance, and so in order to close that gap we want to get to a point where the selection of asset is kind of automated and you have algorithms to just pick the best one in which case, right now, XRP would get picked all the time. So that's why we have such a vested interest in just enabling more efficient selection. All right. So as you can see, it's the lowest fee right now and it’s the fastest turn right.
7:48 STEFAN THOMAS: Now, going a little bit further into the future, I was kind of talking about that huge explosion in volume and I think where that comes from is completely new user inter faces that we don't necessarily think about today. So one example would be, you have something like a publisher and a reader and a reporter and the reader is actually browsing an article and they're not having to sign up and go through a paywall in order to do that Their browser just pays them on their behalf automatically and then as a publisher I can see the money sort of coming in, in real time as users are browsing my website. And so you're basically providing the sort of metered access to your content. There's just one example. I think there's a lot of cases of APIs and other parts the industry that could benefit from micro-payments as a more granular way of transacting. So I don't have time to talk about that, but with that I hope you've got sort of a taste of both what XRP looks like today as well as what the future holds in terms of doing micro payments through payment channels, and so on, on InterLedger. So with that, I'll hand it over to Patrick to start the discussion.
9:00 PATRICK GRIFFIN: Very cool. So maybe it’s worth stepping back and also looking at our company strategy and having a conversation around what it means when we talk about an Internet of Value, which I think well this is a Silicon Valley company and for most people that doesn't mean a whole lot so maybe we can take a first stab at trying to explain what is an Internet of Value and Stefan, I’ll start with you. Actually, why don’t we start with David and give you a break.
9:24 DAVID SCHWARTZ: Yeah, so what is the Internet of Value and what are we working on? Well, the Internet has brought connectivity to billions of people around the world. They have smart phones. They have easy access to the movement of information but money is still siloed. It's still trapped in systems that don't talk to each other. Moving payments are expensive. They're slow. There's high friction. There's trillions of dollars that moves across borders and that's moved mostly by financial institutions, and we need to move that money more efficiently. We need to know where it is. We need to improve that flow.
10:02 DAVID SCHWARTZ: I don't know if any of you have made international payments or most of you have on traditional systems and you know that it's very hard to know where that money is. It’s very hard to know how much it's going to cost you ahead of time. The user experience is not great. A significant fraction of those payments fail. It takes several days. It's almost easier to ship money than it is to use our existing payment system. So we want to provide an Internet of Value where there is instant payment. Payment on demand, without failure. When you know ahead of time how much money is going to deliver. You know what path is going to take and because that transaction is set up using modern internet protocols you know ahead of time exactly what the requirements are at the destination so you don't have a failure because you didn't have the right information at the beginning.
10:45 STEFAN THOMAS: Yeah so um whenever I think of the Internet of Value, I think the number one thing that happened with the internet was that it kind of commoditized reach. So, before the Internet, if you wanted to be an online service provider like AOL or CompuServe the number one thing that you needed to have in order to be competitive is a lot of users. And if the main thing you're competing over is just having a lot of users it's very hard to get into that market for obvious reasons because you start out with zero users so how do you attract the first couple? But once you have something like the internet where all the different networks are actually tied together, suddenly the number of users you have is completely irrelevant, right? Because all of the networks are tied together you can reach all the websites, you can email all the people on the internet and so the competition has to be about something else and what does it become about? It becomes about about the efficiency of the system.
11:35: STEFAN THOMAS: And so, this fundamental transition has not happened with money yet. Like right now the the biggest consumer payment systems are things like Visa and MasterCard and they're very much competing on: We’re the biggest. We have the most merchants. We have the most customers, and so how are you going to compete with us, right? We would not even have to try to be efficient, necessarily, right? Because we're only competing with each other. It's very hard to get into that market, and so what we're trying to do with InterLedger, by creating an internet working protocol we're allowing you to go across multiple hops across multiple steps through the financial system and as a result you can tie a lot of smaller providers, a lot of smaller banks together and as a result make a system that’s much more competitive.
12:15: PATRICK GRIFFIN: I’ll just add my two cents in. I when I talk about the Internet of Value with customers it's typically the conversation on the cost and opportunities and for us you know, one of the analogies it's overused in the internet I think the Internet of Value, at least for me, is the function of bringing the marginal cost of payment processing down to as close to zero as possible. Now you can do that in one of two ways: Lower the cost of payment processing. Just for the sake of conversation these two things are 50/50. Payment processing: the messaging going between institutions and the cost of reconciling transactions as they go from one siloed network to another siloed network. Those are huge costs that the system currently bears just as a function of tracking down lost payments or fixing mistakes and broken transactions.
