CoinDesk Crypto

A developer known for working on enhancing Bitcoin privacy has set his sights on a new project he hopes will “massively improve” how we keep our transactions private.

Chris Belcher, who also created the technical privacy market JoinMarket, is currently working on putting to the test CoinSwap, an idea first proposed by legendary Bitcoin developer Greg Maxwell in 2013. Belcher has been focusing on CoinSwap rather than JoinMarket because he thinks it will give users better privacy, he told CoinDesk. 

Belcher recently received not just one, but two grants for his efforts, showing just how excited Bitcoiners are about the potential of the project.

Related: Listen: What a Bitcoin Researcher Says About Lightning

Though the Bitcoin network arose from a privacy-minded movement, its privacy is actually pretty thin. Just take a look at any block explorer for a glimpse of how easy it is to pull up any transaction that’s ever happened in Bitcoin’s history – as well as the transaction’s associated history. 

Read more: Human Rights Foundation Funds Bitcoin Privacy Tools Despite ‘Coin Mixing’ Legal Stigma

“Right now, Bitcoin privacy is not very good at all. Anyone in the world can analyze the blockchain and then can find all sorts of information about users – their balance, their history, who they transact with and in what amounts, when – everything they spend,” Belcher told CoinDesk in an interview. 

Belcher argues that this is, in some ways, worse than the financial privacy we have in legacy systems today. “The banking system, they know your transactions, but the general public doesn’t. With Bitcoin it is the general public — it is everyone that can see exactly what the user does,” Belcher added.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

He added it’s important to most people that this type of information isn’t exposed to the whole world.

“Financial privacy is good for human dignity, [for example], if you don’t want your neighbors to see what charities you donate to or that type of thing, or if you’re paid in bitcoin you don’t want your employers to know what charities you donate to or what other activities you’re involved in,” Belcher added.

CoinJoins: today’s Bitcoin privacy

“CoinJoins” (distinctive from “CoinSwaps,” which Belcher is putting to the test) are the privacy transactions that are most popular on Bitcoin today. CoinJoins give users good privacy and are becoming more popular. Thus far, they have been adopted in the Wasabi wallet, Samourai Wallet and JoinMarket. 

A CoinJoin takes all inputs from several transactions by different users and mixes them into one big, collaborative transaction. This one big transaction then sends the bitcoins mixed from different addresses out to different addresses. Because no one can tell where the spent bitcoins originally came from, the scent of the trail is obfuscated and the participants in the CoinJoin gain better privacy. 

Read more: What an Uptick in ‘Coinjoins’ Says About Bitcoin’s Value Proposition

But it’s not perfect. There are still ways for people analyzing the Bitcoin blockchain (namely blockchain analysis companies) to detect when and where bitcoins are being mixed. 

For one thing, the transaction sizes of mixed coins are much bigger than normal transactions because they contain so many different inputs.

Also telling is the fact they have outputs that are all the same size. “Equal output CoinJoins are very obvious. If someone sees them on the blockchain they can see that this kind of privacy protocol is happening,” Belcher said. 

Why are outputs the same size? If Bob sends 0.8 BTC into the CoinJoin transaction and Alice sends 0.187 BTC and Mary sends 1.2222 BTC, and the resulting outputs are exactly 0.8 BTC, 0.187 BTC and 1.2222 BTC respectively, that coincidence is pretty obvious to anyone who is looking.

In order to preserve privacy, a CoinJoin transaction usually splits the amount of bitcoin dispensed into even pieces, say 0.1 bitcoin. So, if Alice put in 0.3 bitcoin, she will receive three 0.1 pieces sent to three separate addresses that she controls.

Most transactions don’t have a bunch of equal outputs like this. That’s why CoinJoins are easy to detect. 

Indeed, there have been a few instances of cryptocurrency exchanges banning users who have evidently sent their bitcoin through such privacy services.

“They’ll be suspicious. If there’s someone analyzing the blockchain, they’ll see this is a CoinJoin, so they know this person did that. And if they see another transaction, [by comparison] they can see that it’s not a CoinJoin,” Belcher said. 

CoinSwap: an invisibility cloak for transactions

“CoinJoin” and “CoinSwap” have similar names and they both help to preserve privacy, so it’s easy to confuse them. But they’re different, and Belcher argues CoinSwaps “fixes many of the problems of some kinds of CoinJoins” and “is the next step for on-chain bitcoin privacy.”

