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What Could Happen to Bitcoin? A Visual Guide to Scaling Outcomes

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BIP 148, BIP 141, BIP 91 …

A number of bitcoin improvement proposals (all aimed at boosting the cryptocurrency’s transaction capacity) are set to come to a head in the coming weeks, ending either in a smooth upgrade, a potentially difficult split, or maybe, simply status quo.

While it looks likely that at least one will go into effect, it’s not clear which proposal (or proposals) will trigger, meaning, for now, we’re left tracking how much support each proposal will actually get – and when.

In separate guides, we’ve covered the two main proposals, SegWit2x and BIP 148, as well as how BIP 91 looks to moderate between them.

Still, understanding how the proposals interact can be difficult.

Today, 76% of bitcoin’s mining hashrate is signaling for BIP 91. So, it looks like it could go through. But, if it doesn’t reach the necessary threshold of 80% for a period of 336 blocks by August 1, then BIP 148 will kick in, setting off a slew of ifs and whens.

To help you navigate, we’ve put together the following timeline to show the many ways the summer’s scaling drama could unravel:

Pasted image at 2017 07 17 04 05 PM What Could Happen to Bitcoin? A Visual Guide to Scaling Outcomes

Definitions

  • SegWit2x (BTC1): Backed by miners and startups, this proposal seeks to enact SegWit via a soft fork, while committing to a block-size increase by hard fork three months later.
  • Segregated Witness (SegWit): Proposed by volunteers of Bitcoin Core in 2015, SegWit is aimed to increase network capacity and solve transaction malleability via a soft fork. BIP 141, its proposal, requires a super-majority (95%) of miners to signal for the upgrade over two weeks.
  • BIP 91: Created by BitmainWarranty engineer James Hilliard, BIP 91 looks to lock-in SegWit2x’s SegWit update before August 1, making the proposal compatible with BIP 148. BIP 91 requires 80% of bitcoin’s miners to signal support for a lock-in and a shorter signaling period than BIP141.
  • BIP 148: Uses an older mechanism for making changes to bitcoin, called a user-activated soft fork (UASF). It requires about 50% of mining pools to support the change. Without that support, BIP 148 could activate and split the network into two competing blockchains.
  • Bitcoin ABC: A version of the bitcoin client that erases SegWit and enables a dynamic block size. It was first proposed in reaction to the idea of a UASF, which has some opposition in parts the industry. If bitcoin splits because of UASF BIP 148, the Bitcoin ABC client will launch on another chain.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the SegWit2x agreement.

Code 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. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].



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Daimler’s €100 Million Ethereum Bond Is Bigger Than Mercedes-Benz

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When the manufacturing company behind Mercedes-Benz issued its first blockchain bond last month, it did something that impacts much more than just a single automobile brand.

As revealed to CoinDesk, the €100m bond, issued on a private blockchain modeled on ethereum, signals the first step in a much larger plan by Daimler AG to explore the technology. But it’s the type of bond – called a Schuldschein – that gives the project a truly global scale.

Since the financial crisis of 2008, this German version of a private placement has seen an explosion of use around the world, now totaling more than €20bn annually.

But while Daimler itself says large-scale use of an ethereum-based Schuldschein isn’t likely anytime in the near future, its success is already encouraging the German firm to test even more use cases.

According to Daimler AG’s senior manager of treasury process management, Eva-Marie Scholz, multiple business departments in the firm are now exploring use cases as a result.

Scholz told CoinDesk:

It was definitely not disappointing. [Reflecting on] the process, we are able to review the potential of blockchain to make real business model changes for overall capital markets and banking transactions.

More specifically, the Schuldschein is a way for corporations to borrow money from a small group of private investors with only minimal disclosure and regulatory requirements, typically for between 3–10 years and in amounts as high as €500m.

For Daimler’s first blockchain-based bond, which was designed to simplify the lending process, the automaker partnered with Landesbank Baden-Württemberg (LBBW) to sell a relatively short-term one-year bond to savings banks Esslingen-Nürtingen, Ludwigsburg and Ostalb.

But for a firm that generated €153bn in revenue last year, the bond signals just a drop in the bucket of the total number of Schuldscheins sold in a typical year.

