Canadian Authorities Seek Help Identifying Bitcoin ATM Double-Spenders

Around two weeks later, Coinbase added support for Bitcoin Cash (BCH). And starting on February 22nd, it introduced support for storing, sending, …

Authorities in Canada are reportedly looking for help identifying four suspects of conducting double-spend attacks on Bitcoin ATMs throughout the country, potentially taking advantage of these accepting 0-confirmation transactions.

According to the CBC, the four suspects managed to make over CAD $200,000 ($150,000) through the attacks, in which they managed to conduct 112 fraudulent transactions in seven cities in Canada, half of which in Calgary.

The attacks were carried out for 10 days in September of last year. Besides Calgary, the suspects also conducted double-spend attacks on Bitcoin ATMs in cities like Toronto, Montreal, Winnipeg, Ottawa, and more.

Authorities believe the individuals have n-depth knowledge or interest in cryptocurrency, bitcoin and/or blockchain technology.” They seemingly managed to steal the funds by taking advantage of the Bitcoin ATMs accepting 0-confirmation transactions.

CCN points out that replace-by-fee tools developed by Canadian Bitcoin Core developer Peter Todd could have been used in the attack. The tools themselves weren’t created for such activities, but allow for “stuck” transaction to go through using additional fees.

There is, however, a “double-spend” tool. That creates two transactions in succession, one paying a specific amount to a specific address, and a second one double-spending that transaction.

Per Todd, it also allows users to “optionally specify that the first transaction additional OP-RETURN, multisig, and “blacklisted” address outputs.” He added:

Some miners won’t accept transactions with these output types; those miners will accept the second double-spend transaction, helping you achieve a successful double-spend.

Looking for the suspects, Calgary Police are being aided by other law enforcement agencies, including the Toronto Police, the Winnipeg Police Service, and more. Those with information on the case can submit anonymous tips.

The development comes after criminals snatched a cryptocurrency ATM in a California bakery break-in. According to CoinATMRadar, there are over 4,400 Bitcoin ATMs in the world, and reports seem to suggest criminals are increasingly targeting them.

0-confirmation transactions are somewhat controversial, as while some point out they aren’t as secure as transactions that wait for more confirmations on the BTC blockchain, others claim they are a necessity to not have customers who want to spend funds wait for these confirmations.

As CryptoGlobe covered, however, waiting for confirmations may not be the only problem bitcoiners may have while paying for everyday goods using BTC, as even paying for coffee with the cryptocurrency could lead to tax headaches.

Featured image of the suspects from the Calgary Police Service.

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Cryptocurrency contra Gambling: False equivalence shows correlation but no conclusion

High risk. High return. Many investors look at the cryptocurrency realm using this myopic lens. One that looks at decentralized currency as a mere …

High risk. High return. Many investors look at the cryptocurrency realm using this myopic lens. One that looks at decentralized currency as a mere investment vehicle, failing to see the underlying principle of the lack of centralized control.

Cryptocurrencies have been the most volatile financial asset in the past decade, but its loyalists do not regard the rise and fall of Bitcoin’s price to be an indication of its worth. Proponents do not view the coin market in a constant valuation race with the stock market. In fact, they view it as a means to replace the traditional economic system and take back financial control.

When the price of Bitcoin shot up from $500 to almost $20,000, many crypto-newbies ventured into the industry to simply make some money with no underlying belief. The nature and volatility of the cryptocurrency industry has given birth to the presupposition that many investors in the crypto-realm are avid-gamblers. The correlation between the two was studied via a survey by the Centre for Gambling Studies at Rutgers University School of Social Work. However, the survey itself left a lot to be desired as the correlation presented was thin and the conclusion was questionable, to say the least.

THE GAME

Presenting the argument that ‘gambling,’ being correlated with cryptocurrency trading points to a relationship between the two that is thinly constructed, especially when looked at the pool of people considered to be in the gambling fray. TheCentre for Gambling Studies denoted people who have engaged in any form of gambling i.e. online betting to in-land casinos at least once a month for a year in the aforementioned category. From a minimal standpoint, considering a relatively small group of 876 adults, with once a month for a year gambling frequency and a wide range of gambling options does not show a habit or an addiction, much less a relationship.