13:00 PATRICK GRIFFIN: Something like 12% of all international wires fail. That is an astonishing number if you come from Silicon Valley where you're typically used to five nines of reliability. The financial system isn’t working even with one nine of reliability. The other side of the equation so that it’s a processing function. We are able to achieve better processing by starting that sort of settlement layer, it’s a little bit academic, but then ultimately what our customers are buying from us today is just a payment processing capability.
13:30 PATRICK GRIFFIN: The second stool, leg of the stool, if you will, this two-legged stool, for this Internet of Value, is liquidity. And this iquidity cost is a huge component of the payments that infrastructure today. And so, when you think about the cost that you pay when you wire money internationally, it's not just processing costs and fees. Banks and financial institutions and payment processors have to cover their cost of capital. They are laying out a massive amount of cash in different overseas accounts to make sure that when you send a payment to Japan there's cash on hand in Japan to service your payment.
14:05 PATRICK GRIFFIN: The whole visual that we saw here with XRP that's really where we see there being a large opportunity to bring the liquidity costs down if you can fund your payment instantly on demand without pre-floating cash or opening up credit lines with your counter-parties you can really bring down this component of that cost so those two things together in my mind at least that's that is what really comprises the internet of value. You tackle those two things: processing and liquidity really starts to open up and level the playing field. And on leveling the playing field maybe a question back to you Stefan is and a little bit about the strategy so as we go out and roll out these new APIs for bank to bank or financial institution processing, this narrative around using the digital assets upon payment certainly there's no reason why you couldn't insert Bitcoin in there or Etherium or some other digital assets do you view this as maybe leveling the playing field for all digital assets and creating an opportunity for other digital assets to come in and basically compete for that case?
STEFAN THOMAS: 15:12 Yeah so, we definitely look at it as as a way to create more competition I think that I'm just looking at the market today, most of the digital assets out there are not really designed for enterprising spaces, right? There they're coming from a background of direct to consumer use. They're kind of designed in a way that maybe isn't always necessarily totally in line with how regulators think about the financial system and as a result it’s quite difficult for companies to use these assets, so I think maybe some of people in the room are Bitcoin entrepreneurs and so you may know some of these struggles and you know some of these difficulties of using an asset like Bitcoin. I think you know me, speaking as CTO, more from the technical side, there are definitely big differences between the different digital assets, and so if you look at things like settlement speed on Ripple you get below four seconds most of the time four seconds on average. On Bitcoin you have to wait nine minutes between just to get one confirmation.
16:14 STEFAN THOMAS: There's things like finality. On Ripple when you get one confirmation you can hundred percent trust it, it cannot get reversed because the set of validators that are known so it can't be some validator you've never heard of suddenly coming up with a different answer. Whereas on Bitcoin, there can always be a longer chain that you just haven't heard of yet so you have to wait for multiple confirmations to gain more confidence. Another difference is that you know Ripple is non-deterministic and so bitcoin is is random so what that means is that the actual delay between blocks on Ripple is pretty consistent. It's four seconds with the standard deviation of 0.8 seconds so it's almost always exactly four seconds. And so, with Bitcoin it's more variable, right? So you could have a block after a minute. You can have a block after half an hour. And so, it's much harder for businesses to kind of rely on a system that has that high variability because it increases your risk as you holding an asset.
17:12 STEFAN THOMAS: So these are just some examples of why we think that XRP is best suited for payments use cases. And I think I'll give, be giving a talk later today on on going into a bit more depth on some of these differences
17:28 DAVID SCHWARTZ: And and we're not afraid of a level playing field. As Stefan said we think we can succeed on a level playing field but also you can get people to build a level playing field. It's very hard to get other people to stand behind something that has a built-in bias in favor of one company. Twitter doesn’t, it doesn't mind the fact that the internet wasn't built for Twitter. Facebook doesn't mind. They like the fact that there's an open platform that everybody can support and use and they're willing to compete on that level playing field and if they lose on that level playing field you know, so be it, somebody else will win and the world will be a better place for it. We believe that we have the advantages today and we believe that we can get the industry behind an open standard that facilitates these types of instantaneous payments.