CoinSwaps can be made to look invisible, Belcher said. If done correctly, a CoinSwap transaction can look just like a vanilla bitcoin transaction. 

In a CoinSwap, it looks like two separate people are sending completely separate transactions. But under the hood, something else completely is happening.

Two parties, say Alice and Bob, execute such a swap. In short, Alice sends some bitcoin to a CoinSwap address. Bob sends the same amount of bitcoin to a separate CoinSwap address. 

If both send the right amount of money over, the coins are “swapped.” The coins Alice sent to the CoinSwap address are sent to a new address owned by Bob, and the coins Bob sent to his own CoinSwap address are sent to a new address owned by Alice. 

‘Teleporting’ Coins

Under the hood, the CoinSwap address, which is responsible for this swapping, is much fancier than a normal bitcoin transaction. It’s a multi-signature transaction, meaning it requires more than one person to sign off on it in order to send the transaction. Usually, these types of transactions stand out on the blockchain since they look different from normal bitcoin transactions. But by including ECDSA-2P cryptography, these multi-signature transactions can be made to look just like normal bitcoin transactions. This is very much Belcher’s plan. 

With ECDSA-2P in place, “Alice sends a CoinSwap to Bob and it just looks like just a normal transaction. But actually the coins have ended up somewhere else completely,” Belcher said. 

This component is important. If all of these transactions look the same, people who aren’t even using CoinSwaps are getting more privacy too. There’s no way to tell if any transaction is a CoinSwap transaction or a normal one, turning bitcoin chain analysis on its head. 

Read more: ‘Financial Surveillance’ or ‘Blockchain Analysis’? Human Rights Foundation Debates Elliptic

Similar technology will expand to the Lightning Network as well, so blockchain watchers can’t tell if any single transaction is a CoinSwap, a Lightning Network transaction or just a normal bitcoin transaction.

“CoinSwap could be said to allow bitcoins to teleport undetectably to anywhere else on the blockchain,” as a description of the technology on the Bitcoin Wiki puts it. For a deeper explanation, check out this post from JoinMarket developer Adam Gibson.

That’s not to say that CoinSwap is perfect, though. The problem with CoinSwap is that it is a much more complicated process to implement than CoinJoin. 

‘As decentralized as possible’

In his mountain of a post, Belcher describes how to turn the idea of CoinSwap into reality.

A key reason CoinSwaps haven’t taken off since Maxwell described them seven years ago is that they’re not as straightforward as CoinJoins. So, Belcher has his work cut out for him in implementing the complexity for the first time. 

His first step was just thinking about the best way to do it, outlining a number of different design considerations in the article making up his plan of attack. For one, he plans to use the Rust programming language, since it’s potentially more secure than other languages.

“I want to make it as decentralized as possible, so there’s no central point of failure that can be switched off or censored,” Belcher said. To meet this goal, he wants the “whole thing” to run over the privacy network Tor, which helps to shield IP addresses, which are kind of like a mailing address for a computer exposing where it is located.

“I think that’s quite necessary for privacy,” he said.

Read more: BTCPay Looks to Anonymize Bitcoin Transactions With PayJoin Integration

Belcher outlines this and various other considerations in his proposal, such as routing and using PayJoin, yet another bitcoin privacy technology, alongside it. Now that his ideas are out in the public, people can comment and make suggestions.

The next step is actually implementing it. Belcher told CoinDesk he hopes to release a minimum viable product in the next six months.

Image: “BallesStrob-4” by MathGoulet is licensed under CC BY-ND 2.0.

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As Filecoin inches closer to a blockchain mainnet launch – after several delays since its $200 million raise in 2017 – investors in China are again speculating heavily on the network’s mining hardware and its token prices. 

Since Protocol Labs, the foundation behind Filecoin, released a “Testnet Incentives” program on June 9 that was scheduled to start in a week, more than a dozen Chinese companies have started selling cloud mining contracts and physical hardware – even though important details like the mining incentive economics on the mainnet are still not finalized.

The sales volume so far on each of these companies can range from half a million to tens of millions of dollars, according to self-reported data on these platforms seen by CoinDesk and interviews with several mining hardware manufacturers.

