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Dragonchain Great Reddit Scaling Bake-Off Public Proposal

Dragonchain Great Reddit Scaling Bake-Off Public Proposal

Dragonchain Public Proposal TL;DR:

Dragonchain has demonstrated twice Reddit’s entire total daily volume (votes, comments, and posts per Reddit 2019 Year in Review) in a 24-hour demo on an operational network. Every single transaction on Dragonchain is decentralized immediately through 5 levels of Dragon Net, and then secured with combined proof on Bitcoin, Ethereum, Ethereum Classic, and Binance Chain, via Interchain. At the time, in January 2020, the entire cost of the demo was approximately $25K on a single system (transaction fees locked at $0.0001/txn). With current fees (lowest fee $0.0000025/txn), this would cost as little as $625.
Watch Joe walk through the entire proposal and answer questions on YouTube.
This proposal is also available on the Dragonchain blog.

Hello Reddit and Ethereum community!

I’m Joe Roets, Founder & CEO of Dragonchain. When the team and I first heard about The Great Reddit Scaling Bake-Off we were intrigued. We believe we have the solutions Reddit seeks for its community points system and we have them at scale.
For your consideration, we have submitted our proposal below. The team at Dragonchain and I welcome and look forward to your technical questions, philosophical feedback, and fair criticism, to build a scaling solution for Reddit that will empower its users. Because our architecture is unlike other blockchain platforms out there today, we expect to receive many questions while people try to grasp our project. I will answer all questions here in this thread on Reddit, and I've answered some questions in the stream on YouTube.
We have seen good discussions so far in the competition. We hope that Reddit’s scaling solution will emerge from The Great Reddit Scaling Bake-Off and that Reddit will have great success with the implementation.

Executive summary

Dragonchain is a robust open source hybrid blockchain platform that has proven to withstand the passing of time since our inception in 2014. We have continued to evolve to harness the scalability of private nodes, yet take full advantage of the security of public decentralized networks, like Ethereum. We have a live, operational, and fully functional Interchain network integrating Bitcoin, Ethereum, Ethereum Classic, and ~700 independent Dragonchain nodes. Every transaction is secured to Ethereum, Bitcoin, and Ethereum Classic. Transactions are immediately usable on chain, and the first decentralization is seen within 20 seconds on Dragon Net. Security increases further to public networks ETH, BTC, and ETC within 10 minutes to 2 hours. Smart contracts can be written in any executable language, offering full freedom to existing developers. We invite any developer to watch the demo, play with our SDK’s, review open source code, and to help us move forward. Dragonchain specializes in scalable loyalty & rewards solutions and has built a decentralized social network on chain, with very affordable transaction costs. This experience can be combined with the insights Reddit and the Ethereum community have gained in the past couple of months to roll out the solution at a rapid pace.

Response and PoC

In The Great Reddit Scaling Bake-Off post, Reddit has asked for a series of demonstrations, requirements, and other considerations. In this section, we will attempt to answer all of these requests.

Live Demo

A live proof of concept showing hundreds of thousands of transactions
On Jan 7, 2020, Dragonchain hosted a 24-hour live demonstration during which a quarter of a billion (250 million+) transactions executed fully on an operational network. Every single transaction on Dragonchain is decentralized immediately through 5 levels of Dragon Net, and then secured with combined proof on Bitcoin, Ethereum, Ethereum Classic, and Binance Chain, via Interchain. This means that every single transaction is secured by, and traceable to these networks. An attack on this system would require a simultaneous attack on all of the Interchained networks.
24 hours in 4 minutes (YouTube):
24 hours in 4 minutes
The demonstration was of a single business system, and any user is able to scale this further, by running multiple systems simultaneously. Our goals for the event were to demonstrate a consistent capacity greater than that of Visa over an extended time period.
Tooling to reproduce our demo is available here:
https://github.com/dragonchain/spirit-bomb

Source Code

Source code (for on & off-chain components as well tooling used for the PoC). The source code does not have to be shared publicly, but if Reddit decides to use a particular solution it will need to be shared with Reddit at some point.

Scaling

How it works & scales

Architectural Scaling

Dragonchain’s architecture attacks the scalability issue from multiple angles. Dragonchain is a hybrid blockchain platform, wherein every transaction is protected on a business node to the requirements of that business or purpose. A business node may be held completely private or may be exposed or replicated to any level of exposure desired.
Every node has its own blockchain and is independently scalable. Dragonchain established Context Based Verification as its consensus model. Every transaction is immediately usable on a trust basis, and in time is provable to an increasing level of decentralized consensus. A transaction will have a level of decentralization to independently owned and deployed Dragonchain nodes (~700 nodes) within seconds, and full decentralization to BTC and ETH within minutes or hours. Level 5 nodes (Interchain nodes) function to secure all transactions to public or otherwise external chains such as Bitcoin and Ethereum. These nodes scale the system by aggregating multiple blocks into a single Interchain transaction on a cadence. This timing is configurable based upon average fees for each respective chain. For detailed information about Dragonchain’s architecture, and Context Based Verification, please refer to the Dragonchain Architecture Document.

Economic Scaling

An interesting feature of Dragonchain’s network consensus is its economics and scarcity model. Since Dragon Net nodes (L2-L4) are independent staking nodes, deployment to cloud platforms would allow any of these nodes to scale to take on a large percentage of the verification work. This is great for scalability, but not good for the economy, because there is no scarcity, and pricing would develop a downward spiral and result in fewer verification nodes. For this reason, Dragonchain uses TIME as scarcity.
TIME is calculated as the number of Dragons held, multiplied by the number of days held. TIME influences the user’s access to features within the Dragonchain ecosystem. It takes into account both the Dragon balance and length of time each Dragon is held. TIME is staked by users against every verification node and dictates how much of the transaction fees are awarded to each participating node for every block.
TIME also dictates the transaction fee itself for the business node. TIME is staked against a business node to set a deterministic transaction fee level (see transaction fee table below in Cost section). This is very interesting in a discussion about scaling because it guarantees independence for business implementation. No matter how much traffic appears on the entire network, a business is guaranteed to not see an increased transaction fee rate.

Scaled Deployment

Dragonchain uses Docker and Kubernetes to allow the use of best practices traditional system scaling. Dragonchain offers managed nodes with an easy to use web based console interface. The user may also deploy a Dragonchain node within their own datacenter or favorite cloud platform. Users have deployed Dragonchain nodes on-prem on Amazon AWS, Google Cloud, MS Azure, and other hosting platforms around the world. Any executable code, anything you can write, can be written into a smart contract. This flexibility is what allows us to say that developers with no blockchain experience can use any code language to access the benefits of blockchain. Customers have used NodeJS, Python, Java, and even BASH shell script to write smart contracts on Dragonchain.
With Docker containers, we achieve better separation of concerns, faster deployment, higher reliability, and lower response times.
We chose Kubernetes for its self-healing features, ability to run multiple services on one server, and its large and thriving development community. It is resilient, scalable, and automated. OpenFaaS allows us to package smart contracts as Docker images for easy deployment.
Contract deployment time is now bounded only by the size of the Docker image being deployed but remains fast even for reasonably large images. We also take advantage of Docker’s flexibility and its ability to support any language that can run on x86 architecture. Any image, public or private, can be run as a smart contract using Dragonchain.

Flexibility in Scaling

Dragonchain’s architecture considers interoperability and integration as key features. From inception, we had a goal to increase adoption via integration with real business use cases and traditional systems.
We envision the ability for Reddit, in the future, to be able to integrate alternate content storage platforms or other financial services along with the token.
  • LBRY - To allow users to deploy content natively to LBRY
  • MakerDAO to allow users to lend small amounts backed by their Reddit community points.
  • STORJ/SIA to allow decentralized on chain storage of portions of content. These integrations or any other are relatively easy to integrate on Dragonchain with an Interchain implementation.

Cost

Cost estimates (on-chain and off-chain) For the purpose of this proposal, we assume that all transactions are on chain (posts, replies, and votes).
On the Dragonchain network, transaction costs are deterministic/predictable. By staking TIME on the business node (as described above) Reddit can reduce transaction costs to as low as $0.0000025 per transaction.
Dragonchain Fees Table

Getting Started

How to run it
Building on Dragonchain is simple and requires no blockchain experience. Spin up a business node (L1) in our managed environment (AWS), run it in your own cloud environment, or on-prem in your own datacenter. Clear documentation will walk you through the steps of spinning up your first Dragonchain Level 1 Business node.
Getting started is easy...
  1. Download Dragonchain’s dctl
  2. Input three commands into a terminal
  3. Build an image
  4. Run it
More information can be found in our Get started documents.

Architecture
Dragonchain is an open source hybrid platform. Through Dragon Net, each chain combines the power of a public blockchain (like Ethereum) with the privacy of a private blockchain.
Dragonchain organizes its network into five separate levels. A Level 1, or business node, is a totally private blockchain only accessible through the use of public/private keypairs. All business logic, including smart contracts, can be executed on this node directly and added to the chain.
After creating a block, the Level 1 business node broadcasts a version stripped of sensitive private data to Dragon Net. Three Level 2 Validating nodes validate the transaction based on guidelines determined from the business. A Level 3 Diversity node checks that the level 2 nodes are from a diverse array of locations. A Level 4 Notary node, hosted by a KYC partner, then signs the validation record received from the Level 3 node. The transaction hash is ledgered to the Level 5 public chain to take advantage of the hash power of massive public networks.
Dragon Net can be thought of as a “blockchain of blockchains”, where every level is a complete private blockchain. Because an L1 can send to multiple nodes on a single level, proof of existence is distributed among many places in the network. Eventually, proof of existence reaches level 5 and is published on a public network.

