A friend writes:

Iran May Follow Venezuela In Launching Its Own Cryptocurrency

https:// www.npr.org/sections/thetwo-way/2018/02/22/588080130/iran-may-follow-venezuela-in-launching-its-own-cryptocurrency

Iran becomes latest rogue state to develop its own cryptocurrency

https:// www.cnbc.com/2018/02/22/iran-becomes-latest-rogue-state-to-develop-its-own-cryptocurrency.html

NIÓBIO CASH, A BRAZILIAN NATIONAL CRYPTOCURRENCY

https:// dowbit.com/niobio-cash-brazilian-national-cryptocurrency/

Why São Paulo Wants to Pay for Infrastructure with Cryptocurrency

https:// www.coindesk.com/sao-paulo-wants-pay-infrastructure-cryptocurrency/

Regulatory increase! China will ban and dispose of domestic and foreign virtual currency exchange website

http:// www.thepaper.cn/newsDetail_forward_1983173

China Enlists Its 'Great Firewall' to Block Bitcoin Websites

http:// fortune.com/2018/02/05/bitcoin-china-website-ico-block-ban-firewall/

Pax Crypto: Russia Proposes First Multinational Cryptocurrency, Expert Blog

https:// cointelegraph.com/news/pax-crypto-russia-proposes-first-multinational-cryptocurrency-expert-blog

Russia’s Largest State Bank To Open Cryptocurrency Exchange In Europe

https:// cointelegraph.com/news/russias-largest-state-bank-to-open-cryptocurrency-exchange-in-europe

Russia's Newly Drafted Cryptocurrency Bill: 'Crypto Not Cash'

https:// www.forbes.com/sites/kenrapoza/2018/01/29/russias-newly-drafted-cryptocurrency-bill-crypto-not-cash/#720bf649646e

Moscow Begins Crypto-Elections Testing: Thumbs Nose at U.S.

https:// tomluongo.me/2018/02/21/moscow-begins-crypto-elections-testing-thumbs-nose-at-u-s/

Venezuela Is Talking With Russia About Cryptocurrency

https:// www.coindesk.com/venezuela-talking-russia-cryptocurrency/

Venezuela’s ‘Crypto’ Con

Has Maduro got a currency deal for you.

https:// www.wsj.com/articles/venezuelas-crypto-con-1519343990

Venezuela says its cryptocurrency raised $735 million—but it’s a farce

Venezuela says its presale raised $735 million in 24 hours. Don’t believe it.

https:// arstechnica.com/tech-policy/2018/02/venezuela-says-its-cryptocurrency-raised-735-million-but-its-a-farce/

Draper Says the World Needs New Kind of Currency

https:// www.bloomberg.com/news/videos/2018-02-15/draper-says-the-world-needs-new-kind-of-currency-video

I thought this was a hilarious and fascinating interview because he kept flipping the script on the reporter.

She asked if bitcoin a safe investment? His response was that he now flips the perspective and thinks of bitcoin as the stable currency and "fiat" like dollars are the uncertain ones. When he looks at the value of "fiat" as measured in bitcoin, they've been bouncing all over the place!

She asked if it was safe from hacking. He said that his bitcoin was safer than his bank account! That banks are hacked all the time but the bitcoin blockchain has never been successfully attacked.

She asked if the current price of bitcoin was too high. He gave the total value of all currencies in the world and said that they were all going to turn crypto!

It seems that Proof of Work is clearly unsustainable as it eats up the world's electricity. But there doesn't

seem to be much of a mechanism for that negative externality to make its way back to the users of bitcoin other than the

price of electricity rising so much that less mining is profitable.

Somebody is making the argument that no matter what you do, any coin that has value and can be

created will cause slightly less than its value to be expended in creating it. Because, of course that's

what you'd do! And that can happen in some quite surprising ways (eg. repeatedly fork a coin till you

find one beneficial to you).

Proof of Stake is very interesting but quite hard to analyze. Check Ethereum's proposal:

https:// github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ

It's not at all clear they've thought of all the wrinkles. DFINITY (which I'm involved with) has some innovative

ideas but again the analysis is complex.

There are a bunch of other possibilities such as "Proof of Space":

https:// en.wikipedia.org/wiki/Proof-of-space

and here are some more:

A Hitchhiker’s Guide to Consensus Algorithms

https:// hackernoon.com/a-hitchhikers-guide-to-consensus-algorithms-d81aae3eb0e3

And way worse than that, ever since the early days I've been harping on an aspect which hardly anyone

seems to be considering. Most of these analyses are taking place within the context of the coin. Can

we make sure someone doesn't have an incentive within the coin's ecosystem to break its integrity.