Related: Ferrari, McLaren and $15M in Crypto Seized as Chinese Police Bust Arbitrage Scam

Protocol Labs rolled out Filecoin’s testnet in December 2019. But tokens mined on the testnet so far do not represent the real Filecoin that can circulate when the mainnet goes live. Further, the mining incentive economics on the testnet also do not represent how the final block rewards will be available on the mainnet.

Still, data from Filecoin’s testnet blockchain explorers show that currently eight out of the top 10 miners with the largest effective mining power on the testnet are Chinese miners. 

These eight miners have around 15 petabytes (PB) of effective storage mining power, accounting for more than 85% of the testnet’s total of 17.86 PB. For context, 1 petabyte of hard drive storage = 1,000 terabytes (TB) = 1 million gigabytes (GB).

The Filecoin craze in China may be largely related to the long-standing popularity of crypto mining in the country in general, which is home to around 65% of the computing power on Bitcoin by estimation. Plus, there has been much hype in China about Filecoin mining since 2018, with companies touting all sorts of hardware when the network was still in a development mode.

Related: Hong Kong’s National Security Law Could Threaten Local Crypto Brokerages

Read more: Bitcoin Miners Saw 23% Revenue Drop in June

“Crypto mining has always been a popular thing in China,” said Andy Tian, co-founder of 1475, one of the many Filecoin mining hardware manufacturers that’s backed by notable Chinese VCs such as Fenbushi and Hashkey Capital. 

“Even though Filecoin’s mining process is much more complex technologically, the idea of mining with hard drives instead of specialized machines like a Bitcoin ASIC miner may actually be much easier for retail people to understand,” he said.

Meanwhile, according to Feixiaohao, a Chinese service that is comparable to CoinMarketCap or CoinGecko, nearly 50 Chinese crypto exchanges – mostly little-known ones along with some more notable ones including Gate.io and Biki – have listed trading pairs for Filecoin futures against USDT.

Since Filecoin’s mainnet is not yet live, the token traded on these exchanges is merely a future promise, with no clear visibility on how or when they can be settled when the network goes live.

Nevertheless, the total self-reported 24-hour trading volume on these exchanges on July 8 reached around $100 million, Feixiaohao data shows. And the prices for Filecoin futures have jumped up from around $11 in early June to around $28 on July 8 and are now down to $18 at press time.

Uncertain returns

In an Ask Me Anything hosted on June 25, Juan Benet, co-founder and CEO of Protocol Labs, confirmed the Testnet Incentives program will start on July 20 now that the testnet has been running for months, although it’s still unclear how exactly the economic incentives for Filecoin would work. But that could be delayed.

Asked when miners should expect to “get the detailed parameters for Filecoin’s crypto economic constructions,” Benet said Protocol Labs is finalizing the parameters, which will continue to evolve. 

“We are looking to solidify more final parameters in late July. Let us know if you have more questions on the structural mechanisms themselves,” he told community members.

The incentive program invites miners to compete for 4 million Filecoin tokens that would be mined on the testnet, but would only be distributed after the mainnet goes live. The goal is to do a stress test for the network’s infrastructure ahead of its expected mainnet launch in August if there’s no further delay.

However, since July 11, the team have started gauging feedback from the community within its official Slack channel in terms of postponing the Testnet Incentives as well as the mainnet by potentially another one to two weeks.

Simply owning more hard drive storage does not necessarily equal more effective mining power on the network.

Although Filecoin testnet explorers currently show information about the total mined Filecoin at the testnet as well as each block’s reward, these numbers are at most a reference point as the finalized parameters are yet to be determined on the mainnet.

Therefore, as of this stage, investors buying either future-promised cloud mining contracts or physical hardware can’t be certain about the payback period for their investment with no clear equation to calculate a corresponding mining result on the mainnet.

“For now, [Filecoin] cloud mining is still a pseudo-proposition before all the incentive economics are finalized,” Tian said.

He said 1475 sells mining solutions and physical hardware as a whole but these machines could cost more than $30,000 per set in order to gain effective mining power. Partners who bought from them further sell computing power for around $300 per TB to retailers in the form of cloud mining contracts.

Mars Finance, a Chinese crypto media company invested in by Binance, for example, rolled out a cloud mining sales platform dubbed Mcloud.io. Apart from bitcoin mining contracts, it advertises several types of Filecoin cloud contracts, which tout an annualized rate of return of as much as 300% but do not indicate how much Filecoin can be mined with each TB of bought storage.

