Tips and Tricks for Binance Trading - MyCryptoParadise
Tips and Tricks for Binance Trading - MyCryptoParadise
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Anyone else conflicted about the bitcoin.com widget?
Might just be me but I don't like the fact that Brave browser has allowed this widget which is again an attempt from Roger Ver to trick new users into buying Bitcoin Cash instead of Bitcoin. I don't like that new people who might become interested in cryptocurrency due to the Brave browser will then see the "Bitcoin.com" widget with "Bitcoin Cash" as preselected option in the widget and potentially fall prey to these kind of scummy tactics the BCH team has used in the past. Taken together with the whole Binance affiliate link debacle it sort of feels like selling out a bit and it doesn't sit well with me. Happy to hear other people's thoughts.
21,42% Monthly Return Algorithm Bot Trading - 3Commas Case Study Follow-Up #2
This is the 1-month follow-up to my previous post about bot trading on 3Commas you can find it here: https://www.reddit.com/passive\_income/comments/i2zfjd/31\_daily\_return\_algorithm\_bot\_trading\_3commas/ Since my last post, I have now officially been running the algorithm trading on 3Commas for 1 month and I am blown away by the results. My portfolio increased from 1267$ to 1568$ In 1 month giving me 301$ in profit at the same time I have also earned 0.02511 BTC increasing both my dollar value and the BTC value of the portfolio.
Market performance in test period (1st of August – 1st of September)
Okay so cross referencing whether I’ve been better off just buying BTC and HODLING? In the period where I started from the 1st of August until the moment of writing this (September 1st) BTC only increased 0,627% meaning I outperformed the market with 20,8% in USD terms (Portfolio Performance)! Great news AND my BTC value increased significantly.
Benefits of trading bots
· Bots make it easy to enter the industry (Since you are not actively managing or updating the algorithms, which can get quite complex) · Ensuring efficiency across the board (Bots never sleep and don’t make mistakes) · Trading on a 24-hour basis (Especially useful in the crypto space since the markets never close unlike the stock exchange) · Removing emotions from the equation (You won’t make the emotional YOLO all-in on a crypto/stock that you subjectively like over other, the bot simply follows algorithms and orders and execute)
How to get started?
You can sign up to 3Commas here for your own free 3 days trial period and if you choose to extend you will get a 10% discount and I will get a small commission, so win-win :-). I made a combination of two composite Gordon bots. A Binance BTC Conservative strategy (Safe & Slow) (50%) of portfolio and a Binance BTC Aggressive (Riskier & Fast) (50%) of portfolio. The aggressive bot was outperforming the conservative bot in terms of profit, but of course is more subdue to big volatility. I have also modified my strategy Increasing the amount of trades my bots currently perform I have two Aggressive bots one using BTC and one using USDT. In total I usually have 9 active trading 24/7 and now earn around 25$ per day so expecting my return to exponentially grow as I optimize my bots. Hit me up if you need setup help and I’ll gladly support you first make an account here. Current bot trades
What exchange? Okex
I used Binance initially as 3Commas integrated perfectly with Binance and they are a trusted exchange with low fees. The base fee for trades on Binance is 0.1% for makers and takers. You can reduce that by 25% (that is, to 0.075%) if you hold BNB on Binance, so this is definitely a trick I recommend!. If you don’t have a Binance account you can sign up here and we both get 10% of each other’s trading volume (You will benefit from my continued trades on Binance). However, on the 11th of August I made the transfer over to Okex due to 3Commas making an exclusive deal with Okex giving 100 USDT free in trading fees for new sign-ups giving me a much higher margin on my first trades on that platform. Okex is also highly recommended an have fantastic customer support that answers your question within 30 seconds guaranteed! I can only highly recommend Okex and you can get 10$ in free Bitcoins using this link Sign up to 3Commas here(Free trial + 10% discount): https://3commas.io/?c=Reddit Sign up to Okex here: https://www.okex.com/join/1/2123821
I would love to help anyone interested in getting started with this as it seems like a great passive income stream as I used 15 minutes per day on this bot and earned 0,02511 BTC ≈ 300 USD so far and still counting.
Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses. Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes. First, some background. Here is a summary of how custodians make us more secure: Previously, we might give Alice our crypto assets to hold. There were risks:
Alice might take the assets and disappear.
Alice might spend the assets and pretend that she still has them (fractional model).
Alice might store the assets insecurely and they'll get stolen.
Alice might give the assets to someone else by mistake or by force.
Alice might lose access to the assets.
But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
Alice can't take the assets and disappear (unless she asks Bob or never gives them to Bob).
Alice can't spend the assets and pretend that she still has them. (Unless she didn't give them to Bob or asks him for them.)
Alice can't store the assets insecurely so they get stolen. (After all - she doesn't have any control over the withdrawal process from any of Bob's systems, right?)
Alice can't give the assets to someone else by mistake or by force. (Bob will stop her, right Bob?)
Alice can't lose access to the funds. (She'll always be present, sane, and remember all secrets, right?)
See - all problems are solved! All we have to worry about now is:
Bob might take the assets and disappear.
Bob might spend the assets and pretend that he still has them (fractional model).
Bob might store the assets insecurely and they'll get stolen.
Bob might give the assets to someone else by mistake or by force.
Bob might lose access to the assets.
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are! "On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid". "Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since." "As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!" "Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?" "Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party." "Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!" "What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven." "Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!" "We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies. And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often". How many holes have to exist for your funds to get stolen? Just one. Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so? If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security. The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle. And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet? Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds. So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
ANY CERTAINTY BALANCES WEREN'T EXCLUDED. Quadriga's largest account was $70m. 80% of funds are in 20% of accounts (Pareto principle). All it takes is excluding a few really large accounts - and nobody's the wiser. A fractional platform can easily pass any audit this way.
ANY VISIBILITY WHATSOEVER INTO THE CUSTODIANS. BitBuy put out their report before moving all the funds to their custodian and ShakePay apparently can't even tell us who the custodian is. That's pretty important considering that basically all of the funds are now stored there.
ANY IDEA ABOUT THE OTHER EXCHANGES. In order for this to be effective, it has to be the norm. It needs to be "unusual" not to know. If obscurity is the norm, then it's super easy for people like Gerald Cotten and Dave Smilie to blend right in.
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
First report within 1 month of launching, another within 3 months, and further reports at minimum every 6 months thereafter.
No auditor can be repeated within a 12 month period.
All reports must be public, identifying the auditor and the full methodology used.
All auditors must be independent of the firm being audited with no conflict of interest.
Reports must include the percentage of each asset backed, and how it's backed.
The auditor publishes a hash list, which lists a hash of each customer's information and balances that were included. Hash is one-way encryption so privacy is fully preserved. Every customer can use this to have 100% confidence they were included.
If we want more extensive requirements on audits, these should scale upward based on the total assets at risk on the platform, and whether the platform has loaned their assets out.
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever. Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see. It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation. A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance. Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.) Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive. Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today. Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well. Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do. Facts/background/sources (skip if you like):
The inspiration for the paragraph about splitting wallets was an actual quote from a Canadian company providing custodial services in response to the OSC consultation paper: "We believe that it will be in the in best interests of investors to prohibit pooled crypto assets or ‘floats’. Most Platforms pool assets, citing reasons of practicality and expense. The recent hack of the world’s largest Platform – Binance – demonstrates the vulnerability of participants’ assets when such concessions are made. In this instance, the Platform’s entire hot wallet of Bitcoins, worth over $40 million, was stolen, facilitated in part by the pooling of client crypto assets." "the maintenance of participants (and Platform) crypto assets across multiple wallets distributes the related risk and responsibility of security - reducing the amount of insurance coverage required and making insurance coverage more readily obtainable". For the record, their reply also said nothing whatsoever about multi-sig or offline storage.
In addition to the fact that the $40m hack represented only one "hot wallet" of Binance, and they actually had the vast majority of assets in other wallets (including mostly cold wallets), multiple real cases have clearly demonstrated that risk is still present with multiple wallets. Bitfinex, VinDAX, Bithumb, Altsbit, BitPoint, Cryptopia, and just recently KuCoin all had multiple wallets breached all at the same time, and may represent a significantly larger impact on customers than the Binance breach which was fully covered by Binance. To represent that simply having multiple separate wallets under the same security scheme is a comprehensive way to reduce risk is just not true.
Private insurance has historically never covered a single loss in the cryptocurrency space (at least, not one that I was able to find), and there are notable cases where massive losses were not covered by insurance. Bitpay in 2015 and Yapizon in 2017 both had insurance policies that didn't pay out during the breach, even after a lengthly court process. The same insurance that ShakePay is presently using (and announced to much fanfare) was describe by their CEO himself as covering “physical theft of the media where the private keys are held,” which is something that has never historically happened. As was said with regard to the same policy in 2018 - “I don’t find it surprising that Lloyd’s is in this space,” said Johnson, adding that to his mind the challenge for everybody is figuring out how to structure these policies so that they are actually protective. “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
The most profitable policy for a private insurance company is one with the most expensive premiums that they never have to pay a claim on. They have no inherent incentive to take care of people who lost funds. It's "cheaper" to take the reputational hit and fight the claim in court. The more money at stake, the more the insurance provider is incentivized to avoid payout. They're not going to insure the assets unless they have reasonable certainty to make a profit by doing so, and they're not going to pay out a massive sum unless it's legally forced. Private insurance is always structured to be maximally profitable to the insurance provider.
The circumvention of multi-sig was a key factor in the massive Bitfinex hack of over $60m of bitcoin, which today still sits being slowly used and is worth over $3b. While Bitfinex used a qualified custodian Bitgo, which was and still is active and one of the industry leaders of custodians, and they set up 2 of 3 multi-sig wallets, the entire system was routed through Bitfinex, such that Bitfinex customers could initiate the withdrawals in a "hot" fashion. This feature was also a hit with the hacker. The multi-sig was fully circumvented.
Bitpay in 2015 was another example of a breach that stole 5,000 bitcoins. This happened not through the exploit of any system in Bitpay, but because the CEO of a company they worked with got their computer hacked and the hackers were able to request multiple bitcoin purchases, which Bitpay honoured because they came from the customer's computer legitimately. Impersonation is a very common tactic used by fraudsters, and methods get more extreme all the time.