But once these become large enough (perhaps now!) actors may be incentivized to harm them for

reasons outside the coin itself. For example, a state actor may want to destroy a coin that competes

with their own or may want to destroy another country's coin for political reasons. Or perhaps you can

buy puts on a coin and then destroy it. So, I'm quite suspicious of game theoretic arguments based on

purely economic incentives within the ecosystem.

Longer term, I think we will need mechanisms that make different assumptions than the current coins. It's

a nice abstract idea to build systems that can be run by anyone, anywhere, on any hardware but I don't

think that will last. And that's not the real problem faced by most real users. For other reasons, I think anonymity

on the web is going to disappear and so we'll have "True Names" of a sort. Knowing who someone is and

what their hardware is makes it much easier to create consensus by giving them a valuable reputation which

will be harmed if they don't play nice. And lots of other mechanisms if you give up the strange current set of

assumptions.

After all, in bitcoin, just 3 pools have 58% of the mining power and the top 10 pools are totally dominant. So

we're burning up the electricity of the world to get these few actors to play nice! Kind of a silly solution.

https:// coin.dance/blocks/today

My sense is that the market isn't really responding to these issues yet. It seems to be very sensitive to news announcements about regulation. News about South Korea threatening to regulate and then not seemed to have a big and rapid impact. There's growing awareness

of the electricity usage but I'm guessing it only matters to investors as it impacts the

regulatory environment.

Mnuchin came out today saying they were concerned about criminal usage but the White

House cybersecurity coordinator said the gov "is nowhere close to regulating bitcoin":

US government is nowhere close to regulating bitcoin, White House cybersecurity coordinator says

https:// www.cnbc.com/2018/02/16/munich-security-conference-us-government-nowhere-near-regulating-bitcoin.html

I've brought up the "external" issues to others in the past who totally agreed and felt

that was a critical issue to deal with. But I think there are enough issues to deal with "internally" that

those bigger issues have kind of left the conversation.

For the moment they don't seem to be affecting anything. But they could come roaring back at the most

inopportune time! (eg. say the start of military conflict, especially with a regime who is cut off from

normal financial transactions and who has been rumored to be behind some of the recent hacks…)

For investors, I think the challenge and the opportunity is to see the potential unexpected downsides

and upsides and figure out how to at least hedge against them but perhaps even to profit from them!

We might expect Soros to create a position which benefits from a vulnerability and then cause it!

But longer term my interest is not so much with the current crop of fledgling attempts but in creating

the longer term infrastructure which actually will be robust against even powerful opposing forces. And

which will authentically create huge economic value.

Let's make Draper's snippy comment that all currency should become cryptocurrency be true! This article

claims that there is currently $90.4 trillion "broad money" and more than a quadrillion if you include

derivatives. Plenty of upside for new technology I think!

Here’s all the money in the world, in one chart

https:// www.marketwatch.com/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18

I think a state's optimal solution in the current environment is one which is visible to them and centralized

within their own country but invisible and decentralized in other countries!

If the Kaspersky claim that Satoshi is a US intelligence group is true, they, have gotten remarkably close

to that ideal I think! Presumably the NSA can tie people's true identities to their bitcoin public keys just

by watching them on their computers or phones. Heck, BitFury de-anonymized a sixth of the the bitcoin

blockchain without any special access:

BitFury De-Anonymizes 1/6 of the Bitcoin Blockchain, Highlights Need for Privacy

https:// www.dashforcenews.com/bitfury-de-anonymizes-1-6-bitcoin-blockchain-highlights-need-privacy/

But the system is decentralized enough that it snakes its way into the heart of China, Iran, Venezuela, and other regimes that might prefer it not be there! So it serves to destabilize currency controls and promote

money laundering in other regimes while making all those transactions transparent to the US!

