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The United States Department of Justice (DOJ) filed a lawsuit Thursday to stop Visa’s planned $5.3 billion acquisition of fintech firm Plaid, saying it violates antitrust laws and would eliminate competition in the online debit market. 

Filed in a Northern California federal court, the lawsuit described Visa as a “monopolist” in online debit transactions and noted its proposed acquisition of Plaid violates both Section 2 of the Sherman Act and Section 7 of the Clayton Act.  

According to the DOJ’s complaint, Visa currently operates the largest card network in the United States and has a 70% market share of all online debit transactions. Plaid, on the other hand, provides the technological infrastructure for multiple fintech platforms such as PayPal’s Venmo and crypto exchange Coinbase. 

Related: US Seizes $24M in Crypto as Part of Brazilian Probe Into $200M Fraud Scheme

Plaid has also been working with at least two decentralized finance (DeFi) startups, Dharma and Teller Finance. 

The complaint said that in making its case before Visa’s board of directors to buy Plaid, Visa’s senior leadership estimated a “potential downside risk” of $300 million to $500 million “in our U.S. debit business” by 2024 should Plaid fall into the hands of a rival. According to the Justice Department, Visa knew losing Plaid could create an “[e]xistential risk to our U.S. debit business” and that “Visa may be forced to accept lower margins or not have a competitive offering.”

While the anti-trust lawsuit acknowledged Plaid’s current technology doesn’t directly compete with Visa, DOJ noted Plaid’s online debit service could become a significant competitor to Visa and Mastercard. 

“If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative,” Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division said in a statement.  

Related: ZenGo Joins Visa Fast Track Program to Get Non-Custodial Crypto Card Off the Ground

Plaid declined to comment but a Visa spokesperson told The Wall Street Journal that the lawsuit is “legally flawed and contradicted by the facts. … The combination of Visa and Plaid will deliver substantial benefits for consumers seeking access to a broader range of financial-related services, and Visa intends to defend the transaction vigorously.”

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Fidelity Digital Assets is hiring over 20 engineers in a new push to expand the investing giant’s footprint in the cryptocurrency space.

• Exactly what the new hires will be building was unclear in Fidelity’s Wednesday announcement.
• The post mentioned Fidelity is “improving upon our existing bitcoin custody and execution services” and building new products to “support the ecosystem.”
• Two Digital Asset positions were added to Fidelity’s job board Thursday: a principal data engineer and a senior engineering manager. Eight other digital assets posts were listed on the job board as of press time.
• Hiring will occur over the next several months, Fidelity said.

Read more: Fidelity Report Says Bitcoin’s Market Cap Is ‘Drop in the Bucket’ of Potential

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The phrase “gradually then suddenly” has been overused in the crypto industry to emphasize the importance of each step towards regulatory support and institutional interest.

We had several such moments this month: the confirmation from PayPal that it will support cryptocurrency buying, selling and holding on its platform; more interest in holding bitcoin (BTC) as part of corporate treasuries; JPMorgan issuing a report favorable to a cryptocurrency its chairman mocked just three years ago; several significant fund managers breaching asset under management (AUM) milestones; improving clarity on the definitions of crypto assets and regulated services and much more.

But it’s not yet a case of “suddenly.” We are still in the “gradual” phase. Each month brings progress that seems momentous at the time, but in the grand scheme of market evolution we are still at the beginning. We have left the starting block, for sure. But we are not even a quarter of the way around the track.

Related: Buggy Code in This Compound Finance Fork Just Froze $1M in Ethereum Tokens

In CoinDesk Research’s latest monthly report, we take a brief look at the progress bitcoin and ether (ETH), the two largest cryptocurrencies by market cap, made in October, as well as some of the stories their on-chain metrics are telling us. Momentum is gathering, as shown by the growing congestion in the Bitcoin network and the technological evolution – Eth 2.0 – in Ethereum. And the use case of each is gradually becoming more clear as market and on-chain metrics start to paint a more detailed picture. 

You can download the free report here.

The volatility story

While BTC’s volatility was largely flat throughout October, ETH’s volatility declined. This is likely an adjustment from the jump in September, when the ETH 30-day volatility increased by a significantly greater amount than that of BTC, as seen by the spike and then the fall in the ETH/BTC volatility ratio (blue line). This underscores that the ETH market is still more immature than that of BTC, and could imply that the pending change in ETH’s technology underpinnings is adding a level of uncertainty into an evolving market.

Bitcoin gets congested

Looking at the average block weight (dark blue line), we can see that Bitcoin blocks have been at near full capacity for the longest stretch since May. This can also be seen in the spike in average time between blocks (green line). Network congestion is a common feature of price rallies and usually results in an increase in transaction fees. This more recent congestion, however, has produced a much higher fee spike than in May, even when the U.S. dollar price increase is taken out of the equation, hinting at greater demand for transaction processing.

Ethereum calms down

Related: First Mover: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

Average transaction fees on Ethereum fell over 80% in October, retracing September’s sharp increase. The percentage of miner revenue from fees also declined sharply from a high of 75% in September to 30% by the end of October. Both metrics suggest lower user and dapp activity on Ethereum as the hype around decentralized finance (DeFi) applications starts to ebb. This is a positive sign for the network, which in recent months has been pushed to its limits by the splashy debuts of new DeFi assets such as COMP, SUSHI and others.

For more charts on BTC, ETH and macro evolution over the past month, download the CoinDesk Monthly Review, October 2020 here.

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The Federal Reserve said it would hold benchmark interest rates at their current level and continue increasing holdings of U.S. Treasurys and mortgage bonds at least at the current pace or as needed “to sustain smooth market functioning.”

• The statement is in keeping with economists’ expectations for the U.S. central bank to take no new monetary policy actions.
• “Weaker demand and earlier declines in oil prices have been holding down consumer price inflation,” according to the Fed statement, which noted the “COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world.”
• “Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
• “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
• The Fed has expanded its balance sheet by about $3 trillion this year to $7.1 trillion, sparking fears of future inflation that have bolstered investor demand for bitcoin, seen as a hedge against rising consumer prices and a weakening dollar.
• Bitcoin (BTC) prices have doubled this year to roughly $15,000.

Read More: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

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In an industry built on an ethos of decentralization, we've seen centralized custodial cryptocurrency exchanges lead the charge, until now.

Bitcoin’s price keeps climbing amid election uncertainty. Wasabi Wallet will offer automatic, privacy-preserving CoinJoins in its coming upgrade. A major Russian power provider is entering into a bitcoin mining joint venture.

