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What is Blockchain Technology?

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A Closer Look into the Disruptive Technology

Unless you have been living under a rock for the past nine years, you have heard the term ‘blockchain’ at least once before. The most well-known application for this technology is the cryptocurrency Bitcoin. Bitcoin has been brought up a lot in the news lately and has some very famous critics, Warren Buffet and Bill Gates to name a few.

However what people may not know about Blockchain technology is that cryptocurrencies like Bitcoin, are only one application of it. There are a lot more possibilities for the use of this recent technological advancement. Blockchain can transform not only the financial services industry but many other industries as well.

When did blockchain technology originally get introduced?

The blockchain concept was introduced in a white paper in 2008 by Satoshi Nakamoto, an anonymous person or group of people. To this day Satoshi Nakamoto’s identity is still unknown. In 2009 blockchain technology was first implemented with Bitcoin, the most well-known cryptocurrency to date.

What is blockchain technology?

A blockchain is a decentralized database, meaning that the storage devices for the database are not all connected to a central processor. This decentralized database maintains a list of ordered records, called blocks. Each block has a timestamp and a link to a previous block. Blockchains are secure databases by design.

Cryptography is what only allows users to edit the parts of the blockchain that they own. Users have ownership of individual blocks with the private keys necessary to write to the file.

Every transaction is recorded permanently on a public ledger. This feature of complete transparency on the ledger eliminates the need for a centralized authority managing every transaction made by participants in the blockchain.

How does Bitcoin use Blockchain technology?

What makes Bitcoin unique is this is the first digital currency that doesn’t have the possibility of duplication of the original assets. Blockchain technology is the first technology of its time to be able to send the original “block” and not a copy of it to a recipient.

Every other digital currency system in place before the release of Bitcoin allowed for users to make copies of original files. There was no possible way to send the original data to another user digitally. This system redundancy provides room for error and double spending.

What’s another theoretical example of the utilization of blockchain?

An easy way to understand the functionality of this technology in layman’s terms is to think of how you currently send pictures to friends over email or SMS.

Let’s say you were on vacation and took a fantastic picture of a sunset. You want to send the original file entirely to your friend who couldn’t make the trip.

With our current digital technology, the only way to send this picture is a somewhat degraded copy of the picture of the sunset to your friend.

With blockchain technology, you could send the entire original image through the blockchain to your friend by giving your friend your private key. The image would leave your possession entirely into the full possession of your friend through the blockchain.

You could also see in real-time when the transaction is over. If you have a forgetful friend and they somehow lost the image and doubted that you sent it at all. You could theoretically point to the ledger as proof of the transaction.

The ledger is unalterable. In this current climate of “fake news,” it is incredible that a rapidly evolving technology is guaranteeing a record of transactions that cannot change in any way.

Will blockchain technology disrupt other industries?

Blockchain technology has the potential to impact numerous industries that deal with record keeping. The most apparent industry is the financial services industry.

Other industries to look out for are:

  • The medical field with patient records
  • Real estate for land and property transactions
  • Possibly fine art transactions.

The future is uncertain of how blockchain will affect our everyday lives. However, one thing is certain, blockchain technology is not going away.

If you enjoyed learning some of the basic principles of blockchain please check our blog as we launch https://hybridblock.io/ the world’s most robust cryptocurrency ecosystem

Source: https://blog.hybridblock.io/blockchain-technology-explained/

With over three years of experience in the field of cryptocurrencies, Suumit decided to put his knowledge and experience in front of thousands of people though BitzArena. You can connect with Suumit on LinkedIn, Facebook and Twitter.

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Audit of the Bancor hack

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Audit of the Bancor hack

 

As you all may have heard in the news, yesterday was a major hack on the Bancor network, resulting in another market downturn.
The total amount stolen was:

  • 24,984 ETH (~$12.5M)
  • 3,200,000 BNT (~$10M)
  • 229,356,645 NPXS (~$1M)

Overall view of funds stolen in the past 48 hours as audited through Etherscan

After the hack, Charlie Lee tweeted:

“A Bancor wallet got hacked and that wallet has the ability to steal coins out of their own smart contracts. An exchange is not decentralized if it can lose customer funds OR if it can freeze customer funds. Bancor can do BOTH. It’s a false sense of decentralization.”

