EU flag

Ripple, alongside three other blockchain companies, has launched the “Blockchain for Europe” association.

The partnership includes NEM Foundation, Emurgo – a company that invests in Cardano projects, Fetch.ai – a “smart ledger” utilizing artificial intelligence, and of course Ripple.

The association aims to provide a “unified voice for the blockchain industry” in Europe. Their goal is to educate key members of the European Union and bring some kind of consensus to the fragmented and inconsistent policy debates across the continent.

The Blockchain for Europe association also hopes to support and guide EU regulators. As the accompanying press release explains, they aim to “help Europe to create smart regulation to shape the global agenda on blockchain.”

Ripple’s head of regulatory relations in Europe, Dan Morgan said: “Ripple is delighted to be a founding member of Blockchain for Europe. This is a critical time for policymakers in Europe as they seek to develop the right regulatory framework to capture the benefits of both digital assets and blockchain technology.”

The association held its first summit in November to discuss how blockchain and distributed ledgers can support governance, healthcare, transport, trade, identity, financial market infrastructure as well as tokens/cryptocurrencies.

Source: Blockchain for Europe

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Bitcoin death spiral

A version of this article first appeared in our exclusive newsletter. If you’d like Block Explorer’s cutting-edge analysis before it hits our website, sign up now.

Sigh.

Another day, another slew of negative, fear-inducing, factually-inaccurate cryptocurrency reporting in the mainstream media.

The focus of my wrath is this article in Market Watch, titled Bitcoin is Close to Becoming Worthless.

Written by a professor of finance, it carries some weight.

But it’s also wrong on many technical levels.

The author’s basic claim is this:

With the price of bitcoin dropping, bitcoin mining has now become unprofitable.

If mining produces no profits, he says, miners will abandon the network. It will grind to a halt and bitcoin will become worthless. This phenomenon is known as the “bitcoin death spiral.”

Here’s why he’s wrong…

It’s true that bitcoin mining is currently unprofitable (we reported as much recently). However, the Bitcoin system is designed to adapt and morph to account for this.

It does so by altering the “difficulty” of mining.

This gets a little technical but bear with me.

Bitcoin Mining Background

In very simple terms, bitcoin miners process transactions in “blocks” by using extensive computer power.

That computer power directed towards the Bitcoin network is known as hash power. When lots of miners are working on the network, the hash rate goes up.

One Block Every Ten Minutes

The system is designed to produce one block every ten minutes.

Everything else being equal, if miners throw more computer power at the network, blocks will be produced faster. 

Too fast, actually. Miners get a reward (in bitcoin) for every block they produce. If blocks are produced too quickly, too much bitcoin is released.

That’s where the self-adjusting algorithm comes in.

When hash power is high, the algorithm automatically adjusts to make it more difficult to mine a block, slowing down production to meet the ten-minute block target.

The Problem Today

The problem we face currently is that miners are leaving the network. Some mining facilities are closing and throwing away equipment.

Hash power on the network is now lower, but the difficulty remains somewhat high.

In other words, the remaining miners have to work incredibly hard (using much more computer power) to produce the same block – hence the lack of profitability.

The “Difficulty” Just Readjusted

But it works both ways. With fewer miners contributing hash power, the algorithm will automatically adjust to make it easier and ultimately return to profitability.

That readjustment happened this week, with Bitcoin’s difficulty dropping 15%. 

Every Two Weeks

Bitcoin’s difficulty is set to re-adjust after every 2016 blocks (roughly every two weeks).

The “death spiral” is only possible if block production slows down so much that we don’t make it to the next difficulty adjustment.

Worst Case Scenario

If that reality plays out, there’s another option.

Bitcoin could execute a “hard fork” and form a new blockchain where the difficulty is lower.

Still confused? This tweet from Nic Carter sums it up quite neatly.

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As blockchain expert Andreas Antonopoulos explains: “The chances of [a death spiral] actually happening are pretty low. The chances of it happening and nobody doing anything to fix it is near zero.”

So, as usual, the mainstream and financial media are blowing things out of proportion without explaining the full picture or technical background of bitcoin. 

Intrigued? Here are some more resources:

Proof of Work Explained: How Cryptocurrencies Keep Block Production in Check (Block Explorer)

Bitcoin Difficulty Targeting and the “Death Spiral” (Andreas Antonopoulos video)

A version of this article first appeared in our exclusive newsletter. If you’d like Block Explorer’s cutting-edge analysis before it hits our website, sign up now.