Top shelf

$1B BTC forfeiture
The U.S. government is suing for the forfeiture of thousands of bitcoins, totaling more than $1 billion, that it seized on Tuesday. These bitcoins are said by the U.S. Department of Justice to be connected with the Silk Road marketplace. The address holding the bitcoins has been dormant since 2015, when the coins were transferred to now defunct crypto exchange BTC-e. According to Bloomberg, authorities seized the funds from an unknown hacker who had gained access to the address. The BTC are now likely to be auctioned, reintroducing them to the market supply. Near equivalent amounts of bitcoin gold, bitcoin sv and bitcoin cash were also recovered from the address.

Fat-fingered
Reddit user “ProudBitcoiner” accidentally paid 23.5172 ETH (approximately $9,400) fee on a $120 transaction, the person disclosed in a post. The costly mistake occurred while manually entering a “Gas Price” while executing a swap on the DeFi liquidity protocol Uniswap rather than a “Gas Limit.” Mining pool Ethermine processed the transaction and collected the windfall fee, which was way higher than the current average of 0.0022 ETH ($1.07), though ProudBitcoiner has contacted the miner for assistance in potentially recovering the fee.

Related: Bitcoin Breaks $15K as Investor Numbers Peak

Mining co-venture
One of the largest aluminum and power producers in the world will begin crypto mining through a joint venture with BitRiver, which already owns the largest mining venue in Russia and is looking to expand. En+, whose largest shareholder is Russian billionaire oligarch Oleg Deripaska, owns four major hydropower plants in Siberia that produce about 7% of the country’s electricity. The joint venture (an 80/20 split between En+ and BitRiver) will offer 10 megawatts of power for miners to host ASICs, with the potential to expand to 40 megawatts. En+ was sanctioned by the U.S. in 2018, though these prohibitions have since been lifted.

Exchange expansion
Coinbase is hiring in Japan, with renewed plans to launch. While the U.S.-based exchange has not received a mandatory operating license from Japan’s Financial Services Agency (FSA), in March it became a second-class member of the Japan Virtual Currency Exchange Association, a self-regulatory organization approved by the regulator. IT, data, finance and accounting, legal, marketing and communications, customer experience, and international expansion roles are currently open. CoinDesk’s Sebastian Sinclair reports Coinbase has had plans to expand into Japan since 2016.

Privacy preservation
Wasabi Wallet is looking to overhaul its privacy-focused bitcoin software wallet with user-centric design and privacy improvements including automatic, default CoinJoins. (A CoinJoin is a method of mixing BTC transactions from multiple users to better conceal identities). Separately, Blockstream engineers will roll out improvements to bitcoin multi-signature transactions, with privacy benefits. The “MuSig2” design builds on previous multi-signature schemes – a way to authorize transactions using more than one private key – while reducing the technical complexity and amount of communication between parties to operate.

Quick bites

• FTX is considering a derivatives market for beacon chain ether as Ethereum 2.0’s deposit contract gains its footing. (CoinDesk)
• Jim Epstein, executive editor of ReasonTV podcasts, joins NLW to discuss the history of the cypherpunks. (The Breakdown/CoinDesk)
• Binance Uganda is shutting down, following the fate of its Jersey operation. (Decrypt)
• Lightning operators are bracing for a bitcoin bull run. (CoinDesk)
• Porsche turns to Circularise’s blockchain to track plastics used in its vehicles. (Modern Consensus)

Market intel

Bitcoin’s stimulus
Bitcoin crossed $15,000, the first time since January 2018. The cryptocurrency is now up 7.8% over the past 24 hours and over 108% on a year-to-date basis, with little sign of slowing. CoinDesk’s Omkar Godbole notes this recent rally is represents a ~40% climb in the last four weeks alone. Buoyed by an imminent sense of monetary stimulus, indeterminate of who wins the U.S. presidential election, analysts predict this rise to continue. “We may not know what a post-election [fiscal] stimulus may look like, but investors continue to believe that the [Federal Reserve] will keep printing money at a pace that favors bitcoins finite supply,” John Kramer, a trader at crypto liquidity provider GSR, told CoinDesk.

At stake

Related: First Mover: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

Anyone’s bet
Prediction markets are still buzzing with activity amid the uncertainty of the current U.S. presidential election process. Yesterday, decentralized predictions platform Polymarket became the fourth-highest fee-generating blockchain project, according to Cryptofees, only behind Bitcoin, Ethereum and DeFi protocol Uniswap.

Currently, perhaps obviously, the largest pool on Polymarket is “Will Trump win the 2020 U.S. presidential election?,” with nearly $8.8 million in trading volume. While predictions flipped in President Donald Trump’s favor on the first night of ballot counting, most bettors now see former Vice President Joseph Biden as favored to win.

“I think us being top 4 of fee-generating blockchain apps, literally anything blockchain-related, is insanity,” Shayne Coplan, Polymarket CEO, told CoinDesk’s Sebastian Sinclair. “Just in this election cycle alone, we have seen our volume surpass $10 million which is a lot higher than we expected in such a short time frame.”

Of course, prediction markets are not the only way for people to take bets out on election results. It’s likely most markets are, in some way, processing the current moment of anxiety and uncertainty.

For instance, trading in Chicago Mercantile Exchange (CME) bitcoin futures during the U.S. election has spiked 75% above the 2020 average. The CME is routinely one of the largest, and most institutionally-driven crypto options exchanges. Average daily open positions, which allow traders the option to buy bitcoin between a specified period, was up 20% in just the first two days in November compared to October.

Making sense of bitcoin’s current three-year high, Bill Noble, chief technical analyst at Token Metrics, said that no matter the electoral outcome, monetary stimulus is to be expected. This strengthens one of bitcoin’s core narratives (the things people believe about the oldest cryptocurrency) as a hedge against inflation.

“If there is social disorder because of a Trump win, the Fed prints. If the election result is a blue wave and taxes rise, the dollar falls because the Fed prints more, and more and more,” Noble said.

Going back to predictions markets: Anthony Sassano wrote, “I’ve long thought that one of the major reasons prediction markets hadn’t taken off yet was due to little to no interesting markets being available to bet on.”

That’s not to say predictions markets are any better or worse than traditional ways of measuring risk. Cami Russo’s The Defiant publication said Ethereum prediction markets are the “best or worst answer” to uncertainty, while Decrypt found FTX’s platform largely mirrors FiveThirtyEight’s model.

