Bitcoinist Weekly News Re-Hash: Bitcoin Mining Milestone, DCG to go Public?

This week, we saw an overall decline in the bitcoin price, as it fell from $398.78 at the beginning of the week to $373.55 at Sunday’s close. This week’s bearish activity was characterized by relatively flat activity, punctuated by sudden price drops that the market seemed to be unable to fully recover from. Meanwhile, in the news, we learned of new Bitcoin network milestones, regulatory efforts and investments. 

Also read: Gamerholic, the Next ‘Billion Dollar Gaming Company’? A Q&A with Anari Sengbe

Daily Bitcoin Price Action

January 25: $398.78

January 26: $391.04

January 27: $393.75

January 28: $379.37

January 29: $370.39

January 30: $377.75

January 31 Open: $377.74

January 31 Close: $373.55

Total Change: -6.33%

Weekly News Roundup

 

The week kicked off on January 25, 2016 with the bitcoin price at $398.78, staying within the loose upper $390s trend established last week. The price hit $400 in the early morning hours, but quickly dipped back down into the $390s. By the early afternoon, the price had fallen again into the low $390s, briefly entering $380s territory. Activity slowed down in the afternoon, with the price leveling out in the low $390s, where it stayed for the rest of the day.

In the news, we reported on a milestone in the Bitcoin network. For the first time in the history of the network, the hash rate exceeded 1 Exa Hash per second. The achievement of this milestone means that the bitcoin network has become approximately 300,000 times more powerful than the world’s fastest supercomputer, and over 43,000 times faster than the top 500 supercomputers combined. To drive home the significance of this milestone even further: the bitcoin network at one Exa Hash per second could be capable of running a neural net AI that is approximately 100 times more powerful than the human brain.

Tuesday began at $391.04, about $7 below the opening price on Monday. The $390s range held firmly throughout the entire day. The only divergence from this trend was a brief drop to $386.2 during the 6 PM hour. The price quickly recovered, though, returning to the $390s range to end the day.

Meanwhile, in the news, we reported on a development from Belgium regarding Bitcoin money laundering. According to Belgian newspaper De Morgen, the Belgian government has started working on plans to target money laundering facilitated by Bitcoin.

Wednesday the 27th opened at $393.75, a slight gain over the start of the previous day. For the most part, market activity on the 27th was extremely calm. Between the start of the day and 8 PM, there was hardly any movement in the price, with the candlesticks forming an almost perfectly straight line. However, at 9 PM, the bitcoin price suddenly plunged, falling into the low $380s. During the last hours of the night, the price struggled to remain above the $380 level, falling to $379 several times.

On the 27th, we reported on a new investment make by Japanese bitcoin exchange Bitflyer. The company invested in a blockchain-based Internet of Things program called “Sivira.” This project aims to “conjoin your favorite apps, automate actions, and keep information on the blockchain.”

Thursday started at $379.37, significantly lower than the prices we got used to seeing in the preceding days. The morning of the 28th saw a small climb into the low $380s, after which the markets kept the bitcoin price fairly flat for most of the day. At 7 PM, though, the previous day’s last minute plunge repeated itself, and the price fell into the high $360s range. The bitcoin price just barely made it out of the $360s before the end of the day, reaching $370 right at midnight.

In the news, Bitcoinist published an interview with the COO of the OpenBazaar project, Sam Patterson. Our writer Tyson O’Ham sat down with Patterson and discussed several things regarding the OpenBazaar project, including the upcoming beta release.

Friday, January 29 began with the bitcoin price at $370.39, just narrowly escaping the $360s after the previous night’s sudden selloff. The price climbed steadily in the early morning hours, reaching the low $380s. The growth halted at 7 AM, though, and the price slid downwards until the early evening, sinking to the mid-$370s. At 5 PM, the price jumped to $380, and the markets spent the rest of the day struggling to settle on $379 or $380.

Saturday opened at $377.75, an almost $8 gain over the start of the previous day. Aside from some small fluctuations, market activity on Saturday was fairly quiet. The price floated around in the mid-$370s throughout the day, with some spikes into the high-$370s and dips into the low-$370s.