A notable case in Canada was the Canadian Bitcoins exploit. Funds were stored on a server in a Rogers Data Center, and the attendee was successfully convinced to reboot the server "in safe mode" with a simple phone call, thus bypassing the extensive security and enabling the theft.
The very nature of custodians circumvents multi-sig. This is because custodians are not just having to secure the assets against some sort of physical breach but against any form of social engineering, modification of orders, fraudulent withdrawal attempts, etc... If the security practices of signatories in a multi-sig arrangement are such that the breach risk of one signatory is 1 in 100, the requirement of 3 independent signatures makes the risk of theft 1 in 1,000,000. Since hackers tend to exploit the weakest link, a comparable custodian has to make the entry and exit points of their platform 10,000 times more secure than one of those signatories to provide equivalent protection. And if the signatories beef up their security by only 10x, the risk is now 1 in 1,000,000,000. The custodian has to be 1,000,000 times more secure. The larger and more complex a system is, the more potential vulnerabilities exist in it, and the fewer people can understand how the system works when performing upgrades. Even if a system is completely secure today, one has to also consider how that system might evolve over time or work with different members.
By contrast, offline multi-signature solutions have an extremely solid record, and in the entire history of cryptocurrency exchange incidents which I've studied (listed here), there has only been one incident (796 exchange in 2015) involving an offline multi-signature wallet. It happened because the customer's bitcoin address was modified by hackers, and the amount that was stolen ($230k) was immediately covered by the exchange operators. Basically, the platform operators were tricked into sending a legitimate withdrawal request to the wrong address because hackers exploited their platform to change that address. Such an issue would not be prevented in any way by the use of a custodian, as that custodian has no oversight whatsoever to the exchange platform. It's practical for all exchange operators to test large withdrawal transactions as a general policy, regardless of what model is used, and general best practice is to diagnose and fix such an exploit as soon as it occurs.
False promises on the backing of funds played a huge role in the downfall of Quadriga, and it's been exposed over and over again (MyCoin, PlusToken, Bitsane, Bitmarket, EZBTC, IDAX). Even today, customers have extremely limited certainty on whether their funds in exchanges are actually being backed or how they're being backed. While this issue is not unique to cryptocurrency exchanges, the complexity of the technology and the lack of any regulation or standards makes problems more widespread, and there is no "central bank" to come to the rescue as in the 2008 financial crisis or during the great depression when "9,000 banks failed".
In addition to fraudulent operations, the industry is full of cases where operators have suffered breaches and not reported them. Most recently, Einstein was the largest case in Canada, where ongoing breaches and fraud were perpetrated against the platform for multiple years and nobody found out until the platform collapsed completely. While fraud and breaches suck to deal with, they suck even more when not dealt with. Lack of visibility played a role in the largest downfalls of Mt. Gox, Cryptsy, and Bitgrail. In some cases, platforms are alleged to have suffered a hack and keep operating without admitting it at all, such as CoinBene.
It surprises some to learn that a cryptographic solution has already existed since 2013, and gained widespread support in 2014 after Mt. Gox. Proof of Reserves is a full cryptographic proof that allows any customer using an exchange to have complete certainty that their crypto-assets are fully backed by the platform in real-time. This is accomplished by proving that assets exist on the blockchain, are spendable, and fully cover customer deposits. It does not prove safety of assets or backing of fiat assets.
If we didn't care about privacy at all, a platform could publish their wallet addresses, sign a partial transaction, and put the full list of customer information and balances out publicly. Customers can each check that they are on the list, that the balances are accurate, that the total adds up, and that it's backed and spendable on the blockchain. Platforms who exclude any customer take a risk because that customer can easily check and see they were excluded. So together with all customers checking, this forms a full proof of backing of all crypto assets.
However, obviously customers care about their private information being published. Therefore, a hash of the information can be provided instead. Hash is one-way encryption. The hash allows the customer to validate inclusion (by hashing their own known information), while anyone looking at the list of hashes cannot determine the private information of any other user. All other parts of the scheme remain fully intact. A model like this is in use on the exchange CoinFloor in the UK.
A Merkle tree can provide even greater privacy. Instead of a list of balances, the balances are arranged into a binary tree. A customer starts from their node, and works their way to the top of the tree. For example, they know they have 5 BTC, they plus 1 other customer hold 7 BTC, they plus 2-3 other customers hold 17 BTC, etc... until they reach the root where all the BTC are represented. Thus, there is no way to find the balances of other individual customers aside from one unidentified customer in this case.
Proposals such as this had the backing of leaders in the community including Nic Carter, Greg Maxwell, and Zak Wilcox. Substantial and significant effort started back in 2013, with massive popularity in 2014. But what became of that effort? Very little. Exchange operators continue to refuse to give visibility. Despite the fact this information can often be obtained through trivial blockchain analysis, no Canadian platform has ever provided any wallet addresses publicly. As described by the CEO of Newton "For us to implement some kind of realtime Proof of Reserves solution, which I'm not opposed to, it would have to ... Preserve our users' privacy, as well as our own. Some kind of zero-knowledge proof". Kraken describes here in more detail why they haven't implemented such a scheme. According to professor Eli Ben-Sasson, when he spoke with exchanges, none were interested in implementing Proof of Reserves.
And yet, Kraken's places their reasoning on a page called "Proof of Reserves". More recently, both BitBuy and ShakePay have released reports titled "Proof of Reserves and Security Audit". Both reports contain disclaimers against being audits. Both reports trust the customer list provided by the platform, leaving the open possibility that multiple large accounts could have been excluded from the process. Proof of Reserves is a blockchain validation where customers see the wallets on the blockchain. The report from Kraken is 5 years old, but they leave it described as though it was just done a few weeks ago. And look at what they expect customers to do for validation. When firms represent something being "Proof of Reserve" when it's not, this is like a farmer growing fruit with pesticides and selling it in a farmers market as organic produce - except that these are people's hard-earned life savings at risk here. Platforms are misrepresenting the level of visibility in place and deceiving the public by their misuse of this term. They haven't proven anything.
Fraud isn't a problem that is unique to cryptocurrency. Fraud happens all the time. Enron, WorldCom, Nortel, Bear Stearns, Wells Fargo, Moser Baer, Wirecard, Bre-X, and Nicola are just some of the cases where frauds became large enough to become a big deal (and there are so many countless others). These all happened on 100% reversible assets despite regulations being in place. In many of these cases, the problems happened due to the over-complexity of the financial instruments. For example, Enron had "complex financial statements [which] were confusing to shareholders and analysts", creating "off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them". In cryptocurrency, we are often combining complex financial products with complex technologies and verification processes. We are naïve if we think problems like this won't happen. It is awkward and uncomfortable for many people to admit that they don't know how something works. If we want "money of the people" to work, the solutions have to be simple enough that "the people" can understand them, not so confusing that financial professionals and technology experts struggle to use or understand them.
For those who question the extent to which an organization can fool their way into a security consultancy role, HB Gary should be a great example to look at. Prior to trying to out anonymous, HB Gary was being actively hired by multiple US government agencies and others in the private sector (with glowing testimonials). The published articles and hosted professional security conferences. One should also look at this list of data breaches from the past 2 years. Many of them are large corporations, government entities, and technology companies. These are the ones we know about. Undoubtedly, there are many more that we do not know about. If HB Gary hadn't been "outted" by anonymous, would we have known they were insecure? If the same breach had happened outside of the public spotlight, would it even have been reported? Or would HB Gary have just deleted the Twitter posts, brought their site back up, done a couple patches, and kept on operating as though nothing had happened?
In the case of Quadriga, the facts are clear. Despite past experience with platforms such as MapleChange in Canada and others around the world, no guidance or even the most basic of a framework was put in place by regulators. By not clarifying any sort of legal framework, regulators enabled a situation where a platform could be run by former criminal Mike Dhanini/Omar Patryn, and where funds could be held fully unchecked by one person. At the same time, the lack of regulation deterred legitimate entities from running competing platforms and Quadriga was granted a money services business license for multiple years of operation, which gave the firm the appearance of legitimacy. Regulators did little to protect Canadians despite Quadriga failing to file taxes from 2016 onward. The entire administrative team had resigned and this was public knowledge. Many people had suspicions of what was going on, including Ryan Mueller, who forwarded complaints to the authorities. These were ignored, giving Gerald Cotten the opportunity to escape without justice.
There are multiple issues with the SOC II model including the prohibitive cost (you have to find a third party accounting firm and the prices are not even listed publicly on any sites), the requirement of operating for a year (impossible for new platforms), and lack of any public visibility (SOC II are private reports that aren't shared outside the people in suits).
Securities frameworks are expensive. Sarbanes-Oxley is estimated to cost $5.1 million USD/yr for the average Fortune 500 company in the United States. Since "Fortune 500" represents the top 500 companies, that means well over $2.55 billion USD (~$3.4 billion CAD) is going to people in suits. Isn't the problem of trust and verification the exact problem that the blockchain is supposed to solve?
To use Quadriga as justification for why custodians or SOC II or other advanced schemes are needed for platforms is rather silly, when any framework or visibility at all, or even the most basic of storage policies, would have prevented the whole thing. It's just an embarrassment.
We are now seeing regulators take strong action. CoinSquare in Canada with multi-million dollar fines. BitMex from the US, criminal charges and arrests. OkEx, with full disregard of withdrawals and no communication. Who's next?
We have a unique window today where we can solve these problems, and not permanently destroy innovation with unreasonable expectations, but we need to act quickly. This is a unique historic time that will never come again.
Disclaimer: I am not and have never been affiliated with any of the mentioned parties in a private or professional matter. Presumably in an attempt to smear a local competitor, Hayden Otto inadvertently publishes irrefutable on-chain proof that he excluded non-BCH retail revenue to shape the "BCH #1 in Australia" narrative.
Scroll down to "Proof of exclusion" if you are tired of the drama recap.
Scroll down to "TLDR" if you want a summary.
