crypto exchange manipulation

Major cryptocurrency exchanges are manipulating their own volume figures. That’s according to a new report by the Blockchain Transparency Institute (BTI). 

The BTI report claims as much as 80% of the volume on the top 25 bitcoin pairs are subject to wash trading and manipulative bot trading.

Exchanges are inflating their own volume numbers in an attempt to draw huge listing fees from new coin projects.

What is wash trading?

Wash trading is a practice by which an investor or company buys and sells an asset simultaneously. They are essentially buying and selling from themselves. Do this with enough frequency, and it gives the impression of huge volume.

The BTI claims that major exchanges use wash trading techniques to fake the volume on their exchanges.

By doing this, crypto exchanges appear larger and more active than they truly are.

In some cases, true volume is under 1% of reported volume

To find out how deep the problem goes, BTI calculated the true volume of CoinMarketCap’s top 25 BTC pairs. The research firm discovered that actual volume on most of the pairs is less than 1% of the reported figures.

The worst offenders: OKEx, Bithumb, Huobi

Among the worst offenders are some of the biggest crypto exchanges on the planet.

OKEx, the fourth-largest exchange by reported volume, was singled out for evidence of wash trading on all 30 of its traded tokens. Huobi, the fifth-largest by reported volume, appears to be wash trading most of its top pairs, according to the report. And Bithumb, the second-largest by reported volume, is accused of wash trading its Monero, Dash, Bitcoin Gold, and ZCash pairs.

Bithumb now tops the BTI’s Exchange Advisory List, which highlights risky or opaque exchange practices.

BTI Advisory List: use with caution

Binance, Bitfinex, Coinbase Pro get the green light

Not all exchanges are engaging in nefarious wash trading. The BTI found no evidence of manipulation at Binance or Bitfinex. Binance is currently the largest exchange by adjusted volume on CoinMarketCap.

Bitfinex has been accused of market manipulation in the past due to its close ties with stablecoin Tether. However, the BTI report confirms that 100% of trading volume is real.

Coinbase Pro, Kraken, and Gemini also appear to have 100% true volume.

Crypto exchanges reporting true volume, according to BTI

Why are crypto exchanges manipulating their volume?

By faking their volume, crypto exchanges appear bigger and more liquid than they truly are. A high “reported volume” also puts them near the top of CoinMarketCap rankings, which drives more traffic to the exchange.

With a bigger profile, the exchange can charge huge fees for projects looking to list their coins on the platform.

The BTI estimates that coin project teams spend an average of $50,000 on listing fees just for the exchanges on its advisory list. It amounts to $100 million stolen by shady exchanges.

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Tim May cypherpunks

Cypherpunk Tim May has reportedly died at his home in California. May was a co-founder of the Cypherpunk mailing list and author of The Crypto Anarchist Manifesto. His influence lay the groundwork for bitcoin, cryptocurrencies, and a new movement of privacy advocates.

Word of his death was announced by fellow cypherpunk Lucky Green: 

“My dear friend, co-conspirator in many things and for many years, fellow Freedom Fighter Tim May passed away earlier this week at his home in Corralitos, California… Tim May co-founded the Cypherpunks, perhaps the single most effective pro-cryptography grassroots organization in history.”

Founded in 1992, Tim May’s Cypherpunk mailing list was home to some of the most groundbreaking ideas in cryptographic and cryptocurrency history. Wei Dei shared his vision for a digital currency called b-money on the mailing list, many years before bitcoin was envisioned. Nick Szabo shared his concept for “smart contracts,” a decade before Ethereum came along to popularize the technology. And Adam Back outlined an early version of “proof of work,” which became the algorithm behind bitcoin.

The Cypherpunk mailing list was a melting pot of concepts and ideas that eventually came to the mainstream via Satoshi Nakamoto’s famous bitcoin whitepaper.

Without Tim May and the cypherpunk movement, there would be no bitcoin.

