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What Coinbase’s Cuba Problem Says About the Bitcoin Business

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As travelers to Cuba can attest, an unfortunate reality of cryptocurrency services today is often the poor customer support.

After taking a vacation to the Caribbean island, Elliott Smith, a visual effects programmer from the UK, was sitting at the airport and, as is common after vacation, began catching up on his digital life.

With a keen interest in bitcoin, Smith decided to open the Coinbase app and check the price of his holdings. After a quick look, he closed the app.

He didn’t buy. He didn’t sell. He didn’t trade.

And yet, when he got back home, he saw a disheartening message when he tried to login again:

coinbaseaccountclosurecropped What Coinbases Cuba Problem Says About the Bitcoin Business

Grey area

According to Drew Hinkes, a partner at Berger Singerman, Coinbase’s action was not particularly surprising given that the country is still subject to financial sanctions by the U.S.

“The fact that we’ve opened up some tourism and widened the pipes may have suggested to folks traveling there that the full spectrum of economic activity was available,” Hinkes said.

But just like Iran, Syria and North Korea, Cuba remains not fully in the good graces of the U.S.

Hinkes told CoinDesk:

“Regulated entities, especially those in financial services and if they’re doing proper OFAC compliance, are going to be looking for virtual currency assets in those nations.”

Hinkes refers to the Office of Foreign Assets Control, an office which comprises several agencies that have engaged the digital currency community.

Plus, Coinbase has already proven itself highly conservative in its approach to compliance, recently ousting a white-hat hacker for paying ransoms and buying black market documents at the behest of clients.

“Coinbase has taken great pains to stay in the good graces of regulators,” Hinkes said.

The long wait

Although, companies can get licenses to do business in the country, and Netflix and Airbnb are examples of U.S. companies that received a license.

The others aren’t allowed to provide services for people that live in the country. But, Smith doesn’t live in Cuba.

And he told Coinbase as much, detailing the issue to their support team on May 22. Two days later, Smith received a response from a member of Coinbase’s support team, stating:

“Having investigated the issue, I am working with a specialist to address it properly. We will follow-up with you as soon as we have an update.”

Since then, even with a half a dozen requests for updates, Smith hasn’t heard a thing.

And his story isn’t unique. On Reddit, a handful of people have lamented the same situation, including Charles Thomson, who has taken the issue further.

Thomson continued to ask Coinbase to release his funds, but with no digital response, he stepped it up to a formal demand by registered mail. On June 15, after Coinbase failed to meet the deadline set in the demand, Thomson filed a lawsuit.

The bigger issue

According to Thomson, the lawsuit is less about money, and more about forcing Coinbase to fix the problem.

“Everybody else that doesn’t have the means to bring a lawsuit against them, Coinbase is just ignoring – unless they’re threatened, it seems, at least with legal action,” said Smith, who didn’t have much bitcoin in the account when it was closed.

The problem, then, is more of principle.

Smith contended:

”It’s undermining confidence in bitcoin, even though they’re the ones messing up.”

“I knew there would be a backlog, so I gave them a few weeks, but this is really frustrating,” he continued.

Coinbase agrees.

Daniel Romero, senior vice president of operations at the firm, told CoinDesk:

“The honest answer is we’ve had a tremendous amount of growth, and didn’t have enough support staff and compliance staff to handle the amount of requests on the platform.”

According to Romero, Coinbase has seen a 10-fold increase in the number of customers using the platform.

Growing pains

But Romero says the company is working on it.

In a June 2 Medium post, Coinbase co-founder and CEO Brian Armstrong, outlined how the company would be addressing the situation in Q3 of this year. Coinbase is committing significant investment toward customer service, for instance, working with an outsourced team to double support capacity and hiring a consultant to help the company scale and introduce phone support.

The goal is to take care of support requests in six hours or less, said Romero.

“Compliance-related requests are always going to take us a little more time because we need to look at the account and make a judgement, and we’re pretty thorough when were doing anything related to compliance,” Romero said.

While Romero wouldn’t speak to specific cases, he added Coinbase plans on doubling the support team again in the next six to eight weeks.

This isn’t only a Coinbase problem, though.

Perusing cryptocurrency company’s Twitter feeds (Poloniex, for example) reveals a significant amount of frustration related to support.