If this were a bank heist it would take months for details of the heist to be made public, but with the transparency of the blockchain we can audit the hack now by tracing the hackers transactions, and see how Bancor managed to “freeze” the stolen BNT.

In a short amount of time the hacker moved the stolen funds into the following account:

https://etherscan.io/address/0x33ed22f4b6b05f8a5faac4701550d52286bd735a

Etherscan labels this account as Fake_Phishing1701

Starting with the ETH, it got stolen from 3 separate addresses:

  • 22,450 ETH from 0xc0829421C1d260BD3cB3E0F06cfE2D52db2cE315 (ETH Victim 1)
  • 1,950 ETH from 0x009BB5e9fCF28E5E601B7D0e9e821da6365d0a9c (ETH Victim 2)
  • 542 ETH from 0x5Aa9e9De3E667Ad79A097b4b75ccdE10Acb7F930 (ETH Victim 3)

This address 0xc0829421C1d260BD3cB3E0F06cfE2D52db2cE315 (ETH Victim 1) is not a regular ethereum wallet, but rather a smart contract called ether token, which is owned by Bancor.

The hacker stole most of the BNT from the following 2 wallets:

  • 1.46M BTN from 0x0024d891047e844186758F89EB2F4DcFBB02C952 (BNT Victim 1)
  • 853k BNT from 0x009BB5e9fCF28E5E601B7D0e9e821da6365d0a9c (BNT Victim 2)

The hacker also stole some BNT and all the NPXS from this smart contract https://etherscan.io/address/0x2d56d1904bb750675c0a55ca7339f971f48d9dda
This contract is labeled as the BancorConverter.

This BNT Victim 2 wallet is the most important address in this hack:

https://etherscan.io/address/0x009bb5e9fcf28e5e601b7d0e9e821da6365d0a9c

as it was the original creator of the Bancor Token contract. Tracking it’s transaction history, you can see this wallet had created many Bancor related smart contracts, and instantly becoming the owner of those contracts. Being the owner of a smart contract essentially gives you admin access to that contract.

Thankfully this wallet is not the current owner of the Bancor token contract. The wallet that does own this token contract has the ability to issue and destroy tokens, basically play god in the Bancor network.

Taking a closer look at the Bancor token contract, it has two important functions called Destroy and Issue:

function destroy(address _from, uint256 _amount)

@dev removes tokens from an account and decreases the token supply can only be called by the contract owner

function issue(address _to, uint256 _amount)

@dev increases the token supply and sends the new tokens to an account can only be called by the contract owner

These two functions are what make Bancor centralized. It basically allows Bancor to destroy BNT tokens from a specific ethereum wallet, or issue new BNT tokens into an ethereum wallet. Destroying tokens is the equivalent of god reaching into someones wallet and poof the funds in that wallet do not exist anymore. Issuing tokens is the opposite, where god creates funds out of thin air and puts it into someones wallet.

Many criticize Bancor for making their token centralized, however the one plus side is that it allowed Bancor to recover the stolen BNT quickly from the hacker.

The biggest concern though with Bancor being this centralized is that it will always have a central point of failure. If ever a hacker gains control of the Bancor token contract, it is game over. That is worse than a 51% attack in Bitcoin, as it would make the hacker the god in the Bancor network, and everyone would lose trust in the Bancor network.

Taking a look at the Bancor token contract, you can see Bancor changed the owner of the token contract twice over the past few days, likely as a security concern. The current owner of their token contract is this multi-sig wallet:
https://etherscan.io/address/0x9d0357d184122b85dbc095d196b5ebbafc7f3010#readContract

As you can see it is a 2/4 multi-sig that controls the Bancor network. So all a hacker has to do is compromise two of those wallets, and it is game over.

I’ve been around this space since 2012 and it’s unfortunate that even after all these years, these hacks are common. This is why at Formosa Financial we take security around our custody offering more than seriously and partner with the industry leaders in digital custody to ensure the security of our customer funds at all time.

In the coming months we will share more details on our product offerings and how we will help Blockchain innovators manage their funds.