The Eerily Accurate Predictions of The Crypto Anarchist Manifesto

May’s lasting contribution to the world, however, is The Crypto Anarchist Manifesto. A short, passionate piece of writing published in 1988 that predicted the future with eerie accuracy. 

May outlined how computer technology would provide “the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner.”

However, he explained how governments would react negatively to the movement. 

“The State will of course try to slow or halt the spread of this technology, citing national security concerns, use of the technology by drug dealers and tax evaders, and fears of societal disintegration.”

May even predicted how the technology would lead to an internet black market: 

“[Cryptography] will allow illicit and stolen materials to be traded. An anonymous computerized market will even make possible abhorrent markets for assassinations and extortion.”

The prediction is not a million miles away from the infamous Silk Road marketplace which harnessed bitcoin as a payment method.

But May was right in predicting that these events would not bring down the wider movement:

“This will not halt the spread of crypto anarchy.”

“Satoshi would barf”

As bitcoin infiltrated the mainstream, May became somewhat disillusioned with the trajectory. In his last published interview with CoinDesk, he lamented the direction of cryptocurrency:

“I can’t speak for what Satoshi intended, but I sure don’t think it involved bitcoin exchanges that have draconian rules about KYC, AML, passports, freezes on accounts and laws about reporting “suspicious activity” to the local secret police… I think Satoshi would barf.”

The Crypto Anarchist Manifesto, in Full

For those that are interested in Bitcoin and its history, take some time to read through The Crypto Anarchist Manifesto in full. This is how cryptocurrency took shape. It’s how the early pioneers envisioned the technology and what it could do. RIP, Tim May. 

The Crypto Anarchist Manifesto – Timothy C. May

A specter is haunting the modern world, the specter of crypto anarchy.

Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner. Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other. Interactions over networks will be untraceable, via extensive re- routing of encrypted packets and tamper-proof boxes which implement cryptographic protocols with nearly perfect assurance against any tampering. Reputations will be of central importance, far more important in dealings than even the credit ratings of today. These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.

The technology for this revolution–and it surely will be both a social and economic revolution–has existed in theory for the past decade. The methods are based upon public-key encryption, zero-knowledge interactive proof systems, and various software protocols for interaction, authentication, and verification. The focus has until now been on academic conferences in Europe and the U.S., conferences monitored closely by the National Security Agency. But only recently have computer networks and personal computers attained sufficient speed to make the ideas practically realizable. And the next ten years will bring enough additional speed to make the ideas economically feasible and essentially unstoppable. High-speed networks, ISDN, tamper-proof boxes, smart cards, satellites, Ku-band transmitters, multi-MIPS personal computers, and encryption chips now under development will be some of the enabling technologies.

The State will of course try to slow or halt the spread of this technology, citing national security concerns, use of the technology by drug dealers and tax evaders, and fears of societal disintegration. Many of these concerns will be valid; crypto anarchy will allow national secrets to be trade freely and will allow illicit and stolen materials to be traded. An anonymous computerized market will even make possible abhorrent markets for assassinations and extortion. Various criminal and foreign elements will be active users of CryptoNet. But this will not halt the spread of crypto anarchy.

Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions. Combined with emerging information markets, crypto anarchy will create a liquid market for any and all material which can be put into words and pictures. And just as a seemingly minor invention like barbed wire made possible the fencing-off of vast ranches and farms, thus altering forever the concepts of land and property rights in the frontier West, so too will the seemingly minor discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property.

Arise, you have nothing to lose but your barbed wire fences!

I suppose this is as good a time as any. Bitcoin’s price continues to tumble and our faith has begun to shake; or has already shaken. There’s nothing quite like checking the market to see numbers dropping. For those of us that bought high, there’s a tinge of rage, regret, and anger. We’re only human. No one likes to see their investment devalue. And at the moment, there’s only one meme that can correctly personify how we’re feeling. The Pink Wojak; also known as the /biz/ Wojak.