“Daimler issues around 50 to 70 bonds annually,” said Orhan Oezcelik from Daimler’s capital markets division. “While we don’t expect blockchain to impact the total volume of issuances, the technology could allow a greater number of transactions which would then be smaller in size.

Streamlined Schuldscheins

While Scholz said the single test wasn’t enough to determine the efficiencies gained from ethereum-based bond issuance, there’s plenty room for improvement on the standard process.

In March 2016, German bank NORD/LB co-published a fixed income research report along with Bloomberg-Kurzel laying out the legal framework and spreads for a Schuldschein bond.

In spite of being widely considered a streamlined version of borrowing, a typical Schuldschein transaction still requires 20 pages of documentation and takes as long as 14 weeks to close, not counting ongoing administrative services.

Screen Shot 2017 07 12 at 5.52.34 PM 728x381 Daimlers €100 Million Ethereum Bond Is Bigger Than Mercedes Benz

In spite of the already simplified regulatory requirements typically associated with the bond, using a shared, distributed ledger has the potential to even further streamline the process, while also decreasing what credit rating agency Moody’s last year described as an “increased risk for investors” resulting from lack of transparency.

To give an idea of what’s at stake should blockchain-based Schuldscheines become the norm, between 2014 and 2015, the issuance of the bonds increased by 67 percent to €20.2bn, according to a BNP Paribas report.

And Moody’s has predicted a record level of issuances this year.

Beyond bonds

With the World Bank also getting into the issuance of bonds on a blockchain earlier this year, the asset class is ripe for disruption. But Daimler’s work doesn’t stop there.

Currently, there are several business departments looking at use cases, including in sales, engineering, securities trade, the cross-border shipment of goods and – perhaps most promising – the payment of transactions.

While the actual blockchain solutions that might eventually be employed have yet to be settled – several of Hyperledger’s open-source solutions are still on the table – the next step forward is a bit more certain.

Scholz concluded:

“For the payments streams, those are use cases we are currently looking at to go ahead with.”

Mercedes-Benz badge 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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Are We Heading to $100 Support Level?

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As anticipated in the last ETH-USD price analysis, ETH-USD found a new low yesterday as the market continued its downward path within a cryptomarket-wide bear run. After making a Double Bottom a couple of weeks ago, ETH-USD has made a vicious run for lower prices. The figure below shows the Fibonacci Retracement values for our current, post-Double-Bottom-Reversal:

Post DB Reversal Fib jpeg.original Are We Heading to $100 Support Level?Figure 1: ETH-USD, 2HR Candles, Gemini, Fibonacci Retracement Values

At the time of this article, ETH-USD is testing the first Fibonacci Retracement value at 23%. Before continuing to lower lows, it is very common to see retests of previous, significant support levels to establish the strength in the trend. The figure above shows the retracement path of the current bear run we are seeing. Before continuing to lower lows, the market likes to establish lines that were previously support values, and turn them into resistance lines:

Fib Retest jpeg.original Are We Heading to $100 Support Level?Figure 2: ETH-USD, 2HR Candles, Gemini, Fibonacci Retracement Retests

Whether or not we make any significant upward progress with this bounce from the bottom remains to be seen. However, we have some indicators that will give us some insight into the health of this move:

1HR Divergence jpeg.original Are We Heading to $100 Support Level?Figure 3: ETH-USD, 1HR Candles, Gemini, 1HR MACD Divergence

Looking at the 1HR MACD, one of the first things that pops out is the strong divergence the market is currently seeing. Divergence occurs when the price makes a new high, but the MACD fails to accompany the high with a new high on the MACD histogram. This is usually an indication of momentum loss and can often lead traders to begin the process of position exit and entry. In our case, we are currently testing two significant levels of support:

  1. The 23% retracement (mentioned above);

  2. The values that established the ETH-USD market’s previous low.

At the moment, the ETH-USD markets are at the mercy of whatever BTC-USD decides to do. Given that the entire cryptomarket is experiencing a very strong bear market, any noteworthy upward price movement must be well established with plenty of consistent volume. A failure to breach these values will almost certainly lead to a retest of our current low before any further upward progress can be seen. If our current low is broken, we can expect the next significant level of support to lie in the low $100 range:

Next line of support jpeg.original Are We Heading to $100 Support Level?Figure 4: ETH-USD, 12HR Candles, Gemini, Next Line of Support

Summary:

  1. ETH-USD continues to make new lows as it begins to retest old support lines,

  2. Before any significant positive price movement is seen, more buy volume needs to flow into the market to establish firm support. Otherwise, we will continue to descend.