Longer term, I think the real solution will be a mix of centralized and decentralized. The anonymity ideal

is just a fantasy, I think. David Brin wrote about this back in 1999:

The Transparent Society: Will Technology Force Us To Choose Between Privacy And Freedom?

https:// www.amazon.com/Transparent-Society-Technology-Between-Privacy-ebook/dp/B004P5O37W/ref=sr_1_1

For example, here's a cheap 1 millimeter square camera and getting smaller all the time:

NanEye

http:// www.awaiba.com/product/naneye/#tab-evaluation-kits

Resolution 62.5KP – 250(H) x 250(V)

Footprint 1.0 x 1.0 x 1.7 mm

And already today the information your computer and browser exposes about you is enough to uniquely

identify almost everyone. You can test this by clicking here:

Is your browser safe against tracking?

https:// panopticlick.eff.org/

And there are a bunch of marketing companies which have figured out how to "de-anonymize" users

on the internet:

The Web Cookie Is Dying. Here's The Creepier Technology That Comes Next

https:// www.forbes.com/sites/adamtanner/2013/06/17/the-web-cookie-is-dying-heres-the-creepier-technology-that-comes-next/#6d8cc185a9bf

People try to use VPNs to hide from this kind of stuff. But it turns out many VPNs are in the business of exposing people

who attempt to hide:

##Don't use VPN services.##

https:// gist.github.com/joepie91/5a9909939e6ce7d09e29

Humans are big lumbering creatures made up of 37 trillion cells. We leave traces of our activities everywhere! The idea that in an

advanced civilization we might somehow hide our activities is a silly conceit. (Digital agents is another story which needs to be thought through

very carefully, I think)

If we assume that participants in financial networks and the hardware they use are identifiable, then many of the issues that

cryptocurrencies attempt to solve disappear.

But, of course, lots of new issues open up! We need ways to trust any centralized body! We need to shine the light of transparency back

on the governing bodies. The Chinese are developing a social credit system. But for this to really work it needs to be designed

so that it can't be corrupted by government officials. And the citizenry needs to know and believe that it isn't corrupted. Otherwise

you just end up with another kleptocracy or kakistocracy.

In today's world, I think there is still a need for radically decentralized technologies in places like Africa. But I think that need will rapidly

fade in importance.

Really identifying exactly what are the needed characteristics for, say, a world-wide digital currency I think would be very helpful in

designing a truly effective system. Bitcoin, et. al. make both unrealistic assumptions and provide unneeded services while missing some

aspects which are really important, I think. For example, bitcoin's and the rest's irreversibility of transactions isn't going to fly long term

I believe. You need recourse against hacking, theft, fraud, etc. That issue plays subtly into issues of privacy, reputation, governance, and

the rest.

And the idea that smart contracts should be unstoppable once launched is insanity! The first Ethereum "assassination market"

smart contract will lead to the whole chain being shut down and a mad scramble to add some kind of governance to shut down

anti-social contracts. Clearly that needs to be built-in to the foundations, I think. And not having done so will come back to bite them.

Here is the recent BitFury bitcoin de-anonymization paper. They cluster bitcoin addresses using

both on-chain info and social media info.

bitfury.com/content/5-white-papers-research/clustering_whitepaper.pdf

Other countries seem to be getting into the game. Tracking the Russian offerings like vk, telegram, and now gram and TON:

Inside Telegram’s ambitious $1.2B ICO to create the next Ethereum

https:// techcrunch.com/2018/01/15/inside-telegrams-ambitious-1-2b-ico-to-create-the-next-ethereum/

Interesting that they based it in Dubai!

Kaspersky co-founder says bitcoin was created by NSA:

Bitcoin is a 'Project of US Intelligence,' Kaspersky Lab Co-Founder Claims

https:// sputniknews.com/business/201801191060881605-kasperskaya-bitcoin-us-intelligence/

Makes me wonder if Telegram has FSB connections!

Ha! Just found these two articles:

Telegram CEO Durov Says Russia's FSB Demands Messenger's Encryption Keys

https:// www.rferl.org/a/telegram-durov-russia-fsb-encryption-keys-security/28760575.html

Telegram wants to make its FSB dispute a UN issue

https:// meduza.io/en/news/2017/12/14/telegram-wants-to-make-its-fsb-dispute-a-un-issue

Why one of the world's leading cyber-espionage firms won't touch Russia

http:// www.businessinsider.com/kaspersky-and-russian-spies-2015-3

Kaspersky Lab's founder and CEO, Eugene Kaspersky, used to work for the KGB and reportedly maintains relationships with former and current Russian intelligence officials.

"Unless Kaspersky is traveling, he rarely misses a weekly banya(sauna) night with a group of about 5 to 10 that usually includes Russian intelligence officials," Bloomberg writes. "Kaspersky says in an interview that the group saunas are purely social: 'When I go to banya, they’re friends.'"