With election headlines currently dominating the discourse, the stakes are high and the bets are on.

Who won #CryptoTwitter? Related Stories

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The U.S. is suing for the forfeiture of thousands of bitcoins, totaling more than $1 billion, that it recently seized, the Department of Justice said Thursday.

• The seizure on Tuesday, tied to early darknet market Silk Road, is the largest the U.S. has ever conducted, the DOJ said.
• Court documents reveal the seized funds include over 69,370 bitcoin and nearly equivalent amounts of forked cryptos bitcoin cash (BCH), bitcoin gold (BTG) and bitcoin satoshi vision (BSV).
• Prosecutors say an unnamed hacker stole the trove from Silk Road and moved them to a wallet where they sat from April 2013 until the Tuesday seizure.
• The individual consented to the government seizure on Tuesday.
• The news comes days after blockchain intelligence firm Elliptic reported that a wallet possibly belonging to the Silk Road marketplace moved almost $1 billion worth of bitcoin earlier this week.
• This was the first transaction from the address since 2015, when it transferred 101 BTC to BTC-e – a now-shuttered cryptocurrency exchange allegedly favored by money launderers, Elliptic said. BTC-e operator Alexander Vinnik has been in custody in Europe since 2017.
• Earlier this week, Elliptic co-founder Tom Robinson speculated the coins may have been moved by imprisoned Silk Road operator Ross Ulbricht or a Silk Road vendor.
• Ulbricht – who operated under the pseudonym Dread Pirate Roberts – operated the darknet website from 2011 until his arrest in 2013 and is currently serving a life sentence.

Since the coins have sat dormant in the wallet for years, unavailable for trading, their confiscation appears unlikely to have played any role in the recent run-up in bitcoin’s price. On the contrary, if the government were to auction them as it typically does, the coins could rejoin the circulating supply.

This is a developing story; refresh for updates.

Related: Nearly $1B in Bitcoin Moves From Wallet Linked to Silk Road

Read the court filings below:

Read more: Nearly $1B in Bitcoin Moves From Wallet Linked to Silk Road

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Bitcoin’s rally is still going as investors continue to accumulate the cryptocurrency, ignoring overbought signals on technical indicators.

• Bitcoin rose to $15,017.05 at 10:50 a.m. ET (15:50 UTC) on Thursday, its highest level since January 2018.
• The price gains happened as global equities rally. European stock indexes are up around 1% on the day and U.S. stock indexes such as the S&P 500 are up over 2%.
• The cryptocurrency is now up 7.8% over the past 24 hours and over 108% on a year-to-date basis, according to CoinDesk’s Bitcoin Price Index.
• Amid the price rally, the number of “accumulation addresses” has risen to a record high of 519,228, according to data source Glassnode. 
• The metric has risen by 3% in the past four weeks alongside bitcoin’s rally from $10,500 to $15,000. “It shows retail flow … investors accumulating amid the price rally,” Denis Vinokourov, head of research at the London-based prime brokerage Bequant told CoinDesk in a Telegram chat.
• Also, accumulation addresses are up over 9% in 2020, meaning investors have been accumulating coins throughout the year, possibly creating upward pressure on prices.
• Notably, the number of bitcoins locked in accumulation addresses has gone up 20% to 2,818,447 BTC this year.
• Accumulation addresses are those that have at least two incoming “non-dust” transfers (representing minuscule amounts of bitcoin) and have never spent funds. The metric does not include addresses belonging to miners and exchanges and excludes addresses active more than seven years ago to adjust for lost coins.

• In a sign of confidence in the cryptocurrency’s long-term prospects, investors accumulated coins during the March crash and also during the price drop in September. On both occasions, the price dip was short-lived.
• The recent rise in both accumulation addresses and prices indicates the market participants are not worried about a chart-driven sell-off and foresee a continued rise in prices.
• Bitcoin’s 14-day relative strength index (RSI) has been indicating overbought conditions since Oct. 20, when bitcoin was trading near $11,700. So far, the technical pullback has remained elusive.

Also read: First Mover: Just Another Day for Bitcoin as US Election Slides Into Discord, Division

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A group of Spanish companies, including banks and energy firms, is working to develop a “self-managed” digital identity system using blockchain technology.

• In an announcement sent to CoinDesk on Thursday, the group, called Dalion, said the “secure and reliable” ID platform will give users more control over their personal data, and will be accessible via their mobile devices.
• The platform will remove the need for users to fill in “tedious” forms, per the release, automatically providing the validated data required by the requesting entity.
• Dalion – which includes members such as Banco Santander, CaixaBank, LiberBank, Naturgy and Repsol – says likely use cases include car rentals, insurance and loan applications, and sign-ups at utility providers.
• Blockchain technology provides the assurance that user data has not been altered, the group said.
• The member firms hope the technology will make user registrations more efficient and will offer new business processes and models, alongside improving the experience for customers.
• A proof-of-concept trial found the ID solution worked “satisfactorily,” and a second phase of development launches this month.
• Currently, the tech is based on a version of the Quorum blockchain from the Alastria consortium, a group member, and is based on digital identity work carried out previously by Alastria.
• The consortium is said to have made efforts to ensure its system aligns with Spanish and European Union regulations, including the General Data Protection Regulation.
• Dalion claims its continuation of the work can prevent duplication and errors; protect users’ privacy, as their data is not stored on the blockchain; and can also prevent user activity being tracked.
• The project is slated for completion within six months, with a production rollout to follow in May 2021.

Also read: JPMorgan’s ‘JPM Coin’ Is Live, Execs Say

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With the price of  bitcoin jumping to fresh 2020 highs last month, those running the digital currency’s underlying infrastructure are pondering the consequences. Namely, the routing node operators at the heart of Bitcoin’s Lightning Network are busily bracing for the curious new users that usually come with a bull run. 

Bitcoin’s Lightning Network promises faster and cheaper payments, without the occasionally crazy fees associated with the underlying Bitcoin network. 

Read more: What Is Bitcoin’s Lightning Network?

Related: Someone Just Paid a $9,000 Fee for a $120 DeFi Transaction

The platform is still new, in Bitcoin time, having launched for real payments in 2018. As such, it has its kinks. Developers still call using it “reckless,” because it’s new enough that it may be hiding bugs that could lead to loss of funds. Would the network be able to handle an influx of new users suddenly jumping to the Lightning Network?

Whether it can or not, those who run routing nodes are busily preparing for such a scenario. 