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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This Bear Still Has Some Bite Left in It

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In just a few short days, the BTC-USD price dropped nearly $700 in value in a move that consequently managed to drop the entire crypto-market by almost 25 percent:

market cap jepg.original This Bear Still Has Some Bite Left in ItFigure 1: BTC-USD Market Cap

Leading up to this weekend’s drop in BTC-USD price, several previous BTC-USD market breakdowns (click here and here for details) tracked the progress of a massive Head and Shoulders Pattern. The estimated price target of the Head and Shoulders pattern left the previous market value of $2,400 poised to drop steeply to $1,800. If you are reading this article, you are probably wondering what the heck just happened and if the carnage is going to continue …

First, let’s take a look at how the market reacted to the completion of this Head and Shoulders pattern and then extrapolate what that may mean for the overall trend of BTC-USD. The figure below shows the key support levels that were broken during the fall this weekend:

BTC Macro HS Support Lvls jpg.original This Bear Still Has Some Bite Left in ItFigure 2: BTC-USD, 6-hr Candles, GDAX, Head and Shoulders Key Support Levels

After the initial breakout of the Head and Shoulders, the price took a steep plunge downward. Ultimately, after several days of a strong bear market (and several significant support levels broken), we reached our price target of $1,800 before bouncing and beginning the process of retesting crucial support (now turned resistance) levels:

BTCUSD HS Breakthrough jpeg mPpEn99.width 800 This Bear Still Has Some Bite Left in ItFigure 3: BTC-USD, 6-hr Candles, GDAX, Broken Support Levels

With very little effort, the BTC-USD market managed to reach its price target and appears to be making a recovery — but is this a fake-out? Are we bouncing back to our previous trend? Not likely. Below are some of the more glaring reasons why I think this bear still has some bite left in it.

On the higher timescales, BTC-USD is actually showing strength in downward momentum of this move. No MACD divergence (loss in market momentum) is visible. The lack of macro-trend divergence indicates that the market still has plenty of downward pull left in it before it strongly begins to resist the lower prices.

BTCUSD No Diverg jpeg.original This Bear Still Has Some Bite Left in ItFigure 4: BTC-USD, 12-hr Candles, GDAX, No Divergence

On a smaller, one-hour scale, the market is strongly diverging in a bearish fashion. Although the market had a decent rebound off the bottom of the recent run, it is quickly losing steam (indicated by the divergence shown on the 1-hr MACD and labeled in pink). Not only is it diverging on the 1-hr MACD, across the length of the bear run, the market doesn’t seem comfortable maintaining the downward momentum across multiple bearish/bullish periods (shown in yellow):

BTCUSD 1HR jpeg.original This Bear Still Has Some Bite Left in ItFigure 5: BTC-USD, 1-hr Candles, GDAX, 1HR Bearish Divergence

It’s nearly impossible to predict the true bottom of a sustained bear or bull market, so it is very important to keep an eye on the market and constantly update your perspective. At the moment, there are several indicators that BTC-USD has a sustained bear market in its future. And, as we’ve seen over the course of several weeks: what brings Bitcoin down brings everyone down.

Summary:

  1. The Head and Shoulders pattern predicted in previous articles completed its price target of $1,800.

  2. There are multiple signs that the BTC-USD bear market still has downward momentum left in it.

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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The Bitcoin Scaling Countdown: Miners Begin Running Segwit2x Software

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The Bitcoin Scaling Countdown Miners Begin Running Segwit2x Software 640x400 The Bitcoin Scaling Countdown: Miners Begin Running Segwit2x Software

It seems July 17 has initiated the beginning steps towards Segwit2x activation as the code has been released and miners who supported the “New York Agreement” (NYA) have started running the new BTC1 software.