API Documentation

APIs (on chain & off)

SDK Source

Nobody’s Perfect

Known issues or tradeoffs
  • Dragonchain is open source and even though the platform is easy enough for developers to code in any language they are comfortable with, we do not have so large a developer community as Ethereum. We would like to see the Ethereum developer community (and any other communities) become familiar with our SDK’s, our solutions, and our platform, to unlock the full potential of our Ethereum Interchain. Long ago we decided to prioritize both Bitcoin and Ethereum Interchains. We envision an ecosystem that encompasses different projects to give developers the ability to take full advantage of all the opportunities blockchain offers to create decentralized solutions not only for Reddit but for all of our current platforms and systems. We believe that together we will take the adoption of blockchain further. We currently have additional Interchain with Ethereum Classic. We look forward to Interchain with other blockchains in the future. We invite all blockchains projects who believe in decentralization and security to Interchain with Dragonchain.
  • While we only have 700 nodes compared to 8,000 Ethereum and 10,000 Bitcoin nodes. We harness those 18,000 nodes to scale to extremely high levels of security. See Dragonchain metrics.
  • Some may consider the centralization of Dragonchain’s business nodes as an issue at first glance, however, the model is by design to protect business data. We do not consider this a drawback as these nodes can make any, none, or all data public. Depending upon the implementation, every subreddit could have control of its own business node, for potential business and enterprise offerings, bringing new alternative revenue streams to Reddit.

Costs and resources

Summary of cost & resource information for both on-chain & off-chain components used in the PoC, as well as cost & resource estimates for further scaling. If your PoC is not on mainnet, make note of any mainnet caveats (such as congestion issues).
Every transaction on the PoC system had a transaction fee of $0.0001 (one-hundredth of a cent USD). At 256MM transactions, the demo cost $25,600. With current operational fees, the same demonstration would cost $640 USD.
For the demonstration, to achieve throughput to mimic a worldwide payments network, we modeled several clients in AWS and 4-5 business nodes to handle the traffic. The business nodes were tuned to handle higher throughput by adjusting memory and machine footprint on AWS. This flexibility is valuable to implementing a system such as envisioned by Reddit. Given that Reddit’s daily traffic (posts, replies, and votes) is less than half that of our demo, we would expect that the entire Reddit system could be handled on 2-5 business nodes using right-sized containers on AWS or similar environments.
Verification was accomplished on the operational Dragon Net network with over 700 independently owned verification nodes running around the world at no cost to the business other than paid transaction fees.

Requirements

Scaling

This PoC should scale to the numbers below with minimal costs (both on & off-chain). There should also be a clear path to supporting hundreds of millions of users.
Over a 5 day period, your scaling PoC should be able to handle:
*100,000 point claims (minting & distributing points) *25,000 subscriptions *75,000 one-off points burning *100,000 transfers
During Dragonchain’s 24 hour demo, the above required numbers were reached within the first few minutes.
Reddit’s total activity is 9000% more than Ethereum’s total transaction level. Even if you do not include votes, it is still 700% more than Ethereum’s current volume. Dragonchain has demonstrated that it can handle 250 million transactions a day, and it’s architecture allows for multiple systems to work at that level simultaneously. In our PoC, we demonstrate double the full capacity of Reddit, and every transaction was proven all the way to Bitcoin and Ethereum.
Reddit Scaling on Ethereum

Decentralization

Solutions should not depend on any single third-party provider. We prefer solutions that do not depend on specific entities such as Reddit or another provider, and solutions with no single point of control or failure in off-chain components but recognize there are numerous trade-offs to consider
Dragonchain’s architecture calls for a hybrid approach. Private business nodes hold the sensitive data while the validation and verification of transactions for the business are decentralized within seconds and secured to public blockchains within 10 minutes to 2 hours. Nodes could potentially be controlled by owners of individual subreddits for more organic decentralization.
  • Billing is currently centralized - there is a path to federation and decentralization of a scaled billing solution.
  • Operational multi-cloud
  • Operational on-premises capabilities
  • Operational deployment to any datacenter
  • Over 700 independent Community Verification Nodes with proof of ownership
  • Operational Interchain (Interoperable to Bitcoin, Ethereum, and Ethereum Classic, open to more)

Usability Scaling solutions should have a simple end user experience.

Users shouldn't have to maintain any extra state/proofs, regularly monitor activity, keep track of extra keys, or sign anything other than their normal transactions
Dragonchain and its customers have demonstrated extraordinary usability as a feature in many applications, where users do not need to know that the system is backed by a live blockchain. Lyceum is one of these examples, where the progress of academy courses is being tracked, and successful completion of courses is rewarded with certificates on chain. Our @Save_The_Tweet bot is popular on Twitter. When used with one of the following hashtags - #please, #blockchain, #ThankYou, or #eternalize the tweet is saved through Eternal to multiple blockchains. A proof report is available for future reference. Other examples in use are DEN, our decentralized social media platform, and our console, where users can track their node rewards, view their TIME, and operate a business node.
Examples:

Transactions complete in a reasonable amount of time (seconds or minutes, not hours or days)
All transactions are immediately usable on chain by the system. A transaction begins the path to decentralization at the conclusion of a 5-second block when it gets distributed across 5 separate community run nodes. Full decentralization occurs within 10 minutes to 2 hours depending on which interchain (Bitcoin, Ethereum, or Ethereum Classic) the transaction hits first. Within approximately 2 hours, the combined hash power of all interchained blockchains secures the transaction.

Free to use for end users (no gas fees, or fixed/minimal fees that Reddit can pay on their behalf)
With transaction pricing as low as $0.0000025 per transaction, it may be considered reasonable for Reddit to cover transaction fees for users.
All of Reddit's Transactions on Blockchain (month)
Community points can be earned by users and distributed directly to their Reddit account in batch (as per Reddit minting plan), and allow users to withdraw rewards to their Ethereum wallet whenever they wish. Withdrawal fees can be paid by either user or Reddit. This model has been operating inside the Dragonchain system since 2018, and many security and financial compliance features can be optionally added. We feel that this capability greatly enhances user experience because it is seamless to a regular user without cryptocurrency experience, yet flexible to a tech savvy user. With regard to currency or token transactions, these would occur on the Reddit network, verified to BTC and ETH. These transactions would incur the $0.0000025 transaction fee. To estimate this fee we use the monthly active Reddit users statista with a 60% adoption rate and an estimated 10 transactions per month average resulting in an approximate $720 cost across the system. Reddit could feasibly incur all associated internal network charges (mining/minting, transfer, burn) as these are very low and controllable fees.
Reddit Internal Token Transaction Fees

Reddit Ethereum Token Transaction Fees
When we consider further the Ethereum fees that might be incurred, we have a few choices for a solution.
  1. Offload all Ethereum transaction fees (user withdrawals) to interested users as they wish to withdraw tokens for external use or sale.
  2. Cover Ethereum transaction fees by aggregating them on a timed schedule. Users would request withdrawal (from Reddit or individual subreddits), and they would be transacted on the Ethereum network every hour (or some other schedule).
  3. In a combination of the above, customers could cover aggregated fees.
  4. Integrate with alternate Ethereum roll up solutions or other proposals to aggregate minting and distribution transactions onto Ethereum.

Bonus Points

Users should be able to view their balances & transactions via a blockchain explorer-style interface
From interfaces for users who have no knowledge of blockchain technology to users who are well versed in blockchain terms such as those present in a typical block explorer, a system powered by Dragonchain has flexibility on how to provide balances and transaction data to users. Transactions can be made viewable in an Eternal Proof Report, which displays raw data along with TIME staking information and traceability all the way to Bitcoin, Ethereum, and every other Interchained network. The report shows fields such as transaction ID, timestamp, block ID, multiple verifications, and Interchain proof. See example here.
Node payouts within the Dragonchain console are listed in chronological order and can be further seen in either Dragons or USD. See example here.
In our social media platform, Dragon Den, users can see, in real-time, their NRG and MTR balances. See example here.
A new influencer app powered by Dragonchain, Raiinmaker, breaks down data into a user friendly interface that shows coin portfolio, redeemed rewards, and social scores per campaign. See example here.

Exiting is fast & simple
Withdrawing funds on Dragonchain’s console requires three clicks, however, withdrawal scenarios with more enhanced security features per Reddit’s discretion are obtainable.

Interoperability Compatibility with third party apps (wallets/contracts/etc) is necessary.
Proven interoperability at scale that surpasses the required specifications. Our entire platform consists of interoperable blockchains connected to each other and traditional systems. APIs are well documented. Third party permissions are possible with a simple smart contract without the end user being aware. No need to learn any specialized proprietary language. Any code base (not subsets) is usable within a Docker container. Interoperable with any blockchain or traditional APIs. We’ve witnessed relatively complex systems built by engineers with no blockchain or cryptocurrency experience. We’ve also demonstrated the creation of smart contracts within minutes built with BASH shell and Node.js. Please see our source code and API documentation.

Scaling solutions should be extensible and allow third parties to build on top of it Open source and extensible
APIs should be well documented and stable

Documentation should be clear and complete
For full documentation, explore our docs, SDK’s, Github repo’s, architecture documents, original Disney documentation, and other links or resources provided in this proposal.