Bitcoin Lightning “routing” nodes are the ones tasked with passing on payments through the network, until they reach their destination. Many operators of Lightning routing nodes are beefing up their nodes to make sure they can help to support a sudden increase in users.

Why use the Lightning Network?

But first, why would Bitcoin users move to Lightning?

Related: Bitcoin’s Lightning Network Is Getting a Marketplace for Payment Channel Liquidity

One word: Fees. Bitcoin fees are now higher than they’ve been in more than two years, reaching an average of $13 per transaction. With Lightning, users can avoid these fees. 

“Higher bitcoin prices go hand in hand with higher transaction fees for on-chain payments,” Tudor Iova, Lightning routing node operator and founder of BTCfactura, told CoinDesk. He also noted he has seen more users tapping Lightning as fees have risen. 

Read more: Bitcoin Transaction Fees Rise to 28-Month High as Hashrate Drops Amid Price Rally

In contrast, Lightning payments usually cost less than a cent, making the payment method more and more attractive as fees rise. 

That said, setting up a Lightning channel – a means for sending Lightning payments – requires a Bitcoin transaction. It’s kind of like a one-time setup fee for creating a Lightning account. 

Say Alice puts $50 into a Lightning account and pays a $3 fee. Once that’s done, she can make as many transactions as she needs with that $50 – like 16 transactions for 16 cups of coffee. 

With the Lightning Network, fees for each transaction will be negligible, averaging roughly a satoshi, worth a fraction of a cent. 

Dodging bitcoin fees

Channels are the lifeblood of the Lightning Network. They’re also the means by which Lightning routing nodes pass along payments to others. 

But, again, creating such channels requires on-chain transactions, which can be expensive when the network is congested. More transactions in the Bitcoin “mempool” – a waiting area for transactions – means higher fees.

Lightning routers are actively scouting out the best times to open channels. “We’re all watching the mempool very closely to find opportunities to open Lightning channels inexpensively as the extra space in blocks dries up completely,” said pseudonymous Lightning routing node operator Jestopher. 

Jestopher expects the block space to become more scarce when (and if) a bull run commences. This happened last week, for instance, after the price shot up.

Another point routers are keeping in mind is that fees are usually lower on the weekends, when users are sending fewer transactions.

Lightning routers are busy learning and researching the best ways to tackle these issues, so that if a bunch of new users flock to the network, payments will remain smooth. 

“What we are doing, and suggesting our users do, too, is to opening channels on weekends, when the fees peak off. Later, during the week, you can use Lightning payments and avoid horrendous [fees]. Else you can end up paying a fee that is higher than the price of the goods purchased,” Iova said. 

Building liquidity and connections

Routing nodes are also open channels with a variety of peers designed to reduce failed transactions and to make the overall network more robust so payments don’t fail for users. 

“We are preparing ourselves for a bull run by opening new channels and improving our Lightning node connectivity to other nodes, in order to make it possible for users to use our node Transylvania for payments and routing, when necessary,” Iova said. 

The other trick is that once a Lightning channel is open, that’s not necessarily the end of the struggle. “Lightning requires lots of liquidity management, which is unfamiliar to most folks outside of Wall Street,” Jestopher said.

In short, it’s not enough to just put money into the Lightning Network; the money needs to be moved to the right spots in order for a routing node to build a path that can be used to send payments for users. Not to mention, every time a payment is made by a routing node, this liquidity is moved around. So, routing nodes need to constantly be managing where the coins are.

In fact, there’s an entire Telegram channel “LN mutual balanced channels” devoted to helping fellow Lightning users find peers and liquidity for their channels. Jestopher recently created a poll there asking fellow routing-node operators what they’re doing to prepare for a bull run. The most votes went to “consolidating liquidity into fewer, larger channels” and “opening channels to routing peers” to build more connections with the network.

Read more: Bitcoin’s Lightning Network Is Getting a Marketplace for Payment Channel Liquidity

“I think the shared goal is to find out how to operate routing nodes in a sustainable way where we don’t have to clog up the mempool when it gets expensive,” Jestopher said, pointing to Lightning Loop and ThunderHub as helpful tools for boosting liquidity where needed. 

Startup Lightning Labs also released a new marketplace Monday for buying and selling liquidity, an innovative way of addressing this issue. 

Thousands of new users?

Even if many Lightning routers are preparing, some think the network is already equipped for more action.

“I think the Lightning Network is already capable enough to support thousands of new users,” Bitfinex CTO Paolo Ardoino told CoinDesk. The cryptocurrency exchange runs both the second and third largest Lightning routing nodes on the network and was one of the first exchanges to support Lightning payments. 

“Spinning up new nodes and interconnecting them with others is not a very complex job, so I believe that with the growth of the user base we’ll definitely see a strengthening of the Lightning global network. I think our Lightning Network node and in general, the Lightning Network global network of routing nodes will be able to cope with an increased demand,” Ardoino added.

Iova had a similar view. 

“I think the Lightning infrastructure is a bit underestimated, and many people think it can’t cope with the traffic, [it’s] not reliable enough or it can handle only micropayments. Well, things are changing in this part of the network,” he said, pointing to public Lightning network data showing that 2020 brought in a 50% increase in the number of nodes.

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A “permanent Dropbox” launches in beta on Arweave today. 

“Arweave is the only crypto that’s claiming to be permanent data storage so there’s no other place that I could have built this,” ArDrive founder Phil Mataras said in an interview. 

The new file sync app lets users pay a fee once, depending on the price of Arweave tokens, and have their data (documents, photos, videos) live forever on the web, without a data cap or fear of censorship.

Related: New York Lawyers Propose Toolkit for Keeping ‘Decentralized’ Blockchains Honest

“We have a good use case because everyone understands it,” Mataras said. “When you look at a lot of these blockchain apps, especially the new DeFi applications out there, it’s hard for people to understand let alone use.”

Arweave operates on the same idea as the recently launched decentralized file storage and content distribution network Filecoin, but with further ambitions toward a permanent and “virtually unlimited” digital Library of Alexandria. 

Read more: Arweave 2.0 Gets File Storage Project One Step Closer to Its ‘Library of Alexandria’ Dreams

Arweave founder and CEO Sam Williams added that a permanent Dropbox is an obvious use case of the network. The difference is when you upload a piece of information on Dropbox today, its business model may change in a decade or two, so what happens to that stored data from 2020? 

Related: Filecoin Launch Finally Brings $200M ICO to Fruition

“With ArDrive, the system never changes,” said Williams. “It’s kind of like Ethereum’s ‘code is law’ philosophy, except for web services.” 