Buying in

Nevertheless, it appears these looming questions have not held back speculation in China, especially during a time when the bitcoin and cryptocurrency market have remained relatively static.

6block, one mining pool based in China, told CoinDesk it estimates multiple Filecoin mining pools have accumulated at least several hundred million yuan (over $15 million) worth of hardware and software for self-mining and selling to investors. 

Some larger bitcoin mining farms in China, like RRMine, also started buying hardware to prepare for Filecoin mining and selling cloud computing contracts based on these hardware. The firm said it sold out more than $15 million worth of contracts within minutes in two of the four sale phases that started in June.

Even some Chinese crypto exchanges, such as BKEX and ZB, also partnered with Filecoin miner makers and claimed on their website that Filecoin cloud mining contracts worth over $1 million in USDT were sold out within minutes last month.

But there’s another nuance: Simply owning more hard drive storage does not necessarily equal more effective mining power on the network. This logic is different from bitcoin mining.

In bitcoin mining, at the current difficulty level, one terahash per second (TH/s) of hash rate is expected to generate roughly 0.000008 BTC in 24 hours. The more TH/s there is, the more bitcoin a miner should be able to produce proportionally.

Read more: Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-Start Its File-Storage Network

But in Filecoin, a miner’s effective mining power depends on the volume of sealed data on a hard drive, not the total volume of a hard drive.

To seal data into a hard drive, a Filecoin miner still needs processing power, i.e. a CPU or GPU as well as ram. More powerful processors with more optimized software can seal data into a hard drive more quickly, so a miner can consolidate more effective mining power faster in a given day. 

That resembles the idea of a customized personal computer with no exact specification standard, although Protocol Labs has a recommended specification for a starter.

“A huge volume of hard drive storage alone is not the point,” Tian of 1475 said. “What matters is the combination of hardware, i.e. core processors, ram, storage, and software optimization to determine the acceleration speed for you to accumulate effective mining power as time goes on.”

But as of this stage, there appears to be no transparent way at the network level for retail investors to see how much of their purchased storage hard drive is actually effective mining power. 

Delays

Protocol Labs, which is headquartered in the U.S., was behind Filecoin’s 2017 initial coin offering, which raised a staggering $200 million. 

That was in addition to a $50 million private investment raise backed by notable VCs including Sequoia, Andreessen Horowitz and Union Square Ventures. CoinDesk’s parent company Digital Currency Group also invested in Protocol Labs.

The goal for Filecoin is to build a distributed storage network with token rewards to incentivize hosting storage as a way to push for a wider adoption.

Colin Wang at The Force Partners, which has been mining Bitcoin for three years and followed Filecoin developments since 2018, also said that the idea of mining with a hard drive is more intuitive for ordinary investors to understand, although in reality the mining hardware is more than just a hard drive.

“Since 2018, there has been some Filecoin-related media coverage in China and so many machine sales companies have also been established,” he said.

But back then, Protocol Labs was still far away from rolling out the testnet – so there was a great level of uncertainty regarding a suitable mining hardware specification. 

As the mainnet launch kept investors waiting, Wang said some Chinese companies had taken advantage of this information gap and used misleading claims to sell substandard machines to unwitting investors in China. 

Wang went so far as to estimate that “uncodified mining machines may have sold for more than 30 billions yuan [$4 billion] in China” over the past two years.  

Though an actual number may be hard to verify, such activities went rampant to the point that Protocol Labs issued an anti-fraud statement in December 2018, warning its Hong Kong and mainland China communities that it had no affiliation with any such miner sales and that investors should be wary of potential risks.

In one instance, local Chinese media reported in March 2019 that one self-claimed Filecoin hardware manufacturer allegedly exploited more than hundreds of people by an estimated $300 million for their fake Filecoin miners through an alleged multi-layer marketing scheme.

After rounds of delay, Protocol Labs said in September 2019 that the testnet launch would be live around December 2019 and the mainnet will be rolled out around Q1 2020. 

The testnet did go live as promised, but the mainnet was once again delayed and is now expected to launch in August 2020.

Jaspreet Kalra contributed to reporting

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Bitcoin gold’s developer team announced Friday night that it foiled a 51 percent attack that it had known was coming for over a week.