Third-party permissionless integrations should be possible & straightforward Smart contracts are Docker based, can be written in any language, use full language (not subsets), and can therefore be integrated with any system including traditional system APIs. Simple is better. Learning an uncommon or proprietary language should not be necessary.
Advanced knowledge of mathematics, cryptography, or L2 scaling should not be required. Compatibility with common utilities & toolchains is expected.
Dragonchain business nodes and smart contracts leverage Docker to allow the use of literally any language or executable code. No proprietary language is necessary. We’ve witnessed relatively complex systems built by engineers with no blockchain or cryptocurrency experience. We’ve also demonstrated the creation of smart contracts within minutes built with BASH shell and Node.js.

Bonus

Bonus Points: Show us how it works. Do you have an idea for a cool new use case for Community Points? Build it!

TIME

Community points could be awarded to Reddit users based upon TIME too, whereas the longer someone is part of a subreddit, the more community points someone naturally gained, even if not actively commenting or sharing new posts. A daily login could be required for these community points to be credited. This grants awards to readers too and incentivizes readers to create an account on Reddit if they browse the website often. This concept could also be leveraged to provide some level of reputation based upon duration and consistency of contribution to a community subreddit.

Dragon Den

Dragonchain has already built a social media platform that harnesses community involvement. Dragon Den is a decentralized community built on the Dragonchain blockchain platform. Dragon Den is Dragonchain’s answer to fake news, trolling, and censorship. It incentivizes the creation and evaluation of quality content within communities. It could be described as being a shareholder of a subreddit or Reddit in its entirety. The more your subreddit is thriving, the more rewarding it will be. Den is currently in a public beta and in active development, though the real token economy is not live yet. There are different tokens for various purposes. Two tokens are Lair Ownership Rights (LOR) and Lair Ownership Tokens (LOT). LOT is a non-fungible token for ownership of a specific Lair. LOT will only be created and converted from LOR.
Energy (NRG) and Matter (MTR) work jointly. Your MTR determines how much NRG you receive in a 24-hour period. Providing quality content, or evaluating content will earn MTR.

Security. Users have full ownership & control of their points.
All community points awarded based upon any type of activity or gift, are secured and provable to all Interchain networks (currently BTC, ETH, ETC). Users are free to spend and withdraw their points as they please, depending on the features Reddit wants to bring into production.

Balances and transactions cannot be forged, manipulated, or blocked by Reddit or anyone else
Users can withdraw their balance to their ERC20 wallet, directly through Reddit. Reddit can cover the fees on their behalf, or the user covers this with a portion of their balance.

Users should own their points and be able to get on-chain ERC20 tokens without permission from anyone else
Through our console users can withdraw their ERC20 rewards. This can be achieved on Reddit too. Here is a walkthrough of our console, though this does not show the quick withdrawal functionality, a user can withdraw at any time. https://www.youtube.com/watch?v=aNlTMxnfVHw

Points should be recoverable to on-chain ERC20 tokens even if all third-parties involved go offline
If necessary, signed transactions from the Reddit system (e.g. Reddit + Subreddit) can be sent to the Ethereum smart contract for minting.

A public, third-party review attesting to the soundness of the design should be available
To our knowledge, at least two large corporations, including a top 3 accounting firm, have conducted positive reviews. These reviews have never been made public, as Dragonchain did not pay or contract for these studies to be released.

Bonus points
Public, third-party implementation review available or in progress
See above

Compatibility with HSMs & hardware wallets
For the purpose of this proposal, all tokenization would be on the Ethereum network using standard token contracts and as such, would be able to leverage all hardware wallet and Ethereum ecosystem services.

Other Considerations

Minting/distributing tokens is not performed by Reddit directly
This operation can be automated by smart contract on Ethereum. Subreddits can if desired have a role to play.

One off point burning, as well as recurring, non-interactive point burning (for subreddit memberships) should be possible and scalable
This is possible and scalable with interaction between Dragonchain Reddit system and Ethereum token contract(s).

Fully open-source solutions are strongly preferred
Dragonchain is fully open source (see section on Disney release after conclusion).

Conclusion

Whether it is today, or in the future, we would like to work together to bring secure flexibility to the highest standards. It is our hope to be considered by Ethereum, Reddit, and other integrative solutions so we may further discuss the possibilities of implementation. In our public demonstration, 256 million transactions were handled in our operational network on chain in 24 hours, for the low cost of $25K, which if run today would cost $625. Dragonchain’s interoperable foundation provides the atmosphere necessary to implement a frictionless community points system. Thank you for your consideration of our proposal. We look forward to working with the community to make something great!

Disney Releases Blockchain Platform as Open Source

The team at Disney created the Disney Private Blockchain Platform. The system was a hybrid interoperable blockchain platform for ledgering and smart contract development geared toward solving problems with blockchain adoption and usability. All objective evaluation would consider the team’s output a success. We released a list of use cases that we explored in some capacity at Disney, and our input on blockchain standardization as part of our participation in the W3C Blockchain Community Group.
https://lists.w3.org/Archives/Public/public-blockchain/2016May/0052.html

Open Source

In 2016, Roets proposed to release the platform as open source to spread the technology outside of Disney, as others within the W3C group were interested in the solutions that had been created inside of Disney.
Following a long process, step by step, the team met requirements for release. Among the requirements, the team had to:
  • Obtain VP support and approval for the release
  • Verify ownership of the software to be released
  • Verify that no proprietary content would be released
  • Convince the organization that there was a value to the open source community
  • Convince the organization that there was a value to Disney
  • Offer the plan for ongoing maintenance of the project outside of Disney
  • Itemize competing projects
  • Verify no conflict of interest
  • Preferred license
  • Change the project name to not use the name Disney, any Disney character, or any other associated IP - proposed Dragonchain - approved
  • Obtain legal approval
  • Approval from corporate, parks, and other business units
  • Approval from multiple Disney patent groups Copyright holder defined by Disney (Disney Connected and Advanced Technologies)
  • Trademark searches conducted for the selected name Dragonchain
  • Obtain IT security approval
  • Manual review of OSS components conducted
  • OWASP Dependency and Vulnerability Check Conducted
  • Obtain technical (software) approval
  • Offer management, process, and financial plans for the maintenance of the project.
  • Meet list of items to be addressed before release
  • Remove all Disney project references and scripts
  • Create a public distribution list for email communications
  • Remove Roets’ direct and internal contact information
  • Create public Slack channel and move from Disney slack channels
  • Create proper labels for issue tracking
  • Rename internal private Github repository
  • Add informative description to Github page
  • Expand README.md with more specific information
  • Add information beyond current “Blockchains are Magic”
  • Add getting started sections and info on cloning/forking the project
  • Add installation details
  • Add uninstall process
  • Add unit, functional, and integration test information
  • Detail how to contribute and get involved
  • Describe the git workflow that the project will use
  • Move to public, non-Disney git repository (Github or Bitbucket)
  • Obtain Disney Open Source Committee approval for release
On top of meeting the above criteria, as part of the process, the maintainer of the project had to receive the codebase on their own personal email and create accounts for maintenance (e.g. Github) with non-Disney accounts. Given the fact that the project spanned multiple business units, Roets was individually responsible for its ongoing maintenance. Because of this, he proposed in the open source application to create a non-profit organization to hold the IP and maintain the project. This was approved by Disney.
The Disney Open Source Committee approved the application known as OSSRELEASE-10, and the code was released on October 2, 2016. Disney decided to not issue a press release.
Original OSSRELASE-10 document

Dragonchain Foundation

The Dragonchain Foundation was created on January 17, 2017. https://den.social/l/Dragonchain/24130078352e485d96d2125082151cf0/dragonchain-and-disney/
submitted by j0j0r0 to ethereum [link] [comments]

Bob The Magic Custodian



Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses.
Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes.

First, some background. Here is a summary of how custodians make us more secure:

Previously, we might give Alice our crypto assets to hold. There were risks:

But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
See - all problems are solved! All we have to worry about now is:
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are!

"On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid".
"Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since."

"As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!"
"Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?"

"Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party."
"Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!"

"What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven."
"Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!"

"We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies.
And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often".

How many holes have to exist for your funds to get stolen?
Just one.

Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so?
If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security.

The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle.

And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet?

Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds.
So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever.

Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see.
It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation.
A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7.

History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance.
Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.)
Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive.

Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today.
Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well.
Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do.

Facts/background/sources (skip if you like):



Thoughts?
submitted by azoundria2 to QuadrigaInitiative [link] [comments]

Meet the YFDAI Team!

