Ethereum’s Joseph Lubin: Bitfinex, Tether Situation ‘Probably Won’t Get Better’

As covered, Bitfinex was accused by New York’s Attorney General of participating in a cover-up to hide $850 million in losses. The allegations revived …

Ethereum co-founder Joseph Lubin, who’s also the founder and CEO of cryptocurrency-related software company ConsenSys, has recently stated he believes the Bitfinex, Tether situation seems to be a “really big mess” that “probably won’t get better.”

Speaking to Bloomberg at the sidelines of the Fluidity Summit conference in New York, Lubin revealed he thinks some good may come out of it, as other stablecoins may gain traction. He was quoted as saying:

Tether is somewhat important to our ecosystem because it’s used by different institutions to effect more fluid trading. There are other price-stable tokens out there — many others — and I think they’re going to gain traction because of this. I think that will be a really good thing.

As covered, Bitfinex was accused by New York’s Attorney General of participating in a cover-up to hide $850 million in losses. The allegations revived concerns over Tether’s backing, as it was supposed to have 1 USD in reserve for every USDT token in circulation.

Earlier this year the company quietly diluted its reserve claims, and soon after it was revealed that USDT is backed by cash and short-term securities equal to 74% of USDT tokens in circulation. Worryingly, Tether accounted for over 80% of bitcoins’ trading volume as of March of this year.

Bitfinex reportedly lost the $850 million as a third-party payment processor claims the funds were seized by governments throughout the world. To fix the situation it’s set to hold a $1 billion initial exchange offering (IEO) that’s said to already have lined up the $1 billion in commitments.

Regarding concerns Tether’s USDT tokens have been used to manipulate the price of bitcoin – something the US Department of Justice is investigating – Lubin noted that “all prices on the planet are being manipulated.” He added:

Any time that well-resourced actors can get in there and do something, you have to expect them to do that. So we need to build better system.

Lubin added that the “status of things is great,” as last year’s price correction aw the system grow “enormously” as those who were “pulled in by excitement riven by price growth” stayed in the crypto space and have been helping build it.

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Joe Lubin Believes Bitfinex and Tether Situation Won’t Get Any Better From Here on Out

Many of our regular readers are probably well aware of the recent Bitfinex-Tether scandal which involved a whopping sum of $850 Million. In relation …
Joe-Lubin-Believes-Things-Wont-Get-Any-Better-for-Bitfinex-From-Here-on-OutJoe-Lubin-Believes-Things-Wont-Get-Any-Better-for-Bitfinex-From-Here-on-Out

Many of our regular readers are probably well aware of the recent Bitfinex-Tether scandal which involved a whopping sum of $850 Million. In relation to the matter, Ethereum co-founder Joseph Lubin stated that moving forward, this mess would affect Bitfinex’s reputation in a big way — so much so that it would not be shocking to see the exchange lose a massive chunk of its core clientele by the end of 2019.

While giving an interview at the recently concluded Fluidity Summit conference in New York, Lubin was quoted as saying:

“It seems like a really big mess that probably won’t get better. Tether is somewhat important to our ecosystem because it’s used by different institutions to effect more fluid trading. There are other price-stable tokens out there — many others — and I think they’re going to gain traction because of this. I think that will be a really good thing.”

A Little Recap Of The Associated Happenings

As mentioned previously, the New York Attorney General’s office recently accused Tether and Bitfinex of taking part in a cover-up scheme that involved a total of $850 million — with the AG’s office stating that the above-stated sum of money was used to hide losses that had been incurred by the Tether project over the course of 2018.

Since then, Tether’s executive brass has come forth and disclosed that its USDT stablecoin is backed by cash as well as other “short-term securities” that amount to around 74% of the firm’s outstanding token tally.

This is quite shocking to hear since Tether’s market USP from the very beginning has been that

“each of its tokens are backed by the US dollar”.

Additionally, this is not the first time Tether and Bitfinex have indulged in nefarious activities since back in 2017 both organizations were sent subpoenas by the U.S. Commodity Futures Trading Commission (CFTC) for manipulating the price of BTC in an unlawful manner.

“All prices on the planet are being manipulated. Any time that well-resourced actors can get in there and do something, you have to expect them to do that. So we need to build better systems.”

Final Take

In closing out this piece, it should be pointed out that the crypto world has been faced with a few scandals of this nature over the course of the past 24-36 months. However, with that being said, it still seems as though a lot of investors have immense confidence in this burgeoning sector. This is highlighted by the fact that since the start of the year, the values of BTC, as well as many of the other premier altcoins (available in the market today), have surged massively.

Lastly, in regards to the matter, Lubin was quoted as saying:

“The status of things is great. Since that price correction, the system has grown enormously because the people who build the systems, who were pulled in by excitement driven by price growth, stay in the system. Once you’ve seen the potential, you can’t un-see it.”