At this stage, ArDrive is only for users who already hold Arweave tokens to upload their data. Mataras said in the next six months, the team is building fiat on-ramps as a way to expand ArDrive’s user base. 

“We want to make it really easy for anyone to swipe a credit card, buy a block and start uploading their files,” he said. 

Mataras added that a desktop application of ArDrive for Mac, Windows and Linux will be released in December and a mobile app will follow in the first quarter of 2021.

Read more: Filecoin, But Forever: Arweave Raises $5 Million to Build Out ‘Permaweb’

Arweave, which launched in June 2018, currently has 350 apps running on the network. The protocol announced Profit Sharing Tokens this summer that allows companies on Arweave to mint their own assets. Since then, 26 projects on the network now have their own tokens.

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Bitcoin has now doubled its price in 2020, after surging early Thursday to above $14,900 for the first time since 2018. 

The cryptocurrency appeared to get a lift from the likeliest outcome of this week’s U.S. elections, where a Democratic president is blocked from passing major initiatives (like tax cuts) by a Republican-controlled U.S. Senate. That could imply more monetary stimulus from the Federal Reserve, where Chair Jerome Powell is expected to announce no new actions Thursday after a two-day meeting this week but could signal a willingness to do whatever’s needed to keep the economy and markets on track. 

Investors are “favoring bitcoin as a hedge against political risks,” Lennard Neo, head of research for the cryptocurrency-focused firm Stack Funds, told clients in a weekly newsletter. 

Related: Bitcoin Breaks $15K as Investor Numbers Peak

In traditional markets, stocks rallied globally, Treasury yields dropped, the dollar declined and gold strengthened as investors reacted to the growing likelihood that a U.S. government led by former Vice President Joe Biden might struggle to enact tax cuts, pushing more of the onus of financing new Treasury debt onto the Federal Reserve.

Market moves

Pundits on Wednesday picked apart this week’s U.S. election results as previously too-close-to-call states got called. President Donald Trump, suddenly eyeing the all-too-real prospect of being labeled a loser, started mounting legal challenges wherever possible.

And bitcoin? It took a victory lap. 

Worries that election uncertainty might lead to a sell-off in the largest cryptocurrency were quickly replaced by bullish enthusiasm that some form of stimulus, whether fiscal or monetary, would ultimately push up prices for bitcoin, seen by many investors as a hedge against inflation.

Related: Election Bets Drive Fee Spike at Predictions Platform Polymarket

The cryptocurrency has doubled this year as the Federal Reserve pumped more than $3 trillion of freshly printed money into global markets. The Standard & Poor’s 500 Index of U.S. stocks, by contrast, is up just 6.6%.  

The return dynamic could come into sharper focus Thursday as Fed officials release a statement on this week’s two-day, closed-door monetary-policy meeting. No major actions are anticipated, but Jerome Powell is expected to reiterate a pledge that the U.S. central bank stands ready to support markets if needed to kindle an economic recovery from the devastating toll of the coronavirus. 

“The policy announcement tomorrow will likely affirm their accommodative stance going forward, focusing on the status quo, and avoid creating policy uncertainty in the immediate wake of the election,” Denis Vinokourov, head of research for the cryptocurrency prime broker Bequant, told First Mover in an email.

On Wall Street, traditional markets staged a relief rally Wednesday as Trump’s Democratic challenger, Joe Biden, widened his lead in the race, with apparent victories called in Michigan and Wisconsin.

Bitcoin also appeared to benefit, which makes sense given that Biden has pledged to push for at least $5 trillion of new government spending on initiatives related to education, housing, health care, paid leave and infrastructure. Ostensibly the Treasury Department would have to borrow money to pay for the agenda, and the Fed would likely have to print money to finance the extra debt. 

Gridlock, with a split Congress that stonewalls major legislative initiatives, is viewed by many investors as the most halcyon environment for business continuity, and perhaps a bulwark against Biden’s proposed tax increases. 

“Since members of Congress are the ones in charge of government spending, the puppet that sits as figurehead of the nation tends to play a side role in both fiscal and monetary policy,” Mati Greenspan, founder of the foreign-exchange and cryptocurrency analysis firm Quantum Economics, told clients Wednesday in a note.

What’s less clear is whether a spending bill, which the Fed says is needed to promote a speedy economic recovery, could get passed during the next couple months if Trump loses. The Republican-controlled U.S. Senate proved unwilling to pass a big economic stimulus package over the past month even with Trump agitating for a deal. 

“If Biden ekes out a win, Trump will have little incentive to push through a deal for another round of stimulus, which could cause markets to sell off in the short term,” the digital-asset analysis firm Messari wrote Wednesday in a note. “This sell-off could bleed into bitcoin.”

That’s if Trump agrees to go quietly – hard to imagine given his track record of combativeness.

“Trump is now tweeting about how his lead ‘magically’ disappeared, setting the stage for a contested election which would likely spell further volatility ahead,” according to Messari.

The American electorate might be ready for respite from the drama. Bitcoin appears to have plenty of energy.  

Bitcoin watch

Bitcoin has surged to around $14,720, the highest since January 2018, representing over 100% gains on year-to-date basis.

While Joe Biden was in the lead in the U.S. presidential race, Congress is heading toward a split, meaning the much anticipated fiscal stimulus could be smaller than previously expected.

“We may not know what a post-election stimulus may look like, but investors continue to believe that the Fed will keep printing money at a pace that favors bitcoin’s finite supply,” John Kramer, a trader at crypto liquidity provider GSR, told CoinDesk.

The cryptocurrency’s convincing break above the June 2019 high of $13,880 has shifted the focus to the record high of $20,000 reached in December 2017. That’s because there is very little resistance between $13,880 and $20,000.

That said, the rally is looking overstretched as per technical indicators such as the 14-day relative strength index. While an overbought reading does not imply a bearish reversal, it often yields a pause or a temporary pullback. The rising 10-day simple moving average (SMA) is the support to watch out for in the short-term.