Reprieve

The result is that tensions between companies and users are still high. Even with his account reopened, Thomson has kept the lawsuit against Coinbase pending.

“I have quite a bit of experience with filing these types of lawsuits, and the same thing always happens when a company gets the plaintiff’s claim and the order to go to court, they immediately pick up the phone and try to make you go away,” he said on Reddit.

Thomson has continued encouraging others to give him their support case numbers, so when Coinbase calls he can give support all the cases, and hopefully get everyone’s accounts reopened (including those of his girlfriend and a friend who traveled with him to Cuba).

Five days after he filed the lawsuit, Coinbase reopened Thomson’s account. But they had only emailed him a confirmation. He posted on Reddit that, because he didn’t end up on the phone with anyone at Coinbase, he was unable to ask about other’s case numbers.

On July 19, Thomson posted on Reddit an email he received from Coinbase that stated the exchange would like Thomson to withdraw the filing because access was fully restored to his account.

The best part: It was sent and signed by Coinbase corporate counsel Shahab Asghar, a real person.

Thomson expects to get on the phone with Asghar soon, asking about all the other’s case numbers who have dealt with the same issue.

In Thomson’s words: “The end is near.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Cuban flag image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].



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What Coinbase’s Cuba Problem Says About the Bitcoin Business

0


As travelers to Cuba can attest, an unfortunate reality of cryptocurrency services today is often the poor customer support.

After taking a vacation to the Caribbean island, Elliott Smith, a visual effects programmer from the UK, was sitting at the airport and, as is common after vacation, began catching up on his digital life.

With a keen interest in bitcoin, Smith decided to open the Coinbase app and check the price of his holdings. After a quick look, he closed the app.

He didn’t buy. He didn’t sell. He didn’t trade.

And yet, when he got back home, he saw a disheartening message when he tried to login again:

coinbaseaccountclosurecropped What Coinbases Cuba Problem Says About the Bitcoin Business

Grey area

According to Drew Hinkes, a partner at Berger Singerman, Coinbase’s action was not particularly surprising given that the country is still subject to financial sanctions by the U.S.

“The fact that we’ve opened up some tourism and widened the pipes may have suggested to folks traveling there that the full spectrum of economic activity was available,” Hinkes said.

But just like Iran, Syria and North Korea, Cuba remains not fully in the good graces of the U.S.

Hinkes told CoinDesk:

“Regulated entities, especially those in financial services and if they’re doing proper OFAC compliance, are going to be looking for virtual currency assets in those nations.”

Hinkes refers to the Office of Foreign Assets Control, an office which comprises several agencies that have engaged the digital currency community.

Plus, Coinbase has already proven itself highly conservative in its approach to compliance, recently ousting a white-hat hacker for paying ransoms and buying black market documents at the behest of clients.

“Coinbase has taken great pains to stay in the good graces of regulators,” Hinkes said.

The long wait

Although, companies can get licenses to do business in the country, and Netflix and Airbnb are examples of U.S. companies that received a license.

The others aren’t allowed to provide services for people that live in the country. But, Smith doesn’t live in Cuba.

And he told Coinbase as much, detailing the issue to their support team on May 22. Two days later, Smith received a response from a member of Coinbase’s support team, stating:

“Having investigated the issue, I am working with a specialist to address it properly. We will follow-up with you as soon as we have an update.”

Since then, even with a half a dozen requests for updates, Smith hasn’t heard a thing.

And his story isn’t unique. On Reddit, a handful of people have lamented the same situation, including Charles Thomson, who has taken the issue further.

Thomson continued to ask Coinbase to release his funds, but with no digital response, he stepped it up to a formal demand by registered mail. On June 15, after Coinbase failed to meet the deadline set in the demand, Thomson filed a lawsuit.

The bigger issue

According to Thomson, the lawsuit is less about money, and more about forcing Coinbase to fix the problem.

“Everybody else that doesn’t have the means to bring a lawsuit against them, Coinbase is just ignoring – unless they’re threatened, it seems, at least with legal action,” said Smith, who didn’t have much bitcoin in the account when it was closed.

The problem, then, is more of principle.

Smith contended:

”It’s undermining confidence in bitcoin, even though they’re the ones messing up.”

“I knew there would be a backlog, so I gave them a few weeks, but this is really frustrating,” he continued.

Coinbase agrees.