Out of the pool, only 50 percent of the respondents dove into cryptocurrency trading in the past year, with no indication of the quantity or frequency of trades. The study also failed to mention the type of digital assets traded, stablecoins that track their corresponding fiat values do not pose a gambling hazard especially in comparison to low market cap ‘pump and dump’ altcoins. This sliver of a connection between the two also looks very weak, given the significant rise and fall of the global coin market in the past year.

The volatility of the collective cryptocurrency market in 2018 was at an all-time high, attracting risk-savvy and risk-averse investors alike. With the December 2017 crypto-boom serving as an anticipatory mirror of yet another rise, hesitant investors were further buoyed to buy digital assets. Despite this hanging investment carrot, only 50 percent of the avid gamblers invested in the coin market, showing the false equivalency in this correlation.

THE BUY-IN

Devin Mills, the lead author of the study does admit that for “some people,” cryptocurrency trading is an investment opportunity, there is no denying this claim, especially given the growing popularity of the crypto-pegged investment funds that are now mainstream.

He further equates crypto-trading to show people “gamble on horses or sports or slots,” which presents the same medium but fails on the objective. Betting on sports or at the tracks are driven by sheer greed of monetary gains and not value generation. The rush of a full-house is not the same as a coin surging on CoinMarketCap, and does not point to a direct tie between the two.

Furthermore, Gambling sans principle does not derive pleasure from the nature of the underlying asset being risked, it derives pleasure from the asset’s mere change in value. Chance is the only motivator for a gambler, with no skill, effort or study involved; random events result in random rewards, unlike skilled investing.

Drawing the correlation between crypto-trading and gambling was not the intention of the study. It was initially crafted to study the use of virtual currencies as a payment method for online casinos. The study then veered into defining cryptocurrency trading from a narrow gambling lens than through the larger dimension of decentralized currency.

THE CALL

Mills also highlights the culpable infrastructure of crypto-trading that would lust the gambler. Agreed, the crypto-space has made several strides in making trading easier, but if the infrastructure is the argument, nothing is easier than traditional stock market investing.

With end-to-end assistance, a plethora of assets tranches and classes to invest in, stock traders could also be edged closer to the gambling crowd, keeping in mind the similarities between the two fields. The volatility of the stock market is not as dominant as that of virtual currencies, but if the high-risk stocks are analyzed, it does draw an inference to the fluctuations of cryptocurrencies.

Lia Nower, a co-author of the report, attested the same as she drew parallels between high-risk stock investors and crypto-traders, hence debilitating the isolated correlation of cryptocurrency investors to that of gambling.

Furthermore, on studying the responses between the two broad categories of gambling cited by the study, it was found that gambling in casinos draws a negative relationship with crypto-trading and gambling in sports and high-risk stocks draws a positive one. This clear difference in the types of gambling leading to an antithetical trading pattern suggests that the relationship between the two is further blurred.

The study by the Centre for Gambling Studies draws a false equivalence between the two varied concepts, right from their definition of gamblers. As mentioned earlier, the study looked at people who gambled once a month for a year, which denotes on-and-off gamblers, rather than habitual ones. Even with the severity of the sample reduced, just 50 percent of an 876 pool responded to having traded cryptocurrencies, with no further metrics provided and in an enticing year as well.

THE FINAL CALL

Gamblers’ mindset looks at everything as a game of value, of numbers that constantly change and blur the objective from vision. Anything, according to them, can be chanced up and sold for millions, not merely virtual currencies, stocks, commodities, goods, and services anything can be gambled.

Satoshi Nakamoto created the first coin to bypass currency controls, cross geographical borders and push back against controlling governments, with no drive to create an investment vehicle, despite the claims. Cryptocurrencies, even today, are not seen as an asset class but, by many, as a tool for financial freedom.

The equivalence between the two might point to a weak correlation between gambling and any constantly changing asset class, not just cryptocurrencies, but it falls well short of a conclusion.