The Pink Wojak is the embodiment of self-hatred and regret. The kind of sentiment one might have having bought Bitcoin nine months ago. Remorse that has you feeling like an anvil landed on your head. We’ve all felt it. Even if we didn’t purchase Bitcoin at $20k. When crypto is tanking, there’s no shortage of Pink Wojaks to scream for us. But it wasn’t always that way.

Figure 1. The Pink Wojak

Like many a great crypto meme, its origins lie elsewhere. Wojak, or “Feels Guy,” the Pink Wojak started out as a black and white MSPaint illustration of a bald guy with a sad expression. Originally posted in a 2010 Reddit AMA, Feels Guy slowly began circulating around the web on international forums and image boards. Used to express empathy, Feels Guy took a turn when it inevitably made its way into cryptocurrency circles. 

Figure 2. The Wojak or “Feels Guy”

During a market crash, specifically an Ethereum dump in June of 2017, a 4chan user posted a warped version of Feels Guy. Instead of expressing empathy and understanding, this time Feels Guy’s appearance had been warped; his head twisted, skin pink, screaming, while his eyes bled tears. Soon another Pink Wojak surfaced days later when ANTS, now NEO, began to tank. The meme caught fire. And the original content began to flow. 

Figure 3. The Birth of The Pink Wojak Meme on 4Chan

In almost no time, Pink Wojaks became the symbol of the market crash. There’s almost no need to look at graphs. You know bitcoin isn’t on the rise when you see a couple of these guys. They’re almost a market barometer all on their own. And lately, we’ve been drowning in a sea of ‘em. Here’s hoping that’ll change soon.

Figure 4. One my Personal Favorites, using the Binance puzzle verification

bitcoin hacks

$927 million worth of cryptocurrency was stolen in 2018 according to a new report by CipherTrace.  The vast majority of this money was taken from cryptocurrency exchanges in high-profile hacks.

Block Explorer decided to review the biggest crypto hacks of 2018 to remind our readers about the importance of taking all the possible measures to keep their digital fortunes safe. Meet the notorious winners:

January: Coincheck ($532.6 Million Hack)

This year started with one of the biggest crypto heists ever. Around 500 million XEM coins (native cryptocurrency of the NEM project) were stolen from the hot wallet of Tokyo-based crypto exchange Coincheck. 

At the date of the incident, the coins were worth roughly $532.6 million, beating the well-known disastrous Mt. Gox hack, when 850,000 of Bitcoins disappeared. The damage at the time was around $450 million.

Coincheck’s misadventures led to its acquisition by Monex Inc., a Japanese financial services group in April 2018. Monex was interested to increase the company’s international outreach.

It took ten months for the dust to settle, but Coincheck has now resumed its trading services.

February: BitGrail ($170 Million Hack)

Another month, another hack. This time the bad luck happened to BitGrail, a small Italian crypto exchange. And even though its trading volumes were not impressive, it was a perfect place for trading Nano (XRB). The asset went from $0.1 back in November 2017 to as high as $34 in January 2018 and was trading around $9-$18 at the moment of the hack. Its volatility made it very attractive for speculative traders, and the prospect of potential gains made them blind to the risk of using the non-mainstream exchange. 

And so it happened: BitGrail reported that hackers get away with 17 million nano, worth around $170 million at the time of the incident. Francesco Firano, known as @bomberfrancy on Twitter, the man behind the exchange, tried to put the blame on the Nano developers and claiming that they didn’t want to collaborate.

Firano offered the project’s team a solution for recovery after the hack: to modify the ledger. But the answer was negative. 

This story quickly became more and more controversial due to the endless discussions and theories suggested by social media users. They included the hypothesis that the nano hack was an exit scam.   

April: Ian Balina ($2 Million Hack on YouTube Live Stream)

Ian Balina, quite an established crypto influencer, investor and advisor, was hacked during his live stream ironically named “Hacking the System”. Approximately $2 million worth of tokens were snatched during this attack. Some participants of the crypto sphere speculated that it was a foxy trick to avoid taxes. 