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Fluidity to Introduce Ethereum-Based Mortgages This Summer

Fluidity will then process the information and create a smart contract using a tokenized representation of the mortgage. Lippiatt then explained that the …
Photo: Fluidity / Facebook

Photo: Fluidity / Facebook

The blockchain technology has become a reliable ledger that hosts information for many industries including supply chains. Now, on fintech startup called Fluidity plans to launch a project that will log mortgages onto the blockchain network. On Thursday the company announced its schedule to develop the first ethereum-powered mortgages in New York and California.

After all the licensing paperwork is finalized, Fluidity executives said the offering is planned for this summer. The chief architect of Fluidity, Todd Lippiatt, said:

“We’ll tokenize the house, which will effectively take the collateral that is the equity of the house. You’re pledging the house and you get an advanced rate back in terms of dollars.”

When the FINRA-registered broker-dealer Propellr merged with the ConsenSys decentralized exchange (DEX) in early 2019, Fluidity appeared Sam Tabar, Fluidity co-founder, said that although Joe Lubin is still a major AirSwap shareholder, the company’s subsidiary, the parent company has another set of shareholders. Some of the new notable shareholders include Mike Novogratz, Bill Tai, and Brock Pierce.

Fluidity Mortgages

The startup’s upcoming mortgages are expected to use cryptocurrency and smart contracts for back-end management. Lippiatt said that Fluidity is currently looking for partnerships with ethereum-centric lending platforms like MakerDAO’s dollar-pegged DAI loans.

Currently, the ethereum-backed stablecoin still struggles to achieve liquidity and stability in the wider markets. However, Lippiatt believes that mortgages from such prospective partnership merely involve a “mitigatable” risk.

Thus, neither the property seller nor the borrower will directly touch any digital currency. He added that:

“We will deal with the inner workings of the decentralized system. The borrowers pay back in dollars and we will also be managing the risk profile of the underlying securities.”

Hence, borrowers must submit online credit checks and all other essential information just like in any other online loan platform. Fluidity will then process the information and create a smart contract using a tokenized representation of the mortgage. Lippiatt then explained that the company can then package these loans together and resell them as securities via an exchange like AirSwap.

Fluidity’s Customers

In his view, the low-income and under-banked borrowers who can repay represent a prime opportunity for these loans. He elaborated:

“The whole portfolio will be a composition of a bunch of different loans. We are looking at methodologies by which we can deploy [underwriting] more algorithmically.”

DeFi smart contracts will offer theoretically auditable records. Moreover, Fluidity plans to offer cheaper rates compared to the banks. Nonetheless, the whole process provides the borrower with a quasi-traditional mortgage. The issuer and the subsequent traders are the main beneficiaries of this blockchain system functionality.

In the end, Lippiatt said that the company’s methodology is designed to offer better pricing. The pricing model solely depends on the intrinsic credit of the transaction. No external factors like the political trade winds and domestic central bank governance policies will affect these Ethereum-based mortgages.

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What is Ethereum’s ProgPoW and how is it impacting miners?

The Ethereum ProgPoW could split the Ethereum community down the middle and have significant consequences on the network’s evolution. The new …

The Ethereum ProgPoW could split the Ethereum community down the middle and have significant consequences on the network’s evolution. The new Programmatic Proof-of-Work mining algorithm was agreed on by Ethereum miners and coin owners through an online processing vote. However, now that it is entering an “audit” phase, many parties are debating the wisdom of their decision.

Could the Ethereum ProgPoW force another hard fork in 2019? It’s still too early to make predictions. However, more and more voices are talking about a split – whether the developers implement the new algorithm or not.

What is the Ethereum ProgPoW?

Programmatic Proof-of-Work is nothing more than an extension of the Ethereum algorithm Ethash. The upgrade is meant to help graphics cards become more competitive against ASICs. This way, miners can fight back against centralisation on the blockchain.

Sole miners who don’t have the resources to invest in expensive equipment can still have a chance of making profits from mining.

Why is the Ethereum ProgPoW important?

Since Ethereum was designed as a decentralised network, miners could use their GPUs to validate transactions and add new blocks to the chain.

But when tech companies started producing ASICs (which are more powerful than graphics cards and consume less energy), making profits using GPUs became a lot harder.

An ASIC (Application Specific Integrated Circuit) is specially designed to do one thing only – solve hashing problems and generate new coins.

The new equipment left GPU miners substantially out of pocket. Many of them, in fact, are still struggling to recover their initial investment.

This situation is leading to a loss of interest in maintaining network operations for Ethereum. Miners are moving to other blockchains where they have higher chances of getting rewards.

The domination of ASICs leads to a concentration of power in the hands of a limited number of users who own the right equipment. Decentralisation is therefore at risk. A handful of people could potentially gain control of 51% of the network. That would be enough to manipulate the entire blockchain.