– Omkar Godbole

Read More: Bitcoin Jumps Above $14.5K, Taking 2020 Gains to Over 100%

What’s Hot

Ethereum 2.0 deposit contract goes live, in key milestone for blockchain network’s “proof-of-stake” upgrade (CoinDesk)  

Coinbase crypto exchange goes on hiring spree in Japan (CoinDesk) 

Unit of crypto exchange ErisX gets OK from U.S. commodity regulators to clear fully collateralized swaps (CoinDesk) 

“Over the next five years, most crypto firms will become banks and bank will become crypto firms” (CoinDesk) 

Sam Bankman-Fried, CEO of FTX exchange where TRUMP and BIDEN futures trade, gave $5.2M to Biden’s presidential campaign, WSJ Says (CoinDesk) 

Russian hydropower giant and aluminum producer En+ opens bitcoin mining farm in Siberia (CoinDesk) 

Someone just paid a $9K fee for a $120 DeFi transaction (CoinDesk)

Analogs The latest on the economy and traditional finance

Bank of England boosts bond-buying program by bigger-than-expected £150B ($195B) as U.K. central bank floods economy with cash (Bloomberg)  

China could impose 200% duty on Australian wines as punishment for alleged dumping (South China Morning Post) 

Tweet of the Day Related Stories

• Someone Just Paid a $9,000 Fee for a $120 DeFi Transaction
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Decentralized predictions platform Polymarket has passed DeFi protocol SushiSwap to become the fourth-highest blockchain project in terms of fees generated.

According to Cryptofees, the platform is averaging over $100,000 in daily takings and currently trails behind first-place Bitcoin, Ethereum (second) and DeFi protocol Uniswap (third).

The rise is partly due to excitement around the U.S. election, which has seen Polymarket users taking punts on bets ranging from “Will Trump win the 2020 U.S. presidential election” through to “Which party will win the state of Georgia.”

Related: First Mover: Bitcoin Likes Biden (and Fed’s Powell) as Price Approaches $15K

“I think us being top 4 of fee-generating blockchain apps, literally anything blockchain-related, is insanity,” said Shayne Coplan, Polymarket founder and CEO. “Just in this election cycle alone we have seen our volume surpass $10 million, which is a lot higher than we expected in such a short time frame.”

Since going live on Ethereum’s Layer 2 transaction scaling sidechain Matic and a product launch 4.5 months ago, Polymarket’s liquidity providers have done “extremely well” in terms of fees generated, according to Coplan.

While competitors such as PredictIt and Electionbettingodds went offline during the vote count on Wednesday Polymarket remained live throughout the entire election process.

“There’s a lot of services out there, there’s a lot of volume but what are people really paying for?” he said. “What are people really getting the most value out of where they are willing to pay fees to some market operator?”

Related: Cryptocurrency CEO Donated Second-Largest Amount to Joe Biden’s Campaign

See also: Predictions Platform Polymarket Raises $4M From Polychain, Naval Ravikant and More

“Polymarket had live markets for a handful of swing states and had accurately forecasted and priced the outcome of a lot of these,” Coplan noted. “It stands to show the significance in the social news cycle in market-based data and market-based journalism.”

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A crypto market participant has accidentally paid a fee 80 times the transaction value while executing a swap on the DeFi liquidity protocol Uniswap.

• About 14 hours ago, the address “0xe6e2e0cf5d2686d73abd7d3ba24f46ad5eb31819” – claimed by Reddit user “ProudBitcoiner” – swapped 0.2955 wrapped ether (WETH) for 531 chi gastoken (CHI) (worth $120) on Uniswap and paid 23.5172 ETH ($9,430 at time of writing) in transaction fees.
• Mining pool Ethermine processed the transaction and collected the windfall fee, which was way higher than the current average of 0.0022 ETH ($1.07).
• Often users manually offer a higher-than-average fee in a bid to get their transactions processed quickly. As such, the system is prone to human errors such as typing mistakes.
• In this instance, ProudBitcoiner said in a Reddit post that they had mistakenly quoted 200,000 in the “Gas Price” input field, instead of the “Gas Limit” field, and ended up paying far above the current 31 Gwei gas price.

• Gas refers to the internal pricing unit for running transactions on Ethereum and is denoted in Gwei. One Gwei is equal to a billionth of an ether.
• The gas limit is the maximum amount of gas provided for a transaction.
• According to the Reddit post, the user has contacted Ethermine for help over the error.
• Further highlighting the care needed when manually setting fee rates, in June, an unknown wallet holder paid around $5.2 million in fees for two ether transactions.

Aalso read: Ethereum 2.0 Countdown Begins With Release of Deposit Contract

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• Cryptocurrency CEO Donated Second-Largest Amount to Joe Biden’s Campaign
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• Market Wrap: Bitcoin Jumps to $14.2K; Ethereum Gas Usage Grows 113% YTD

Cryptocurrency exchange Coinbase is hiring in Japan, years after first saying it planned to launch services in the country.

• According to a tweet by the exchange’s CEO, Brian Armstrong, Coinbase has “a number of open roles in Japan,” and is asking others to put forward candidates.
• Per the company’s website, various roles are up for grabs in the capital Tokyo across IT, data, finance and accounting, legal, marketing and communications, customer experience, and international expansion.
• In March 2020, Coinbase became a second-class member of the Japan Virtual Currency Exchange Association, a self-regulatory organization approved by Japanese regulator, the Financial Services Agency (FSA).
• U.S.-based Coinbase has been eyeing a Japanese arm of its platform from as early as 2016 and has an entity in the country.
• The company previously said it was confident it would receive the country’s mandatory operating license from the FSA in 2019, though that has not yet happened, according to the watchdog’s website.
• CoinDesk reached out to Coinbase to ask if the flurry of new job positions heralds the launch of trading services in Japan sometime soon, but did not receive a reply by press time.

See also: Coinbase to Launch Crypto Debit Card in US for Retail Spending

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• Bitcoin Dips as Trump Threatens to Stop Vote Counting

Sam Bankman-Fried, the CEO of cryptocurrency derivatives platform FTX, made the second-largest donation to Joe Biden’s presidential campaign, according to details revealed in The Wall Street Journal on Oct. 28.

• The Hong Kong-based CEO gifted Biden’s campaign a total of $5.2 million, behind only former New York Mayor Michael Bloomberg’s $56 million donation.
• Biden received $79.5 million from his top 100 donors, compared to Trump’s $75 million.
• While vote counting is still underway, the edge in donations may have proven effective in pushing Biden first over the finish line, although at press time it’s still too early to say who’s won for sure.
• Bankman-Fried is a member of the wealthiest Democratic super PAC, Future Forward, which includes Facebook co-founder Dustin Moskovitz and former Google CEO Eric Schmidt.
• The fund also includes Kathryn Murdoch, daughter-in-law of media mogul Rupert Murdoch, and Patty Quillin, wife of Netflix co-founder Reed Hasting, according to a report by the New York Times.
• Future Forward was on pace to spend more than $108 million on television ads in support of Joe Biden in October, hoping to turn the tide among last-minute swing voters.
• Other CEOs who donated larger amounts to Biden’s campaign include Seth Klarman ($3 million) and Michael Sacks (around $1.7 million). Both are hedge-fund managers.
• CoinDesk reached out to Sam Bankman-Fried who declined to be interviewed for this article.