Later in September, two young men, Fletcher Robert Childers, 23 and Joseph Harris, 21 (believed to go by the alias ‘Doc’), were arrested on suspicion of carrying out the attack. As reported by Motherboard, Balina confirmed he thought persons named Doc and Veri were behind the hack. 

June: Coinrail ($40 Million Hack)

June started with some noise in South Korea when a tiny exchange Coinrail lost more than $40 million worth of crypto in yet another hack. The biggest hit was taken by payment processing startup called Pundi X, with around 3% of total NPXS token supply affected. 

The project’s team was very eager to cooperate by freezing the stolen tokens immediately and halting trading to help with the investigation.

To this date, there are no major announcements on identifying the criminal behind the Coinrail’s heist. 

June: Bithumb ($31 Million Hack)

Bithumb is one of the most popular crypto exchanges in South Korea; one of the top ten in the world by volume for trading bitcoin cash and ethereum at the time of the hack. 

In spite of being a mainstream exchange, Bithumb was the subject of a hack in June 2018. During the attack, approximately 35 billion of Korean won worth of crypto was stolen ($31 million equivalent).  

According to some reports, the exchange’s management was aware of security issues prior to the breach and took measures to enhance the exchange’s safety, but it still didn’t work out. 

After the hack was discovered, the exchange’s management made a pledge to refund the losses to all affected customers from its own reserves. 

The investigation of the event was held by South Korea’s National Police Agency and its cybersecurity division. However, at the moment of writing, no definite suspects were found. 

September: Zaif ($60 Million Hack)

Another Japanese exchange came under attack. Hackers accessed the exchange’s hot wallets, which resulted in the loss of $60 million worth of crypto assets, including monacoin, bitcoin cash, and bitcoin.

The owner of the exchange, Tech Bureau Corp., promised to cover the losses of all affected customer and to do so got into a deal with Fisco Ltd. They agreed to exchange the major stake of Zaif exchange for financial support to resolve the issue. The total amount received was 5 billion yen (approximately $45 million). 

October: MapleChange (Unknown Figures)

Later in October, MapleChange, a tiny Canadian crypto exchange reported a hack, losing practically all the funds the exchange had at their disposal. The announcement was followed by the company’s management shutting down its website and social media accounts. They deleted everything that might have led to identifying the owner’s names. Many of MapleChange’s customers were not buying the “hack” story and suspected that it was a scam exit. 

October: Trade.io ($8 million Hack)

Another crypto exchange was hacked in October. Swiss-based Trade.io reported the loss of about $8 million worth of TIO tokens, apparently stolen from a company’s cold wallet. 

The stolen tokens were intended to be used as a project’s liquidity pool. Therefore, the management performed a fork to get the funds back. 

Interestingly enough the team stored the wallet itself in a local bank’s deposit safe. And since it was reported that the safe wasn’t compromised the only explanation is that hackers somehow managed to access the wallet details for making the transfers, that normally indicates an “inside job”. 

SIM Swap Hacks Turn Mainstream. Millions of Dollars Lost

 Towards the end of the year, we saw a new trend emerge: sim swap hacks.

By November these got completely out of hand and became a real pain for the members of the crypto community. 

In the nutshell, the SIM swap method gives the criminal the access to someone’s crypto wallets. By using SMS backup it’s possible to bypass two-factor authentication commonly used to protect the digital fortunes. 

Among the possible scenarios of a perfect SIM swap heist are: 

  • Bribing the mobile operator’s employees to get some inside help with the crime
  • Intentional abuse of customers’ data by former or current employees
  • Employees tricking innocent colleagues to swap the potential target’s SIM cards. 

As for the victims… Robert Ross, an angel investor from San Francisco, lost around $1 million due to the SIM swap. Christian Ferri, the head of BlockStar lost over $100,000. Michael Terpin, a well-known veteran of crypto space, is suing AT&T over a SIM swap that cost Terpin around $23.8 million at the time. And that’s just to name a few.

The list is living proof that with the evolution of blockchain-based projects comes the increased level of sophistication and persistence of crypto criminals. Don’t let them get you and be safe! 