Daniel Romero, senior vice president of operations at the firm, told CoinDesk:

“The honest answer is we’ve had a tremendous amount of growth, and didn’t have enough support staff and compliance staff to handle the amount of requests on the platform.”

According to Romero, Coinbase has seen a 10-fold increase in the number of customers using the platform.

Growing pains

But Romero says the company is working on it.

In a June 2 Medium post, Coinbase co-founder and CEO Brian Armstrong, outlined how the company would be addressing the situation in Q3 of this year. Coinbase is committing significant investment toward customer service, for instance, working with an outsourced team to double support capacity and hiring a consultant to help the company scale and introduce phone support.

The goal is to take care of support requests in six hours or less, said Romero.

“Compliance-related requests are always going to take us a little more time because we need to look at the account and make a judgement, and we’re pretty thorough when were doing anything related to compliance,” Romero said.

While Romero wouldn’t speak to specific cases, he added Coinbase plans on doubling the support team again in the next six to eight weeks.

This isn’t only a Coinbase problem, though.

Perusing cryptocurrency company’s Twitter feeds (Poloniex, for example) reveals a significant amount of frustration related to support.

Reprieve

The result is that tensions between companies and users are still high. Even with his account reopened, Thomson has kept the lawsuit against Coinbase pending.

“I have quite a bit of experience with filing these types of lawsuits, and the same thing always happens when a company gets the plaintiff’s claim and the order to go to court, they immediately pick up the phone and try to make you go away,” he said on Reddit.

Thomson has continued encouraging others to give him their support case numbers, so when Coinbase calls he can give support all the cases, and hopefully get everyone’s accounts reopened (including those of his girlfriend and a friend who traveled with him to Cuba).

Five days after he filed the lawsuit, Coinbase reopened Thomson’s account. But they had only emailed him a confirmation. He posted on Reddit that, because he didn’t end up on the phone with anyone at Coinbase, he was unable to ask about other’s case numbers.

On July 19, Thomson posted on Reddit an email he received from Coinbase that stated the exchange would like Thomson to withdraw the filing because access was fully restored to his account.

The best part: It was sent and signed by Coinbase corporate counsel Shahab Asghar, a real person.

Thomson expects to get on the phone with Asghar soon, asking about all the other’s case numbers who have dealt with the same issue.

In Thomson’s words: “The end is near.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.

Cuban flag image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].



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Between a Rock and a Hard Fork: Jeff Garzik’s Plan to Avoid a Bitcoin Split

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Jeff Garzik has been accused of a lot of things of late.

Since taking the lead on turning the Segwit2x scaling agreement into code, the CEO of blockchain startup Bloq has been accused of everything from closing off bitcoin’s open-source development to encouraging unnecessarily aggressive network changes to playing loose with facts to sway public sentiment on the plan.

But if the long-time developer, one of the first employed by a startup to work directly with bitcoin’s underlying software, has emerged as a lightning rod, Garzik seems enthusiastic about the role.

Fond of taking on critics head on in lengthy Twitter exchanges, Garzik may be unique among bitcoin developers in displaying a largely take-charge entrepreneurial mindset, one that finds him at odds with the project’s more security-conscious developer group, Bitcoin Core.

But if Garzik is under scrutiny now, he’s likely to be there for some time.

Screen Shot 2017 07 18 at 8.59.38 PM Between a Rock and a Hard Fork: Jeff Garziks Plan to Avoid a Bitcoin Split

While there are a few steps left before bitcoin’s long-awaited capacity upgrade is a done deal (it’s looking increasingly likely that bitcoin miners will push a scaling upgrade by the end of August), the code changes he’s shepherding aren’t due to conclude until the fall.

That’s when they’ll perhaps hit a fever pitch that dwarfs the current debate, and in a new interview, Garzik doubled down on his intent to introduce the code for a hard fork that would further boost the network’s capabilities while putting it again on a path to a split.

Against this backdrop, Garzik sat down with CoinDesk to discuss his thoughts on the future of Segwit2x, addressing the key questions and controversies that have been bubbling behind the scenes of late.

Below, that interview is reproduced, though some of Garzik’s comments have been shortened for clarity.

Mining pools started signaling for BIP 91 earlier than expected this week – why given that they’ve been reluctant about SegWit in the past? 