We’ll be sharing more posts like these on custodial solutions as we launch https://www.formosa.financial/ an institutional grade digital management tool for blockchain innovators. Please join our social communities for up to minute updates and news:
Telegram: 
https://t.me/formosafinancial
Twitter: 
https://twitter.com/formosaofficial
Facebook: 
https://www.facebook.com/formosa.financial/

*Note omitted out a few smaller transactions of stolen funds as they were less impactful to the audit.*

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Top names in Silicon Valley are Backing an Ex-Wall Streeter Turned Professor with a Native Chain Deployment

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On Tuesday July 10th, it was announced that Stanford professor Kapil “KK” Jain started a new venture that was seed funded by relevant funds in the Silicon Valley Technology scene.

KK was a regular on the Wall Street Quant for years before switching Alto the world of Academia where he lead teaching on Mathematical and Computational Finance at Stanford. Recently, he has left to build a new native chain deployment called NCENT that focuses on incentives.

KK spoke in a fire-side style chat at the HackSummit virtual conference earlier yesterday. The recording, posted here features an hour long fire-side chat with Silicon Valley veteran venture capitalist Steve Jurvetson.

Some highlights from the Quant Fund Manager turned Entrepreneur:

“I always sort of felt like Wall Street picked me, I didn’t sort of affirmatively pick Wall Street.”

“The kind of mouse olympics, it was the first time in my life I looked myself in the mirror…. I sort of think that a career on Wall Street is sort of like playing the Mouse Olympics….as the line sort of goes, even if you sort of win all the gold medals at the Mouse Olympics, you’re still a mouse…. I really wanted to give back… to teach.”

“Obviously this speaks close to my heart, being an ex-Statistical arbitrage trader and seeing sort of every kind of trick in the book on Wall Street ….I would actually say in my judgement being a stat-arb-trader that there actually is NO Alpha or outperformance systematically to be gained investing in stat-arb funds in crypto.”

The NCENT team made up of Stanford alums, students, and professors. They are looking to build an incentives native chain protocol which is based on the famous red balloon research study.

KK Jain has strong views on bitcoin, monetary policy, incentive structures, and networks.

The investors include some of the early timers in bitcoin and the blockchain:

  • Sequoia: American venture capital firm. The firm is located in Menlo Park, California and mainly focuses on the technology industry. It has backed companies that now control $1.4 trillion of the combined stock market value.
  • Steve Jurvetson: Stephen T. Jurvetson is an American businessman and venture capitalist. He is a cofounder and former partner of Draper Fisher Jurvetson. Current board seats include Synthetic Genomics, Planet Labs, Nervana Systems, Flux, D-Wave, SpaceX, and Tesla.
  • Naval Ravikant: \CEO and a co-founder of AngelList. He previously co-founded Epinions (which went public as part of Shopping.com) and Vast.com.
  • Winklevoss Capital: Family office founded in 2012 by Tyler Winklevoss and Cameron Winklevoss. The firm invests across multiple asset classes with an emphasis on providing seed funding and infrastructure to early-stage startups.
  • SV Angel: San Francisco-based angel investment firm, which helps startup companies with business development, financing, M&A and other strategic advice.
  • Floodgate: Venture capital firm based in the United States created by Mike Maples and Ann Miura-Ko. It is focused on investments in technology companies in Silicon Valley.
  • AME Cloud Ventures: Venture fund led by Jerry Yang, co-founder of Yahoo! AME Cloud Ventures focuses on seed to later stage companies building infrastructure and value chains around data.
  • MetaStable: Cryptocurrency hedge fund founded by Lucas Ryan, Josh Seims and Naval Ravikant.
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A Case For New Taiwan Dollar on the Blockchain

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Last week at the Asia Blockchain Summit, “Crypto Congressman” Jason Hsu provided me with the privilege of delivering these remarks to representatives of leading companies in the blockchain industry and government agencies including the National Development Council, National Communications Commission, and American Institute in Taiwan. Formosa Financial is eager to work with Taiwan’s financial institutions and ministries to unleash the benefits of financial technology innovation.