18:07 PATRICK GRIFFIN: So David, this is a question coming back to you. In this level playing field obviously there are digital assets can compete on different characteristics. Obviously I think that Bitcoin as scalability challenges have been I think very famous recently could you comment a little bit on Bitcoin’s recent lows some of the things that have come up around resiliency scalability and maybe draw a contrast to XRP and how XRP is working.
18:32 DAVID SCHWARTZ: Sure. I think the idea that you don't need governance. The idea that you can just have this decentralized system that magically government itself doesn't really work. The internet is a decentralized system it has governance. Bitcoin currently is experiencing a little bit of a governance failure due to with dis-alignment of incentives. Historically the minerss have had an incentive to keep the system working. Everybody needs the Bitcoin system to work, whether you hold, whether you try to do payment’s, whether you're mining. This system has to work or nobody has anything. Everybody's benefited from the value of Bitcoin going up. If you’re a miner, you want the value to go up. If you hold Bitcoin, you want the value to go up. If you're using it for payments having more liquidity and lower risk and holding bitcoins is good for you.
19:11 DAVID SCHWARTZ: So everybody's incentives were aligned. They're starting to become dis-aligned recently because miners have been getting a lot of revenue from transaction fees Miners like high transaction fees. Users obviously would prefer to pay less for their payments. People who want to use Bitcoin as a payment platform want frictionless payments and they're not getting them because of the fees. So there's been a little bit of a governance breakdown due to that misalignment of incentives and it's not clear how you resolve that. It's not really clear how the stakeholders can realign their incentives.
19:39 DAVID SCHWARTZ: I’m confident that Bitcoin will come out come through it but I think it shows that governance is important. You should understand how a system is governed whatever system it is because there is going to have to be governance. It’s not going to magically govern itself. Now Ripple, the stakeholders are the validators and the validators are sort of chosen by the other validators, so right now Ripple is obviously very big in that space. We’re the major stakeholder on the network, but the recent interest into the price increase has begun diversifying the stakeholders and so we hope to see different jurisdictions, different companies and those will be the people who will be the stakeholders and they'll make the decision if there are going to be changes in the rules behind in that market. We think that that will work better and I think if you, once you accept that there has to be governance, you really want it to be the people who are using the network. You don't want the technology to force you into having other stakeholders whose interest may be adverse to the people who just want to use the system to store value and make payments.
20:32 PATRICK GRIFFIN: So what stuff, I mean do you have anything to add just in terms of the underlying design of the systems and how they're confirming transactions? I think when you go way way way back to our company's beginning it was billed as Bitcoin 2.0. And you know we felt like there was another way you could build a decentralized digital asset without without mining. So maybe talk a little about the confirmation engine behind XRP and some of its advantages over other systems
21:04 STEFAN THOMAS: Yeah, so as I mentioned in the introduction, I was fairly involved in the in the Bitcoin community back in 2010-2011 and one of the features that I contributed to was paid to script hash as a reviewer it was one of the first people to re-implement Bitcoin and I pointed out some flaws and you know we ended up with a much better solution. And so, through that experience going through the cycle of new feature on Bitcoin, even back then when the committee was much smaller I realized that it was actually very painful to do even a uncontroversial improvement to the system and that was partly because people had a very strong tendency to be conservative which is a good thing, for any, like whenever you're modifying a live system. But there was also just like no good process for introducing changes.
22:00 STEFAN THOMAS: We had to come up with a process ad hoc. We came up with this whole voting on mining power and so on. Now, from that experience I remember going back to a wiki page on the big part of working called the hard fork wish list and I kind of looked at and is sort of the list of things other things that we wanted to do and a lot of them were in my opinion, in my humble opinion, must haves for any kind of mainstream or enterprise adoption and so I was kind of like putting numbers next to them like this would take eight months this would take 12 months this would take two years and it started to add up like I'm not going to see this get to that point if we go at this rate.