They were chomping in the bit. One of the completely ridiculous narratives out there is that mining pools are blocking SegWit and don’t want SegWit for various reasons.

In real life, they’re chomping at the bit to activate SegWit.

They’re really ready to plunge and take the plunge to step two in scaling, which is raising the block size. They were ready to pull the trigger as soon as everyone could get their nodes spun up.

Didn’t the original deployment of SegWit stall because of lack of mining pool support?

Well, it was more than just miners.

That’s the thing about Segwit2x. SegWit wasn’t going to increase the block size at a speed that was realistic to a lot of the players in the space. By itself, it’s a two-step upgrade. First you upgrade the nodes to support those new rules, then you have a year-long process of updating the wallets. Upgrading the wallets, that second step, is where SegWit actually brings new capacity.

After this long, contentious debate, a SegWit-only path would only leave us with only the same capacity that we have now.

That’s why it stalled. And why Segwit2x moves that needle forward. It delivers guaranteed short-term capacity. That’s the base block size increase. And it sets the foundation for the long-term, and that’s SegWit.

Mining pools are already running the code. Is it safe for them to do so even if the final release isn’t out?

Absolutely. The consensus rules have not been changed. Those are the security rules changed across the entire network.

We’ll release the final version when it’s ready. If there are bugs, we’ll have a second, third, or even fourth release candidate.

It’s released when it’s ready. There are never guarantees with software.

Segwit2x introduces SegWit code to the network, but you’ve been critical of SegWit in the past, or at least soft forks. Did you change your mind in support of Segwit2x?

Nope. Basically what happens with Segwit2x is there’s a short, interim soft fork and a hard fork that locks in those SegWit rules. It locks in in a way in a A or B way. That’s what a hard fork does that a soft fork doesn’t. It gives users a choice to follow the chain or not.

But with a soft fork, all rules are already accepted by all rules in a soft fork. You can imagine many different situations where you don’t want to automatically accept new rules.

A hard fork is different in that the network doesn’t automatically accept the new rules.

I’ve been a proponent of SegWit as a hard fork, because you lock in those rules in a way that people endorse those rules or not. That’s the outcome of Segwit2x. Post-hard fork, the SegWit rules are locked in.

Segwit2x is most likely to result in one coin, whereas a big block hard fork or just a SegWit upgrade was stuck at 30% hashrate and no consensus from economic nodes. You have SegWit-only, Bitcoin Core supporters. Then you have partisans on the other side – the we need big blocks, Bitcoin Unlimited, etc.

Neither of those were getting full traction in the market. It got to 30% and then got stuck. The community was just at this gridlock stage.

Segwit2x at a high-level attempts to move past that gridlock, moves past the communities are stuck in a way that results in one coin that doesn’t result in a chain split. That riles up people in the big blocker community as well as some of the people in the SegWit-only, Bitcoin Core community. But there’s a lot of support for it and it’s getting rolled out on the network right now because Segwit2x is, ironically, the fastest path for activating SegWit.

Many in the community have criticised Segwit2x for its closed development process.

That’s pretty typical of the mud slung by Peter Todd and Adam Back specifically. It’s not true at all. The GitHub is completely open, the mailing list completely open. All the feedback that’s been received has been thoughtfully addressed.

The feedback that we’ve received from Bitcoin Core to date has largely been make-this-change-that-breaks-all-of-the-wallets-type changes, signaling the hard fork in a different way, or just a disruptive, trolling GitHub comments.

There’s all sorts of mud being slung. There are some people who don’t like things being done in the way they wouldn’t have done them.

The main criticism that comes up is the 2 MB hard fork. Some developers think that it could be done in a safer way or think that the three-month timeline is too fast.

This gets into the weeds of the scaling debate. Those are criticisms from people who have delayed planning a hard fork for years. That’s really why supporters of Segwit2x wants to move on. They didn’t get more than 30% traction. SegWit is a great technology, but it’s not very good at delivering capacity.

Capacity, high transaction speed – and the proposal proposes to extend a years-long delay with another years-long delay as SegWit capacity ramps up. That’s the core at that disagreement.

Folks who’ve failed to plan for a hard fork who’ve thrown shade on all hard forks are throwing more shade on this one. That’s entirely expected. That’s part of the process of reaching across the isle and bringing these two camps together.