The Ethereum ProgPoW consensus algorithm doesn’t eliminate ASICs. Instead, it brings some balance back to the equation by making them less effective than GPUs. The ProgPoW also aims to prevent a monopoly among equipment manufacturers by reducing the influence of ASIC users on the blockchain.

The principle behind this extension is quite simple. The algorithm uses all components of GPUs to their full extent while changing the problem in mining regularly.

By creating these random sequences of problems, the network requires more flexibility – a characteristic that ASICs don’t have for now. GPUs adapt faster to changes, making them more competitive against ASICs.

An unnecessary diversion from the Proof-of-Stake move?

The problem with ASICs’ domination is not new. The crypto community is split between people who see ASICs as a threat to decentralisation and those who have the resources to invest in expensive equipment to gain higher rewards.

Ethereum is already an “ASIC-resistant” network. And it’s not the first blockchain that would see a hard fork occur as an attempt to render ASICs unprofitable.

However, the adoption of the Proof-of-Stake consensus algorithm is the most effective way of countering ASICs’ domination once and for all. This is why Ethereum developers have been planning a switch to Proof-of-Stake for almost four years.

In this light, the Ethereum ProgPoW seems like an unnecessary diversion since it won’t have significant long-term effects on the network anyway. It’s just a matter of time before tech companies develop new ASICs for mining with Ethereum’s ProgPoW.

What about the audit?

The audit for the Ethereum ProgPoW has raised more controversy in the crypto ecosystem. Miners and coin owners who have already voted for the Programmatic Proof-of-Work algorithm are feeling undermined.

The audit performed by Least Authority (an independent German security consultant) is supposed to buy more time before integrating the extension.

However, there is increasing pressure from influential community members that have spoken against ProgPoW more than once. The audit of the code seems to be just one way in which developers are trying to deal with the criticism.

How the Ethereum ProgPoW could impact miners

Miners are essential for maintaining the blockchain, but loyalty alone doesn’t pay the bills. So, unless mining on Ethereum brings in a profit, many miners will look for more advantageous blockchains.

According to developers, the ProgPoW should balance forces on the network and encourage decentralisation. Miners will have more chances of making profits regardless of their equipment. This should be enough to motivate them to maintain network operations.

On the other hand, ASICs have their benefits, as they have higher hash power per unit of electricity and are more secure. Moreover, many community members don’t see this equipment as a real threat to decentralisation. It would likely take hundreds (or even thousands of ASICs) to control 51% of the Ethereum blockchain.

So how will things end up for Ethereum and its controversial ProgPoW? Will we have another major hard fork in 2019? It’s still too early to make predictions, but like anything in crypto, all bets are off.

The post What is Ethereum’s ProgPoW and how is it impacting miners? appeared first on Coin Rivet.

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New to Blockchain: Turning In-Game Virtual Goods into Assets

A so-called “digital collectible,” she lives a lonely life in perpetuity at an address on the Ethereum blockchain: You can look at her, but little else. Soon …

I recently started worrying about Catoshi Nakameowto. Last year, WIRED purchased its resident CryptoKitty, a cartoon cat with tiger stripes and trembling eyes, for $1.05. Since then, we haven’t seen her much. A so-called “digital collectible,” she lives a lonely life in perpetuity at an address on the Ethereum blockchain: You can look at her, but little else. Soon, though, her digital life could gain a bit more excitement—in the hands of game developers.

Gregory Barber covers cryptocurrency, blockchain, and artificial intelligence for WIRED.

For developers, the technology that underpins Catoshi offers an intriguing twist on the economics of gaming. Virtual goods are already a $50 billion-plus annual market, making up the bulk of gaming industry revenue as players shell out for the likes of fancier virtual swords and new character outfits. But unlike a CryptoKitty, gamers don’t really own the virtual items they pay for: at the end of the day, they’re pixels that disappear when you delete the game. Companies like Andreessen Horowitz–backed Forte and Hong Kong’s Animoca, which invested in CryptoKitties last year, want to use blockchain technology to turn these ephemeral items into assets.

Kevin Chou, Forte’s CEO, previously founded Kabam, the mobile gaming company that was a pioneer of the so-called freemium model: Games that are free to download and don’t require a fancy console to play, but generate revenue by selling virtual goods. Chou’s insight was that people increasingly live their lives online, and put real value on their virtual experience. “Imagine a person who’s spending three or four hours a day playing a game and is plugged into the community, talking about what’s going on in their lives with their friends,” he says. That makes people more likely to pay for virtual items, whether to unlock new types of gameplay or simply because they look pretty. Kabam sold for nearly $1 billion in 2017, primarily to South Korea’s Netmarble.