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Perspectives on the Italian crypto scene. Interview with Michele Zilocchi

Interview with Michele Zilocchi. Why did you start with cryptocurrencies? I remember the time when I was graduating, and I dreamed about an …

Interview with Michele Zilocchi

Why did you start with cryptocurrencies?

I remember the time when I was graduating, and I dreamed about an International working position, full of entrepreneurs and with lots of different projects. It was the year 2013, andI could not figure out that I was already thinking about the Cryptocurrencies environment, but now it seems to me like I have found what I was looking for.

You now write on Amicaborsa.com, an emerging business website in the Italian market. What happened?

I had a great opportunity of showing my skills to a strong Italian entrepreneurs team that operates in London managing a rising investment fund. Along the year 2017, we decided to start a new section on Amicaborsa.com talking about Cryptocurrencies technology, Blockchain and Trading of Cryptocurrencies.

You talk a lot about Cryptocurrency trading and trading for newbies, tell us more?

My adventure in Cryptocurrencies started with Binance, buying some Altcoins randomly, and selling randomly the same coins. What I realised was that the Cryptocurrencies markets (especially the Altcoins versus Bitcoin markets) have a higher volatility and price excursion than usual Forex market. Higher volatility is mainly due to lower capitalisation of the markets and to strong correlations with some major markets such as BTCUSD.

You are Italian. How do you feel about cryptocurrencies in your country?

I feel comfortable in saying that Italy is moving forward within the Cryptocurrency and Blockchain environment with lots of initiatives.

For example, Rovereto (north Italy, county of Trento) is generally known as the first area in the Country where you can get Bitcoin from ATMs since the year 2018.

A second great initiative has been the Blockchain volunteer group in Napoli, where they are focusing on the Waste Disposal Tokenization.

Last but not least, the Italian Parliament appointed 30 Italian Blockchain Experts as part of a team to develop Blockchain application. Among these 30 Experts, there are lots of different professional profiles such as Accountants, Engineers, Entrepreneurs, Professors and Information Technologists.

What are the activities related to cryptocurrencies that you think are most popular in Italy?

I think the Italians approach does not differ too much from the average individuals around the world facing for the first time the cryptocurrencies’ market: reluctance and difficulty understanding in getting their first crypto coins. Once you have got a coin, what do you do to get more value from it?

What are cryptocurrencies market activities you are focusing on right now?

I am building my credibility as a cryptocurrency trader, as a cryptomining farm’s advisor and experiencing as an ICO advisor.

I like the Advisor experience because it gives me the opportunity of being in touch with many of blockchain’s based companies and looking through their business development since the early stage.

We are currently starting our cryptocurrency mining facility based in Asia, but so far my deepest experience has been focused on Crypto trading. I am struggling to sharpen some trading methods detached from the ordinary technical analysis that sometimes involves extra-confusional graphics.

At this moment, the Cryptocurrency market generally has a low capitalisation, being easily influenced by some big trade orders put on the market and bypassing any technical analysis. You may have been told the OTC market is growing and more and more Exchanges are offering this opportunity, but you have to consider the Market Prices might be tastier even for big players.

In my opinion, when you begin trading on Cryptocurrency, you must be familiar with and increasingly dominate your approach to Money Management controlling and distinguishing the risk accordingly.

Binance is my favourite broker, even if I had experience with several Cryptocurrency brokers and having had my first trading experience with Derivatives contracts. Do you know what happened? There were too many hidden fees,and I got rid of them, switching to the “pure Cryptocurrency trading” where you have no overnight fees, and no taxes apply in Italy until a certain traded amount.


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Will stablecoins bring cryptocurrency into the mainstream?

Stablecoins are digital money collateralized to the value of an underlying asset, eliminating the volatility of other cryptocurrencies.

Blockchain is a technology with the ability to disrupt several industries (we wrote about it in our 5 Fintech Trends of 2019). It has several uses, and the technology aims to create a secure, transparent, decentralized payments system. It’s most popular use is to create cryptocurrencies.