It’s no surprise that the democrats in bitcoin don’t like the republicans in bitcoin.

It seems like some are completely opposed to a hard fork, but some developers think that the timeline should extended to a year instead of three months.

I’ll disagree with that. If you go through the Twitter history, they’ve been saying that for years. There’s never enough time for a hard fork, yet that planning never happens.

The community has lost patience with that message. There’s no outcome other than delay.

Will Segwit2x add replay protection in the case of a hard fork? 

Definitely. There have been a few proposals.

One was proposed by a Bitcoin Core contributor. That replay protection would break every wallet, so we view that as a non-serious, disruptive proposal.

The other proposal was from [former lead bitcoin maintainer] Gavin Andresen. Others have proposed forms of opt-in replay protection.

That’s definitely something we’re looking into, but we’re not interested in breaking all wallets.

There is a contingent of bitcoin users who disagree with the hard fork aspect of Segwit2x. Will that impact whether it succeeds?

That’s actually why I think that hard forks are better than soft forks.

With soft forks you’re automatically accepting the new rules. If you disagree with a hard fork, then you do not automatically accept the new rules. From a governance perspective, that’s very, very healthy.

To answer your question, that won’t disrupt the hard fork.

Furthermore, it’s a good thing that people can disagree with the hard fork. Disagreement and freedom of choice is great and it’s what makes bitcoin great.

Do you think that could lead to a split then?

I do. My predicted outcome, as we’re seeing right now, is that the miners are adopting the BTC1 software. And that leaves the vast majority of mining software on one coin.

By definition, a minority chain behaves in a certain way. If a large amount of the hashpower splits away from the chain or in a UASF scenario, where many users run away from the hashpower, the software behaves in a very predictable and known way. The chain grounds to a halt. Instead of it taking 10 minutes to mine a block, it takes, say, a few hours per block. You have 2016 blocks before you have a difficulty ramp-down.

What that means for users is that it’s unusable for a while. What happens when there’s a hard fork is there’s going to be – the vast majority of hashpower will activate and secure the 2 MB chain.

There will be a chain that nobody uses. Number three, there will be a tiny amount of activist users who don’t want a hard fork at all. And that will continue as a much smaller security level.

Say it does split and the minority group coin doesn’t work as well in the way that you described. Isn’t that forcing choice?

I agree. That’s very true. There are unquestionably incentives that lend you to stick to the chain with the most hashpower.

But the governance point is that there’s a choice point. Whereas in a soft fork there’s not. But every user has to make that choice.

I think the more informed each user is, the better.

What do you think of other scaling proposals like BIP 148 or BitcoinABC?

UASF has no hashpower and no economic nodes supporting them.

If it weren’t for Segwit2x activating SegWit, they would fork themselves off into the unusable chain scenario that I described.

They would have to create a second chain fork to correct the difficulty to get back to the 10-minute block times. That’s how it will play out without hashpower, which looks like unlikely scenario. With hashpower, which is how things are playing out now, SegWit will get activated and the UASF folks will get what they were asking for – and there will be no chain split.

BitcoinABC is creating a new coin. Segwit2x is not going to have a major impact on BitcoinABC itself. There will be a slight reduction in hashpower, maybe 4% moves to BitcoinABC. It’s essentially an altcoin, where every bitcoin holder has a stake in the new coin.

It shouldn’t majorly impact bitcoin users or Segwit2x.

Some people are saying that the UASF is what led to Segwit2x, and that mining pools are are signaling for BIP 91 right now to avoid a UASF.

It’s basically to maintain unity. Not to avoid UASF, but to make sure that everyone on the main chain stays on the chain by activating SegWit. It’s the unity path. Everyone, including the UASF activists, get what they want, which is SegWit activating.

It’s going through the Segwit2x path by activating at ‘bit 4,’ which should lock-in today. That will flip on ‘bit 1’ which will activate SegWit.

That ‘bit 4’ activation three months in the future will also trigger the fork rule change.

Some have argued that sidechains are a better alternative to a 2MB hard fork, since users can opt-in to a system with whatever blocksize parameter they want.

Bloq sponsors the Drivechain project, which is a project for adding usable sidechains to bitcoin in the future. Blockstream originated the sidechain proposal, but their sidechain never really made it to bitcoin.

Drivechain technology potentially allows you to have a sidechain that has huge blocks, it doesn’t matter what rules are on there.