The Russian Company That Is a Danger to Our Security

https:/ /www.nytimes.com/2017/09/04/opinion/kapersky-russia-cybersecurity.html

Bloomberg recently reported on emails from October 2009 in which Mr. Kaspersky directs his staff to work on a secret project “per a big request on the Lubyanka side,” a reference to the F.S.B.’s Moscow offices. The McClatchy news service uncovered records of the official certification of Kaspersky Lab by Russian military intelligence, which experts in this field call “persuasive public evidence” of the company’s links to the Russian government.

What isn’t Telegram saying about its connections to the Kremlin?

https:// theoutline.com/post/2348/what-isn-t-telegram-saying-about-its-connections-to-the-kremlin?zd=1

Telegram’s ICO is attracting the industry’s newer crypto investors while firms like Andreessen Horowitz sit this one out

The investors are not who you’d expect.

https:// www.recode.net/2018/1/26/16937942/telegram-ico-cryptocurrency-venture-capital

Silicon Valley investors line up to back Telegram ICO

Kleiner Perkins, Benchmark, Sequoia bid to join messaging app’s $1.2bn fundraising

https:// www.ft.com/content/790d9506-0175-11e8-9650-9c0ad2d7c5b5

Looks like they're increasing the value of the ICO to $2 billion! White paper attached.

Telegram Raises Target for Biggest ICO Ever to $2 Billion

https:// www.bloomberg.com/news/articles/2018-01-18/biggest-ico-ever-is-said-to-grow-as-telegram-targets-2-billion

And hackers have created a fake site claiming to already be selling their gram tokens! Just send in your bitcoin and ether!

GRAM TOKEN TELEGRAM ICO!

Sold: 6,756,562 GRAM

https:// ico-telegram.io/

Scammers are cashing in on Telegram’s upcoming ICO

https:// techcrunch.com/2018/01/20/telegram-ico-scammers/

Beware of TON ICO (Gramtoken.io) SCAM!

https:// steemit.com/cryptocurrency/@avistark/beware-of-ton-ico-gramtoken-io-scam

Ha! And the scammers have even created an affiliate program!

Secretive messaging app Telegram is selling a $2 billion crypto dream — but skeptics smell a 'ploy'

https:// www.cnbc.com/2018/02/15/telegram-the-2-billion-crypto-offering-thats-dividing-tech.html

People are already flipping the Telegram ICO for millions, even though it’s not on sale yet

https:// qz.com/1194612/telegram-ico-allocations-are-being-flipped-for-millions-before-going-on-public-sale/

I was first attracted to the Telegram whitepaper because it seems like it has the potential to be a kind of decentralized

"WeChat". WeChat is a very popular social media app that is China's "App for Everything" with payment systems,

social media, and a bunch of other stuff:

https:// en.wikipedia.org/wiki/WeChat

Tencent which developed it is now Asia's most valuable company, worth $580 billion:

https:// en.wikipedia.org/wiki/Tencent

Telegram already has 200 million users and is the platform for many cryptocurrency discussions. It seems that

they could implement a coin with low transaction fees and use it to drive micropayments on the web. They

already know who their customers are and they have a big hardware infrastructure.

But there are some suspicious things about them. I sent a bunch of links before showing that they appear to

still be very connected to the FSB (the Russian CIA). Officially, their founders made a bunch of money from

starting vk and fund the hardware supporting Telegram out of their own pockets to the tune of $70 million of

which $62 million was on equipment. They don't make any money!

From what I've seen, that story sounds like a cover for an FSB operation to spy on people who seek to use

an end-to-end encrypted chat app! More evidence for that theory is that they rolled their own encryption,

something called "MTProto". This is generally regarded as a very bad idea for most technologists. Of course,

if you are actually the FSB then it may be a very good idea!

In particular, there is a little known possibility of hiding mathematical backdoors in seemingly secure cryptosystems

in a way that may be very difficult to detect:

We need to talk about mathematical backdoors in encryption algorithms

https:// www.theregister.co.uk/2017/12/15/crypto_mathematical_backdoors/

Here's a particular technique for doing that:

Partition-Based Trapdoor Ciphers

https:// www.intechopen.com/books/partition-based-trapdoor-ciphers/partition-based-trapdoor-ciphers

In 2015 it was revealed that the Swiss company Crypto AG had installed this kind of backdoor into the

encryption machines they sold to Iran, Libya, and other countries at the behest of the NSA, GCHQ, and

the BND. They backdoored machines at least from 1955 to 1997 and led to the exposure of diplomatic

communications in the 1980's.

Telegram's "ICO" is quite different from other ICOs in the way it is structured.

And they claim a "Proof of Stake" mining. But I actually suspect that the whole system will be centralized!