Meet the YFDAI Team!

https://preview.redd.it/yq470s2kmcu51.png?width=1280&format=png&auto=webp&s=4c04f1499dca093a4550beb19ae8c7626326959e
Over the course of mere months, the DeFi space has grown to the tune of billions in 2020. While DeFi has earned its title as the next hottest crypto trend, its popularity has shown to be a double-edged sword. Reports of scams and “rug pulls” have volleyed into crypto news outlets, social media, and discussion groups, damaging the reputation of the DeFi space.
DeFi is unique in that the tenets of trust and decentralization has normalized the practice of anonymity to the point where nearly every single DeFi team launches anonymously. While the freedom to create DeFi tools does support the notion that anyone should be able to create an honest financial protocol for the goodwill of the people, the opposite effect often occurs. If the past few months has proven anything, it’s that the normalization of anonymity has acted as both the greatest weapon and the greatest defence for fraudulent actors and dishonest entities. Because of this, DeFi is often seen as a free-for-all minefield as countless exit scams and “rugpulls” have become the norm. Having this as an accepted vice of DeFi shouldn’t mean investors should normalize risk of losses. It should inspire projects to set a higher standard in the DeFi space.
We are excited to announce that the YFDAI team has taken the tenets of decentralized finance and expanded on them. As a DeFi protocol, we champion decentralization and the collective action of the community to pave the road towards true transparency and security for all. After countless hours of legal counseling, we’re proud to announce that we will be among the very few DeFi projects to go public and among the first to set a new precedent for the DeFi space.
Say hello to the YFDAI team.
Meet Pritha Paul (Olivia) — Chief Strategic — Volunteer

https://preview.redd.it/jqqax671lcu51.jpg?width=357&format=pjpg&auto=webp&s=66703ab44c96cea71df47178627e586a8d70a1e5
Olivia is both a software engineer and a Businesswoman. Having been an avid fan of blockchain and trader of cryptocurrencies, Olivia felt the need to contribute her expertise to the cryptocurrency space. This desire prompted her to create YFDAI, one of DeFi’s most secure and trusted protocols. Seeing the cryptocurrency space as a professional programmer, Olivia knows the importance of making a clean and secure DeFi protocol.
With the rate of fraudulent projects ascending contemporaneously with the rise of DeFi, Olivia knew it was crucial to have a trusted and well-secured protocol that can guide as an example for other projects to follow. Along with this idea, Olivia felt that for DeFi to reach its highest potential, there needed to be an ecosystem that protects investors and supports DeFi projects looking to bring real value to the space. With this in mind, Olivia came up with YFDAI’s signature SafeSwap and LaunchPad platforms.
Olivia has a number of qualifications and holds a bachelor’s in Computer Applications. Some of her advanced programming languages include: C, C++, JAVA, Python, Oracle.
https://www.linkedin.com/in/pritha-paul-olivia-a576b71b9/
Meet Tapas Paul (Rocky) — Lead Dev — Volunteer

https://preview.redd.it/otog4vkclcu51.jpg?width=357&format=pjpg&auto=webp&s=c668d0b6ac5573757030a609ed563ee49d734ac7
Doubling as a software developer and website designer, Tapas carries ample experience in web development and design. Having been familiar with cryptocurrencies for years, his initial descent into the space came in the golden year of 2017. Since then, Tapas has been engaged in crypto and felt the need to create a truly honest and secure DeFi platform together with Pritha. Tapas’s vast expertise in web development and blockchain gives YFDAI an edge in becoming one of the top DeFi protocols in the space.
Tapas has a diverse range of tech experience that range from creating web applications and front-end designs for various startups to working as a senior blockchain developer for distributed solidity systems for complicated DAPPs. Since then, Tapas has provided Ethereum and TRON consulting to multiple blockchain startups entering the space.
Some of Tapas expertise and advanced programming languages include- Solidity, Web3 TronWeb, JavaScript, MongoDB, ExpressJS, ReactJS Node.JS React Native, HTML5, CSS3, Distributed Ledger Technology , Ethereum and TRON DAPPs, Authentication systems, Real Time Web Apps.
https://www.linkedin.com/in/tapas-paul-rocky-4609781b2/
Meet Ankit Ruthala (Thore) — Chief Business Development — Volunteer

https://preview.redd.it/0b7vqesglcu51.jpg?width=357&format=pjpg&auto=webp&s=f5aaaaf903753cd2373b0bc32d924f8729bbcb41
Thore carries a Bachelor’s in Mechanical Engineering with fundamental engineering and dynamics experience. He has extensive background experience in both engineering and blockchain development. With the ever-increasing level of innovation that is occurring in the blockchain and cryptocurrency space, Thore felt the need to contribute his own knowledge and expertise to the field. Thore’s extensive experience in the field is projected into the YFDAI project with the end-user in mind. Being proficient in both blockchain literacy and technical analyses, Thore understands the cryptocurrency space from both a developer and investor perspective.
https://www.linkedin.com/in/ankit-runthala-752a4785
Meet Wesley — Security Consultant — Volunteer

https://preview.redd.it/d4738ojklcu51.jpg?width=357&format=pjpg&auto=webp&s=c98608b8f71087285cf14e7bd8be2d8125c978d6
Wesley specializes in Infrastructure and security management with a background in economics. Having been involved in the cryptocurrency scene for over three years, Wesley has had ample exposure to the world of blockchain and cryptocurrencies. Since 2017, Wesley has worked as an agent for BTC Direct and in Binance community management.
https://www.linkedin.com/in/wesley-thijssen-223813134/
Meet Cristian- Graphic Designer — Volunteer

https://preview.redd.it/nb91hb6qlcu51.jpg?width=357&format=pjpg&auto=webp&s=256969502f4223b56a9f615e6445a6340660a68b
Despite his previous work experience as a computer programmer, Cristian found his niche excelling in graphic design and maximizing brand identity. After winning over 400 graphic design competitions, Cristian now works as a dedicated graphic designer. Living by the mantra of “every profession is an act of service”, Cristian’s passion is manifested through his works in design, brand awareness, and customer satisfaction.
https://99designs.com/profiles/oakbrand
Meet Cris Content Writer — Volunteer

https://preview.redd.it/y6fgolqulcu51.jpg?width=357&format=pjpg&auto=webp&s=46f981373a8b011cf570bf50ef46b5e87b395c4e
Cris first began his cryptocurrency journey in the summer of 2017. Since then, he has been obsessed with everything cryptocurrency and blockchain related. After being featured on a series of cryptocurrency publications on Medium, Cris found his way into writing and managing a variety of cryptocurrency startups. Cris now continues pursuing his passion in cryptocurrency while balancing life as a university student.
https://www.linkedin.com/m/in/cris-montoya-1738b61b9-Cris/
Meet Christof Waton — Business Development Consultant — Volunteer

https://preview.redd.it/2r3vb6u1mcu51.jpg?width=357&format=pjpg&auto=webp&s=ca5a3c009dd7a32211bb2c141c13f6ccddeb04a2
Christof currently holds a bachelor’s in data communication and is currently completing his masters in Digital Currencies. His initial descent into cryptocurrencies came when he first bought Bitcoin in 2014. Since then, Christof has led his professional career in a variety of fields in and out of the crypto space. Within the crypto space, Christof has held positions as chief business development officer for both ExMarkets and CoinMargin. Outside of the crypto space Christof led as a consultant for both Dubai Hills Fund and Verifo, an e-money institution. After years of experience in both the financial and crypto industry, Christof has experienced cryptocurrency through the lens of a professional, investor, and an enthusiast.
https://www.linkedin.com/in/watonchristof/
Meet Philip Dow — Head Advisor — Volunteer

https://preview.redd.it/a7yu2nd5mcu51.jpg?width=357&format=pjpg&auto=webp&s=cd00c47f55530afb4570808168a26d88c3cf7529
Phil operates as a strategic executive with a high-level background in project management, business development, and marketing. Phil first brought his expertise to the cryptocurrency field in 2016. Phil carries a wealth of knowledge as his years in crypto garnered him key connections with a variety of different cryptocurrency partners ranging from, developers, project CEOs, and marketing.
For the past 4 years Phil has brought coverage to a multitude of different blockchain companies, each offering unique expertise and applications in a wide variety of fields.
https://www.linkedin.com/in/philipdow55/
Now that the team identities have been released this dispels the “Elephant in the room”. The fact that the team chose to become non-anon opens up many doors that would otherwise be closed. The specifics of those opportunities will be made clear in the upcoming whitepaper and future announcements.
Even though the names and faces of the founders behind the project have been revealed, please note that there are many people who are working on the YFDAI project on a contractual basis and volunteer basis who have not been included in the disclosure. There are experts and advisors in the fields of business development, economics, law, and other areas vital to any business that play a major role in the success of YFDAI and who share the vision of the founders to clean up the DeFi space and offer a safe, reliable, and secure suite of DeFi products to the public.
While the team behind a crypto project is vital, the ultimate success of any DeFi project relies on the technology, the code, and the community. YFDAI’s technology and code have been designed to be bulletproof in order to maximize the safety and security for the end user. In the not too distant future, YFDAI’s business model envisions the everyday decisions to ultimately be made by you, the community, by way of the DAO as governance is turned over to the token holders.
To ensure we are operating as securely and compliantly as possible YFDAI has been incorporated as a Technology business in Singapore:
Company Name — Tejster Technologies PTE. LTD. Registration No — 202031933C Address — 50,Raffles Place,#37–00,Singapore Land Tower, Singapore (048623)
To finalise the compliance aspect YFDAI is in the process of obtaining full Financial Services regulation by means of receiving compliance and registration in the Republic of Estonia.
This will be a two stage process with an initial Virtual Currency Exchange and E-Wallet licence currently being sought. YDFAI’s legal representatives have moved this to an advanced stage and expect this to be finalized in Q4 2020. It is at this point that the team shall resume their full job titles and the term “Volunteer” will no longer be required.
The licenses will open up a plethora of opportunities which will be fully detailed in our soon to be released whitepaper and will also provide YFDAI with a level of accreditation that will provide users with full peace of mind.
Once YFDAI secures the Financial Services accreditation listed above, YFDAI will have full insurance coverage of the project’s financial holdings and transactions, including project wallets and user funds.
Thank you for your support and we look forward to setting a new standard of self regulation that will revolutionize the DeFI arena and level the playing field for all participants while minimizing the fraud and desecration of the bad actors who have infiltrated the DeFi space.
- YFDAI Team
Visit us on our website and chat with us on Telegram!
Website: https://www.yfdai.finance
Telegram Community: https://t.me/yfdaifinance
Telegram Announcements: https://t.me/yfdai
Linkedin: https://www.linkedin.com/company/yfdai-finance
submitted by YFDAIFinance to u/YFDAIFinance [link] [comments]

How To End The Cryptocurrency Exchange "Wild West" Without Crippling Innovation


In case you haven't noticed the consultation paper, staff notice, and report on Quadriga, regulators are now clamping down on Canadian cryptocurrency exchanges. The OSC and other regulatory bodies are still interested in industry feedback. They have not put forward any official regulation yet. Below are some ideas/insights and a proposed framework.