The issue with that is maturity level. It’s an in-the-lab science project. Were it more secure, it might be a better solution today, but like Lightning it’s a very promising technology that’s still getting baked.

So the 2 MB parameter increase is a short-term solution. Then, maybe Drivechain come later?

Exactly. Basically, the 2 MB hard fork is the one path that we know with 100% that guarantees increased capacity.

We don’t know how much capacity SegWit will deliver because we don’t know how many or how few people will update their wallet software to enable SegWit. That’s an unknown. Lightning, we don’t know anything about the trust model or economics of that. So, we don’t know if that will be used.

Sidechains are similarly just getting baked. All of these are promising projects that we don’t know will be a solution yet.

The 2 MB hard fork is definitely a stopgap until we get something better. But as I always say, mind the gap. It’s pragmatism versus a years-long science project that may or may not work out.

How long do you plan to work on Segwit2x? Are you in it for the longhaul or do you plan to stop after the hard fork?

No, it’s a very focused. It will not expand its charter at all. This is in keeping with IETF working groups. We have this one charter to activate SegWit and activate a hard fork and that’s it. It’s a one-and-done. You see the same thing at Red Hat, where I used to work, for developing software and hardware specifications.

When working on the Linux kernel, we got people who hated each other and they actually worked together in a focused setting, accomplishing a specific goal, such as developing USB specifications. Segwit2x is modeled after that. It will be disbanded after that’s in place.

Now, the BTC1 project, I’m calling the Fedora of bitcoin. It will be around after the Segwit2x .

Any plans on what you’ll do with BTC1 after that?

I really want to create a community that’s more professional that doesn’t spin narratives and sling mud and that welcomes more developers. When I worked at Linux we helped new developers up the steep learning curve.

We could do that, but instead, to my sadness, we have certain portions of the community who are very negative about any new developments and negative in pushing the bounds.

Ethereum has been very welcoming. Bitcoin is by far the most secure blockchain out there, and much more secure than ethereum. But ethereum is doing a better job of attracting new developers.

I want BTC1 to be sort of that welcome sign that I chose as an icon for the project. We want to welcome new projects, welcoming new ideas, rather than attacking ideas that are outside a self-defined bubble.

Is the plan to replace Bitcoin Core?

Absolutely not. This is a patchset on top of Bitcoin Core. We’ll use the best of Bitcoin Core, and we very much welcome those contributions, but also other contributions as well.

We want to work with Bitcoin Core, not against Core. Even if they disagree with us working with them, we want to work with them.

That’s what’s so amusingly ironic. The original SegWit authors are doing everything that they can to delay the rollout of SegWit, which is what Segwit2x is actually accomplishing.

You mentioned ethereum. A lot of people do mention that they’re more welcoming to new developers or new ideas. But some people argue that that could be a problem for the security of the software.

That’s absolutely right. We’re securing money. With new ideas, comes new risks.

Where Segwit2x comes in is it that, the core contingent is way too much on the conservative side where we’re letting bitcoin slam into this fee wall, which was predictable years ago, rather than prepare for a hard fork.

You can risk-adjust yourself into a corner and hurt market share where you’re being so conservative that nobody can use it.

Now that BIP91 has locked in, what do you see ahead?

Ultimately I think the best path for SegWit, which is not going to happen, would be to deploy it on a sidechain, test it on money for a year and integrate it into bitcoin. It’s seen some real money testing in litecoin, but that’s it.

Litecoin, they’ve only done the first step. Wallets aren’t using SegWit. The ideal scenario would have been a much longer cycle of real-money testing on a sidechain. That was the original vision of sidechains.

But we have what we have today. I think that Segwit2x is the best chance to deploy SegWit and to keep everyone on one coin.

It clearly has a large amount of buy-in, so we’re confident of its success.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Bloq.

Jeff Garzik image via TEDx video

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].



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Recent Bull Run Calls for a Level Head

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Over the course of three days, BTC-USD managed to climb $1,100 in value — a near 60 percent growth. Shortly after reaching a local high in the mid $2,900s, it immediately retraced down to the mid $2,700s where, at the time of this article, it is currently sitting. Is this price growth sustainable? Is there more bull left in this rally? I’ll attempt to break down this recent market move from both sides of the fence and show why investors should or shouldn’t be wary of a move of this magnitude.  