In September 2019, BitcoinBCH.com started publishing so called monthly "reports" about crypto retail payments in Australia. They claimed that ~90% of Australia's crypto retail revenue is processed via their own HULA system and that ~92% of all crypto retail revenue happens in BCH. They are aggregating two data sources to come up with this claim. One is TravelByBit (TBB) who publishes their PoS transactions (BTC, LN, ETH, BNB, DASH, BCH) live on a ticker. The other source is HULA, a newly introduced POS system (BCH only) and direct competitor to TBB run by BitcoinBCH.com - the same company who created the report. Despite being on-chain their transactions are private, not published and not verifiable by third parties outside BitcoinBCH.com Two things stood out in the "reports", noted by multiple users (including vocal BCH proponents):
The non-BCH parts must have tx excluded and the report neglects to mention it (the total in their TBB analysis does not match what is reported on the TBB website.)
The BCH part has outliers included (e.g. BCH city conference in September with 35x the daily average)
Hayden Otto's reaction
In direct response to me publishing these findings on btc, Hayden Otto - an employee at BitcoinBCH.com and the author of the report who also happens to be a moderator of /BitcoinCash - banned me immediately from said sub (source). In subsequent discussion (which repeated for every monthly "report" which was flawed in the same ways as described above), Hayden responded using the same tactics: "No data was removed"
"The guy is straight out lying. There is guaranteed no missing tx as the data was collected directly from the source." (source)
"Only data I considered non-retail was removed"
"I also had these data points and went through them to remove non-retail transactions, on both TravelbyBit and HULA." (source)
He admits to have removed non-BCH tx by "Game Ranger" because he considers them non-retail (source). He also implies they might be involved in money laundering and that TBB might fail their AML obligations in processing Game Ranger's transactions (source). The report does not mention any data being excluded at all and he still fails to explain why several businesses that are clearly retail (e.g. restaurants, cafes, markets) had tx excluded (source). "You are too late to prove I altered the data"
"[...] I recorded [the data] manually from https://travelbybit.com/stats/ over the month of September. The website only shows transactions from the last 7 days and then they disappear. No way for anyone to access stats beyond that." (source)
Proof of exclusion
I published raw data as extracted from the TBB site after each report for comparison. Hayden responded that I made those numbers up and that I was pulling numbers out of my ass. Since he was under the impression that
"The website only shows transactions from the last 7 days and then they disappear. No way for anyone to access stats beyond that." (source)
he felt confident to claim that I would be
unable to provide a source for the [missing] data and/or prove that that data was not already included in the report. (source)
Luckily for us Hayden Otto seems to dislike his competitor TravelByBit so much that he attempted to reframe Bitcoin's RBF feature as a vulnerability specific to TBB PoS system (source). While doublespending a merchant using the TBB PoS he wanted to prove that the merchant successfully registered the purchase as complete and thus exposed that the PoS sales history of TBB's merchants are available to the public (source), in his own words:
"You can literally access it from a public URL in the Web browser. There is no login or anything required, just type in the name of the merchant." (source)
As of yet it is unclear if this is intentional by TBB or if Hayden Ottos followed the rules of responsible disclosure before publishing this kind of data leak. As it happens, those sale histories do not only include the merchant and time of purchases, they even include the address the funds were sent to (in case of on-chain payments). This gives us an easy method to prove that the purchases from the TBB website missing in the reports belong to a specific retail business and actually happened - something that is impossible to prove for the alleged HULA txs. In order to make it easier for you to verify it yourself, we'll focus on a single day in the dataset, September 17th, 2019 as an example:
Hayden Otto's report claims 20 tx and $713.00 in total for that day (source)
The TBB website listed 40 tx and a total of $1032.90 (daily summary)
Paste the associated crypto on-chain address 17MrHiRcKzCyuKPtvtn7iZhAZxydX8raU9 in a blockchain explorer of your choice, e.g like this. This proves that a transfer of funds has actually happened.
I let software aggregate the TBB statistics with the public sale histories and you'll find at the bottom of this post a table with the on-chain addresses conveniently linked to blockchain explorers for our example date. The total of all 40 tx is $1032.90 instead of the $713.00 reported by Hayden. 17 tx of those have a corresponding on-chain address and thus have undeniable proof of $758.10. Of the remaining 23, 22 are on Lightning and one had no merchant history available. This is just for a single day, here is a comparison for the whole month.
TBB wo. Game Ranger
TBB according to Hayden
The usual shills will respond in a predictive manner: The data must be fake even though its proof is on-chain, I would need to provide more data but HULA can be trusted without any proof, if you include outliers BCH comes out ahead, yada, yada. But this is not important. I am not here to convince them and this post doesn't aim to. The tx numbers we are talking about are less than 0.005% of Bitcoin's global volume. If you can increase adoption in your area by 100% by just buying 2 coffees more per day you get a rough idea about how irrelevant the numbers are in comparison. What is relevant though and what this post aims to highlight is that BitcoinBCH.com and the media outlets around news.bitcoin.com flooding you with the BCH #1 narrative are playing dirty. They feel justified because they feel that Bitcoin/Core/Blockstream is playing dirty as well. I am not here to judge that but you as a reader of this sub should be aware that this is happening and that you are the target. When BitcoinBCH.com excludes $1,000 Bitcoin tx because of high value but includes $15,000 BCH tx because they are made by "professionals", you should be sceptical. When BitcoinBCH.com excludes game developers, travel businesses or craftsmen accepting Bitcoin because they don't have a physical store but include a lawyer practice accepting BCH, you should be sceptical. When BitcoinBCH.com excludes restaurants, bars and supermarkets accepting Bitcoin and when pressed reiterate that they excluded non-retail businesses without ever explaning why a restaurant shouldn't be considered reatil, you should be sceptical. When BitcoinBCH.com claims the reports have been audited but omit that the data acquisition was not part of the audit, you should be sceptical. I expect that BitcoinBCH.com will stop removing transactions from TBB for their reports now that it has been shown that their exclusion can be provably uncovered. I also expect that HULA's BCH numbers will rise accordingly to maintain a similar difference. Hayden Otto assumed that nobody could cross-check the TBB data. He was wrong. Nobody will be able to disprove his claims when HULA's BCH numbers rise as he continues to refuse their release. You should treat his claims accordingly. As usual, do your own research and draw your own conclusion. Sorry for the long read.
BitcoinBCH.com claimed no transactions were removed from the TBB dataset in their BCH #1 reports and that is impossible to prove the opposite.
Hayden Otto's reveals in a double spend attempt that a TBB merchant's sale history can be accessed publicly including the merchant's on-chain addresses.
(For example,) this table shows 40 tx listed on the TBB site on Sep 17th, including their on-chain addresses where applicable. The BitcoinBCH.com report lists only 20 tx for the same day.
(Most days and every months so far has had BTC transactions excluded.)
(For September, TBB lists $10,502 yet the report only claims $3,737.
How To End The Cryptocurrency Exchange "Wild West" Without Crippling Innovation
In case you haven't noticed the consultation paper, staff notice, and report on Quadriga, regulators are now clamping down on Canadian cryptocurrency exchanges. The OSC and other regulatory bodies are still interested in industry feedback. They have not put forward any official regulation yet. Below are some ideas/insights and a proposed framework.
Typical securities frameworks will cost Canadians millions of dollars (ie Sarbanes-Oxley estimated at $5m USD/yr per firm). Implementation costs of this proposal are significantly cheaper.
Canadians can maintain a diverse set of exchanges, multiple viable business models are still fully supported, and innovation is encouraged while keeping Canadians safe.
Many of you have limited time to read the full proposal, so here are the highlights:
Effective standards to prevent both internal and external theft. Exchange operators are trained and certified, and have a legal responsibility to users.
Regular Transparent Audits
Provides visibility to Canadians that their funds are fully backed on the exchange, while protecting privacy and sensitive platform information.
Establishment of basic insurance standards/strategy, to expand over time. Removing risk to exchange users of any hot wallet theft.