Jason asked me to speak about the potential for a project that many people in the blockchain community have been thinking about recently: issuing, holding, and exchanging New Taiwan Dollar on a blockchain or some other type of distributed ledger system.

I wanted to take this opportunity to first lay out the argument for why doing something like this may be impactful for Taiwan, discuss some potential design considerations in developing an experimental program, and potential next steps.

The Rationale for New Taiwan Dollar on the Blockchain

So why should Taiwanese regulators, financial institutions, and businesses explore the possibility of creating a new, blockchain-based, digital New Taiwan Dollar? There are many potential benefits, but realizing those benefits always starts with first assessing areas for improvement. Allow me to suggest two potential areas where such a project may be able to strengthen the competitiveness of Taiwan’s economy.

Firstly, Taiwan’s highly developed economy provides it with a strong and stable banking sector alongside a world-class electronics and information technology industry. These two factors combined mean that Taiwan ranks very favorably in terms of bank account and smartphone penetration, at over 90% and 70% of the population, respectively. Despite these figures, cash is still the dominant method for settling transactions. Implementing a digital Taiwan dollar can help ensure tax compliance, combat money laundering, and accelerate the velocity of money within the domestic economy.

Internationally, development of a blockchain based system for sending and exchanging NTD with other foreign currencies can help Taiwanese corporates and SMEs more efficiently manage their working capital and trade finance needs. Today, settling payments internationally is often an arduous, multi-step process laden with time delays, leg risk, and opaque fees. By enabling commercial banks to settle transactions between Taiwanese banks handling NTD and banks abroad handling other currencies such as USD or RMB many of these time and capital costs can be reduced significantly if not eliminated altogether. In a blockchain based system, payment, exchange, and settlement all take place simultaneously in a single, atomic, publicly verifiable transaction. Additional features to ensure compliance with foreign exchange rules and liquidity provisioning can be built around the system as safeguards to ensure that all inbound and outbound payments meet necessary requirements before execution.

Design Considerations for NTD on the Blockchain

Now that I’ve outlined some of the potential benefits, here are some key questions that need to be considered in designing a robust, safe, and scalable system to bring NTD onto a blockchain.

The first major question that needs to be addressed is who is the end user of this system. Is the digital NTD intended to be a general purpose replacement for bills and coins, used by citizens to settle retail payment transactions? If not intended for retail use, is this instead for the exclusive use of commercial banks conducting cross-border transactions on behalf of corporate clients?

Having clarity on the end user of the system informs all relevant design considerations in deciding which distributed ledger to use and which features need to be supported for the intended use cases of New Taiwan Dollar upon it.

These considerations include, but are not limited to: consensus algorithm, network node operators, use of a public or private blockchain, how read and write permissions are granted, interoperability with other blockchains, built-in exchange functions and more. By first defining the end users, relevant stakeholders, and intended use case, settling on the proper list of design features for this system will come into clearer and clearer focus.

When considering transformative projects, it is best to define the problem statement and goals as clearly as possible. This is always the first step. From there, deciding on the end user and their desired features will lead to technology selection and development.

At the moment there are numerous blockchains and software providers to choose from, but it may be difficult to find a “one size fits all” solution. That is why my suggestion is to design a small pilot program using proven technology to familiarize stakeholders with the relevant systems and processes to issue, hold, and exchange NTD for other assets on a blockchain in real-time.

A simple method for doing so would be to take existing NTD deposit money held at a bank, transfer it to a dedicated custodial account, then issue fully-reserved NTD tokens on a blockchain that can be transferred, audited, and approved amongst participants in real-time.

With the support of the ministers and chairpeople in the room today, alongside representatives in the banking and technology industries, we have the right collection of talent and motivation to move Taiwan’s economy into the blockchain era. In speaking for both myself and Formosa Financial, it would be a great honor to join you all in this journey. Thank you.

We’ll be sharing more posts like these on blockchain and regulation in Taiwan as we launch https://www.formosa.financial/ an institutional grade digital management tool for blockchain innovators.Please join our social communities for up to minute updates and news:
Telegram: 
https://t.me/formosafinancial
Twitter: 
https://twitter.com/formosaofficial
Facebook: 
https://www.facebook.com/formosa.financial/

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