See also: FTX Raises ‘TRUMP’ Futures Margins as Price Suggests Lower Expectations of Election Win

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• Bitcoin Jumps Above $14.5K, Taking 2020 Gains to Over 100%
• $14.1K: Bitcoin Breaks New 2020 High With US Election Still Undecided
• First Mover: Just Another Day for Bitcoin as US Election Slides Into Discord, Division

Bitcoin’s price rally is powering on despite the U.S. elections being as yet undecided.

• The top cryptocurrency by market value jumped to a 33-month high of $14,558 soon before press time, taking the year-to-date gains to 101%, according to CoinDesk’s Bitcoin Price Index.
• The cryptocurrency has notched up a 38% rally in the last four weeks alone.
• Prices did suffer a minor pullback from $14,000 to $13,520 during Wednesday’s Asian trading hours after President Trump’s victory in Florida and other key states appeared to reduce the odds of a bigger fiscal spending package under Democrat Joe Biden’s leadership.
• The decline, however, was quickly reversed and the cryptocurrency resumed its uptrend from October lows near $10,400, possibly on expectations for continued Fed stimulus.
• “We may not know what a post-election [fiscal] stimulus may look like, but investors continue to believe that the Fed will keep printing money at a pace that favors bitcoins finite supply,” John Kramer, a trader at crypto liquidity provider GSR, told CoinDesk.
• The central bank is unlikely to cut down or halt the liquidity-boosting bond purchases intended to lift inflation and has pledged to keep interest rates low for sometime after inflation rises above the 2% target.
• The central bank is expected to reiterate the dovish bias later today and may express a willingness to do more if the election results in a prolonged period of uncertainty for the economy and markets.
• ” If there is social disorder because of a Trump win, the Fed prints. If the election result is a blue wave and taxes rise, the dollar falls because the Fed prints more, and more, and more,” Bill Noble, chief technical analyst at Token Metrics, a cryptocurrency research company, said.
• According to reports, Democrat Joe Biden has inched closer to the White House, however, the jury is still out on elections with President Trump filing lawsuits in key states seeking to pause postal vote counts.
• Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Bitcoin Is Good for PayPal, but Is PayPal Good for Bitcoin?

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• $14.1K: Bitcoin Breaks New 2020 High With US Election Still Undecided

En+, one of the largest aluminium and power producers in the world, is venturing into crypto mining.  

En+ decided to enter the crypto space after some experimentation in the field, the firm’s chief financial officer, Mikhail Khardikov, told CoinDesk via a spokesperson. Three years ago the company got mining firm BitRiver as a client, selling power to its farm in Bratsk. 

BitRiver owns the largest mining venue in Russia, hosting about 100 megawatt worth of clients’ ASICs on a farm near the Bratsk hydropower plant in Siberia. The firm is also looking to expand to neighboring regions with the blessing of the local authorities. The partnership with En+ will add to the future growth.

Related: Ethereum Fees Plummeted 65% in October Following DeFi Volumes Back to Earth

The public company is a rare example of a large, mainstream industrial firm entering the crypto world. In this case, it seems like a natural fit: En+, owning four major hydropower plants in Russia’s Siberia, is producing about 7% of the country’s electricity and has resources to become one of the leading players in the market. 

Read more: A New Company Claims It’s Opening the Biggest Mining Farm in Russia

Industrial powerhouses like En+ entering the space might change the current power balance in the global crypto mining industry, where China’s domination is reportedly diminishing and countries like the U.S., Russia, Kazakhstan and Canada are trying to win larger shares of the market.

Ambitious alliance

Now, En+ and BitRiver have partnered to run a new farm, with En+ holding a 80% stake and BitRiver 20% in the joint venture, they said. The venue, located not far from BitRiver’s existing site, will initially offer 10 megawatts of power for miners who would choose to keep their ASICs there, with the potential to expand to 40 megawatts.

Related: Technician Used Airport’s Computers to Mine Ethereum in Italy: Report

“Our main business is combining the production of electricity and aluminium, which allows for turning electricity right into aluminium production, instead of selling it via the power grid [to consumers]. Data centers, especially for the mining farms, are an even more attractive way of turning electricity into a product,” Khardikov said.

He added that En+ is happy to see more miners as its clients, and is offering to locate their farms in the direct vicinity of the firm’s power plants. “We have venues with electricity infrastructure readily available, from smaller ones for 10-30 megawatts, to larger ones for 100-120 megawatts,” Khardikov said. 

Read more: A Russian Company Is Opening a Mining Farm in the Arctic

According to him, En+ is actively lobbying the interests of the crypto industry in Russia and is talking to both the government and market participants, in hopes of better crypto regulation in the country. 

“A reasonable regulation of the [crypto] space will help develop other sectors of the economy as well, such as energy generation and other industries,” Khardikov said.

As for BitRiver, the partnership will help it grab an even bigger share of the market, BitRiver CEO Igor Runets told CoinDesk. 

“We’re planning to grow the capacity of our data centers significantly in 2021, and partnering with the largest private hydropower company in the world is important to achieve this goal,” he said. The new status of being a partner, rather than a client, of En+, will help reduce costs and build a better relationship with the electricity provider, Runets added.

Political entourage

Apart from the potential scale of the new mining enterprise, En+ getting into crypto is interesting for another reason: The company’s largest shareholder, Oleg Deripaska, is the second Russian billionaire to publicly dip his toes into crypto and blockchain. Last year, Vladimir Potanin announced a project to tokenize the metals his company, Nornickel, is producing in Russia.  

Deripaska was sanctioned by the U.S. in 2018 for being one of the Russian oligarchs who are close to the country’s authorities and “profit from this corrupt system,” U.S. Treasury Steven Mnuchin said at the time. 

Read more: Digital Ruble ‘Promising,’ Pilot Likely in 2021, Says Bank of Russia Chief 

Deripaska’s companies, including En+, were sanctioned as well. The sanctions on En+ were lifted in 2019, when Deripaska’s stake in the company was reduced – he now owns 44.95% of the company. 