Background and Justifications
Cold Storage Custody/Management After reviewing close to 100 cases, all thefts tend to break down into more or less the same set of problems: • Funds stored online or in a smart contract, • Access controlled by one person or one system, • 51% attacks (rare), • Funds sent to the wrong address (also rare), or • Some combination of the above. For the first two cases, practical solutions exist and are widely implemented on exchanges already. Offline multi-signature solutions are already industry standard. No cases studied found an external theft or exit scam involving an offline multi-signature wallet implementation. Security can be further improved through minimum numbers of signatories, background checks, providing autonomy and legal protections to each signatory, establishing best practices, and a training/certification program. The last two transaction risks occur more rarely, and have never resulted in a loss affecting the actual users of the exchange. In all cases to date where operators made the mistake, they've been fully covered by the exchange platforms. • 51% attacks generally only occur on blockchains with less security. The most prominent cases have been Bitcoin Gold and Ethereum Classic. The simple solution is to enforce deposit limits and block delays such that a 51% attack is not cost-effective. • The risk of transactions to incorrect addresses can be eliminated by a simple test transaction policy on large transactions. By sending a small amount of funds prior to any large withdrawals/transfers as a standard practice, the accuracy of the wallet address can be validated. The proposal covers all loss cases and goes beyond, while avoiding significant additional costs, risks, and limitations which may be associated with other frameworks like SOC II. On The Subject of Third Party Custodians Many Canadian platforms are currently experimenting with third party custody. From the standpoint of the exchange operator, they can liberate themselves from some responsibility of custody, passing that off to someone else. For regulators, it puts crypto in similar categorization to oil, gold, and other commodities, with some common standards. Platform users would likely feel greater confidence if the custodian was a brand they recognized. If the custodian was knowledgeable and had a decent team that employed multi-sig, they could keep assets safe from internal theft. With the right protections in place, this could be a great solution for many exchanges, particularly those that lack the relevant experience or human resources for their own custody systems. However, this system is vulnerable to anyone able to impersonate the exchange operators. You may have a situation where different employees who don't know each other that well are interacting between different companies (both the custodian and all their customers which presumably isn't just one exchange). A case study of what can go wrong in this type of environment might be Bitpay, where the CEO was tricked out of 5000 bitcoins over 3 separate payments by a series of emails sent legitimately from a breached computer of another company CEO. It's also still vulnerable to the platform being compromised, as in the really large $70M Bitfinex hack, where the third party Bitgo held one key in a multi-sig wallet. The hacker simply authorized the withdrawal using the same credentials as Bitfinex (requesting Bitgo to sign multiple withdrawal transactions). This succeeded even with the use of multi-sig and two heavily security-focused companies, due to the lack of human oversight (basically, hot wallet). Of course, you can learn from these cases and improve the security, but so can hackers improve their deception and at the end of the day, both of these would have been stopped by the much simpler solution of a qualified team who knew each other and employed multi-sig with properly protected keys. It's pretty hard to beat a human being who knows the business and the typical customer behaviour (or even knows their customers personally) at spotting fraud, and the proposed multi-sig means any hacker has to get through the scrutiny of 3 (or more) separate people, all of whom would have proper training including historical case studies. There are strong arguments both for and against using use of third party custodians. The proposal sets mandatory minimum custody standards would apply regardless if the cold wallet signatories are exchange operators, independent custodians, or a mix of both. On The Subject Of Insurance ShakePay has taken the first steps into this new realm (congratulations). There is no question that crypto users could be better protected by the right insurance policies, and it certainly feels better to transact with insured platforms. The steps required to obtain insurance generally place attention in valuable security areas, and in this case included a review from CipherTrace. One of the key solutions in traditional finance comes from insurance from entities such as the CDIC. However, historically, there wasn't found any actual insurance payout to any cryptocurrency exchange, and there are notable cases where insurance has not paid. With Bitpay, for example, the insurance agent refused because the issue happened to the third party CEO's computer instead of anything to do with Bitpay itself. With the Youbit exchange in South Korea, their insurance claim was denied, and the exchange ultimately ended up instead going bankrupt with all user's funds lost. To quote Matt Johnson in the original Lloyd's article: “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.” ShakePay's insurance was only reported to cover their cold storage, and “physical theft of the media where the private keys are held”. Physical theft has never, in the history of cryptocurrency exchange cases reviewed, been reported as the cause of loss. From the limited information of the article, ShakePay made it clear their funds are in the hands of a single US custodian, and at least part of their security strategy is to "decline to confirm the custodian’s name on the record". While this prevents scrutiny of the custodian, it's pretty silly to speculate that a reasonably competent hacking group couldn't determine who the custodian is. A far more common infiltration strategy historically would be social engineering, which has succeeded repeatedly. A hacker could trick their way into ShakePay's systems and request a fraudulent withdrawal, impersonate ShakePay and request the custodian to move funds, or socially engineer their way into the custodian to initiate the withdrawal of multiple accounts (a payout much larger than ShakePay) exploiting the standard procedures (for example, fraudulently initiating or override the wallet addresses of a real transfer). In each case, nothing was physically stolen and the loss is therefore not covered by insurance. In order for any insurance to be effective, clear policies have to be established about what needs to be covered. Anything short of that gives Canadians false confidence that they are protected when they aren't in any meaningful way. At this time, the third party insurance market does not appear to provide adequate options or coverage, and effort is necessary to standardize custody standards, which is a likely first step in ultimately setting up an insurance framework. A better solution compared to third party insurance providers might be for Canadian exchange operators to create their own collective insurance fund, or a specific federal organization similar to the CDIC. Such an organization would have a greater interest or obligation in paying out actual cases, and that would be it's purpose rather than maximizing it's own profit. This would be similar to the SAFU which Binance has launched, except it would cover multiple exchanges. There is little question whether the SAFU would pay out given a breach of Binance, and a similar argument could be made for a insurance fund managed by a collective of exchange operators or a government organization. While a third party insurance provider has the strong market incentive to provide the absolute minimum coverage and no market incentive to payout, an entity managed by exchange operators would have incentive to protect the reputation of exchange operators/the industry, and the government should have the interest of protecting Canadians. On The Subject of Fractional Reserve There is a long history of fractional reserve failures, from the first banks in ancient times, through the great depression (where hundreds of fractional reserve banks failed), right through to the 2008 banking collapse referenced in the first bitcoin block. The fractional reserve system allows banks to multiply the money supply far beyond the actual cash (or other assets) in existence, backed only by a system of debt obligations of others. Safely supporting a fractional reserve system is a topic of far greater complexity than can be addressed by a simple policy, and when it comes to cryptocurrency, there is presently no entity reasonably able to bail anyone out in the event of failure. Therefore, this framework is addressed around entities that aim to maintain 100% backing of funds. There may be some firms that desire but have failed to maintain 100% backing. In this case, there are multiple solutions, including outside investment, merging with other exchanges, or enforcing a gradual restoration plan. All of these solutions are typically far better than shutting down the exchange, and there are multiple cases where they've been used successfully in the past. Proof of Reserves/Transparency/Accountability Canadians need to have visibility into the backing on an ongoing basis. The best solution for crypto-assets is a Proof of Reserve. Such ideas go back all the way to 2013, before even Mt. Gox. However, no Canadian exchange has yet implemented such a system, and only a few international exchanges (CoinFloor in the UK being an example) have. Many firms like Kraken, BitBuy, and now ShakePay use the Proof of Reserve term to refer to lesser proofs which do not actually cryptographically prove the full backing of all user assets on the blockchain. In order for a Proof of Reserve to be effective, it must actually be a complete proof, and it needs to be understood by the public that is expected to use it. Many firms have expressed reservations about the level of transparency required in a complete Proof of Reserve (for example Kraken here). While a complete Proof of Reserves should be encouraged, and there are some solutions in the works (ie TxQuick), this is unlikely to be suitable universally for all exchange operators and users. Given the limitations, and that firms also manage fiat assets, a more traditional audit process makes more sense. Some Canadian exchanges (CoinSquare, CoinBerry) have already subjected themselves to annual audits. However, these results are not presently shared publicly, and there is no guarantee over the process including all user assets or the integrity and independence of the auditor. The auditor has been typically not known, and in some cases, the identity of the auditor is protected by a NDA. Only in one case (BitBuy) was an actual report generated and publicly shared. There has been no attempt made to validate that user accounts provided during these audits have been complete or accurate. A fraudulent fractional exchange, or one which had suffered a breach they were unwilling to publicly accept (see CoinBene), could easily maintain a second set of books for auditors or simply exclude key accounts to pass an individual audit. The proposed solution would see a reporting standard which includes at a minimum - percentage of backing for each asset relative to account balances and the nature of how those assets are stored, with ownership proven by the auditor. The auditor would also publicly provide a "hash list", which they independently generate from the accounts provided by the exchange. Every exchange user can then check their information against this public "hash list". A hash is a one-way form of encryption, which fully protects the private information, yet allows anyone who knows that information already to validate that it was included. Less experienced users can take advantage of public tools to calculate the hash from their information (provided by the exchange), and thus have certainty that the auditor received their full balance information. Easy instructions can be provided. Auditors should be impartial, their identities and process public, and they should be rotated so that the same auditor is never used twice in a row. Balancing the cost of auditing against the needs for regular updates, a 6 month cycle likely makes the most sense. Hot Wallet Management The best solution for hot wallets is not to use them. CoinBerry reportedly uses multi-sig on all withdrawals, and Bitmex is an international example known for their structure devoid of hot wallets. However, many platforms and customers desire fast withdrawal processes, and human validation has a cost of time and delay in this process. A model of self-insurance or separate funds for hot wallets may be used in these cases. Under this model, a platform still has 100% of their client balance in cold storage and holds additional funds in hot wallets for quick withdrawal. Thus, the risk of those hot wallets is 100% on exchange operators and not affecting the exchange users. Since most platforms typically only have 1%-5% in hot wallets at any given time, it shouldn't be unreasonable to build/maintain these additional reserves over time using exchange fees or additional investment. Larger withdrawals would still be handled at regular intervals from the cold storage. Hot wallet risks have historically posed a large risk and there is no established standard to guarantee secure hot wallets. When the government of South Korea dispatched security inspections to multiple exchanges, the results were still that 3 of them got hacked after the inspections. If standards develop such that an organization in the market is willing to insure the hot wallets, this could provide an acceptable alternative. Another option may be for multiple exchange operators to pool funds aside for a hot wallet insurance fund. Comprehensive coverage standards must be established and maintained for all hot wallet balances to make sure Canadians are adequately protected.
Current Draft Proposal
(1) Proper multi-signature cold wallet storage. (a) Each private key is the personal and legal responsibility of one person - the “signatory”. Signatories have special rights and responsibilities to protect user assets. Signatories are trained and certified through a course covering (1) past hacking and fraud cases, (2) proper and secure key generation, and (3) proper safekeeping of private keys. All private keys must be generated and stored 100% offline by the signatory. If even one private keys is ever breached or suspected to be breached, the wallet must be regenerated and all funds relocated to a new wallet. (b) All signatories must be separate background-checked individuals free of past criminal conviction. Canadians should have a right to know who holds their funds. All signing of transactions must take place with all signatories on Canadian soil or on the soil of a country with a solid legal system which agrees to uphold and support these rules (from an established white-list of countries which expands over time). (c) 3-5 independent signatures are required for any withdrawal. There must be 1-3 spare signatories, and a maximum of 7 total signatories. The following are all valid combinations: 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. (d) A security audit should be conducted to validate the cold wallet is set up correctly and provide any additional pertinent information. The primary purpose is to ensure that all signatories are acting independently and using best practices for private key storage. A report summarizing all steps taken and who did the audit will be made public. Canadians must be able to validate the right measures are in place to protect their funds. (e) There is a simple approval process if signatories wish to visit any country outside Canada, with a potential whitelist of exempt countries. At most 2 signatories can be outside of aligned jurisdiction at any given time. All exchanges would be required to keep a compliant cold wallet for Canadian funds and have a Canadian office if they wish to serve Canadian customers. (2) Regular and transparent solvency audits. (a) An audit must be conducted at founding, after 3 months of operation, and at least once every 6 months to compare customer balances against all stored cryptocurrency and fiat balances. The auditor must be known, independent, and never the same twice in a row. (b) An audit report will be published featuring the steps conducted in a readable format. This should be made available to all Canadians on the exchange website and on a government website. The report must include what percentage of each customer asset is backed on the exchange, and how those funds are stored. (c) The auditor will independently produce a hash of each customer's identifying information and balance as they perform the audit. This will be made publicly available on the exchange and government website, along with simplified instructions that each customer can use to verify that their balance was included in the audit process. (d) The audit needs to include a proof of ownership for any cryptocurrency wallets included. A satoshi test (spending a small amount) or partially signed transaction both qualify. (e) Any platform without 100% reserves should be assessed on a regular basis by a government or industry watchdog. This entity should work to prevent any further drop, support any private investor to come in, or facilitate a merger so that 100% backing can be obtained as soon as possible. (3) Protections for hot wallets and transactions. (a) A standardized list of approved coins and procedures will be established to constitute valid cold storage wallets. Where a multi-sig process is not natively available, efforts will be undertaken to establish a suitable and stable smart contract standard. This list will be expanded and improved over time. Coins and procedures not on the list are considered hot wallets. (b) Hot wallets can be backed by additional funds in cold storage or an acceptable third-party insurance provider with a comprehensive coverage policy. (c) Exchanges are required to cover the full balance of all user funds as denominated in the same currency, or double the balance as denominated in bitcoin or CAD using an established trading rate. If the balance is ever insufficient due to market movements, the firm must rectify this within 24 hours by moving assets to cold storage or increasing insurance coverage. (d) Any large transactions (above a set threshold) from cold storage to any new wallet addresses (not previously transacted with) must be tested with a smaller transaction first. Deposits of cryptocurrency must be limited to prevent economic 51% attacks. Any issues are to be covered by the exchange. (e) Exchange platforms must provide suitable authentication for users, including making available approved forms of two-factor authentication. SMS-based authentication is not to be supported. Withdrawals must be blocked for 48 hours in the event of any account password change. Disputes on the negligence of exchanges should be governed by case law.