Please don’t keep your crypto on an exchange

It might be simple and convenient, but it is not safe. Instead, move your funds to a secure wallet of your own where it is less vulnerable to hacks.

Essential further reading: 12 Best Bitcoin Wallets (For Safe and Secure Crypto Storage in 2018)

 

women in blockchain

Edit: Block Explorer’s Women in Blockchain article was updated on January 11th to reflect the industry in 2019.

Women in blockchain and cryptocurrency are dramatically under-represented.

As the New York Times reported earlier this year, the industry has so far been dominated by “blockchain bros,” with women accounting for just four-to-six percent of blockchain investors.

However, there are women out there making a real change in the blockchain industry, offering a living example that gender doesn’t matter as long as you bring value to the table. 

As Silicon Valley entrepreneur Brit Morin explained, “We have an opportunity to rebuild the financial systems. Women want to be part of that.”

Block Explorer proudly presents the most important women in blockchain: 

1. Kathleen Breitman (@breitwoman)

 Who: Breitman is one of the co-founders of Tezos, a self-governed automatically updated blockchain. The project raised $232 million of funding becoming the third-largest Initial Coin Offering (ICO) in 2017 and the tenth-largest in history (according to data from CoinSchedule). 

Even though the project went through the process of harsh legal scrutiny, the team was able to make it work, launching the fully operational protocol back in September. 

Why follow: Her tweets are a balanced mix of personal thoughts, heads up about important people and events in the field and funny jokes, delivered in a very calm manner. 

What does she say?

2. Neha Narula (@neha)

Who: Narula was a Google engineer and part of the team in charge of relaunching Digg, the news aggregator. Now, Narula is a director of the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) Media Lab. It’s a pioneer in industry research, focused on cryptocurrencies, related technologies and solving the major issues standing in the way of mass adoption including privacy, security, and scaling.

Why follow: She is responsible for many amazing things in blockchain development right now, including creating a demo for a crypto-powered vending machine that allows the buyer to pay for goods with multiple coins. You don’t want to miss it! 

What does she say?

3. Galia Benartzi(@galiabenartzi)

 Who: Benartzi co-founded Bancor, the protocol for smart tokens, one of the most successful token sales to date. Getting back to CoinSchedule and their stats, Bancor was the fifth-largest token sale in 2017 and the 12th largest in history, at the time of publishing. 

Benartzi is currently in charge of Bancor’s business development, and that’s one hell of a mission. 

Why follow: Galia mostly retweets Bancor’s whereabouts and given that the project is working to rethink the future of money and digital assets – it’s a lot. Also, she shares her interviews and talks at the major events. It’s nice to be in the loop if you’re eager to attend blockchain events featuring ladies on the panels.

What does she say?

4. Preethi Kasireddy (@iam_preethi)

 Who: Preethi used to work as a blockchain engineer at Coinbase. And before that as an analyst at Goldman Sachs and partner at Andreessen Horowitz investment firm. Her recent venture is a project called TruStory, a social network of experts helping to identify what is real and what isn’t, focused on crypto-related news. She also holds 1:1 sessions with women who want to get involved in blockchain and crypto. 

Why follow: As a person who believes there’s no point in accumulating knowledge if you are not eager to share it, Kasireddy is indeed a goldmine of blockchain theoretical or practical information. All delivered in an easy to digest manner with lots of personality and character.

Her “aha” moment? Realizing that: “One of the biggest potentials of crypto was going to be its ability to break down some of the entrenched, ineffective, and corrupt systems we have in place today and re-imagine them from the ground up. To do things more openly, fairly, and effectively. All along, I had been approaching crypto as just a technological breakthrough. But I realized that it doesn’t stop at the technology, it merely starts there — it’s a movement. A revolution.”

What does she say? 

5. Meltem Demirors (@Melt_Dem)

Who: According to her Twitter profile, Demirors teaches at The Massachusetts Institute of Technology and Oxford University. She has a prominent corporate background as an analyst at Dow Chemical and Tradax Energy and as a consultant at Deloitte.