Also read: A Brief Glimpse Into the Lives of Chinese Bitcoin Miners

Miners Begin Running the New Segwit2x Software

As the price of bitcoin dropped to new lows this weekend, some bitcoin proponents were patiently waiting for the promised BTC1 software. Now it seems in a short period of time the bitcoin ‘community’ may see the protocol Segregated Witness (Segwit) activated as the mining community has begun to signal BIP91. The proposal BIP91 is a combination of Segwit2x and BIP148. The version 1.14.4 code has been pushed to the repository by the Segwit2x working group, and a few mining pools have already started running the protocol. The China-based Bitmain technologies announced their support via Twitter by stating;

All of our bitcoin mining pools will start running the new Segwit2x software today  

Other mining pools signaling and mining BIP91 blocks include Bixin, Antpool, BTC.com, Bitfury, and Bitclub so far. Now spectators are waiting for other pools like BTCC, F2pool, Slush, and a few others to join. Back in June Bitcoin.com reported on how a vast majority of the hashrate was signaling their initial support for Segwit2x. Miners running the new BTC1 software and currently signaling BIP91 means that if enough hashrate reaches over 80 percent and continues for a 336 block period, Segwit will “lock in”. If all is successful, this will then lead to another 336 block period that will activate the Segwit protocol on the main chain.

NYABIP91 The Bitcoin Scaling Countdown: Miners Begin Running Segwit2x Software
Mining pools mining BIP91 blocks on July 17, 2017.

Bitcoin Community Sentiment  

It’s still a bit early and hard to gauge the overall sentiment of bitcoiners, but there are definitely a lot of individuals on forums and social media who support the Segwit2x plan. For instance, Fred Wilson, managing partner at Union Square Ventures revealed he favored Segwit2x adoption on July 17 via the investor’s blog.

“I am for the Segwit2x proposal and hope that we see it broadly adopted later this month,” explains Wilson. “There is a chance that doesn’t happen, and a user activated soft fork (UASF) could be used to force Segwit into the market. I personally hope that a user activated soft fork doesn’t happen as it would create a lot of turbulence.”

BIP91 The Bitcoin Scaling Countdown: Miners Begin Running Segwit2x Software
An explanation of BIP91.

Rootstock Chief Scientist, Sergio Demian Lerner also states his opinion of the Segwit2x compromise revealing he doesn’t believe the intention is to “fire core programmers,” which is one of the conspiracies that has been spread around the community.

“In my humble opinion the New York Agreement wanted to start from Bitcoin Core 0.14 because the group wants core to keep leading Bitcoin,” explains the Rootstock developer and initial creator of the Segwit2x proposal.

It doesn’t try to be the next core — If NYA intention was to dump Core, they would have started from BU or Bitcoin Classic or they would have removed the witness discount

Further Sergio Demian Lerner details that he knows Segwit isn’t perfect but he doesn’t think perfection is obtainable anyway.

“I audited Segwit in 2016. Found problems. Code far from perfect. HOWEVER I DO support Segwit because I don’t believe in perfection,” says the Rootstock engineer. “You have to know the actual code in detail to say you know Segwit. That’s the problem with Segwit. That’s a community fault.”

Many Others Just Want This All to Be Over

BIP77781872 300x240 The Bitcoin Scaling Countdown: Miners Begin Running Segwit2x Software
BIP91 begins to gather support on July 17, 2017.

There are still those who vehemently disagree with the progression of BTC1 and are showing sole support for either UASF or UAHF, vowing never to compromise. However, gauging sentiment via Twitter or Reddit forums is a horrible metric, and the only things that matters now in this debate are the actions from the network’s participants, rather than mere internet chatter.

People are also discussing the next step of the Segwit2x plan after the Segregated Witness protocol is implemented, which is the 2MB hard fork. The hard fork subject is also a contentious topic, and people are wondering if NYA participants will still support the hard fork after Segwit gets implemented. If Segwit2x continues to be agreed upon then exactly 12,960 blocks (~3 months) after Segwit activates  The hard fork will commence.

Now if mining pools continue to do what they agreed upon in regards to the NYA plan and other miners join in then the implementation of Segwit will likely happen soon.

What do you think about Segwit2x? Are you in favor of this compromise? Let us know in the comments below.


Images via Shutterstock, XBT.eu, and Bitcoin.com.


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