In the meantime, the current regulatory trends in Russia are far from optimistic: After President Vladimir Putin signed into law a measure defining crypto as taxable property, the country’s Ministry of Finance suggested amendments that might prohibit crypto mining in Russia altogether.

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Wasabi Wallet, the privacy-focused bitcoin software wallet, has set a broad timeframe for the release of Wasabi Wallet 2.0. The goal is not only to make the wallet easier to use as more people start adopting bitcoin, but also to implement the privacy improvements of the WabiSabi protocol, including making CoinJoins automatic by default. 

In a blog post laying out the launch timeline of the wallet, Wasabi announced the updated version would get a full UI (user interface) rewrite and user experience improvements, as well as make a CoinJoin easier for your average user. At the moment the team is in the midst of first steps for all three of these developments. While the most likely timeline for release is nine months, it could take as few as three or as many as 14. 

The post also said manual coinjoining will be a thing for “power-users only.” 

Related: Blockstream Is Working on Simpler, More Private Multi-Sig Bitcoin Transactions

Read more: Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

“Wasabi adds complications to traditional Bitcoin wallet workflows with its manual coinjoining process and its mandatory coin control features,” said Adam Ficsor, Wasabi co-founder and lead researcher, in an email to CoinDesk.

“To improve upon these we’re planning to make coinjoining automatic by default and build upon the realization that coin control is mostly friction when the user would like to spend conjoined coins, so we should be able to introduce a simple send for that.”

Automatic CoinJoins

A CoinJoin is a method for bitcoin (BTC) users to make their payments harder to track by combining multiple payments from multiple senders into a transaction, muddying the ability of third parties to see who paid whom.

Related: Market Wrap: Bitcoin Jumps to $14.2K; Ethereum Gas Usage Grows 113% YTD

Ficsor said his plan currently is that at wallet creation, users would be asked if they want the wallet to take care of CoinJoins or whether they’d prefer to do it manually, as is the case now. Users would also set a privacy target (Ficsor tossed out levels such as none, some, high and Snowden) and then everything would happen automatically from there. 

“CoinJoins would be done while the wallet is open (and even when it isn’t) so all the user would have to do is use its wallet like a normal bitcoin wallet,” said Ficsor. 

He did say that while this is his plan, the final product could turn out differently based on what the team learns along the way. 

How WabiSabi improves on CoinJoins

In the original Wasabi Wallet, there were limits to the functionality of CoinJoins. 

My colleague Colin Harper wrote about some of these earlier this year:

“For this to work effectively, each user in a CoinJoin transaction must send a minimum amount of bitcoin to the mixing pool (e.g., 0.1, 0.01, etc) so as to ensure that they receive the same output as other users when the CoinJoin is complete,” Harper wrote. “If recipients don’t receive the same amount of bitcoin at the end of a join as other users in the mix, the transactions could be easily de-anonymized by blockchain surveillance.”

Read more: Europol Names Privacy Wallets, Coins, Open Marketplaces as ‘Top Threats’ in Internet Crime Report

Typically, the coordinator of a CoinJoin also has insight into a user’s information, that could allow them to link inputs to a user. 

WabiSabi, which will launch with the Wasabi Wallet 2.0, works to address some of these limitations by allowing users to input different amounts of BTC, independent of what other participants put in – which, let’s be honest, is how most people spend money. The coordinator role will still exist. 

How this helps the average user

Ficsor said for average users the only uncomfortable thing they might experience with Wasabi Wallet 2.0 is that it may take a while until CoinJoins happen. This means if the users receive coins to their wallets, then it’d be automatically coinjoined in the background, and that may take a while. If users are in a hurry and want to spend their money before it’s coinjoined, they would have to utilize the manual coin control tab and figure it out, given spending non-coinjoined coins without coin control is “privacy suicide,” according to Ficsor. 

“That being said, I think in 99% of the cases there will always be coinjoined coins to spend from, so this wouldn’t really occur that often.”

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With Bitcoin’s long-awaited Taproot upgrade on the horizon, the engineers at Blockstream are working on a new scheme to improve multi-signature transactions. 

These transactions, which require signatures from more than one private key to authorize spends, will stand to benefit from Taproot. This upgrade implements Schnorr signatures into Bitcoin’s codebase, a cryptographic signature scheme that will make creating and executing smart contracts easier on the network. 

In a post-election day blog post, Blockstream engineers Jonas Nick and Tim Ruffing lay out a new multi-signature design that would reduce the technical complexity of multi-signature transactions in a way that still preserves privacy. 

Related: Market Wrap: Bitcoin Jumps to $14.2K; Ethereum Gas Usage Grows 113% YTD

Nick and Ruffing, alongside French National Security Agency member Yannick Seurin, published a cryptographic e-journal on this MuSig2 design that is currently undergoing peer review.

Read more: Bitcoin’s Future: Exactly How a Coming Upgrade Could Improve Privacy and Scaling

‘Non-interactive signing’

MuSig2 combines the strengths of the two leading multi-signature designs without sacrificing trade-offs.

Bitcoin’s oldest multi-sig trick, the ‘CHECKMULTISIG’ OP-code, for instance, requires less communication from the signers of a multi-sig transaction but is less private than the MuSig1 multi-signature scheme, which improves user privacy at the expense of adding extra steps to the signing process.

Related: Crypto.com: We Got the Highest Ratings on Privacy, Security Based on US Standards

Specifically, MuSig1 requires the parties in a multi-signature transaction to communicate in multiple rounds to approve a transaction.

MuSig2 would retain all the privacy guarantees of MuSig1 while only requiring two rounds of communication between signers to approve a transaction (e.g., Alice generates a 2-of-3 multi-signature transaction she sends to Bob for approval; Bob signs the transaction, sends it back to Alice and the transaction is approved).

Read more: Bitcoin Developers Still Divided on Specifics of Taproot Activation

“It offers the same functionality and security as MuSig1 but makes it possible to eliminate almost all interaction between signers. With MuSig2, signers need only two rounds of communication to create a signature, and crucially, one of these rounds can be preprocessed before signers know the message that they want to be signed,” the blog post explains.

Besides improving general multi-signature wallets, MuSig2 could stand to benefit Lightning Network privacy and improve so-called threshold signatures that are often used by exchanges and custodians for fund storage.

If Taproot is adopted in the coming months, then Blockstream will replace the MuSig1 standard with MuSig2 in a code library for Schnorr signature schemes. The post also hints that Blockstream’s Liquid sidechain may run the Taproot code early to test the multi-signature scheme before it is ready for deployment on Bitcoin’s mainnet. 

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