Many of you have limited time to read the full proposal, so here are the highlights:

Offline Multi-Signature

Effective standards to prevent both internal and external theft. Exchange operators are trained and certified, and have a legal responsibility to users.

Regular Transparent Audits

Provides visibility to Canadians that their funds are fully backed on the exchange, while protecting privacy and sensitive platform information.

Insurance Requirements

Establishment of basic insurance standards/strategy, to expand over time. Removing risk to exchange users of any hot wallet theft.


Background and Justifications


Cold Storage Custody/Management
After reviewing close to 100 cases, all thefts tend to break down into more or less the same set of problems:
• Funds stored online or in a smart contract,
• Access controlled by one person or one system,
• 51% attacks (rare),
• Funds sent to the wrong address (also rare), or
• Some combination of the above.
For the first two cases, practical solutions exist and are widely implemented on exchanges already. Offline multi-signature solutions are already industry standard. No cases studied found an external theft or exit scam involving an offline multi-signature wallet implementation. Security can be further improved through minimum numbers of signatories, background checks, providing autonomy and legal protections to each signatory, establishing best practices, and a training/certification program.
The last two transaction risks occur more rarely, and have never resulted in a loss affecting the actual users of the exchange. In all cases to date where operators made the mistake, they've been fully covered by the exchange platforms.
• 51% attacks generally only occur on blockchains with less security. The most prominent cases have been Bitcoin Gold and Ethereum Classic. The simple solution is to enforce deposit limits and block delays such that a 51% attack is not cost-effective.
• The risk of transactions to incorrect addresses can be eliminated by a simple test transaction policy on large transactions. By sending a small amount of funds prior to any large withdrawals/transfers as a standard practice, the accuracy of the wallet address can be validated.
The proposal covers all loss cases and goes beyond, while avoiding significant additional costs, risks, and limitations which may be associated with other frameworks like SOC II.

On The Subject of Third Party Custodians
Many Canadian platforms are currently experimenting with third party custody. From the standpoint of the exchange operator, they can liberate themselves from some responsibility of custody, passing that off to someone else. For regulators, it puts crypto in similar categorization to oil, gold, and other commodities, with some common standards. Platform users would likely feel greater confidence if the custodian was a brand they recognized. If the custodian was knowledgeable and had a decent team that employed multi-sig, they could keep assets safe from internal theft. With the right protections in place, this could be a great solution for many exchanges, particularly those that lack the relevant experience or human resources for their own custody systems.
However, this system is vulnerable to anyone able to impersonate the exchange operators. You may have a situation where different employees who don't know each other that well are interacting between different companies (both the custodian and all their customers which presumably isn't just one exchange). A case study of what can go wrong in this type of environment might be Bitpay, where the CEO was tricked out of 5000 bitcoins over 3 separate payments by a series of emails sent legitimately from a breached computer of another company CEO. It's also still vulnerable to the platform being compromised, as in the really large $70M Bitfinex hack, where the third party Bitgo held one key in a multi-sig wallet. The hacker simply authorized the withdrawal using the same credentials as Bitfinex (requesting Bitgo to sign multiple withdrawal transactions). This succeeded even with the use of multi-sig and two heavily security-focused companies, due to the lack of human oversight (basically, hot wallet). Of course, you can learn from these cases and improve the security, but so can hackers improve their deception and at the end of the day, both of these would have been stopped by the much simpler solution of a qualified team who knew each other and employed multi-sig with properly protected keys. It's pretty hard to beat a human being who knows the business and the typical customer behaviour (or even knows their customers personally) at spotting fraud, and the proposed multi-sig means any hacker has to get through the scrutiny of 3 (or more) separate people, all of whom would have proper training including historical case studies.
There are strong arguments both for and against using use of third party custodians. The proposal sets mandatory minimum custody standards would apply regardless if the cold wallet signatories are exchange operators, independent custodians, or a mix of both.

On The Subject Of Insurance
ShakePay has taken the first steps into this new realm (congratulations). There is no question that crypto users could be better protected by the right insurance policies, and it certainly feels better to transact with insured platforms. The steps required to obtain insurance generally place attention in valuable security areas, and in this case included a review from CipherTrace. One of the key solutions in traditional finance comes from insurance from entities such as the CDIC.
However, historically, there wasn't found any actual insurance payout to any cryptocurrency exchange, and there are notable cases where insurance has not paid. With Bitpay, for example, the insurance agent refused because the issue happened to the third party CEO's computer instead of anything to do with Bitpay itself. With the Youbit exchange in South Korea, their insurance claim was denied, and the exchange ultimately ended up instead going bankrupt with all user's funds lost. To quote Matt Johnson in the original Lloyd's article: “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
ShakePay's insurance was only reported to cover their cold storage, and “physical theft of the media where the private keys are held”. Physical theft has never, in the history of cryptocurrency exchange cases reviewed, been reported as the cause of loss. From the limited information of the article, ShakePay made it clear their funds are in the hands of a single US custodian, and at least part of their security strategy is to "decline[] to confirm the custodian’s name on the record". While this prevents scrutiny of the custodian, it's pretty silly to speculate that a reasonably competent hacking group couldn't determine who the custodian is. A far more common infiltration strategy historically would be social engineering, which has succeeded repeatedly. A hacker could trick their way into ShakePay's systems and request a fraudulent withdrawal, impersonate ShakePay and request the custodian to move funds, or socially engineer their way into the custodian to initiate the withdrawal of multiple accounts (a payout much larger than ShakePay) exploiting the standard procedures (for example, fraudulently initiating or override the wallet addresses of a real transfer). In each case, nothing was physically stolen and the loss is therefore not covered by insurance.
In order for any insurance to be effective, clear policies have to be established about what needs to be covered. Anything short of that gives Canadians false confidence that they are protected when they aren't in any meaningful way. At this time, the third party insurance market does not appear to provide adequate options or coverage, and effort is necessary to standardize custody standards, which is a likely first step in ultimately setting up an insurance framework.
A better solution compared to third party insurance providers might be for Canadian exchange operators to create their own collective insurance fund, or a specific federal organization similar to the CDIC. Such an organization would have a greater interest or obligation in paying out actual cases, and that would be it's purpose rather than maximizing it's own profit. This would be similar to the SAFU which Binance has launched, except it would cover multiple exchanges. There is little question whether the SAFU would pay out given a breach of Binance, and a similar argument could be made for a insurance fund managed by a collective of exchange operators or a government organization. While a third party insurance provider has the strong market incentive to provide the absolute minimum coverage and no market incentive to payout, an entity managed by exchange operators would have incentive to protect the reputation of exchange operators/the industry, and the government should have the interest of protecting Canadians.

On The Subject of Fractional Reserve
There is a long history of fractional reserve failures, from the first banks in ancient times, through the great depression (where hundreds of fractional reserve banks failed), right through to the 2008 banking collapse referenced in the first bitcoin block. The fractional reserve system allows banks to multiply the money supply far beyond the actual cash (or other assets) in existence, backed only by a system of debt obligations of others. Safely supporting a fractional reserve system is a topic of far greater complexity than can be addressed by a simple policy, and when it comes to cryptocurrency, there is presently no entity reasonably able to bail anyone out in the event of failure. Therefore, this framework is addressed around entities that aim to maintain 100% backing of funds.
There may be some firms that desire but have failed to maintain 100% backing. In this case, there are multiple solutions, including outside investment, merging with other exchanges, or enforcing a gradual restoration plan. All of these solutions are typically far better than shutting down the exchange, and there are multiple cases where they've been used successfully in the past.

Proof of Reserves/Transparency/Accountability
Canadians need to have visibility into the backing on an ongoing basis.
The best solution for crypto-assets is a Proof of Reserve. Such ideas go back all the way to 2013, before even Mt. Gox. However, no Canadian exchange has yet implemented such a system, and only a few international exchanges (CoinFloor in the UK being an example) have. Many firms like Kraken, BitBuy, and now ShakePay use the Proof of Reserve term to refer to lesser proofs which do not actually cryptographically prove the full backing of all user assets on the blockchain. In order for a Proof of Reserve to be effective, it must actually be a complete proof, and it needs to be understood by the public that is expected to use it. Many firms have expressed reservations about the level of transparency required in a complete Proof of Reserve (for example Kraken here). While a complete Proof of Reserves should be encouraged, and there are some solutions in the works (ie TxQuick), this is unlikely to be suitable universally for all exchange operators and users.
Given the limitations, and that firms also manage fiat assets, a more traditional audit process makes more sense. Some Canadian exchanges (CoinSquare, CoinBerry) have already subjected themselves to annual audits. However, these results are not presently shared publicly, and there is no guarantee over the process including all user assets or the integrity and independence of the auditor. The auditor has been typically not known, and in some cases, the identity of the auditor is protected by a NDA. Only in one case (BitBuy) was an actual report generated and publicly shared. There has been no attempt made to validate that user accounts provided during these audits have been complete or accurate. A fraudulent fractional exchange, or one which had suffered a breach they were unwilling to publicly accept (see CoinBene), could easily maintain a second set of books for auditors or simply exclude key accounts to pass an individual audit.
The proposed solution would see a reporting standard which includes at a minimum - percentage of backing for each asset relative to account balances and the nature of how those assets are stored, with ownership proven by the auditor. The auditor would also publicly provide a "hash list", which they independently generate from the accounts provided by the exchange. Every exchange user can then check their information against this public "hash list". A hash is a one-way form of encryption, which fully protects the private information, yet allows anyone who knows that information already to validate that it was included. Less experienced users can take advantage of public tools to calculate the hash from their information (provided by the exchange), and thus have certainty that the auditor received their full balance information. Easy instructions can be provided.
Auditors should be impartial, their identities and process public, and they should be rotated so that the same auditor is never used twice in a row. Balancing the cost of auditing against the needs for regular updates, a 6 month cycle likely makes the most sense.