Continued review of existing OSC feedback is still underway. More feedback and opinions on the framework and ideas as presented here are extremely valuable. The above is a draft and not finalized. The process of further developing and bringing a suitable framework to protect Canadians will require the support of exchange operators, legal experts, and many others in the community. The costs of not doing such are tremendous. A large and convoluted framework, one based on flawed ideas or implementation, or one which fails to properly safeguard Canadians is not just extremely expensive and risky for all Canadians, severely limiting to the credibility and reputation of the industry, but an existential risk to many exchanges. The responsibility falls to all of us to provide our insight and make our opinions heard on this critical matter. Please take the time to give your thoughts.
It was full of surprises and threats to crypto prices, including: - Elon Musk and Bill Gates asking for BTC on Twitter - Binance Crypto card for the EU and UK residents Also, be sure to check out top altcoin gainers and losers of the week ⬇️ Elon Musk, Kanye West, and Bill Gates Twitter Accounts Hacked By Bitcoin Thief Elon Musk's Twitter account was apparently hijacked last week after a series of attacks on cryptocurrency accounts, including major exchanges such as Binance, US Coinbase, and Gemini. Scammers used the hack to trick bitcoin holders into sending irreversible transactions to a digital wallet. Bill Gates' account was also targeted as the attack continued. While the attackers initially focused on crypto accounts, they expanded to tech leaders including Amazon's Jeff Bezos, and celebrities like Kanye West, hijacking 130 high-profile accounts in total.. It looks like the breach was an internal Twitter’s problem - one of the employees with access to Twitter’s admin panel was hacked. Binance’s Swipe-Powered Crypto Debit Card Debuts in Europe Binance's long-awaited cryptocurrency debit card, the Binance Card, is making its official debut in the European Economic Area, or EEA. On July 14, Binance told Cointelegraph that EEA users will be able to apply for a Binance card starting August. As previously reported, Swipe is currently available in 31 countries in the EEA, including countries such as France, Germany, Italy, and Spain. Swipe is not yet available in the United States, but the company is purportedly planning to release the service in the nearest future, after doing all the paperwork and compliance with the American law. https://preview.redd.it/rfxcowpct0c51.jpg?width=1200&format=pjpg&auto=webp&s=879628bbd5bc2cbe29e8d1316ed3c9c6ef14aa0e
A double-spend occurs when the same funds are spent more than once. The term is used almost exclusively in the context of digital money — after all, you’d have a hard time spending the same physical cash twice. When you pay for a coffee today, you hand cash over to a cashier who probably locks it in a register. You can’t go to the coffee shop across the road and pay for another coffee with the same bill. In digital cash schemes, there’s the possibility that you could. You’ve surely duplicated a computer file before — you just copy and paste it. You can email the same file to ten, twenty, fifty people. Since digital money is just data, you need to prevent people from copying and spending the same units in different places. Otherwise, your currency will collapse in no time. For a more in-depth look at double-spending, check out Double Spending Explained.
Why is Proof of Work necessary?
If you’ve read our guide to blockchain technology, you’ll know that users broadcast transactions to the network. Those transactions aren’t immediately considered valid, though. That only happens when they get added to the blockchain. The blockchain is a big database that every user can see, so they can check if funds have been spent before. Picture it like this: you and three friends have a notepad. Anytime one of you wants to make a transfer of whatever units you’re using, you write it down — Alice pays Bob five units, Bob pays Carol two units, etc. There’s another intricacy here — each time you make a transaction, you refer to the transaction where the funds came from. So, if Bob was paying Carol with two units, the entry would actually look like the following: Bob pays Carol two units from this earlier transaction with Alice. Now, we have a way to track the units. If Bob tries to make another transaction using the same units he just sent to Carol, everyone will know immediately. The group won’t allow the transaction to be added to the notepad. Now, this might work well in a small group. Everyone knows each other, so they’ll probably agree on which of the friends should add transactions to the notepad. What if we want a group of 10,000 participants? The notepad idea doesn’t scale well, because nobody wants to trust a stranger to manage it. This is where Proof of Work comes in. It ensures that users aren’t spending money that they don’t have the right to spend. By using a combination of game theory and cryptography, a PoW algorithm enables anyone to update the blockchain according to the rules of the system.
How does PoW work?
Our notepad above is the blockchain. But we don’t add transactions one by one — instead, we lump them into blocks. We announce the transactions to the network, then users creating a block will include them in a candidate block. The transactions will only be considered valid once their candidate block becomes a confirmed block, meaning that it has been added to the blockchain. Appending a block isn’t cheap, however. Proof of Work requires that a miner (the user creating the block) uses up some of their own resources for the privilege. That resource is computing power, which is used to hash the block’s data until a solution to a puzzle is found. Hashing the block’s data means that you pass it through a hashing function to generate a block hash. The block hash works like a “fingerprint” — it’s an identity for your input data and is unique to each block. It’s virtually impossible to reverse a block hash to get the input data. Knowing an input, however, it’s trivial for you to confirm that the hash is correct. You just have to submit the input through the function and check if the output is the same. In Proof of Work, you must provide data whose hash matches certain conditions. But you don’t know how to get there. Your only option is to pass your data through a hash function and to check if it matches the conditions. If it doesn’t, you’ll have to change your data slightly to get a different hash. Changing even one character in your data will result in a totally different result, so there’s no way of predicting what an output might be. As a result, if you want to create a block, you’re playing a guessing game. You typically take information on all of the transactions that you want to add and some other important data, then hash it all together. But since your dataset won’t change, you need to add a piece of information that is variable. Otherwise, you would always get the same hash as output. This variable data is what we call a nonce. It’s a number that you’ll change with every attempt, so you’re getting a different hash every time. And this is what we call mining. Summing up, mining is the process of gathering blockchain data and hashing it along with a nonce until you find a particular hash. If you find a hash that satisfies the conditions set out by the protocol, you get the right to broadcast the new block to the network. At this point, the other participants of the network update their blockchains to include the new block. For major cryptocurrencies today, the conditions are incredibly challenging to satisfy. The higher the hash rate on the network, the more difficult it is to find a valid hash. This is done to ensure that blocks aren’t found too quickly. As you can imagine, trying to guess massive amounts of hashes can be costly on your computer. You’re wasting computational cycles and electricity. But the protocol will reward you with cryptocurrency if you find a valid hash. Let’s recap what we know so far:
It’s expensive for you to mine.
You’re rewarded if you produce a valid block.
Knowing an input, a user can easily check its hash — non-mining users can verify that a block is valid without expending much computational power.
So far, so good. But what if you try to cheat? What’s to stop you from putting a bunch of fraudulent transactions into the block and producing a valid hash? That’s where public-key cryptography comes in. We won’t go into depth in this article, but check out What is Public-Key Cryptography? for a comprehensive look at it. In short, we use some neat cryptographic tricks that allow any user to verify whether someone has a right to move the funds they’re attempting to spend. When you create a transaction, you sign it. Anyone on the network can compare your signature with your public key, and check whether they match. They’ll also check if you can actually spend your funds and that the sum of your inputs is higher than the sum of your outputs (i.e., that you’re not spending more than you have). Any block that includes an invalid transaction will be automatically rejected by the network. It’s expensive for you to even attempt to cheat. You’ll waste your own resources without any reward. Therein lies the beauty of Proof of Work: it makes it expensive to cheat, but profitable to act honestly. Any rational miner will be seeking ROI, so they can be expected to behave in a way that guarantees revenue.
Proof of Work vs. Proof of Stake
There are many consensus algorithms, but one of the most highly-anticipated ones is Proof of Stake (PoS). The concept dates back to 2011, and has been implemented in some smaller protocols. But it has yet to see adoption in any of the big blockchains. In Proof of Stake systems, miners are replaced with validators. There’s no mining involved and no race to guess hashes. Instead, users are randomly selected — if they’re picked, they must propose (or “forge”) a block. If the block is valid, they’ll receive a reward made up of the fees from the block’s transactions. Not just any user can be selected, though — the protocol chooses them based on a number of factors. To be eligible, participants must lock up a stake, which is a predetermined amount of the blockchain’s native currency. The stake works like bail: just as defendants put up a large sum of money to disincentivize them from skipping trial, validators lock up a stake to disincentivize cheating. If they act dishonestly, their stake (or a portion of it) will be taken. Proof of Stake does have some benefits over Proof of Work. The most notable one is the smaller carbon footprint — since there’s no need for high-powered mining farms in PoS, the electricity consumed is only a fraction of that consumed in PoW. That said, it has nowhere near the track record of PoW. Although it could be perceived as wasteful, mining is the only consensus algorithm that’s proven itself at scale. In just over a decade, it has secured trillions of dollars worth of transactions. To say with certainty whether PoS can rival its security, staking needs to be properly tested in the wild.