22:38 STEFAN THOMAS: And then you know Ripple approached me and they had a lot of that hard fork wish list already implemented but maybe more importantly they had a different idea on the governance structure and I think there's sort of two key differences: The first key difference is there is an entity that's actually funding the development of the asset and all the technology behind the asset. And so you know, I was looking at the Bitcoin foundation website the other day and they're currently, their most recent blog post is to promote this lawsuit in New York to try to strike down the bit license and apparently the foundation feels that it's strategically important for Bitcoin to kind of fund this lawsuit and they looked at how many people had actually donated to the donation address that they were giving and it was just over a thousand dollars basically. Almost nothing
23:31 STEFAN THOMAS: And I was thinking like well if XRP you know had any strategic issue like that there would be millions of dollars immediately that just Ripple would put behind the issue and so as a holder of the asset that's really important for me to know that, you know, there is some some entity that's actually defending it from a technical standpoint, from a legal standpoint, from a business standpoint. That makes a big difference
23:53 STEFAN THOMAS: And then the second big difference that I saw was how features and how generally the evolution of the technology is managed. So on Ripple, there's voting among the validators, which is not too dissimilar from you know the kind of mining voting that we're doing on Bitcoin. However the validators on Ripple are largely chosen by the users or they are chosen by the users. And so they're not chosen by so this algorithm or just by their virtue of being very efficient in mining. And so as David pointed out earlier, the incentives are very different. On Ripple, the incentives are you know I want the people who are appointing me to be validators to be happy with my validations because otherwise you know there's what they will stop paying me. And so you know there's a much more closely aligned incentive for the value of some Ripple to do what the actual users want to do.
24:46 DAVID SCHWARTZ: And I would add that there there are sort of vulnerabilities in both types of systems. Like with the miners, it would be a double spend. With the validators, they could simply stop validating and the network would halt, but one tremendous difference is that you know how to fix one and it's not clear how you would fix the other so if you had the miners that were being pressured, let's say by a friend in government, or they were double spending or for whatever reason they are holding transaction fees high, let's say the block size issue got to the point where it was absolutely critical and there was no ability to come up with an agreement. It's not clear how you solve that. You change the mining algorithm? Like that's the nuclear option? Nobody knows what you do. With the system on consensus it is clear what you do. You can, you can change the validators. The validators work at the pleasure of the users, the holders, the real stakeholders of the network.
25:33 DAVID SCHWARTZ: That, I think that is a fairly significant advantage once you realize how important governance is. And it's not just a handle of failure as Stefan pointed out there's going to be evolution of the system unless you think the systems are absolutely perfect today. Well bitcoin is already proven that there they're not absolutely perfect today. I can’t, I certainly wouldn't try to claim the Ripple is perfect today. We have a wish list of features too, limited by engineering time, but we have to get people to agree to implement those features and I think that's also an argument why you can't have one blockchain to rule them all. There are features that also have costs and every feature has a cost because if you have a public blockchain everybody that uses that public blockchain, at a minimum, when there's a new feature they have to do a security review and make sure that that feature doesn't create a vulnerability for them. So there's a fixed cost that's fairly high. There's a huge bug bounty on Bitcoin and on Ripple right? Billions of dollars if you could steal money on the system. So the cost to implement a feature is high. So if there's a feature that somebody really wants it would be really useful for them they're probably not going to get that's not enough to get any feature on the system, so you're going to have a diversified system of multiple block chains and multiple ledger systems of all kinds competing with each other for share. that's why I think InterLedger is important because InterLedger will permit people who use different block chains and different systems, for good reasons, to be able to make payments to each other quickly seamlessly and without the risk associated with little pays problem.
26:53 PATRICK GRIFFIN: hmm Maybe just a last question before we turn it over to the audience and you've mentioned InterLedger. Stefan is the creator of InterLedger or the chief architect of it. When you walk around the conference today, you'll see a lot of companies that have blockchain offering. So, sort of going back to 2014, now if you remember, the the terminology and the marketing was all about it's not about Bitcoin it's about the blockchain. And so now we have some sound perspective on that. What's your take on the fundamental premise of a de-centralized distributed database without a digital asset and what's the trade-offs in terms of functionality versus utility? What's your opinion given the architecture IOP.