The problem with cryptocurrencies

We all have heard the stories about people who became millionaires by investing in bitcoin, and also the stories of it losing its value just a few weeks later.

This happens because cryptocurrencies’ value is centered around speculation, so they fluctuate on a daily basis, which makes them unreliable as a currency.

Stabecoins aims to help in this regard – having the benefits of cryptocurrencies – transparency, security, privacy, simplicity) but without the volatility that comes with it.

What are stablecoins

Just like other cryptocurrencies, stablecoins are digital money that aims to mimic traditional stable currencies.

How? Well, just like other currencies, stablecoins are collateralized to the value of an underlying asset (which can vary). In general, there are 4 types:

  • Fiat-collateralized Stablecoins: These coins are backed by fiat currencies (like USD, EUR or GBP), which means that as long as that country’s economy stays stable, so is the currency.
  • Commodity-collateralized stablecoins: These coins are backed by other commodities like gold and other precious metals, oil, and even real estate. They have the potential to value overtime and make investing in gold or real estate achievable for everyone.
  • Crypto-collateralized stablecoins: These are stablecoins backed by other cryptocurrencies. They are very decentralized because everything runs on the blockchain and enjoy more liquidity. They have not gained much tractio mostly because of its complexity.
  • Non-collateralized stablecoins: These coins use an algorithmically governed approach to control the stablecoin supply. This is the most decentralized and independent form of stablecoin, as it isn’t collateralized to any other asset. However, it requires continual growth to be successful.
(Read more about the different types of stablecoins here.)

How can stablecoins help in the real world

Although complex in its structure, stablecoins can be a reality and bring a lot of advantages to users.

They can be used as a day to day currency, enabling digital payments everywhere and reducing the risks of cash use.

It can streamline recurring payments and P2P payments, making it easier for employers to have employees working remotely from all over the world.

Stablecoins can also be useful in diminishing inequality and helping developing countries around the world – the money sent by migrant workers to their families can now reach them in a faster way, with much lower fees, and without the stress of volatility of current cryptocurrencies.

It can also protect citizens in case of a crash of the local currency and hyperinflation.

Where is the future going

With all its advantages, there are still some setbacks for stablecoins: fiat-backed stablecoins are managed by a single entity, which means there is a need for a regular transparent audit of its reserve, to guarantee that the entity is actually backing up their stablecoins with real fiat.

It’s also constrained by the same regulations as fiat-currency, which means conversion is less efficient, and it has less liquidity.

There’s also the chance that the asset backing the currency crashes (be it fiat or other cryptocurrencies).

Stablecoins are still in the beginnings of its development and it’s still far from a mature level. However, its stability and advantages are certainly the reasons it might help cryptocurrencies come to the mainstream.

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SEC Chairman Clarifies Securities Treatment Around Bitcoin, Ethereum, and Cryptocurrency Broadly

The SEC chairman Jay Clayton provided additional clarity on the securities treatments for cryptocurrency—more specifically by addressing his stance …

The SEC chairman Jay Clayton provided additional clarity on the securities treatments for cryptocurrency—more specifically by addressing his stance towards William Hinman’s statements about Bitcoin and Ethereum potentially being non-securities.

Congressman Asks for Clarity on Cryptocurrency Securities Classification

In a Sep. 28th, 2018 letter, North Carolina Republican congressman Ted Budd asked Securities Exchange Commission (SEC) chairman Jay Clayton questions around cryptocurrency and its securities treatment.

More specifically, he asked Clayton to clarify what criteria are used to determine when the offer and sale of a cryptocurrency should be considered “investment contracts,” and therefore securities.

“Current uncertainty surrounding the treatment of offers and sales of digital tokens is hindering innovation in the United States and will ultimately drive business elsewhere,” Budd wrote.

Budd also inquired whether Clayton agreed with the analysis previously conducted by director of the Division of Corporate Finance William Hinman in his speech delivered in June of 2018. Finally, Budd asked if a cryptocurrency sold as part of an investment contract can later be deemed a non-security if the circumstances change.

