Blockchain Bites: Bitfinex Sues, Miners Prepare, Congress Considers

Around the world, from the Middle East to Washington, D.C., Beltway, blockchain is proving its value.

In the Middle East, citizens hampered by weak governments, unstable currencies and fraught political environments are turning to crypto to store their wealth and transact on a daily basis. Meanwhile, the U.S. Senate is considering blockchain voting as a way to legislate through the COVID-19 crisis.

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Still, as with any emerging technology, there are visible fault lines. Researchers at Kaspersky and EY have said enterprise blockchains may be walled-off but they are easily penetrated. Here's the story:

Deposing Banks
The Bitfinex crypto exchange is making a new push to find and potentially recover more than $800 million in user funds seized by legal authorities in four different countries after its payment processor’s bank accounts were frozen. iFinex Inc., Bitfinex's parent firm, applied for subpoenas in Colorado, Arizona and Georgia this month, asking federal courts to aid it in deposing banks that may have held funds for Crypto Capital, the payment processor on which Bitfinex stored customers’ and exchange funds. 

Emerging Market
Citizens in the Middle East are turning to crypto – from bitcoin to stablecoins – to resist the effects of weak governments and wildly fluctuating exchange rates. CoinDesk’s Leigh Cuen weighs in on the phenomenon as part of a three-part column on how cryptocurrencies are used in the developing world, leading up to her “Crypto Across Emerging Markets” panel at Consensus: Distributed.

Enterprise Risks
Enterprise-grade private blockchains, the supposedly more efficient sister to public chains, are vulnerable to denial of service attacks and insider threats, according to researchers at Kaspersky and EY. “Open source code that isn’t widely used and doesn’t have a vigilant community testing and inspecting it is far less secure and reliable than systems like Bitcoin and Ethereum, which are continuously hardened by nearly constant attack and public inspection,” said Paul Brody, EY's global blockchain lead.  

Blockchain Voting
The Permanent Subcommittee on Investigations, a U.S. Senate subcommittee unit, floated blockchain voting as a way to keep the chamber legislating through crises. “The Senate may consider blockchain” if its 100 members must vote remotely, staffers wrote. It also proposed voting on end-to-end encryption platforms and via a military-esque “air-gapped” communications system akin to those presidents and generals use.

Fraud Ruling 
A New Jersey judge dismissed a lawsuit against Riot Blockchain, which alleged the firm committed securities fraud by changing its name to "Riot Blockchain" in an effort to boost its share price.

Restricted Access
Japan has amended the way cryptocurrencies are regulated within the country, prompting BitMEX to begin restricting access to local residents, the exchange announced last week.

New Collateral?
MakerDAO may collaterialize tBTC, an Ethereum-based token pegged to bitcoin. Though the token is expected to launch in mid-May, Matt Luongo, tBTC’s creator, proposed the move Sunday on MakerDAO’s forum. "While I believe BTC can be great collateral for DAI, more importantly, I believe a native BTC on-ramp into the ecosystem can grow the protocol’s user base,” he said. (The Block)

Bitcoin's Benefits
Even as stocks tread water, it's likely the global economy is due for a correction. Bitcoin's underlying technology and monetary system make it one of the few investable assets that is immune to the economic fluctuations we have ahead, argues CoinDesk Director of Research Noelle Acheson, in the latest Crypto Long & Short newsletter.

Granted
More than 150 Ethereum projects have received nearly $25 million in total grant money to date, primarily from the Ethereum Foundation. (The Block)

Porsche-Backed 
Gapless, a blockchain startup meant to track vehicle ownership, raised about $6 million from FinLab EOS VC Fund and previous investor Porsche among others. (The Block)

CoinDesk Live: Lockdown Edition continues its popular twice-weekly virtual chats via Zoom and Twitter, giving you a preview of what’s to come at Consensus: Distributed, our first fully virtual – and fully free – big-tent conference May 11-15. 

Register to join our sixth session Tuesday, May 5, with speaker Amy Davine Kim from the Chamber of Digital Commerce to discuss upcoming guidelines from the Financial Action Task Force, most notably the Travel Rule, hosted by Consensus organizer Aaron Stanley. Zoom participants can ask questions directly to our guests.

Price Pullback?
While bitcoin is rallying ahead of the halving, jumping from $6,700 to $9,400 in the last 10 days of April alone, historical data suggests it could suffer a temporary price pullback following the supply-altering event. On-chain data suggests both small and large investors are accumulating coins in the run-up to the event. As a result, a bout of profit taking may be seen after May 12. Some investors, especially short-term traders, may sell their coins after halving, putting downside pressure on prices.

Public Interest
Bitcoin is up 21% in 2020 to about $8,600, during a time when the pandemic laid bare some of the structural vulnerabilities of the post-Bretton Woods monetary system. While bitcoin is outperforming the S&P 500 as well as gold, it still appears popular interest in the cryptocurrency is still tied to its ongoing price volatility. 

Miner Interests
F2Pool is the largest bitcoin mining pool in the world, controlling 20% of the collective computational energy on the Bitcoin network. On the fifth and final episode of Bitcoin Halving 2020: Miner Perspectives, Thomas Heller, the mining pool's global business director, discusses the economic incentives driving cryptocurrency mining and mining pool operations.