• Bitcoin gold alerted exchanges and mining pools of the attack on July 2, and posted a notice to the community on July 10 noting that it was time for “everyone else to upgrade their nodes.”
• The team only revealed the attempted network takeover to the public after the unknown attacker, which had been mining blocks since July 1, released 1300 blocks late Friday night.
• Developers had circulated an update that featured a checkpoint at block 640650 on July 2. That checkpoint prevented the attacker’s chain from taking over the honest chain, they said Friday.
• “The majority of honest pool hashpower continues to mine on the honest chain,” website maintainer CryptoDJ said in the post. 
• According to the cryptocurrency’s official website, there are only 108 bitcoin gold nodes which are in the world. Nearly 30% of them are in Germany. Bitcoin Gold communications director Edward Iskra told CoinDesk that these only represent immediately responsive nodes, and not ones that don’t allow incoming connections.
• The price seems to have been unaffected by the attempted attack, trading between $9 and $10 since Tuesday, according to Bitfinex

UPDATE (July 11, 2020, 04:23 UTC): This article has been updated with additional information.

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Bitcoin gold’s developer team announced Friday night that it foiled a 51 percent attack that it had known was coming for over a week.

• Bitcoin gold alerted exchanges and mining pools of the attack on July 2, and posted a notice to the community on July 10 noting that it was time for “everyone else to upgrade their nodes.”
• The team only revealed the attempted network takeover to the public after the unknown attacker, which had been mining blocks since July 1, released 1300 blocks late Friday night.
• Developers had circulated an update that featured a checkpoint at block 640650 on July 2. That checkpoint prevented the attacker’s chain from taking over the honest chain, they said Friday.
• “The majority of honest pool hashpower continues to mine on the honest chain,” website maintainer CryptoDJ said in the post. 
• According to the cryptocurrency’s official website, there are only 108 bitcoin gold nodes which are in the world. Nearly 30% of them are in Germany. Bitcoin Gold communications director Edward Iskra told CoinDesk that these only represent immediately responsive nodes, and not ones that don’t allow incoming connections.
• The price seems to have been unaffected by the attempted attack, trading between $9 and $10 since Tuesday, according to Bitfinex

UPDATE (July 11, 2020, 04:23 UTC): This article has been updated with additional information.

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• Tron Arbitration Challenged in Hostile Work Environment Lawsuit
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Kik’s proverbial day in court may last a lot longer than Telegram’s.

That’s the takeaway from a federal judge’s response to the U.S. Securities and Exchange Commission during a hearing in its case against messaging platform Kik over the company’s 2017 initial coin offering, which raised $100 million. 

Judge Alvin K. Hellerstein, senior judge of the United States District Court for the Southern District of New York, rejected the SEC’s argument that the token sale was similar to that of Telegram, another messaging company which raised money for a blockchain project, and should face a similar outcome. The SEC won a preliminary injunction against Telegram this year, ordering the company to halt the issuance of its gram tokens, and the firm later discontinued the TON project. 

Related: Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering

“I think that there is no binding precedent one way or another,” Hellerstein said.

Nearly 200 people dialed in to listen to Thursday’s hearing, which took place just over a year after the SEC filed suit. Both the SEC and Kik have filed for summary judgment, meaning they hope to end the lawsuit before it reaches a jury trial, either by a ruling that Kik violated securities laws (the SEC’s argument) or that it didn’t (Kik’s argument). It is now up to the judge to either grant a judgment or let the trial proceed, unless the parties settle.

When SEC counsel Stephan Schlegelmilch invoked the Telegram case as a very similar token offering to Kik’s, Judge Hellerstein interrupted. He noted that Judge P. Kevin Castel, who presided over the Telegram case, only found that there was a “likelihood of success” in the preliminary injunction ruling. 

“Now with you, it’s different,” he told Schlegelmilch. “You’re asking for summary judgment. I understand that Judge Castel’s decision has a lot of reasoning that is comfortable to you. [It’s a] very well-reasoned decision characteristic of Judge Castel, but I think our issue is different.”

Related: Alleged Shopin ICO Fraudster Pays $450K Fine in Ether

See also: Telegram Responds to SEC: Gram Tokens Are Not Securities

Common enterprise

The hearing quickly turned into a two-hour-long debate on the application of the Howey Test, a U.S. Supreme Court case used as a precedent to determine if a financial instrument is a security. 