Hot Wallet Management
The best solution for hot wallets is not to use them. CoinBerry reportedly uses multi-sig on all withdrawals, and Bitmex is an international example known for their structure devoid of hot wallets.
However, many platforms and customers desire fast withdrawal processes, and human validation has a cost of time and delay in this process.
A model of self-insurance or separate funds for hot wallets may be used in these cases. Under this model, a platform still has 100% of their client balance in cold storage and holds additional funds in hot wallets for quick withdrawal. Thus, the risk of those hot wallets is 100% on exchange operators and not affecting the exchange users. Since most platforms typically only have 1%-5% in hot wallets at any given time, it shouldn't be unreasonable to build/maintain these additional reserves over time using exchange fees or additional investment. Larger withdrawals would still be handled at regular intervals from the cold storage.
Hot wallet risks have historically posed a large risk and there is no established standard to guarantee secure hot wallets. When the government of South Korea dispatched security inspections to multiple exchanges, the results were still that 3 of them got hacked after the inspections. If standards develop such that an organization in the market is willing to insure the hot wallets, this could provide an acceptable alternative. Another option may be for multiple exchange operators to pool funds aside for a hot wallet insurance fund. Comprehensive coverage standards must be established and maintained for all hot wallet balances to make sure Canadians are adequately protected.

Current Draft Proposal

(1) Proper multi-signature cold wallet storage.
(a) Each private key is the personal and legal responsibility of one person - the “signatory”. Signatories have special rights and responsibilities to protect user assets. Signatories are trained and certified through a course covering (1) past hacking and fraud cases, (2) proper and secure key generation, and (3) proper safekeeping of private keys. All private keys must be generated and stored 100% offline by the signatory. If even one private keys is ever breached or suspected to be breached, the wallet must be regenerated and all funds relocated to a new wallet.
(b) All signatories must be separate background-checked individuals free of past criminal conviction. Canadians should have a right to know who holds their funds. All signing of transactions must take place with all signatories on Canadian soil or on the soil of a country with a solid legal system which agrees to uphold and support these rules (from an established white-list of countries which expands over time).
(c) 3-5 independent signatures are required for any withdrawal. There must be 1-3 spare signatories, and a maximum of 7 total signatories. The following are all valid combinations: 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7.
(d) A security audit should be conducted to validate the cold wallet is set up correctly and provide any additional pertinent information. The primary purpose is to ensure that all signatories are acting independently and using best practices for private key storage. A report summarizing all steps taken and who did the audit will be made public. Canadians must be able to validate the right measures are in place to protect their funds.
(e) There is a simple approval process if signatories wish to visit any country outside Canada, with a potential whitelist of exempt countries. At most 2 signatories can be outside of aligned jurisdiction at any given time. All exchanges would be required to keep a compliant cold wallet for Canadian funds and have a Canadian office if they wish to serve Canadian customers.
(2) Regular and transparent solvency audits.
(a) An audit must be conducted at founding, after 3 months of operation, and at least once every 6 months to compare customer balances against all stored cryptocurrency and fiat balances. The auditor must be known, independent, and never the same twice in a row.
(b) An audit report will be published featuring the steps conducted in a readable format. This should be made available to all Canadians on the exchange website and on a government website. The report must include what percentage of each customer asset is backed on the exchange, and how those funds are stored.
(c) The auditor will independently produce a hash of each customer's identifying information and balance as they perform the audit. This will be made publicly available on the exchange and government website, along with simplified instructions that each customer can use to verify that their balance was included in the audit process.
(d) The audit needs to include a proof of ownership for any cryptocurrency wallets included. A satoshi test (spending a small amount) or partially signed transaction both qualify.
(e) Any platform without 100% reserves should be assessed on a regular basis by a government or industry watchdog. This entity should work to prevent any further drop, support any private investor to come in, or facilitate a merger so that 100% backing can be obtained as soon as possible.
(3) Protections for hot wallets and transactions.
(a) A standardized list of approved coins and procedures will be established to constitute valid cold storage wallets. Where a multi-sig process is not natively available, efforts will be undertaken to establish a suitable and stable smart contract standard. This list will be expanded and improved over time. Coins and procedures not on the list are considered hot wallets.
(b) Hot wallets can be backed by additional funds in cold storage or an acceptable third-party insurance provider with a comprehensive coverage policy.
(c) Exchanges are required to cover the full balance of all user funds as denominated in the same currency, or double the balance as denominated in bitcoin or CAD using an established trading rate. If the balance is ever insufficient due to market movements, the firm must rectify this within 24 hours by moving assets to cold storage or increasing insurance coverage.
(d) Any large transactions (above a set threshold) from cold storage to any new wallet addresses (not previously transacted with) must be tested with a smaller transaction first. Deposits of cryptocurrency must be limited to prevent economic 51% attacks. Any issues are to be covered by the exchange.
(e) Exchange platforms must provide suitable authentication for users, including making available approved forms of two-factor authentication. SMS-based authentication is not to be supported. Withdrawals must be blocked for 48 hours in the event of any account password change. Disputes on the negligence of exchanges should be governed by case law.

Steps Forward

Continued review of existing OSC feedback is still underway. More feedback and opinions on the framework and ideas as presented here are extremely valuable. The above is a draft and not finalized.
The process of further developing and bringing a suitable framework to protect Canadians will require the support of exchange operators, legal experts, and many others in the community. The costs of not doing such are tremendous. A large and convoluted framework, one based on flawed ideas or implementation, or one which fails to properly safeguard Canadians is not just extremely expensive and risky for all Canadians, severely limiting to the credibility and reputation of the industry, but an existential risk to many exchanges.
The responsibility falls to all of us to provide our insight and make our opinions heard on this critical matter. Please take the time to give your thoughts.
submitted by azoundria2 to QuadrigaInitiative [link] [comments]

Price Discovery in Bitcoin exchange

About thirty days ago I shared a chart on Price Discovery in this sub. There was a lot of interest in it and I promised to explain in detail a Bitcoin price discovery algorithm.. I do so in this post.
*this text post is a slightly shorter version of what I wrote in my blog.

TL;DR

I applied price discovery algorithms to 5 Min OHLCV data from Bitmex and CME contracts and Bitstamp, Coinbase, HitBTC, Kraken, Poloniex, Binance, and OkEx BTCUSD/BTCUSDT markets from March 2016 to May 2020. Some exciting results I got was:

Introduction

Price discovery is the overall process of setting the price of an asset. Price discovery algorithms identify the leader exchanges whose traders define the price. Two approaches are most famous for use in Price Discovery. Gonzalo and Granger (1995) and Hasbrouck (1995). But they assume random walk, and a common efficient price. I do not feel comfortable assuming random walk and common efficient price in Bitcoin Markets. So I used this little know method by De Blasis (2019) for this analysis. This work assumes that "the fastest price to reflect new information releases a price signal to the other slower price series." I thought this was valid in our market. It uses Markov Chains to measure Price Discovery. Without going into the mathematical details the summary steps used was:
De Blasis (2019) names this number Price Leadership Share (PLS). High PLS indicates a large role in price discovery. As the sum of the numbers is 1, they can be looked at as a percentage contribution. I recommend reading the original paper if you are interested to know more about the mathematical detail.

Data

Andersen (2000) argues that 5 Minute window provides the best trade-off between getting enough data and avoiding noise. In one of the first work on Bitcoin's Price Discovery, Brandvold et al. 2015 had used 5M window. So I obtained 5M OHLCV data using the following sources:
Futures data are different from other data because multiple futures contract trades at the same time. I formed a single data from the multiple time series by selecting the nearest contract until it was three days from expiration. I used the next contract when the contract was three days from expiration. This approach was advocated by Booth et al ( 1999 )