But Chou says in-game economies have grown so complicated that developers have trouble overseeing them. As a result, they place limits. Game developers typically sell goods directly to gamers and keep a firm grip on the levers of supply and demand. There’s no mechanism for players to sell the virtual items among themselves—because they don’t actually own the things. “Right now these are basically command-and-control economies,” says Brett Seyler, Forte’s COO.

Some players find loopholes to buy and sell their in-game spoils. CounterStrike: Global Offensive, a popular multiplayer shooting game, became notorious for supporting billions of dollars in bets that use decorative virtual weapons, known as “skins,” as gambling chips to wager on matches. Valve, the game’s publisher, never explicitly allowed the practice, but third-party trading sites could let players trade by plugging into the game’s API.

Chou believes blockchain tools could make in-game economies a bit more laissez-faire. He credits CryptoKitties, which arrived in 2017, with the concept. “All these light bulbs went on around the industry,” he says. With a blockchain system, gamers could trade virtual goods securely, without developers having to manage the commerce; they could even arrange to take a cut of each trade. But CryptoKitties’ initial success—one of the cats was auctioned for $170,000 in 2018—was a red herring, Chou says. The hype eventually fizzled, leaving a bunch of deflated cats stranded on the blockchain. There wasn’t much to do with them, apart from creating more cats.

Forte is looking to first develop trading platforms within well-established games where virtual goods are already used. In February, the company announced a $100 million fund with payments company Ripple to entice game developers to start using its tools, which involve a mix of Ethereum and Ripple technology to do things like handle transactions and help developers visualize what’s going on in the marketplace. The first round grants will be announced later this month, Chou says, with the goal of having “hundreds of thousands” of players involved by the end of the year.

The question is whether the traditional gaming industry will embrace a business model that lets gamers trade—and the nascent tech behind it. Serkan Toto, an analyst at Kantan Games, sees blockchain trading as an inevitable extension of the marketplaces built by the freemium model. Currently, when gamers pay for a new sword or outfit, they’re simply paying for pixels to appear on their screen; they haven’t actually invested in a virtual asset. “With blockchain, you actually own these items, and in that respect it’s really different from what we have today,” he says. “That’s a major shakeup potential for the industry.”

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That could also be perilous for game makers, Toto notes. Regulators are just now catching up to the freemium model with crackdowns on in-game spending—especially so-called loot boxes, where players pay for a haul of mystery items in the hopes of receiving a particular item. In Europe, some countries have banned the practice, calling it a form of gambling; this week US Senator Josh Hawley (R-Missouri) introduced a bill that would require developers to wall off loot boxes from younger players. But the concerns extend broadly to in-game spending, especially when it comes to kids.

“The defense that a company has against being regulated is that those virtual items have no value,” says Michael Pachter, video game analyst at Wedbush Securities. Trading, he adds, changes that calculus, and he’s skeptical that major publishers will take on the risk. There are other hurdles, he notes, like whether gamers themselves might rebel against new trading features that change how existing games are played.

Others are taking different approaches to blockchain games. Toto points to Animoca, which is focused on licensing popular brands, like Formula 1 and MLB, to build games with tradable race cars and baseball players. The company also invested last year in Dapper Labs, the makers of CryptoKitties, which CEO Roham Gharegozlou says is focused on building new experiences for your cat, like racing games, directly on Ethereum. But so far such decentralized applications, or dApps, have gotten little traction. Limited storage and speed mean Ethereum is fine for hosting a card game or a collectible item, but no good for the high-octane gaming of today. Not to mention what happens if you lose your cryptographic keys. (Your cat gets stranded forever.) But the company hopes to be there when the technology matures. “It’s purring along,” he says.

Toto compares today’s early blockchain efforts to micropayments a decade ago, before they became the ubiquitous way to buy items in freemium games. In other words, it’s early days, but with too much profit at stake for gaming companies to ignore. “We need basically one game that popularizes the concept,” he says. Still, that could take some time, with only flickers of interest from major publishers so far. Ubisoft is experimenting with blockchain technology, but hasn’t announced a game yet, while Fortnite creator Epic recently distanced itself from rumors that it was looking for blockchain partners.

It’s also unclear whether blockchain will prove the right fit for developers. Thus far, blockchain technology has struggled to find much practical use, not only due to technical hiccups but how to design economic incentives and integrate with the real world. A classic example is using blockchain tech to trace food supply chains and hunt down the source of, say, an E. coli outbreak; that’s great, as long as you can believe the head of lettuce you eat is the one that was tracked.

But Seyler says that perhaps the virtual worlds of games, with their tech-savvy participants and lack of real-world considerations, will be the place where blockchain technology can be tested and improved, a bit like how a self-driving car runs in simulation before navigating real-world streets. “Games will probably be the place where a lot of these technology and design problems are resolved first,” Seyler says. “It’s a great little sandbox.”


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