Proof of Work was the original solution to the double-spend problem and has proven to be reliable and secure. Bitcoin proved that we don’t need centralized entities to prevent the same funds from being spent twice. With clever use of cryptography, hash functions, and game theory, participants in a decentralized environment can agree on the state of a financial database.
BCH and Roger are much worse than BSV keep that in mind!
I know some of you have been following the latests flop from the Craig the fraud and the Calvyn the pedo suing a random user with couple thousands followers on twitter. Although that movement brought the bitcoin community together and showed how powerful we are lets not forget a couple of things: 1- Bcash and their fraudulent marketing on b . Com is still scamming/misleading/tricking millions selling bcash instead of bitcoin to newcommers. Bcash is actually the real cancer. 2- Fakesatoshi might be a fraud yeh, a charlatan and a clown but he has never conducted any sort of scam related to ICOs or Shitcoins. He has always pronounced himself loudly against all of them for being bad actors, its easy now pile on him but don’t forget who drags bitcoin’s popularity/price down. 3- Exchanges like Coinbase Binance (Cz) or Shapeshift joined the action threatening of delisting Bsv... what about the other 99% of shitcoins with proven fake volume, watchtrading and spoofing? What about bcash and their insider-trader that happened when they got listed on Coinbase? In my opinion Cz or Roger are no better than CWS, the former created a token out of thin air to boost his exchange based in China accepting every single user or shitcoin, and now they delist and comply like if they worked for the government. Roger Ver... enough have been said about that arrogant man who supports shitcoins and attacks bitcoin relentlessly every single day using the dirtiest marketing. Erick Voorhees... the most hypocrite human being in the crypto sphere, the kyc man. Thats why Bitcoin is bleeding out atm not due to CWS This movement is awesome and all that fellow redditors, but lets not forget what we have had to overcome to be where we are right now. Bitcoin and only Bitcoin I love you. Tldr; Roger Ver (Bcash), Cz (Bnb token) and many many others that dont need to be named are no better than CSW (Bsv) they are all ( on their way) the same trash.
Do Trading Bots Control The Cryptocurrency Markets?
Supposed You've researched the market price for the coin you want to buy and it is low enough, and you've decided the time is right to buy it. You immediately go to the Binance exchange and place your limit order, hoping that a slight price drop will allow your order to complete quickly. But wait ... what just happened? After placing your order, you notice another buyer place a large order with a marginally higher price, pushing your order below the queue. He says "fair enough" as you decide to increase the bid price of your order to keep your order in the queue and once again your order is pushed downwards and new order just appears above your order and before you know it, that attractive pricing opportunity you wanted to take advantage of is gone. How annoying! Why did this happen? In other words, CryptoTradingBots. Crypto Trading Bots
What Is A Bot?
A bot is an automated trading entity that is programmed to identify market trends and automatically execute trades. Using algorithms, these robot operators can replicate what human operators would do in response to various market scenarios. But crucially, bots can process information and make business decisions much faster than humans. And the bots they just keep improving. They use a wealth of market data to examine trends, update their algorithms, and eventually make more informed and profitable business decisions. Today, bots are used in many financial markets by high-frequency traders to exploit small price anomalies. Markets like currencies have undergone a bot revolution in recent years. The days of crowded commercial flats overflowing with merchants yelling "Buy!" and "Sell!" they are gradually becoming a thing of the past. And e-commerce facilities and rows of computer servers have come in their place as automation takes hold.
Bots And Crypto Markets Are Perfectly Matched
Bots are now proving to be especially popular within the crypto community, from sophistication from free services designed for everyone to more expensive subscription-based bots for professionals. Crypto exchanges are proving to be the ideal playground for bots to expand their influence: Unlike traditional financial markets that normally close evenings and weekends, crypto markets are open 24 hours a day, 7 days a week. This makes them ideal for automated trading: humans sleep but trading bots do not. With some cryptocurrencies now tradable on dozens of exchanges, the abundance of arbitrage opportunities that have arisen can be exploited more efficiently by bots than by traders. Last year, Bloomberg set the amount of automated Bitcoin trading on some exchanges to 80% of total trade volume. Bots could also be partially liable for the massive price changes we've seen in the crypto markets. But what is certain is that a large number of exchange order books are being influenced by bot action. And these bots can produce merchants to buy at a higher price or sell at a lower price than they originally intended. It is often the case with limited orders that bots will be the lowest offer and/or demand prices on the market, and largely the rest of the order book. Also, bots are annoying to deal with! Seeing that your offer is outnumbered almost instantly, and by a robot, not even another merchant, can be very irritating, especially if you place your initial order intending to capitalize on what you think is a 'wrong price' in the market. Looking at market orders, you can also observe a series of bot orders of insignificant quantities that exist close to the market price, before the initial order of any true important quantity is further from the market. Again, bots are trying to trick you into placing a market order that fills up instantly, but most of which will be filled against the large order at a worse price.
Counter Crypto Trading Bot Activity
It can be tempting to outperform the robots simply by resubmitting your limit order with a slight lowering the price although such a single trade strategy may not significantly harm your end-of-day earnings if you are a serious crypto trader who conducts multiple trades on multiple exchanges every day, these small but frequent annoyances will inevitably amount to considerable long-term loss. As such, it may be preferable to keep your order at the price you originally intended. If there is at least some volatility in the market, then your order will complete if you are not in any particular hurry, it is also recommended to take a minute to observe the behavior of the order book. Often bot orders will appear and then suddenly disappear, or move around the book due to constant price adjustments being made. By trying to identify bot intentions, you can end up in a more informed position regarding how and when you place your order. Of course, buying a bot yourself could also help. As more data is collected on the price behavior of various crypto assets, these machines will only evolve further and become even more sophisticated in their business competition. But whatever you do, being aware of the existence and influence of bots will help you avoid getting carried away by a sub-optimal trading position.
Binance English Taking Over Multiple YouTube Channels [Misc FD]
A bitcoin scam operation under the alias of Binance English has tricked and/or hacked multiple YouTube channels this past month. If you look up Binance English in your search bar on YouTube you will find so many channels that have been taken over by these bitcoin scammers. I thought I would try to spread awareness of this if most of you guys were unaware so hopefully these people can regain control of their channels.
Just spent about 12 hours figuring out my tax liabilities with bitcoin.tax. Here is how it went...
I have been reading more lately about all the US tax liabilities that can come into play in the crypto world and have started worrying about how much I would owe for 2017. I was starting to lose some sleep on the matter and finally decided to organize all of my activity once and for all. I figured I'd write this post for other people who might want to find out what I have learned in this process. I am filing in the US, but some of this might apply to people in other countries as well. If you have just bought and HODL'd then it will probably be much simpler for you. But if you have done ICOs and any trading and are worried about this stuff, don't worry too much. Its totally possible to get yourself organized with a little bit of work. Background Bought my first ETH in Feb '17 from Coinbase and since then:
Have traded probably 50 different tokens on 10 different exchanges
Have participated in 21 ICOs
Have received Airdropped tokens
Have sold some and withdrawn profits to my bank account
The Tools The best place to get started is bitcoin.tax Referral Link Normal Link I signed up for the 1 year plan for $19.95 (they also accept crypto) and believe me its worth every penny. You can use it for free, but are limited to 100 items (I ended up having > 1500). It really does almost everything for you, so you don't have to worry about figuring out the cost basis yourself. The only time USD was involved was buying via coinbase, everything else was handled as a token to token trade. Microsoft Excel or Google Sheets is a must if you are doing any trading on the non-supported exchanges because you might have to massage the data into the correct format. Etherscan Unfortunately, for some trades and the ICOs, I had to go directly to Etherscan to track down the data. DeltaBalances This is a lifesaver for tracking trades made on ED. I wasn't able to get the export feature working, but copy/pasting the table into Excel was fine. Html Table to CSV If you are having trouble copy/pasting table data this comes in handy. You can just copy the raw table HTML from Chrome Dev Tools and get a nice CSV. Exchanges I am only going to list the exchanges I use and how I was able to get the data into bitcoin.tax. But regardless of the method, make sure you verify all the data that was imported. The system did a bad import on my Bitfinex data and I had to wipe it and reimport because it was missing a bunch of rows. All the importing is done on the trading tab of bitcoin.tax. Some exchanges require you to download a .csv file from the exchange website, and some have direct API access. Just follow the tutorials on bitcoin.tax for each exchange. The Easy Ones Bitcoin.tax supports API data pulls for these exchanges: Bitfinex, Coinbase, GDAX, Kraken. For these, I still recommend going to the exchanges and downloading a copy of your history for your personal records. You need to login to the exchange and download trade history and then use bitcoin.tax's import tool for these: Binance, Bittrex, Poloniex The Tough Ones Trades made on Etherdelta present a bit of a challenge. There is no direct import into bitcoin.tax so you will have to manually compile a CSV and import it to their system. They give you a template to follow with the required data and it will require a bit of "massaging" to get the ED data to the correct format. For this is it extremely helpful to use DeltaBalances. For each wallet you use you will need to check the trade history and go back a sufficient number of days to cover your trading history. Warning, it might take a long time for this process to finish and it isn't 100% reliable. When I ran it, it needed to download > 200MB worth of data for the 260 days I went back. My suggestion is to run it a few times to validate the results. You will need to run it for each wallet you use to trade on ED. Once you get the results, you can try copy/paste the table into Excel and then format the columns to match. Liqui was the biggest pain in the ass of them all. If you traded a lot on Liqui, be prepared for some pain because they have no export and only show you the history of 1 pair at a time (and only the last 30 trades!). Liqui has over 250 trading pairs so if you forgot what you traded, you will tediously have to go through each pair to check. I couldn't bear this, so I ended up coding a custom script to query all 250 trading pairs and dump out the data for me, then I had to import that into Excel and format it to match the bitcoin.tax template. Kucoin wasn't too bad. They don't have an export function, but you can copy paste the tables into Excel and massage the data there. I did a few trades with OasisDEX but when I went there it didn't have any of my history, so I had to manually cobble that together from looking at Etherscan. Luckily it was only a few trades or else this would have been very tedious. ICOs Like I mentioned, I participated in something like 20 ICOs this last year. Unfortunately I have no records of any of them. In bitcoin.tax I handled these as just another trade. In order to track down the ICOs I participated in, I was forced to use Etherscan and go through my whole transaction history looking for them. In order to add the trades manually in bitcoin.tax you need the Date, the # of ETH you spent and the # of tokens you received. It's not super difficult, but just very tedious. One that threw me for a curve ball was RedPulse. This was a NEO ICO, but adding a trade manually doesn't yet support NEO as a currency. The workaround for this is putting it into a CSV and importing it that way. In fact, if I was to do this again, I would have built a CSV for all the ICOs and just imported it that way rather than inputting them one-by-one. Airdrops I treated airdrops as "Gifts/Tips" under the income tab. I had to find these through Etherscan. Verifying the data In order to verify that all seemed right and there are no problems, there are two things that I was working toward:
No unmatched trades -- On the reports tab, you can filter by "unmatched trades". Ideally you won't have any of these. If there are some, you may need to do some more digging to see why
Closing position report -- On the reports tab, your closing position report should match as closely as possible to your current holdings in Blockfolio.