Full disclosure: This analysis will not attempt to speculate on the value implications within this ongoing scaling debate. This will be an objective, raw analysis of the data at hand.

Figure 1.original Recent Bull Run Calls for a Level HeadFigure 1: BTC-USD, 12-hr Candles, Bitfinex, Macro Bull Run

If we put this entire bull run into perspective, we see that upon the completion of the Head and Shoulders Reversal Pattern, the market retraced down to the 50 percent Fibonacci Retracement values before ultimately bouncing and immediately climbing toward the previous all-time high.

At the moment, BTC-USD has yet to see any significant pullback from its latest move to justify any semblance of considerably strong support. The importance of establishing support levels is crucial for a sustained, healthy bull run. A support level sends out a signal to investors that basically says, “Hey, the market is not likely to drop below ‘x’ value — your risk is lowered by buying at ‘y’ price.”  

However, without these firm support levels, investors don’t know where the price currently stands in the grand scheme of the market. Thus, uncertainty can be injected into the market even in times of strong bull rallies. This uncertainty often leads to early profit taking, panic selling and long-position capitulation (also known as a “long squeeze”).

To play devil’s advocate, one can make an argument for a bullish continuation of yesterday’s massive bull run:

Figure 2.original Recent Bull Run Calls for a Level HeadFigure 2: BTC-USD, 30-min Candles, Bitfinex, Price Consolidation

If we take the current trend out of the context of the entire market, it would appear to display characteristics of a bullish continuation pattern known as a “Bull Pennant.” Bull Pennants are characterized by having lower highs, higher lows and decreasing volume along the length of the pennant. A pennant of this magnitude would have a price target somewhere around $3,400. (For the sake of time, I won’t explain why that’s the price target. You’ll just have to take my word for it.)  

However, when we put the Bull Pennant into the context of the entire market, we see signs of market divergence starting to form on the higher timescales:

Figure 3.original Recent Bull Run Calls for a Level HeadFigure 3: BTC-USD, 4-hr Candles, Bitfinex, Bearish Divergence

On the 4-hr MACD, we see bearish divergence during the market move to $2,900. Divergence is an indication that the market has begun to lose momentum and is likely to pull back before any more uptrending will continue.  

In regard to a bullish continuation of this rally, something to keep an eye out for are the tests of the key Fibonacci Retracement values shown in Figure 1. A retest and strong rejection of the Fibonacci lines will show strong market confidence in the eyes of investors who are currently sitting on the sidelines. Before any sustained, healthy uptrend resumes, the market will have to prove itself at the lower values to establish firm support.

During massive rallies it’s important to always keep in mind that large price movements often come with a large cost. It is still unclear what the immediate future of BTC-USD will be, but it’s important to remain levelheaded when entering trades and always look at the market objectively.  

Summary:

  1. Over three days, the BTC-USD market gained 60 percent in value.

  2. No firm support has been established to justify remaining at this price level.

  3. Because there is no firm support, volume is beginning to taper off while the market decides the next direction to head to next.

Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.



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NRI Subsidiary Launches Blockchain Technology Assessment Service

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NRI SecureTechnologies, a cybersecurity subsidiary of Japanese information security provider NRI, has announced a new blockchain service.

But what separates this offering, according to the release, is that it is designed specifically for systems that use blockchain technology. More specifically, it will seek to analyze and simulate attacks on smart contracts, or self-executing code that runs on a blockchain.

The firms said in future phases, it will develop the service to be able to assess the overall architecture of a blockchain system, including its API, multi-signature wallets, key management systems and top-level applications.

51592292 Chart 1 NRI Secure NRI Subsidiary Launches Blockchain Technology Assessment Service

The need for such an offering can be seen as the broader industry responds to recent heists in the cryptocurrency and blockchain world.

Last year, for example, the infamous hack of DAO resulted in customers losing $60 million worth of ether, at the time through a coding error in the smart contract.

Further, just this week, CoinDash had 34,000 ethers stolen during its initial coin offering, and another hacker drained 150,000 ethers through a security bug in multi-signature wallet software offered by Parity Technologies.

The product launch also follows Japan’s decision to regulate bitcoin as a legal payment method, a decision that made it the first country to put in place national rules for the industry.

Digital lock image via Shutterstock

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