In the news, we reported on rumors of the Digital Currency Group going public at some point, amid investment activity involving DCG in India. At this point, nothing has been confirmed, but our report says that DCG leader Barry Silbert has hinted that the company will likely go public at some point in the future.

Sunday, January 31 began with the bitcoin price at $377.74, virtually no change over the start of the 30th. Sunday was a repeat of Wednesday and Thursday; the price was extremely flat for most of the day, and then the markets suddenly took a dive in the early evening. at 6 PM, after hovering in the mid-to-high $370s for the entire day, the bitcoin price fell into the upper $360s, briefly touching $364.4. The markets attempted a slight recovery in the late night hours, climbing out of the $360s and returning to the low-$370s to end the night. Sunday concluded with the bitcoin price at $373.55, making for an overall decline of 6.33%.

Chinese E-Commerce Giant Alibaba Explores Blockchain-based Cloud Service Platform

During the recent YunQi Computing Conference in Shanghai, Alipay, an online payment platform of Alibaba, the world’s seventh-largest Internet company and popular Chinese e-commerce corporation,announced it may supply a cloud service platform based on blockchain technology.

The Hangzhou-based corporation has become increasingly interested in blockchain technology after observing the initiatives of leading financial organizations and institutions such as Nasdaq, which integrated blockchain applications into the conventional finance sector.

The decentralized and transparent Bitcoin blockchain technology enables anyone on the network to send a peer-to-peer transaction, without the involvement of a third-party application. The independence of the network from intermediaries and the traditional financial platform significantly reduces the costs involved in settling transactions and payments for companies like Alipay.

The Value of Stored Credit Information

“If the blockchain will be widely used, with more and more financial institutions and commercial organizations applying the technology, ordinary people will participate, which will lead to the storage of information in it,” said Alibaba Group Vice President and President of Research Institute Gao Hongbing. “The final value of blockchain is the storage of credit information, which is the heart of business and finance. In the past, we obtained this by ranking the companies.”

He further emphasized the significance of big data, and the application of blockchain technology in the field.

“The usage of the blockchain will grow with the transaction records stored in it,” Hongbing said.

Today, Alipay serves more than 350 million registered users and settles more than 80 million transactions per day. The dominant Chinese payment network controls nearly 80 percent of the entire mobile payment provider market in China and supports 109 million active users on its Alipay Wallet platform.

The growth of cloud computing, Internet infrastructure and financial platforms such as Alipay of Alibaba recorded a revenue increase of 128 percent year-on-year during the third quarter of 2015.According to the official financial statement of Alibaba, the company recorded “$289 million in revenue for cloud computing and Internet infrastructure.”

As a response to the growing demand for simple yet robust financial platforms to process and settle cheap payments, Alipay is planning the launch of a Bitcoin blockchain-based cloud payment platform for existing Alipay users.

Growing Demand for Alipay

Over the past year, a growing number of global corporations and conglomerates have begun to offer Alipay to clients as one of their main payment options. The world’s largest airline by number of destinations, United Airlines, for example, announced that the company has officially integrated Alipay into its system due to the growing demand from Chinese citizens, who account for nearly 3 percent of foreign visitors to the United States.

“We are very pleased to partner with United and help them make online booking from China a hassle-free experience,” said Jingming Li, President of Alipay U.S.“By enabling the option to use China’s most trusted and secure payment system, Chinese travelers using United’s website can expect the safe, easy and consistent experience they have come to expect, while avoiding any currency barriers.”

Earlier this month, major Japanese department store chain Kintetsu also announced that the corporation has introduced the Chinese online payment solution in four of its department stores in Osaka.

“Alipay is a payment platform with over 400 million users in China. Chinese customers will be able to use the Alipay app on their cellphones to pay for the commodities they have bought in our department stores, which will be very convenient for them.” said Aki Shokyoku, foreign business director of Abeno Harukas Kintetsu Main Store. “We want to make payment more convenient for Chinese tourists so as to attract more Chinese customers.”