27:42 STEFAN THOMAS: Well that's a question I could easily spend hours on, so let me try to summarize. So as you mentioned, my colleague Evan Schwartz and I, we we came up with this protocol InterLedger and that came out of actually in a couple of different work streams but one in particular I remember was I was trying to figure out how to make Ripple more scalable and I was thinking about a particular kind of scalability which is similar to what David just mentioned, which was scalability in terms of functionality not just in terms of how many transactions can you do per second. Like how do I serve very different use cases that have you know mutually conflicting trade-offs. So as I was thinking about that problem I was kind of saying well maybe you don't even have to keep that one set of global state. Maybe you can have state in different places and a lot of that is honestly just rediscovering database knowledge that we've had since the 70s. Now just looking at Jim Gray's papers and just oh yeah that works for blockchains too
28:41 STEFAN THOMAS: So we took those ideas and we combined them with ideas around from the internet from the internet background in terms of networking and the concept of internet working and so on. And so, when I look at these private blockchains type approaches I think they are doing the first of those two steps namely they're applying sort of modern data, modern database thinking or classical database thinking to blockchain but I don't think they're really applying the Internet thinking yet because they're if they're attempting to achieve interoperability just by homogeneity which does not give you that diversity of use cases and so if you want that you have to think about what are the simple stateless protocols they can actually tie these different systems together without dictating how they work internally. So I can have my private blockchains that has all these like special features and it works in this way and you can have your private box and it works in the other way but we can still talk through a neutral protocol and you know the way that we're thinking about InterLedger, we're not married to InterLedger being a thing like I'm completely happy if it's lightning or if it's something else but I think as an industry to agree on some kind of standard on that layer.
29:51 STEFAN THOMAS: I think one of the reasons that we can is because unlike a blockchain a standard is neutral you know there's no acid anyone's getting rich off of. There's no there's a lot less to agree on. The list of decisions you have to make is a lot shorter. You know my colleague Evan, he makes a point, a very good point about with InterLedger only like seven eight major decisions that you have to make in the architecture to really arrive at it and so I think we have really good reasons for each one of them and so we think that there will be a certain convergence on on one standard protocol for again not just blockchains, but like any kind of ledger.
30:26 DAVID SCHWARTZ: I just ant to add that InterLedger is completely neutral to how the ledger works internally. Any ledger that can support a very short list of very simple operations. Every banking ledger can perform those operations. Almost anything the tracks ownership of value of any kind is capable of confirming that value exists, putting that value on hold, transferring that value between two people and those are the only primitives that InterLedger builds on. It's just by the clever combination of those operations in a way that provides insurance that all of the stakeholders get out of the transaction the thing that they're supposed to get out and get back whatever they were going to put in if they don't get out what they're supposed to get out. It’s, it's astonishingly simple at the protocol level.
31:08 PATRICK GRIFFIN: Okay, with that I will turn it over to the room for questions and some Q&A Aany questions in the back?
QUESTION: Yeah, I’m kind of new to this and I just have some really basic questions. I read something recently where, Ripple was now the second most funded, or invested. Bitcoin was first, and Etherium was third. Can you tell me how you got to that position? You seem like you’re poking up about Bitcoin and how Ripple probably is more efficient and better. Then I had a second question - Where do I get a Ripple T-Shirt?
32:06 PATRICK GRIFFIN: The first question is how did, how did we get to this position we're in and does that generally capture the essence of that question and then Ripple t-shirts I'm not sure about that (Come work for us!) I will attempt to answer the first question and if you guys want to jump in. I think that is a function of one: Silicon Valley companies do one thing I think very well, they pick a lane and they go deep on it. For us, what we've been very very focused on it the use case. as a company we but we picked a long time ago to go deep on cross-border payments and in particular wholesale cross-border payments that’s financial institution to institution. It’s at the enterprise level and so when we look at digital assets today we think that there is a very very very use case around the consolidation of capital to fund payments overseas, which is exactly what we just demonstrated. Being able to transfer an asset from a server in one country to a server in another country and basically allow for payments companies to operate with much less capital deployed overseas. It's a, it's a quantifiable use case. Today there's 27 and a half trillion dollars in float in the banking system just wait sitting idly waiting for payments to arrive. That's compounded when you go to look at corporates and you look at payment service companies. So there's a very very very very very big number and I think that the recent traction that we've gotten has been an acknowledgement of the use case how it fits into our overall product offering. Ssome of the technical benefits of XRP itself and then when you look around, I mean I think that its head, you're hard-pressed to find another digital asset with as clearly articulated the use case that where the time horizon is now. I think there's lots of really exciting things going on in IOT and device-to-device payments and sort of the future some of things that I that Etherium people talk about for example, but it still feels like it's still at the horizon and I think this is being deployed today. There is a a path to commercial production and ultimately I think that's part of the reason why we're getting some traction.
34:18 DAVID SCHWARTZ: I think we also sort of crossed an important threshold. If an asset doesn't have value and it doesn't have liquidity you can't really use it even if it has the properties that are perfect for your use case simply because you can't you can't get enough of it without moving the market and I think we crossed a threshold (not the end) -
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