Conclusion Overall, although there was some tedious parts, this was a really good exercise. Going through my entire history gave me some great insight on how my strategies played out (ICOs were great / I suck at trading). As far as the taxes themselves, it turned out to be a lot more than I was expecting, but considering the gains I am not too sad. Going into this next year I am going to make some changes. First of all, I will probably stop trading as much. It just wasn't that successful for me and created a lot of work and taxes on top of that. Secondly, I really want to try and stay away from exchanges that don't (or don't plan to) offer history exports. Third, I will probably hold most of my unsold ICOs for at least a year so as not to be liable for short term gains. Lastly, I will keep better records as I go along so I don't have to do so much digging for next tax season. I hope this can help some of you guys figure this out and I would love to hear any additional tips from those of you who have gone through this. Edit: A couple other hiccups that I just remembered. Some tokens change their symbol, this can cause some havoc, I had done some trades in MyriadCoin as MYR then it changed to something else and it got all wacky. Updating the old token symbol to the new one seemed to do the trick. Also, to add to the Liqui woes, I had bought some BCAP way back in the day, but it got delisted so there is no way I found through the UI to get that information. The only way I found out I had actually done that trade was that the script I coded iterated through every possible trading pair and only then it was uncovered. Edit #2: I got a request for the liqui ruby script
Hi Bitcoiners! I’m back with the 29th monthly Bitcoin news recap. (sorry a bit late this month) For those unfamiliar, each day I pick out the most popularelevant/interesting stories in Bitcoin and save them. At the end of the month I release them in one batch, to give you a quick (but not necessarily the best) overview of what happened in bitcoin over the past month. You can see recaps of the previous months on Bitcoinsnippets.com A recap of Bitcoin in May 2019 Adoption
Why we shouldn't be asking for regulation and why we need the RIGHT to make bad investments.
I have deleted some of my old accounts but I have been frequenting bitcoin since 2014 and I am rather disappointed with the change over the last year and calls for regulation of crypto. So I thought I should make a reasoned argument as to why regulation is a terrible idea.
1. There aren't THAT many scams
4 out of 5 startups fail crypto or not. Failing is does not equate to scam. Further more sometimes the difference between a scam, just a poorly run startup, slimely business, and a bad idea isn't so clear. I'd guesstimate that at least 95% of crypto projects actually are acting in good faith.
2. Fraudsters don't follow laws anyways
Scammers are often already breaking laws, if they promise they will do X, Y, and Z and they don't they have already broken a contract and are liable to civil suits, and yes even just a promise in a whitepaper can already be considered a contract! Even emails can be considered to be legally binding between two parties in most countries and most freelancers already know this. If a fraudster is going to really scam people they will be one of those projects with an anonymous team or a fake one. And guess what since the government can't stop people from making crypto transactions a scammer from Russia is still going to be taking your ETH regardless of the regulation because they are anonymous!
3. Regulation favors the rich
In America you often have to be an accredited investor to invest in early startups. In other words to invest in a young company that is having an ICO, if the same rules applied to crypto, you would have to be accredited. So what is an accredited investor?
To be an accredited investor, a person must demonstrate an annual income of $200,000, or $300,000 for joint income, for the last two years with expectation of earning the same or higher income. An individual must have earned income above the thresholds either alone or with a spouse over the last three years. The income test cannot be satisfied by showing one year of an individual's income and the next two years of joint income with a spouse. The exception to this rule is when a person is married within the period of conducting a test. A person is also considered an accredited investor if he has a net worth exceeding $1 million, either individually or jointly with his spouse. The SEC also considers a person to be an accredited investor if he is a general partner, executive officer, director or a related combination thereof for the issuer of unregistered securities.
source This means you basically have to be a millionaire to invest in early stages of a startup. So that means 99% of people in this subbreddit could no longer participate in ICOs if the same rules applied. Furthermore the people that will be writing these regulations are going to tend to be older people who have more traditional and conservative investments, so why would someone who is invested in say paypal, want to make it easy for their investment to be made irrelevant? They have disincentive to create good and fair regulations. They lack what Nassim Taleb calls "Skin in The Game" which leads to poor or selfish decisions.
4. No one seems to actually know what "regulation" means
I see people commenting about how they don't like project A and that its a "scam". Truthfully I feel this is often because sometimes it isn't always the best technology or startup that is the best investment so people can get butt hurt over it when they see projects they don't like become successful and then they say "oh I wish there was regulation so this wouldn't become popular." What the fuck are you guys talking about? How do regulate whether or not a shitty technology is favored by people over a good one? Do you really think the government should be deciding what is "good" or "bad" technology? Because if they did Bitcoin would have never been invented in the first place. Also "regulation" isn't some magic thing that will stop bad things or even scams. Because of the nature of decentralization people can very easily be anonymous and setup ICOs.
5. Regulation will be ineffective and will cause brain drain
Like it or not tax/regulation havens will always exist. So companies will tend to move to places with the least regulation, Binance is a good example of that. And since crypto transactions are trustless the actual company can be in Malta even if the token or coin is used primarily in somewhere like the US. Which means that these crypto companies will still be able to reap the benefits without any of the cost of physically being in some country. That's a lot of tax revenue that will be lost because of regulation. This also creates more inequality as it means most of the worlds wealth will end up be more concentrated in tax havens. Not to mention anonymous scammers don't follow regulations anyways.
6. You are telling the government you are too stupid to handle your own money
Why on earth should you or the government or anyone tell me I can't throw $1000 bucks at some startup on the other side of the world? Regulation is only going to add more red tap for small startups, I have some experience with this personally as I work for two blockchain startups. One of these startups I suggested they add an equity function to their utility token, turning it into stock + utility token, as I think that is way more valuable to investors and they will likely be able to raise more money in their ICO. However they have determined that the paperwork alone costs way too much time and money. So these regulations are already hurting both investors and startups. Regulation KILLS innovation. You can't get 1000x return on one investment without taking a 95% loss on 10, in the end it is still worth it and you still win but regulations will make it damn near impossible for regular people to invest in projects in their early stages or from new better startups being created, so you will only be "protected" from insane profits with maybe a slight improvement in your losses. More regulation means less profit, and lets be real, most of you are here and want "regulation" because you want more money but this is the worst way to go about it. If you are too stupid to do basic research and to have diversified your portfolio then you are bad at investing and you shouldn't be playing this game, no amount of regulation will make you a better decision maker. We need the right to make bad investments that fail because that's how investing is done, you tend to make a loss on most investments but the few that profit more than make up for the sum of losses. Just think of the potential of millions of world changing startups that will never be because of red tape. It's like taxing people because they are dumb.
The Solution: Lawsuits
You can still sue people for things that are not explicitly breaking a law, but breaking a contract. The only regulation should be a business license so the government knows who they are, after that its not harm no foul rule. That means that if ICOs or cryptos try to trick people that they can be taken to court and sued to hell so they still are culpable for wrong doing without hindering young startups. Stricter regulations would have made a lot more sense in a pre-internet and pre-crypto world. This is because only people who could make researching and educating themselves a full time job could really understand if a business had a reasonable proposition and model since researching anything pre-internet was way more difficult. However with the democratization of information with the internet and of value with crypto these regulations don't make as much sense because the informational asymmetry has almost entirely disappeared between accredited investors and regular motivated people. The only difference now is the size of the wallet, this is a terrible world to live in where only rich have the options. I highly recommend everyone in crypto read Nassim Talebs "Incerto" collection particularly his latest book "Skin in The Game".
Ethereum is traded on all cryptocurrency exchanges, as it is the main altcoin. The most popular trading platforms are Binance and BitMEX. To store ether, you need to have a wallet, such as MyEtherWallet. If you plan to trade, there is no need to buy cryptocurrency through exchangers, but you can buy it on the exchange directly - Binance added support for ruble and currency pairs, including ETH/RUB.
How to trade
The Ethereum price chart is represented by the Trading View resource, which is integrated into the Trade-mate.io service. In your account you can connect three exchanges Binance, BitMEX and Poloniex. In addition to advanced Tradingview charts service provides smart trade functionality with trailing stops and autotrade, allowing you to copy trades of other traders and trading bots. The Ethereum volatility allows you to use any classic strategies inherited from Forex. If the foreign exchange market has long acquired immunity to technical analysis, the crypto market allows you to make a profit due to the immaturity of the industry. The most popular trading indicators are Bollinger Bands, Fibonacci Levels, RSI and others. A detailed description is easy to find on the Internet, but do not forget about the main rule - set up stop losses, because any cryptocurrency can collapse by 20% or more in a few hours. Trade-mate.io will help to extract the maximum profit, because smart trade allows you to automatically rearrange the stop loss as long as the price rises.
Small crypto investors all toghether become as influent as whales
How a group of traders is manipulating the crypto market to earn a fortune. 11-25-2019 – DATA and NAV pump on Binance. Every few days, 200,000 strangers come together online to buy little-known cryptocurrencies, also known as altcoins, at exactly 2 p.m. Eastern time. Then, anywhere from 30 to 120 seconds later, they sell them en masse. The members of the Discord group, Big Pump Signal (Source: https://discord.gg/YJYVmTc), buy and sell at the right time and make out like bandits. The pump group ethos is simple: Buy low, sell high. The implication is that investors outside the pump group will see the rapidly rising price and rush to buy in, anxious not to miss the next Bitcoin-style gold rush just like today, with the NAV and DATA pump. In most established groups, the pumping process itself is surprisingly well-organized. Group leaders provide specific instructions to their members that include the exact time a pump will occur (translated into multiple time zones), what exchange the pump will take place on, what the “target” inflation price is and a number of other helpful tips and tricks.