Although Alipay is still unsure whether it will gear toward the integration of the Bitcoin network or the development of its own independent blockchain network, the company’s executives present at the YunQi conference clearly stated that Alipay will most likely introduce a blockchain-backed cloud payment service in 2016.

If the Alipay team successfully integrates Bitcoin into their existing platform, it will immediately enable 400 million users in its system to use Bitcoin in settling international payments and transactions. Arguably, this could be the largest Bitcoin integration by volume to date.

Bitcoin Core Developer Jonas Schnelli Explains Controversial Transaction Replace-by-Fee Feature

Although the block size debate has been the main point of conflict within the Bitcoin community over the past year, the reality is that this conversation is more about the larger topic of scalability. Different Bitcoin users would like to see the network scale via specific methods, and the two main parties in this debate are now Bitcoin Core and Bitcoin Classic.

Along with the block size limit, the Lightning Network, and Segregated Witness, another Bitcoin feature that has been covered in controversy is Replace-by-Fee(RBF). Bitcoin Core Contributor Jonas Schnellirecently discussed this new feature, which has been implemented in Bitcoin Core 0.12, during apresentation at a Bitcoin Meetup Switzerland.

Satoshi Originally Implemented Full RBF

Schnelli started his talk by pointing out that Bitcoin creator Satoshi Nakamoto originally implemented RBF.

Although transaction replacement was disabled by Nakamoto in 2010, the commit disabling the feature came with the comment that it was only being turned off “for now.” The comment next to the code related to transaction replacement in Nakamoto’s original code reads, “Allow replacing with a newer version of the same transaction.”

Schnelli described how transaction replacement once worked on the Bitcoin network:

“It was always possible – or back then it was possible – that if you did a transaction, until that transaction ended up in a block, you could change the transaction fully by just doing something different.”

RBF Helps Avoid Transaction Delays

There are advantages to being able to replace a Bitcoin transaction with a new, updated one. For example, if a user has included a transaction fee that is too low, the ability to replace the transaction with another one containing a higher fee allows users to make sure their transactions do not get stuck with a status of “unconfirmed” for long periods of time. Users are also able to correct errors made when creating a transaction via RBF.

Jonas Schnelli noted that this functionality makes sense to him:

“This makes sense, in my opinion. If I do a payment and I find out, ‘Oh, no – wrong amount,’ or, ‘Oh, no. The fees are wrong,’ I can change it.”

0-Confirmation Doesn’t Work with RBF

The controversial aspect of RBF is that it does not work well with 0-confirmation transactions. When users are able to replace transactions before they are placed into a block, that essentially makes unconfirmed transactions much riskier. Many merchants and payment processors rely on unconfirmed transactions for real-world commerce.

Schnelli described this issue during his talk:

“0-confirmation by Satoshi’s whitepaper was always insecure, but because people have built systems on it, we have to make sure that it’s stable, that people can buy stuff instantly. I mean, you can’t wait ten minutes when you pay for a coffee; I agree.”

On the issue of the security of 0-confirmation transactions, Bitcoin Core contributor Peter Todd recently wrote a blog post where he outlined the current inability of bitcoin wallets to properly protect users against double spends.

Merchants Shouldn’t Be Afraid of RBF

Even with the security concerns often pointed out by Todd and others, it should be noted that the current version of RBF is opt-in.

Jonas Schnelli explained the optional nature of RBF during his talk at Bitcoin Meetup Switzerland:

“When you create a transaction, you can decide, ‘Should I be able to replace a transaction or not?’ If you just create transactions as you did in the past, it’s not replaceable. Nothing is broken; everything works as it was before. But now we can opt in – set the flag on that transaction – and then it gives you the chance to replace a transaction until it’s mined.”

In other words, merchants should not be vulnerable to an RBF-powered double spend because RBF transactions can be differentiated from traditional Bitcoin transactions.

As Schnelli explained during his presentation:

“Merchants can reject RBF transactions … If somebody pays you with a replace-by-fee transaction, you don’t want to accept it if it’s a 0-confirmation [transaction].”

Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report and many other media outlets. You can follow @kyletorpey on Twitter.

BAFT Event Attendees See Future With Billions of Blockchains

A new survey shows financial professionals are increasingly bullish on blockchain and distributed ledger tech, even as they profess to a lack of understanding of the subject matter.

Conducted by think tank and distributed ledger specialist Z/Yen Group at the Bankers' Association for Finance and Trade (BAFT) Global Annual Meeting in Paris this January, the poll found that while 70% of respondents said the financial institution they work for is exploring the technology, 69% reported they don't believe they have a "good grasp" of how it works.

Overall, 73% of respondents reported they had more than 15 years experience in the industry, with the majority working in either a business executive (44%) or product development (46%) role. Just 6% indicated they were responsible for their institution's technology offerings.

Of note was that respondents demonstrated that they believe in a future where there is more than just one central distributed ledger, with just 3% indicating they think a technology like the bitcoin blockchain could serve this function.

Sixty-four percent of survey takers voiced their opinion that there will be thousands or millions of blockchains (48%) or more than 1 billion (16%).

Underscoring this idea is that 71% believe the secure financial telecommunications platform SWIFT believe the service should be extended through the use of distributed ledger tech, with just 18% suggesting the technology would serve as a replacement.

Elsewhere, the survey examined topics such as the perceived impact of regulation on financial technology efforts and the effectiveness of current methods of combatting cybercrime, among other topics.

Bitcoin Price Watch: This Week’s Strategy

Last week we had a pretty tough week in the bitcoin price market. Both our intrarange and our breakout strategies got chopped around, and we took a number of stop loss hits as a result. One thing we did correctly predict was some high volume over the weekend and – as a result – some sharp moves. Action during yesterday evening in Europe saw a steep decline of some heavy selling volume. Based on the time of the decline it’s reasonable to conclude that much of the sell off came out of Asia, as the Asian markets reopened of Monday’s session and a fresh week of trading.

Since this decline, the European markets have opened and the US is just kicking off the day, and we have closed the gap on the decline. Specifically, overnight highs gave way to break and carve fresh lows at circa 365, before the buys got involved and pushed the bitcoin price back up to 373 initially, and subsequently, the most recent swing high at 378 flat. The latter of these two levels will feature in today’s strategy, which we will get to shortly.

We don’t normally bring too much of a fundamental bias to the table when setting up our intraday positions, as our strategy is designed to accommodate action in both directions. Sometimes, however, we let a bias affect how aggressive we are when setting targets and how careful we are when defining our risk. Things have been a bit unsettled in the bitcoin space over the last few weeks, and this is translating to some uncertainty surrounding pricing. As such, we’re going to approach this week’s action a little more gingerly than we have done in the past. It doesn’t mean we won’t place trades, just that we are going to tighten up our risk and chase slightly shorter term targets on the breakout side of things, and keep our stops tight on our intrarange approach.

So, let’s get to the strategy in question. Take a quick look at the chart to get an idea of what’s going on.

As the chart shows, the two key levels that define today’s range are in term support at 374 flat (a level that has played a part in our trading previously) and in term resistance at the aforementioned most recent swing high, 378 flat. It’s a pretty tight range, but as long as we keep stops short we can play for a two or three-dollar reward on any intrarange action. Short at resistance and long at support, with a stop loss just the other side of our entries.

From a breakout perspective, a close above in term resistance will put us long towards an initial upside target of 383, with a stop just ahead of current levels (somewhere in the region of 377 flat should work).

Looking the other way, if the bitcoin price closes below in term support, we will look to enter short towards 368 – a level to which we spiked down a little earlier this morning. Stop around 376 on this one.

Bank of Tokyo To Launch Own Digital Currency Soon

The Bitcoin protocol and its underlying blockchain technology have thrown traditional finance a curveball they never expected. Digital currency allows for global financial services, regardless of existing infrastructure provided by banks or governments. It was only a matter of time until banks decided to look into this technology more, and eventually, issue their own digital currency. The Bank of Tokyo – Mitsubishi UFJ is looking to issue their version of digital currency shortly.