Analysis

I can't embed the chart on reddit so open this https://warproxxx.github.io/static/price_discovery.html
In the figure above, each colored line shows the total influence the exchange had towards the discovery of Bitcoin Price on that day. Its axis is on the left. The black line shows a moving average of the bitcoin price at the close in Bitfinex for comparison. The chart was created by plotting the EMA of price and dominance with a smoothing factor of 0.1. This was done to eliminate the noise. Let's start looking from the beginning. We start with a slight Bitfinex dominance at the start. When the price starts going up, Bitfinex's influence does too. This was the time large Tether printing was attributed to the rise of price by many individuals. But Bitfinex's influence wanes down as the price starts rising (remember that the chart is an exponential moving average. Its a lagging indicator). Afterward, exchanges like Binance and Bitstamp increase their role, and there isn't any single leader in the run. So although Bitfinex may have been responsible for the initial pump trades on other exchanges were responsible for the later rally.
CME contracts were added to our analysis in February 2018. Initially, they don't have much influence. On a similar work Alexandar and Heck (2019) noted that initially CBOE contracts had more influence. CBOE later delisted Bitcoin futures so I couldn't get that data. Overall, Bitmex and CME contracts have been averaging around 50% of the role in price discovery. To make the dominance clear, look at this chart where I add Bitmex Futures and Perp contract's dominance figure to create a single dominance index. There bitmex leads 936 of the total 1334 days (Bitfinex leads 298 days and coinbase and binance get 64 and 6 days). That is a lot. One possible reason for this might be Bitmex's low trading fee. Bitmex has a very generous -0.025% maker fee and price discovery tend to occur primarily in the market with smaller trading costs (Booth et al, 1999). It may also be because our market is mature. In mature markets, futures lead the price discovery.
Exchange bitmex_futures bitfinex coinbase bitmex okex binance cme bitstamp okcoin kraken poloniex
Days Lead 571 501 102 88 34 12 8 7 6 4 1
 Table 1: Days Lead 
Out of 1334 days in the analysis, Bitmex futures leads the discovery in 571 days or nearly 43% of the duration. Bitfinex leads for 501 days. Bitfinex's high number is due to its extreme dominance in the early days.
Exchange binance huobi cme okcoin bitmex_futures okex hitbtc kraken poloniex bitstamp bitfinex coinbase bitmex
Correlation 0.809190 0.715667 0.648058 0.644432 0.577147 0.444821 0.032649 -0.187348 -0.365175 -0.564073 -0.665008 -0.695115 -0.752103
 Table 2: Correlation between the close price and Exchange's dominance index 
Binance, Huobi, CME, and OkCoin had the most significant correlation with the close price. Bitmex, Coinbase, Bitfinex, and Bitstamp's dominance were negatively correlated. This was very interesting. To know more, I captured a yearwise correlation.
index 2016 2017 2018 2019 2020
0 bitfinex 0.028264 -0.519791 0.829700 -0.242631 0.626386
1 bitmex 0.090758 -0.752297 -0.654742 0.052242 -0.584956
2 bitmex_futures -0.011323 -0.149281 -0.458857 0.660135 0.095305
3 bitstamp 0.316291 -0.373688 0.600240 -0.255408 -0.407608
4 coinbase -0.505492 -0.128336 -0.351794 -0.410874 -0.262036
5 hitbtc 0.024425 0.486229 0.104912 -0.200203 0.308862
6 kraken 0.275797 0.422656 0.294762 -0.064594 -0.192290
7 poloniex 0.177616 -0.087090 0.230987 -0.135046 -0.154726
8 binance NaN 0.865295 0.706725 -0.484130 0.265086
9 okcoin NaN 0.797682 0.463455 -0.010186 -0.160217
10 huobi NaN 0.748489 0.351514 -0.298418 0.434164
11 cme NaN NaN -0.616407 0.694494 -0.012962
12 okex NaN NaN -0.618888 -0.399567 0.432474
Table 3: Yearwise Correlation between the close price and Exchange's dominance index
Price movement is pretty complicated. If one factor, like a dominant exchange, could explain it, everyone would be making money trading. With this disclaimer out of the way, let us try to make some conclusions. This year Bitfinex, Huobi, and OkEx, Tether based exchanges, discovery power have shown a high correlation with the close price. This means that when the traders there become successful, price rises. When the traders there are failing, Bitmex traders dominate and then the price is falling. I found this interesting as I have been seeing the OkEx whale who has been preceding price rises in this sub. I leave the interpretation of other past years to the reader.

Limitations

My analysis does not include market data for other derivative exchanges like Huobi, OkEx, Binance, and Deribit. So, all future market's influence may be going to Bitmex. I did not add their data because they started having an impact recently. A more fair assessment may be to conclude this as the new power of derivative markets instead of attributing it as the power of Bitmex. But Bitmex has dominated futures volume most of the time (until recently). And they brought the concept of perpetual swaps.

Conclusion

There is a lot in this data. If you are making a trading algo think there is some edge here. Someday I will backtest some trading logic based on this data. Then I will have more info and might write more. But, this analysis was enough for to shift my focus from a Bitfinex based trading algorithm to a Bitmex based one. It has been giving me good results.
If you have any good ideas that you want me to write about or discuss further please comment. If there is enough interest in this measurement, I can setup a live interface that provides the live value.
submitted by warproxxx to BitcoinMarkets [link] [comments]

I bought $1000 worth of the Top Ten Cryptos on January 1st, 2018 (Nov. 2019 Update)

I bought $1000 worth of the Top Ten Cryptos on January 1st, 2018 (Nov. 2019 Update)
EXPERIMENT - Tracking Top 10 Cryptocurrencies for Two Years (2018 & 2019) - Month Twenty-Three - Down 85%
Full blog post with all the tables
**NOTE 1** - I'm on the fence whether or not to repeat the experiment yet again in 2020 with the new Top Ten. The problem is that there's been almost no movement: unless something drastic changes in December, it will be the exact same group of cryptos as the 2019 Top Ten minus Tron and plus Binance Coin. Tracking almost the same group, in the same way, for similar prices isn't very inspiring. I have some other ideas, but very open to suggestions: if you have any good ideas, please share them in the comments below. **END NOTE 1**
**NOTE 2** - I usually like to release the two posts a day apart, but I'll be spacing out the Top Ten 2018 and the Top Ten 2019 reports a bit more as readers have mentioned they've been removed by the mods (no offence taken, mods - the content is similar, I assume the posts are being removed because they're seen as identical. **END NOTE 2**
tl;dr - After a positive bounce in October, the cryptoverse is back to the summer's downward trajectory. Every crypto was down in November. Cardano performed the best (or least horribly), Dash lost the month for the first time since the experiment began nearly two years ago. Overall, Bitcoin is still well ahead. 60% of the 2018 Top Ten cryptos has lost at least 90% of their January 2018 value. NEM continues to be the absolute worst performer.

The Experiment:

Instead of hypothetically tracking cryptos, I made an actual $1000 investment, $100 in each of the Top 10 cryptocurrencies by market cap as of the 1st of January 2018. Think of it as a lazy man's Index Fund (no weighting or rebalancing), less technical, more fun (for me at least), and hopefully still a proxy for the market as a whole - or at the very least an interesting snapshot of the 2018/2019 crypto space. I’m trying to keep it simple and accessible for beginners and those looking to get into crypto but maybe not quite ready to jump in yet. I try not to take sides or analyze, but rather report and document in a detached manner letting the numbers speak for themselves.
I have also started a parallel project: on January 1st, 2019, I repeated the experiment, purchasing another $1000 ($100 each) into the new Top Ten cryptos as of January 1st 2019. Spoiler alert: the 2019 Experiment makes for much happier reading.

The Rules:

Buy $100 of each the Top 10 cryptocurrencies on January 1st, 2018. Run the experiment two years. Hold only. No selling. No trading. Report monthly. Compare loosely to the 2019 Top Ten Experiment.

Month Twenty-Three - Down 85%

After a strong October bounce, the 2018 Top Ten portfolio reverted to downward trajectory of the summer months. While all cryptos in the experiment were either in the green or flat last month, the opposite was true in November as each crypto ended the month solidly in the red.

Ranking and November Winners and Losers

There was no upward movement in November: every crypto either held onto its position or slid. After slipping three slots last month, Dash fell two more places in November and has now fallen to #22 and out of the Top Twenty for the first time since the beginning of the experiment. For the second straight month, IOTA dropped two places and now is in danger of joining Dash outside the Top Twenty. Bitcoin Cash and NEM also fell one position each, ending November at #5 and #28 respectively.
November Winners - Although it lost -11% in November, Cardano handily outperformed its peers. NEM finished in second, "only" down -15% on the month.
November Losers - Dash had a rough month, losing -28% of its value and dropping out of the Top Twenty. November also marks the first time since January 2018 that Dash ended a month at the bottom. Bitcoin Cash followed close behind Dash, finishing -27% in November.
For those keeping score, here is tally of which coins have the most monthly wins and losses during the first 23 months of this experiment. Most monthly wins (5): Bitcoin. Most monthly losses (5): Stellar. All cryptos have at least one monthly win. Up until last month, the only two coins never to lose a month were Bitcoin and Dash. Thanks to a Dash's dismal November, Bitcoin now stands alone as the only crypto that hasn't lost a month.

Overall update – Bitcoin still well ahead. 60% of the 2018 Top Ten cryptos have lost at least -90% of their January 2018 value, NEM still absolute worst performer.

Although down -45% since January 2018, Bitcoin is still miles ahead of the rest of the field. Litecoin and Ethereum are virtually tied for second place, down -79%.
NEM has performed the absolute worst (currently down -96%) but has plenty of company at the bottom: six out of the ten cryptos that started 2018 in the Top Ten are down at least 90%: NEM, Cardano, Dash, IOTA, Ripple, and Bitcoin Cash. My initial $100 investment in NEM is worth just $3.83.
Additionally, 40% of the cryptos that started 2018 in the Top Ten have dropped out, specifically NEM, Dash, IOTA, and Cardano. They have been replaced by EOS, Binance Coin, Tether, and BTCSV.

Total Market Cap for the entire cryptocurrency sector:

The crypto market gave up its October gains and then some as $50B was shed in November. The overall market cap now back to the $198B mark, last seen in May 2019. Since January 2018, the total market cap is down -66%.

Bitcoin dominance:

Bitcoin dominance decreased slightly in November. For context, the range since the beginning of the experiment in January 2018 has been quite wide: a high of 70% in September 2019 and a low of 33% in February 2018.