Schlegelmilch said the case against Kik rested on a single claim: that the entirety of Kik’s offering of 1 trillion kin was an unregistered securities sale that violated Section 5 of the Securities Act. The token sale, the SEC said, was an investment contract where the investor expected to profit off the efforts of others – in this case, Kik’s promise to build an ecosystem for the use of its kin token. 

“Here, the economic reality is that Kik engaged in an old-fashioned capital raise using a new-fangled device, the blockchain,” Schlegelmilch said. 

Shlegelmilch went on to allege that Kik continually promised it would give the kin token value, referencing Kik’s 2017 white paper, which laid out its plans for kin. Kik allegedly told investors it would “build fundamental value for the new currency by integrating kin into its chat app,” Schlegelmilch said. 

“This was a thing that had no value whatsoever. What it had was Kik’s promises to give it value. And that is a quintessential security, that is a quintessential investment contract and why this matters, Your Honor,” Schlegelmich said. 

One element of Kik’s defense is similar to that of Telegram, which insisted its gram token offering for the TON project was a currency and not a security. 

Despite his disagreement with the SEC over the supposed similarities with the Telegram case, Judge Hellerstein sounded unconvinced by Kik’s argument the initial coin offering (ICO) did not violate securities laws because its token, known as kin, is used as a currency by its app users. 

“I can’t see the difference between that and a stock,” Judge Hellerstein said, responding to Kik’s defense that under the Howey Test the kin offering did not qualify as a common enterprise where the purchaser was led to expect profits from the efforts of the promoter or a third party.  

Kik’s defense

Kik, represented by Patrick Gibbs of Cooley LLP, argued there were no contractual obligations between Kik and kin purchasers, and that if one owner sold his kin for profit, that profit is not shared with other owners. 

Judge Hellerstein pushed back on that statement. Any shareholder in a given company can “sell that share at a price and keep the profit for themselves,” he said. “That’s not what determines whether there’s a common enterprise.”

Gibbs said there were a slew of cases that showed “where the buyer has control over the resale and doesn’t share profits for resale with anyone else, there is not a common enterprise,” and that the SEC had not cited cases that applied to the current situation.

“The SEC has not cited a single case, not one where the alleged profit was going to come from capital appreciation only, resale of an asset at a higher price,” Gibbs said. “They’ve cited to you a bunch of cases … where the profits take the form of a share of a stream of profits or dividends that are paid out over time for an ongoing business.”

See also: A ‘Howey Test’ for Blockchain? Why the SEC’s ICO Guidance Isn’t Enough

Gibbs also reiterated Kik’s position that it could not have known at the time of sale that kin would become a security. 

“One of the cases that we think lays out a very useful framework for thinking about when the sale of an asset becomes an investment contract, and therefore security, is one that cited all of our papers,” he said, referring to Rodriguez vs. Banco Central Corporation, heard almost three decades ago, where swamp land was sold to unsuspecting investors on the alleged promise that the area was ripe for future development. The land sales were not deemed securities. 

Kik General Counsel Eileen Lyon told CoinDesk the legal team presented its arguments well, and the company is awaiting the judge’s decision. 

“Judging by the numbers of people who dialed in for the hearing, this continues to be an important case for our industry,” Lyon said.

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Kik’s proverbial day in court may last a lot longer than Telegram’s.

That’s the takeaway from a federal judge’s response to the U.S. Securities and Exchange Commission during a hearing in its case against messaging platform Kik over the company’s 2017 initial coin offering, which raised $100 million. 

Judge Alvin K. Hellerstein, senior judge of the United States District Court for the Southern District of New York, rejected the SEC’s argument that the token sale was similar to that of Telegram, another messaging company which raised money for a blockchain project, and should face a similar outcome. The SEC won a preliminary injunction against Telegram this year, ordering the company to halt the issuance of its gram tokens, and the firm later discontinued the TON project. 

Related: Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering

“I think that there is no binding precedent one way or another,” Hellerstein said.

Nearly 200 people dialed in to listen to Thursday’s hearing, which took place just over a year after the SEC filed suit. Both the SEC and Kik have filed for summary judgment, meaning they hope to end the lawsuit before it reaches a jury trial, either by a ruling that Kik violated securities laws (the SEC’s argument) or that it didn’t (Kik’s argument). It is now up to the judge to either grant a judgment or let the trial proceed, unless the parties settle.