Also read: Louis CK Accepts Bitcoin for New Show “Horace and Pete”

Touting The Benefits of Digital Currency And Blockchain

People who have been active in the world of Bitcoinand digital currency for quite some time now are well aware of the advantages this new breed of finance brings to the table. Not only will digital currency solutions help on saving costs for established financial players, but it will also help create an ecosystem where transactions are completed a lot faster.

One of the main things hurting traditional finance is the amount of time it takes to transfer value between people. Bank transfers, which are one of the most common methods for money transfers, can take anywhere from one to five business days, which is unacceptable in this day and age. At the same time, there are hefty fees associated with this process, especially when sending international transfers.

Banks have been struggling to come up with solutions that will address both of these issues in a convenient manner. Or that was the case, at last, untildigital currency and Bitcoin came around. It was clear from day one how this technological marvel would help reduce costs, provide instant transactions, and work on a global scale.

Despite that positive outlook, traditional financial players have been fighting the concept of digital currency throughout the years. Granted, in the early years of Bitcoin, there were a lot of questions regarding its survival waiting to be answered. But over time, people started warming up to this concept, and financial institutions could not remain behind.

Fast forward to today and the Bank of Tokyo-Mitsubishi UFJ is looking to issue their own breed of digital currency in the future. Among the main reasons for doing so is the potential to save on overhead costs, and to change the way financial transactions are managed altogether. Distributed ledger technology will make the entire process a lot smoother in the long run, and banks will be able to reap the rewards.

Finishing The MUFG Coin Prototype

Considering how the Bank of Tokyo is part of the Mitsubishi UFJ Financial Group. the name of their new digital currency will be MUFG Coin. Development of this concept and associated prototype begun in 2015 and a working demo is expected to be revealed in the very near future.

By creating MUFG Coin, Bank of Tokyo is investing a lot of money into research and development related to digital currency. However, it is key for existing financial players to embrace new forms of innovation at an opportune time, In the end, this investment will pay for itself, thanks to the cost reduction associated with distributed ledger technology.

No further details regarding MUFG Coin have been announced at this time, and it remains unclear as to whether or not this digital currency will have a fixed coin supply or not. By the look of things, this is not a digital representation of the Japanese Yen by any means, but something entirely different.  

What Does The Future Look Like Without Cash?

Bloomberg’s Editorial Board has published a piece putting the entire idea of how we use cash as a society under a microscope. While cash has undoubtedly had a moment for a few thousand years, Bloomberg’s editorial piece speculates on why cash has become somewhat passe and the goes on to address some of the many advantages, along with a few of the disadvantages to be had with various digital currencies.

In what was an eye-widening announcement for the rest of the world, when the People’s Bank of China stated that it intends to begin issuing its own digital currency, even nations that have kept a cautious eye on the evolution of digital currencies started to take note. Digital currencies such as Bitcoin and otherblockchain related topics have also been a hot topic among elite financial executives recently.

The effects go far beyond simple monetary policy, as broader economic, social and financial effects would surely not be far behind.

“A digital legal tender could resolve this problem. Suppose the central bank charged the banks that deal with it a fee for accepting paper currency. In that way, it could set an exchange rate between electronic and paper money — and by raising the fee, it would cause paper money to depreciate against the electronic standard. This would eliminate the incentive to hold cash rather than digital money, allowing the central bank to push the interest rate below zero and thereby boost consumption and investment. It would be a big step toward doing without cash altogether.”

In more practical terms for the average person to understand, an exclusively digital monetary system as opposed to cash, would make moving money around from people to business and business to business much easier, faster and cheaper. Increased efficiency and cost savings would benefit the poor especially as their barrier to do certain high-fee tasks at banks would be lowered.

One of the largest challenges presented in this editorial is that of convincing a country’s people that cash isn’t worth holding. Political resistance against such a movement away from cash as currency to a digital fiat would be certain. However, education of the masses to the benefits of implementing a digital currency would be the main point of friction that governments could avoid in such a scenario.