Overall return on investment from January 1st, 2018:

The 2018 Top Ten Portfolio lost -$42 in November. If I cashed out today, my $1000 initial investment would return $150, down -85%.
The 2019 Top Ten Experiment is doing better. If I cashed that experiment out today, that $1,000 initial investment would return $1,100, a +10% gain. Full November report to come. In the meantime, here's the October update.
Taken together, here's the bottom bottom line: after a $2000 investment in both the 2018 and the 2019 Top Ten Cryptocurrencies, my portfolios would be worth $1,250.
That's down -37.5%.

Implications/Observations:

As always, the experiment's focus of solely holding the Top Ten Cryptos continues to be a losing approach. While the overall market is down -%66 from January 2018, the cryptos that began 2018 in the Top Ten are down -85% over the same period. This of course implies that I would have done a bit better if I'd picked a different group of cryptos.
At no point in this experiment has this investment strategy been successful: the initial 2018 Top Ten have under-performed each of the twenty-three months compared to the market overall.
I'm also tracking the S&P 500 as part of my experiment to have a comparison point with other popular investments options. The S&P 500 is now up +17.5% since the beginning of 2018. My initial $1k investment into crypto would have yielded about +$175 had it been redirected to the S&P.

Conclusion:

After a bounce in October, it seems like we're back to our previously scheduled programming of downward movement. One month to go in 2019, let's see what happens.
A note: although I'm planning on continuing to track both the 2018 and 2019 Top Ten Cryptos next year, I'm undecided on whether or not to repeat the experiment yet again in 2020. Please do leave your suggestions and ideas in the comments below.
Thanks for reading and for supporting the experiment. I hope you’ve found it helpful. I continue to be committed to seeing this process through and reporting along the way. Feel free to reach out with any questions and stay tuned for progress reports. Keep an eye out for my parallel project where I repeated the experiment, purchasing another $1000 ($100 each) of a new set of Top Ten cryptos as of January 1st 2019.
submitted by Joe-M-4 to CryptoCurrency [link] [comments]

Trading View (Request)

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Playstore Link: https://play.google.com/store/apps/details?id=com.tradingview.tradingviewapp
Mod Features: Additional indicators available in pro version of this app
submitted by shinigamidoge to moddedandroidapps [link] [comments]

I bought $1000 worth of the Top Ten Cryptos on January 1st, 2019 (Nov. 2019 Update)

I bought $1000 worth of the Top Ten Cryptos on January 1st, 2019 (Nov. 2019 Update)
EXPERIMENT - Tracking Top 10 Cryptocurrencies of 2019 - Month Eleven - UP 10%
Full blog post with all the tables
**NOTE** - I'm on the fence whether or not to repeat the experiment yet again in 2020 with the new Top Ten. The problem is that there's not been a lot of movement, so not super interesting tracking the same coins at similar prices. I have some other ideas, but very open to suggestions: if you have any good ideas, please share them in the comments below. **END NOTE**
tl;dr - After a breather in October, crypto is back to the summer's downward trajectory. Every 2019 Top Ten crypto 2019 was down in November except of course Tether. Bitcoin Cash and Ripple both struggled in November, down -27% and -25% respectively. Overall, BTC and Litecoin are still far ahead of their peers, up +93% and +49% respectively in 2019, while Stellar continues to be a drag on the overall return of portfolio, down -50% in 2019.

The Experiment:

Instead of hypothetically tracking cryptos, I made an actual $1000 investment, $100 in each of the Top 10 cryptocurrencies by market cap as of the 1st of January 2018. I then repeated the experiment on the 1st of January 2019. Think of it as a lazy man's Index Fund (no weighting or rebalancing), less technical, more fun (for me at least), and hopefully still a proxy for the market as a whole - or at the very least an interesting snapshot of the 2019 crypto space. I am trying to keep this project simple and accessible for beginners and those looking to get into crypto but maybe not quite ready to jump in yet. I try not to take sides or analyze, but rather report and document in a detached manner letting the numbers speak for themselves.

The Rules:

Buy $100 of each the Top 10 cryptocurrencies on January 1st, 2019. Hold only. No selling. No trading. Report monthly. Compare loosely to the 2018 Top Ten Experiment.

Month Ten - Up 10%

November was the complete opposite of October: 100% of the Top Ten cryptos were in the green last month, 100% are in the red this month (except Tether of course, which is always flat). When Tether is the best performer, it signals a rough month for the 2019 Top Ten portfolio.
Overall, the 2019 Top Ten portfolio is up +10% on the year. For context, this same group of cryptos was up +114% at the peak in May 2019. Additionally, the portfolio has fallen well behind the stock market as measured by the S&P 500 (see below).

Ranking and November Winners and Losers

Not much movement this month. Bitcoin Cash slipped back into the #5 slot. EOS and Tether both advanced a position (to#7 and #4, respectively) and that's it.
Big picture, in the constantly shifting crypto landscape, it's a bit of surprise that nearly all of the coins that started in the Top Ten on January 1st, 2019 are still there (except Tron, which stands alone as a Top Ten dropout, replaced by Binance Coin). This is certainly different from the 2018 Top Ten Experiment where coins have fallen and fallen hard.
November Winners - Winner, singular: Tether. A distant second is Stellar, down -17% in November.
November Losers - Bitcoin Cash followed by Ripple, down -27% and -25% respectively.
For those keeping score, here is tally of which coins have the most monthly wins and loses during the first eleven months of this experiment: Tether has pulled ahead of Bitcoin and BTCSV. Bitcoin SV has the most monthly losses, finishing last in four out of the first eleven months of 2019.

Overall update – Bitcoin maintains sizable lead over second place Litecoin. All cryptos in positive territory except Stellar, Ripple, and Tron.

BTC and Litecoin are still far ahead of their peers, up +93% and +49% respectively in 2019. My initial $100 investment in Bitcoin is now worth $197.
All Top Ten cryptos are still either flat or in positive territory except Stellar, Ripple and Tron. Stellar continues to be a drag on the overall return of the 2019 Top Ten portfolio, down -50% in 2019. Ripple and Tron follow down about -40% and about -20% respectively.

Total Market Cap for the entire cryptocurrency sector:

The crypto market gave up its October gains and then some as $50B was shed in November. The overall market cap now back to the $198B mark, last seen in May 2019.
A bit of perspective: it still has been a very strong year for crypto overall. The entire market cap is up +56% since the beginning of 2019.

Bitcoin dominance:

Bitcoin dominance decreased slightly in November. The range this year has gone from a high of 70% in September 2019 to a low of 50% in March 2019.

Overall return on investment from January 1st, 2019:

If I cashed out the 2019 Top Ten portfolio today, my $1,000 initial investment would return $1,100, a +10% gain.
I'm down significantly in my 2018 Top Ten Experiment. If I cashed that group out today, the $1000 initial investment would return about $150, down nearly -85%.
Taken together, here's the bottom bottom line: after a $2000 investment in both the 2018 and the 2019 Top Ten Cryptocurrencies, my portfolios would be worth $1,250.
That's down -37.5%.

Implications/Observations:

With the crypto market as a whole up +56% on the year, how have the 2019 Top Ten cryptos performed? Up a much lower +10%. As a reminder, in May 2019, the gains from the 2019 Top Ten and the entire market cap were both exactly the same: +114%. The last few months have seen that gap widen: for six straight months, focusing only on the Top Ten has been a losing strategy. This of course implies that I would have done a bit better if I'd picked a different group of cryptos.
This is reminiscent of last year as at no point in the Top Ten 2018 Experiment did the Top Ten strategy outperform the overall market.
I'm also tracking the S&P 500 as part of my experiment to have a comparison point with other popular investments options. The S&P 500 is up +24% since the beginning of 2019. This is now more than double the +10% my 2019 Top Ten portfolio is returning. Quite a turnaround from May of this year, when the Top Ten portfolio was up +114% compared to +10% for the S&P.
So, the initial $1k investment I put into crypto would now be worth $1240 had it been redirected to the S&P 500.

Conclusion:

After a reprieve in October, crypto has resumed the slide it started in the summer. Until recently, it looked like the 2019 Top Ten would easily outperform the market on the year, but that outcome is definitely in doubt now. More telling, with only one month left in 2019, I'm no longer confident that the portfolio will at least break even: as of the end of November, the 2019 Top Ten portfolio only holds a slim +10% return, gains that can easily evaporate before the new year.
If you're just finding this experiment now, here's the backstory: On the 1st of January, 2018, I bought $100 each of the Top Ten cryptos at the time for a total investment of $1000 to see how they would perform over the year. I tracked the experiment and reported each month. The result? I ended 2018 down -85%, my $1000 worth only $150.
After last year's experiment ended, I decided to do two things:
  1. Extend the Top Ten 2018 Crypto project one more year. The experiment is now in its 23rd month. You can check out the latest update here.
  2. What you're reading now is the 11th report of a parallel project: this year I repeated the experiment, purchasing another $1000 ($100 each) of the new Top Ten cryptos as of January 1st, 2019.
Thanks for reading and the support for the experiment. I hope you’ve found it helpful. I continue to be committed to seeing this process through and reporting along the way. Feel free to reach out with any questions and stay tuned for progress reports.
Again: although I'm planning on continuing to track both the 2018 and 2019 Top Ten Cryptos next year, I'm undecided on whether or not to repeat the experiment yet again in 2020. Please do leave your suggestions and ideas in the comments below.
submitted by Joe-M-4 to CryptoCurrency [link] [comments]

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