Highlights of the SEC Chairman’s Response

In Clayton’s response, the chairman reaffirms some of the analysis conducted by Hinman, notably around whether a cryptocurrency classified as a security can later be deemed a non-security:

“I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument. A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition.”

Furthermore, Clayton clarifies his stance on decentralization and its role in securities classification:

“I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework.”

Clayton’s statements are in response to Hinman’s speech, where Hinman says a cryptocurrency’s securities definition may change over time and that a digital asset may no longer represent a security offering if a network is “sufficiently decentralized.” In this speech, Hinman also suggests that Bitcoin and Ethereum are not securities. According to Hinman:

“If the network on which the token or coin is to function is sufficiently decentralized—where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts—the assets may not represent an investment contract.”

By extension, Clayton’s statements provide additional clarity on whether Bitcoin, Ethereum, and other cryptocurrencies, such as XRP, are securities.

For example, based on Clayton’s statement, if Ethereum’s ICO was initially an investment contract (and thus a security) then its coin, ether, can later be deemed a non-security. Securities definitions, according to Clayton, may change over time in line with Hinman’s speech.

Furthermore, Clayton also suggests that if investors “no longer reasonably expect” a group to carry out management, such as in a decentralized organization, then it’s conceivable that cryptocurrencies attached to those organizations do not fall under the securities definition of the Howey test.

Budd’s Concerns Around SEC Enforcement Instead of Guidance

More specifically in Ted Budd’s letter, he calls for more clearer criteria and “FAQ-type” examples to illustrate how different factors can be applied to cryptocurrencies and “aid market participants in better understanding how these factors should be applied.” Budd uses the SEC’s purported criteria for Bitcoin as a reference:

“An example of a digital token that is not considered to be a security is Bitcoin, whose value, functionality, and transferability is determined by a permissionless blockchain maintained by unaffiliated miners, code contributors, and spot-markets for trading.”

These criteria are in line with Hinman’s speech and Budd requested more examples like Bitcoin’s applied to other cryptocurrencies. Another concern Budd voiced regards the SEC “regulating through enforcement” rather than providing clear guidelines:

“We are concerned about the use of enforcement action alone to clarify policy and believe that formal guidance may be an appropriate approach to clearing up legal uncertainties which are causing the environment for the development of innovative technologies in the United States to be unnecessarily fraught.”

SEC Chairman Clarifies Securities Rules Around Crypto

Clayton’s response, in more detail, asserts that the securities definitions of a cryptocurrency greatly depend on the “facts and circumstances of the transaction” and that the definitions used for crypto do not differ from traditional securities:

“Regardless of the terminology used to identify the digital asset—will depend on the facts and circumstances, including the economic realities of the transaction.”

He also iterates that one of the key factors around whether a token is considered a security is the expectation of profit from the effort of others:

“The ‘touchstone’ of an investment contract ‘is the presence of an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.’”

To illustrate his position, Clayton references the DAO Report, which according to him includes “detailed legal analysis applying Howey to the facts and circumstances specific to the DAO tokens.”

The SEC Policing ICO Markets for Scams

Another important factor to consider, Clayton asserts, is the SEC’s role in protecting investors. Although some in the blockchain sector are willing to engage with the Commission in good faith, others are still looking to “prey on investors.” To reduce fraud, Clayton is looking to exercise diligence when policing the cryptocurrency markets:

“I have asked the Division’s leadership to continue to police these markets vigorously and recommend enforcement actions against those who conduct ICOs or engage in other actions relating to digital assets in violation of the federal securities laws.”

The SEC’s actions are consistent with Clayton’s statement. Since 2016 enforcement actions have increased year after year, with major cases including the founder of EtherDelta, ICOs Paragon and Airfox, and DJ Khaled and Floyd Mayweather. As a result, those who do not comply with regulations in the US should be wary:

“The Commission acted swiftly to crack down on allegedly fraudulent activity in this space, particularly where the misconduct has targeted Main Street investors. Regardless of the promise of distributed ledger technology, those who invest their hard-earned money in opportunities that fall within the scope of the federal securities laws deserve the full protections afforded under those laws.”

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.

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