They have a ton of their own hardware for some reason! If they make it centralized, then they will be

able to get huge transaction rates for very little cost and will be able to handle a huge number of

participants.

But, of course, a centralized coin is not very sexy! So I suspect they will do just enough to let them call

it decentralized and to back up their "libertarian" stance while making tons of money and feeding all

kinds of sensitive into to the FSB!

But I guess we'll just have to see how it plays out!

And the Huawei issue is quite topical because there's this story going around:

Don’t use Huawei phones, say heads of FBI, CIA, and NSA

178

The US intelligence community is still worried about Chinese tech giants’ government ties

https:// www.theverge.com/2018/2/14/17011246/huawei-phones-safe-us-intelligence-chief-fears

Don't use Huawei phones, FBI warns

http:// www.newshub.co.nz/home/money/2018/02/don-t-use-huawei-phones-fbi-warns.html

Now it may be that the Huawei phones are indeed sending info back to China, I have no idea. But I wouldn't

be surprised if that story was concocted by big US phone makers to try to counteract $100 phones which are

almost as good as the $1000 US offerings.

A bit of evidence in favor of that interpretation:

UK cyber security agency sticks with China's Huawei despite US spy fears

http:// www.telegraph.co.uk/technology/2018/02/20/uk-cyber-security-agency-sticks-chinas-huawei-despite-us-spy/

There's also the related story (supposedly now debunked) that the Trump admin is considering nationalizing the 5G phone

network to prevent cheap Chinese cell tower equipment from being a security risk:

Scoop: Trump team considers nationalizing 5G network

https:// www.axios.com/trump-team-debates-nationalizing-5g-network-f1e92a49-60f2-4e3e-acd4-f3eb03d910ff.html

Again, I wouldn't be surprised if this were a ploy by US manufacturers to lock out cheaper competition…

I thought his comments on the Wassenaar Agreement were interesting:

"I am convinced that all export versions of encryption system contain backdoors in one way or another. This is a direct constraint from the Wassenaar agreement. In this respect, the crypto AG and other companies (revealed by the Hans Buehler case) are the best examples. There are other less known [examples].

If this is true, it would be interesting to think through the consequences for cryptocurrencies.

Bitcoin uses 3 cryptographic primitives:

The Cryptography of Bitcoin

http:// blog.ezyang.com/2011/06/the-cryptography-of-bitcoin/

The public key cryptography is:

Elliptic Curve DSA on the curve secp256k1

https:// en.wikipedia.org/wiki/Elliptic_Curve_Digital_Signature_Algorithm

The proof of work cryptographic hash function is SHA256:

https:// en.wikipedia.org/wiki/SHA-2

and it also uses another hash function RIPEMD-160:

https:// en.wikipedia.org/wiki/RIPEMD

Here's why it uses two hash functions (though I'm not sure that answer is very convincing!):

Why does Bitcoin use two hash functions (SHA-256 and RIPEMD-160) to create an address?

https:// bitcoin.stackexchange.com/questions/9202/why-does-bitcoin-use-two-hash-functions-sha-256-and-ripemd-160-to-create-an-ad

I haven't seen anyone questioning the security of any of those 3 primitives, but of course they wouldn't would they!

I did find this intriguing article suggesting that quantum computers might break the elliptic curve signature

scheme by 2027:

Bitcoin’s Elliptic Curve Signature Could be Broken by 2027

https:// news.bitcoin.com/bitcoins-encryption-could-be-broken-by-2027-claim-singapore-quantum-experts/

but it suggests that the proof of work SHA256 will not be significantly sped up by quantum computing in the next 10 years.

More suspicious "explanation" for the two hashes:

Why use both SHA and RIPEMD to generate the public address? Why not use one or the other?

https:// www.reddit.com/r/Bitcoin/comments/3ggjyg/why_use_both_sha_and_ripemd_to_generate_the/

A bit more believable to me (of course he's assuming Satoshi is trying to protect bitcoin from being broken by the NSA instead

of him being the NSA!):

How to steal all coins

http:// blog.oleganza.com/post/42523601710/how-to-steal-all-coins

Vanity Fair party least night. They must be so proud.

>>559337

Looked like it was worth a little reverse engineering. Too bad it got away.

>>559353

shills dindu nuffin.

>>559504

nah, only uses are evil. Crypto can stop diversion and give us total transparency for foreign aide or in disaster relief. If we had used the right crypto in Haiti not a nickel could have been diverted.

Whether we want to provide foreign aide is a different question….