Starting from 2015 she was deeply involved in Digital Currency Group, one of the most active investors in the industry (its portfolio counts over 100 companies). Currently, she is chief strategy officer at investment management company, CoinShares. So she really knows her stuff. 

Why follow: Meltem has a UNIQUE point of view on what’s going on in the industry right now and where it might take us soon on the macroeconomic level. And she doesn’t hesitate to share it.

Her “aha” moment? “Sending a bitcoin transaction in 2013. Truly magical. Truly life-changing. When I really understood why this mattered.”

What does she say?

6. Linda Xie (@ljxie)

 Who: Linda accumulated many years of corporate risk management experience at AIG, and in product management at Coinbase. Later she moved on to advising 0x, a project building a protocol for decentralized exchanges, and doing her own thing as the managing director and co-founder at Scalar capital, an investment management firm. 

Why follow: Xie is super insightful on many levels: from how to explain the blockchain and cryptocurrencies to a muggle to sharing worthy thoughts and findings from fellow blockchainers. All delivered in a very warm and personal tone, it’s like reading from a friend. 

What does she say? 

7. Amy Wan (@amyywan)

Who: Amy has a solid legal background established while working for the U.S. Department of Commerce. Later on, she moved to the crowdfunding space (and even helped to raise $23.6 million to a real estate platform in series A). The boom of Initial Coin Offerings got her attention and led to her writing the Bloomberg Law practice guide to ICOs. At the moment her main venture is Sagewise, where along with her team she is building a product aiming to resolve disputes on blockchain efficiently. 

Why follow: Knowledgeable and forceful, but yet feminine, Wan shares her legal insights on security token offerings, decentralization and dispute arbitration on the blockchain. 

What does she say?

8. Taylor Monahan (@tayvano_)

 Who: The woman who founded probably one of the most-used Ethereum wallets out there, MyEtherWallet, and later MyCrypto. 

 Why follow: Monahan tweets her opinions on major industry events and her own product updates, all well-seasoned with humor and irony. 

What does she say?

9. Joyce Kim (@joyce)

 Who: Joyce went a long way from being a legal clerk to counseling startups and then becoming a company founder herself. Here entrepreneurial journey includes Soompi.com, one of the largest online communities for Korean pop fans, Simple Honey Inc., mobile e-commerce app based on “wish list” shopping, that was acquired by OpenCoin Inc. in 2013. 

Later she co-founded Stellar, an open platform trying to make financial products accessible for all, and worked there as an executive director. Since 2017 she is on her own again as a managing partner at SparkChain Capital, series A fund, investing in blockchain companies from around the world.

Why follow: Kim doesn’t tweet a lot, but we hope it will change. She is very passionate not only about the blockchain but also about long-term impact it might have on the disruption of some currently dysfunctional institutions. Also, she talks a lot about crypto founders and a token’s evaluation from the traditional “venture” perspective, and it might get you thinking.  

What does she say?

10. Dovey Wan (@DoveyWan)

 Who:  Founding Partner of Primitive Ventures, a crypto asset investment fund, known for contributing to Zcash, Sia, Kyber Network, and many other stealth-mode projects in the field. 

She’s also a voting member for token listings at Huobi Global, giving her voice for or against the candidates applied to be listed on Huobi Pro (currently ranks number six amongst the largest crypto exchanges based on trading volume) and Hadax exchanges.  

 Why follow: Dovey’s tweets are gold. It’s a never-ending flow of fresh tech-related ideas, witty thoughts on the most debated events in the industry, along with funny pics of the casual things she encounters during her trips. 

What does she say?

#11 Laura Shin (@laurashin)

Who? Former Forbes editor and host of two crypto podcasts, Unchained and Unconfirmed.

Why follow? She has interviewed and grilled some of the biggest names in blockchain, asking them tough questions and removing the hype from blockchain. Just listen to her podcast with Binance founder CZ.

What does she say?

Do you think we left someone behind? Go ahead and share your favorite blockchain female in the comment section below.