Monero cryptocurrency best privacy coin

The US government is tentatively exploring ways to forensically analyze privacy coins like Monero and Zcash. 

That’s according to a document published by the Department of Homeland Security. Specifically, the document “seeks applications of blockchain forensic analytics for newer cryptocurrencies, such as Zcash and Monero.”

Unlike Bitcoin, transactions on the Monero network are completely private, utilizing “burn-after-reading” stealth addresses and decoy transactions to obscure the true sender’s information.

Zcash offers the choice between transparent and fully private transactions, using zero-knowledge-proof cryptography to obscure the data.

The Department of Homeland Security document wants to analyze Monero and Zcash for criminal activity. The document reads: “There is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature.”

How exactly they will achieve it is not yet outlined in detail and the report stresses that it is not an explicit request for proposals. However, the report tentatively suggests: “[Designing] a blockchain analysis ecosystem or modify an existing one, that enables forensic analysis for homeland security.” Further, it invites interested parties to comment on the topic.

Further reading: Best Privacy Coins: Monero vs Zcash (Ranked Against 5 Privacy Criteria)

Nasdaq bitcoin futures

Last week, Block Explorer reported that Nasdaq was gearing up to launch a bitcoin futures trading platform. Well, those reports have now been confirmed by Nasdaq.

Bitcoin futures are coming to Nasdaq, the world’s second-largest stock exchange on the planet, in early 2019.

The news was confirmed by Joseph Christinat, the vice president of Nasdaq’s media arm.

Speaking to The Express, he said:

“Bitcoin Futures will be listed and it should launch in the first half of next year – we’re just waiting for the go ahead from the CFTC but there’s been enough work put into this to make that academic.”

Nasdaq is reported to have “run a few extra miles” with regulators to ensure their futures contracts are free from manipulation and other nefarious market practices. The bitcoin futures platform will integrate Nasdaq’s unique surveillance system which targets and minimizes manipulation.

“We’re Doing This No Matter What”

Asked about launching the trading platform in the midst of bitcoin’s biggest drop since 2013, Christinat was unfazed:

“We’ve put a hell of a lot of money and energy into delivering the ability to do this and we’ve been all over it for a long time – way before the market went into turmoil, and that will not affect the timing of this in any way. No. Period. We’re doing this no matter what.”

A UK broker at XTB confirmed Nasdaq’s sentiment, saying: “This isn’t a knee-jerk reaction or jumping on the bandwagon – this is a serious plan.”

Indeed, Nasdaq claims it has been in the blockchain game for five years now, working on the best way to tap into, and support, the market. It appears the fruits of its labor are now beginning to appear.

Many have claimed the launch of Nasdaq futures will act as a catalyst for the next price surge. However, it’s worth remembering that futures contracts also allow traders to bet against an asset, putting downward pressure on the price.

When the first bitcoin futures contracts were introduced in late 2017, it triggered a record price run, followed by a quick reversal.

Will history repeat itself when the Nasdaq futures platform arrives?

Further reading: Wall Street is Coming to Crypt; Nasdaq Bitcoin Futures Explained

Lei Chen, CEO of Xunlei Technology

Speaking at Fortune’s Global Tech Forum in China last week, one panelist outlined the roadmap to a blockchain future. Lei Chen, CEO of Xunlei Technology, said that a $30 billion blockchain company is not impossible, but it must meet three big milestones:

  1. One million transactions per second.
  2. One “somewhat unified, well-thought-out regulation framework.”
  3. A blockchain application with 10 million users.

This combination of factors could trigger the first major breakthrough company in the blockchain space.

Chen says her company’s blockchain platform, ThunderChain, is capable of the necessary transaction speed by harnessing the unused processing power of idle computers.

However, creating a blockchain application with 10 million users will be the largest hurdle. Current applications on the Ethereum blockchain, for example, struggle to reach 1,000 daily users.

Finally, Chen discussed the possibility of blockchain changing the way personal data is owned and shared with others. “Blockchain will challenge the data ownership models of today because data should be of the people for the people by the people.”

(Source: Fortune)

Block Explorer news bytes. We bring you the most important, world-changing developments in fast, short bursts. For deeper reading: Most popular blockchain applications right now.

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