When SEC counsel Stephan Schlegelmilch invoked the Telegram case as a very similar token offering to Kik’s, Judge Hellerstein interrupted. He noted that Judge P. Kevin Castel, who presided over the Telegram case, only found that there was a “likelihood of success” in the preliminary injunction ruling. 

“Now with you, it’s different,” he told Schlegelmilch. “You’re asking for summary judgment. I understand that Judge Castel’s decision has a lot of reasoning that is comfortable to you. [It’s a] very well-reasoned decision characteristic of Judge Castel, but I think our issue is different.”

Related: Alleged Shopin ICO Fraudster Pays $450K Fine in Ether

See also: Telegram Responds to SEC: Gram Tokens Are Not Securities

Common enterprise

The hearing quickly turned into a two-hour-long debate on the application of the Howey Test, a U.S. Supreme Court case used as a precedent to determine if a financial instrument is a security. 

Schlegelmilch said the case against Kik rested on a single claim: that the entirety of Kik’s offering of 1 trillion kin was an unregistered securities sale that violated Section 5 of the Securities Act. The token sale, the SEC said, was an investment contract where the investor expected to profit off the efforts of others – in this case, Kik’s promise to build an ecosystem for the use of its kin token. 

“Here, the economic reality is that Kik engaged in an old-fashioned capital raise using a new-fangled device, the blockchain,” Schlegelmilch said. 

Shlegelmilch went on to allege that Kik continually promised it would give the kin token value, referencing Kik’s 2017 white paper, which laid out its plans for kin. Kik allegedly told investors it would “build fundamental value for the new currency by integrating kin into its chat app,” Schlegelmilch said. 

“This was a thing that had no value whatsoever. What it had was Kik’s promises to give it value. And that is a quintessential security, that is a quintessential investment contract and why this matters, Your Honor,” Schlegelmich said. 

One element of Kik’s defense is similar to that of Telegram, which insisted its gram token offering for the TON project was a currency and not a security. 

Despite his disagreement with the SEC over the supposed similarities with the Telegram case, Judge Hellerstein sounded unconvinced by Kik’s argument the initial coin offering (ICO) did not violate securities laws because its token, known as kin, is used as a currency by its app users. 

“I can’t see the difference between that and a stock,” Judge Hellerstein said, responding to Kik’s defense that under the Howey Test the kin offering did not qualify as a common enterprise where the purchaser was led to expect profits from the efforts of the promoter or a third party.  

Kik’s defense

Kik, represented by Patrick Gibbs of Cooley LLP, argued there were no contractual obligations between Kik and kin purchasers, and that if one owner sold his kin for profit, that profit is not shared with other owners. 

Judge Hellerstein pushed back on that statement. Any shareholder in a given company can “sell that share at a price and keep the profit for themselves,” he said. “That’s not what determines whether there’s a common enterprise.”

Gibbs said there were a slew of cases that showed “where the buyer has control over the resale and doesn’t share profits for resale with anyone else, there is not a common enterprise,” and that the SEC had not cited cases that applied to the current situation.

“The SEC has not cited a single case, not one where the alleged profit was going to come from capital appreciation only, resale of an asset at a higher price,” Gibbs said. “They’ve cited to you a bunch of cases … where the profits take the form of a share of a stream of profits or dividends that are paid out over time for an ongoing business.”

See also: A ‘Howey Test’ for Blockchain? Why the SEC’s ICO Guidance Isn’t Enough

Gibbs also reiterated Kik’s position that it could not have known at the time of sale that kin would become a security. 

“One of the cases that we think lays out a very useful framework for thinking about when the sale of an asset becomes an investment contract, and therefore security, is one that cited all of our papers,” he said, referring to Rodriguez vs. Banco Central Corporation, heard almost three decades ago, where swamp land was sold to unsuspecting investors on the alleged promise that the area was ripe for future development. The land sales were not deemed securities. 

Kik General Counsel Eileen Lyon told CoinDesk the legal team presented its arguments well, and the company is awaiting the judge’s decision. 

“Judging by the numbers of people who dialed in for the hearing, this continues to be an important case for our industry,” Lyon said..