What not to do when trading crypto Beginners often make mistakes, as a result of which they quickly lose their funds. Let's analyze the most common mistakes that inexperienced traders make when trading cryptocurrencies.
Crypto trading is a cold calculated process. All actions to buy/sell cryptocurrencies should be carefully analyzed and decisions should be made only on the basis of logic. Novice traders often succumb to the influence of FUD during the fall of the price, because of what as quickly as possible seek to get rid of the cryptocurrency, and FOMO, encouraging to buy an asset when it has already grown sufficiently.
Trading large amounts
To trade, you need to allocate a small part of the deposit - 5-10% and even less 1-2%, if you trade with leverage, which is not recommended for beginners anyway. The amount of funds allocated for the purchase of assets may vary depending on the risks: the higher the risk, the smaller the amount you should trade with accordingly.
Misunderstanding of the cryptocurrency market fundamentals
The crypto market is manipulated by large players due to its low liquidity. Whales use tricks to lure inexperienced players and make money on them. The most common scheme is Pump & Dump. Newcomers see a fast-growing asset and rush to buy it to get an easy profit. After that, the value of assets just falls as quickly, and "hamsters" lose their money.
Wrong risk management
Risk management is based on two key principles that are often neglected or misused by inexperienced crypto traders: averaging and diversification. Trading requires long and painstaking study as well as practice. Beginners tend to average to the last, despite the clear downward trend, and diversify too much, distributing the bulk of the funds among altcoins, which fall more rapidly when bitcoin falls. At the same time, they even forget to set stop losses. Trade-mate.ioservice offers tools that will help beginners reduce risks and trade more productively on the crypto market thanks to advanced trailing mechanisms. If you do not have enough experience, you can set up an auto trade on the signals of professional traders and bots on the exchanges Binance, Bitmex, and Poloniex.
I have not been able to focus on writing the past couple of weeks now. I have learned a lot about using multiple different exchanges over the past couple weeks. I went from GDAX, to Binance to Kucoin. I have learned a lot and what I am about to tell you is my honest opinion. The Hay Way Investing in crypto is better done when you research a coin. DYOR is a legit term, even sounds like what it means. Do Your Own Research. Start here David Hay Read Read some books about economics and especially Bitcoin. My favorite books on Bitcoin Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction and Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money. Knowing the history and how Bitcoin works is fundamental I believe in this journey. Another great read I believe will make you look at money forever different How an Economy Grows and Why It Crashes Telegram & Alt Coins I think you should get Telegram. I am not kidding. It is amazing to connect with people from the different Exchanges, coins and dev channels. I warn you right now, you will be targeted for spam channels. You will be targeted in some cases by elaborate stories and ruses. You need to DYOR before following these blindly. Remember jumping into any investment without DYOR is a mistake, there is no free cake in this world. Someone I know was contacted by someone saying they should invest in a coin, it was about to explode, they were hyping about x3 x4 returns. My friend jumped all over it and did DYOLR, do your own little research. Which was is ok, but not wise. All ICO/Crypto Channels Remember, when you go into telegram you are gonna be on the front lines of Alt coins and you are deeper in the inception of Cryptocurrencies. You are no longer in the kiddy pool. What I mean is that out in the Alt ocean there are more predators. There are more people running scams and tricks to get you to be baited in and lured in. You are not gonna get people saying Ethereum is about to make you rich, how Bitcoin is about to explode, how Litecoin is gonna x3 x4. When you are on Telegram you will run into groups and people, personally over messages and in channels pressuring you in the sweetest way to invest. How to spot a scam on telegram (which I get most info from Here):
Anonymous team or members of the team: sure satoshi was anonymous but satoshi also wasnt asking you to invest in his tech.
Insufficient information on website/whitepaper: the whitepaper is present or not at all. The white paper is convoluted or does not make sense.
Empty repositories for open-source projects: Look at their Github, look at their development research if you can. If you cant find quality do not expect to find it.
No clear roadmap: a website is nice and one video just doesnt cover it. With missing a road map or at least a ledger of working projects or working products.
Shady Team: If you interact with the team, the leaders of the company and they do not reply to your questions or become defensive. Be aware people are busy but if you ask legitimate questions and there is little to no response, remember you do not know who or whom is on the other end of that connection.
Special tips or favors: If someone is offering you a tip or a deal of a lifetime, they will say it in a way your defenses will be down. Imagine this is similar to the nicely dressed guy in the walmart parking lot saying his mother is sick and dying and needs to go see her, he needs some money. You will get that same feeling here but you need to be careful. There is no free tips in cryptocurrency, there are people making money and people losing money. If they use terminology a lot like IMO, IMHO. Be aware these are used to drop your defenses. Never get emotionally connected to your investments, if you cant stop thinking about it you have too much invested in it.
Take Profits When you are in an altcoin maybe from the bottom, maybe you are making it big. Never just keep hodling. Remember this and say it with me What goes up must come down. I am a huge hodler and swing trader but I am telling you something. Take profits. Do not let greed ruin your feed. What I mean is that rocket pumps and jumps and quick increases (within a couple days) in price on an alt specifically are the result of a pump. Some are subtle you would never know it. Let me share a story with you.
“…I am upset I have lost so much money… this is what happened… someones messages me on Telegram telling me it alright, I had just lost money. But they say … If I wanna make a profit invest in this coin. So I do. It is great! because you know what ?! it begins to go up up up. I am excited, someone was nice enough to help me out. Such cool. I put more and more money into this altcoin. I mean I believe in the tech, the ideas and the situation is just amazing.… I mean I am making tons of money on my initial investment. It wont stop groing up this is fantastic. I make everything I have into it. With these gains I am going to come out on top. Lambos and all that. Then poof… I have feeling. Maybe I am get scammed this seems all too good to be true. I look at my messages from "the tipper friend" at times I feel like I am talking to a different person, it doesnt seem like the same person. They said oneday they bought some coin it for $.50 and just now they said they actually got it for $1.00. That I should hold and not sell… I have this weird feeling, but I am making increase. By the time it $8.00 I could not believe it. I asked "the tipper" you know he is like my best friend right now, I ask if I should sell, he reminded me to not sell no matter what, do not do it. If you do it you have weak hands, you must hold... but then everything began to drop right after their big annoucement. I wasnt worried I knew they were gonna go back up. He said so… But then Asia banned thing happened and the market just crashed I lost half of everything I owned in that… it hit me… maybe I can help them out maybe do work for them on the side… I mean I want the coin to go back up… I can help build website… my friend laughed at me… he say I work for them now, they give me the money they took from me… ha whatever… well… I ended up helping out and…. To me it felt me I felt trapped. I felt like I owed them something... only to come to find out that whatever just happened was planned maybe and I have this hope if I help out maybe it will go back up.. but it never did…”<
I think its a true story… maybe exaggerated some. You will find these if you ask around. The reality is real, scammers do exist. What is happening in these situations is that often a large group of people are gathered together to hear about a new “coin taking off” one by one they are pulled into a telegram channel. In fact it “the boom” may have already started and the tech seems legitimate enough, you will quickly be blinded by the quick jump in price. If you were in their shoes, you should be asking one question…. ”How did their ICO go? Was it profitable or not?”. Because if it was not, more than likely they are gonna do something whatever it takes to take profit to get their tech started… What you see happening also is that tech that may be great oneday… Remember that “oneday” could be 1-3 years from now. Story of NEO… Rags to Riches. So you have to presume a coins team will do whatever and be as dirty as they can to make ends meet, often it means taking money from innocent people. In this specific situation, the coin was being pumped surgically, not obviously, so it legitimacy seemed legit. Another question that should of been asked is “Where is the working product? If you do not see one what makes you think other investors will actually like the idea?” There were no obvious big signs of a pump, so you can easily think this is all ”Organic”. There is nothing organic in one week in this industry. ”Ask yourself did that 400% literally just happen in a couple days?” because if its too good to be true, let me explain this to you in simple terms. IT IS. Even though slowly and surely the price rose and people held out, no weak hands here… But what is happening is that people holding lost a lot when the devs. and whales sold their coins… you have to be aware many of the smaller coins will have either premined their coins or bought up a ton when it was only cents. They essentially will cash out huge returns.
A “premine” distribution system, while not necessarily an indication of a scam suggests that the creators of the cryptocurrency already own a portion of the cryptocurrency before it hits the exchange.<
It happens, it is normal, but in ways it is wrong, especially if you are new to Altcoins. Read More Here. Buy the dip and sell the news is true. If this user would of done that, they would have made out probably ok, so next time take profits… say it with me what goes up must come down. The Fud Truth This term is thrown a lot. It does not mean F'd up data. But essentially that is what it is, Fear, Uncertainty & Doubt. In my experience people who specifically had showen good data on their Reddit comments or posts or on Telegram that proved some FUD. They were banned, kicked out or shutdown. If you notice a truly negative or hostile atmosphere to people because they are FUD, you need to step back for second and look around. Who do you actually know here, is it just your "tipper" friend. Really think about the FUD when it comes out. Because if the person above would of listened to the FUD they would not be where they are now. Fud Reddit. Rest. Take some time and rest from this. I cannot explain to you the amount of hours I have spent looking at my phone. My computer. Talking on Telegram, acting as if I am being paid for it. Doing little graphic design work here and there. Take a break and have a life. Because at the end of the day your time is what you are using to pay for this. When you buy an alt coin you or anything for that matter you are spending the time you took to make that money. Remember your losing on both ends if you spend your time making money to spend more time losing or making that money. Watch this. Time is your currency. Tl;dr Get telegram, scams happen more in altcoins, build relationships, research, listen to the FUD, rest. Edit:spelling errors and link error. Wow I cannot thank you guys enough, your responses have been encouraging. cryptocurrency can be a place of quality and we can decide to do that everyday. I encourage each of you to share what is happening to you, what you have learned.
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