Related Stories

• Kin Community Approves Move From Stellar Fork to Solana’s Blockchain
• Telegram CEO Donates 10 BTC to Pandemic Relief Effort

A small bitcoin dip down to $9,100 recovered, but traders are unsure about further price appreciation.

• Bitcoin (BTC) trading around $9,240 as of 20:00 UTC (4 p.m. ET), gaining 0.25% over the previous 24 hours.
• Bitcoin’s 24-hour range: $9,118-$9,245
• BTC below 10-day and 50-day moving average, a bearish signal for market technicians.

The market at $9,200 per bitcoin erased gains earlier in the week when the world’s oldest cryptocurrency popped to $9,400 Wednesday. “Two days ago, bitcoin rallied 1.9% then dropped 2.1% and is now flat. Just another failed breakout,” said Elie Le Rest, partner at quantitative trading firm ExoAlpha. Still, traders buying when prices dip isn’t providing enough momentum to significantly move the market higher, Le Rest added. “There’s less and less amplitude to move, so we should see in the next couple of days how this resolves.”

Several traders pointed to $9,400, where momentum might turn into a bullish market. “The price of bitcoin again returned to the range of $9,000-$9,200 after the asset again failed to pass a key level at $9,392,” said Constatin Kogan, a partner at cryptocurrency fund BitBull Capital. Indeed, since the start of July bitcoin has struggled to break out of $9,000-$9,200 territory. 

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Josh Rager, a trader and adviser of crypto brokerage LevelInvest, says it will be hard to get back to Wednesday’s $9,400 price range for the time being. “I think bitcoin drops short of $9,400 to make another lower high on the trend,” he said.

However, bets in the options market overwhelmingly favor bitcoin higher than $9,200, with options on $11,250 per BTC especially popular.

Nonetheless, options volumes continued to trend down, changing the trader profile, noted Vishal Shah, founder of Alpha5. “This is only traders that play options on the high-end of the risk spectrum,” Shah said. 

Read More: Exchanges See Drop in Volumes as Bitcoin Volatility Approaches 2020 Low

Related: Bitcoin Reaches Record High Correlation to S&P 500

ExoAlpha’s Le Rest predicted a wide range where price might head into the weekend and beyond. “We’re pretty neutral as it could really go both ways – up to $9,450 on way to tackle $10,000 once again, or down to $8,200,” he said. 

Bitcoin locked in DeFi up 200%

The second-largest cryptocurrency by market capitalization, ether (ETH), was flat Friday, trading around $239 and in the red 0.10% in 24 hours as of 20:00 UTC (4:00 p.m. ET). Ether is up 84% in 2020, outperforming bitcoin’s 28% year-to-date gains. 

The amount of bitcoin on DeFi, which mostly runs on the Ethereum network, has risen from 5,000 to 15,000 BTC in the past month. That is a 200% increase, according to data aggregator DeFi Pulse. 

By locking bitcoin in DeFi, investors are able to earn a reward, or “yield,” without having to trade into another asset such as ether. In July’s low spot exchange volume environment, traders might be increasingly locking crypto rather than trading it. 

Read more: Nearly $60M in Bitcoin Moved to Ethereum in June

Other markets

Digital assets on the CoinDesk 20 are mixed Friday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• decred (DCR)+ 6%
• monero (XMR) + 3%
• lisk (LSK) + 0.55%

Read More: Kyber Token’s Eightfold Increase Reveals Bet on Future

Notable losers as of 20:00 UTC (4:00 p.m. ET):

• dogecoin (DOGE) – 14%
• cardano (ADA) – 3%
• stellar (XLM) – 2.5%

Read More: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

Equities:

• In Asia the Nikkei 225 ended the day down 1.06% as losses in the transportation and real estate sectors dragged the index lower. 
• Europe’s FTSE 100 index closed in the green 0.80% as financial sector stocks led gains for the day.
• The U.S. S&P 500 index gained 1%, with record highs in tech stocks and optimistic news on a possible coronavirus treatment.

Read More: Coinbase Plans First-Ever Investor Day Amid Talk It May Go Public

Commodities: 

• Oil is up 2.2%. Price per barrel of West Texas Intermediate crude: $40.49.
• Gold is still around $1,800 Friday, flat in the red 0.10% at $1,799 per ounce.

Read More: A Rare Glimpse Into How Crypto Is Really Used in Venezuela

Treasurys:

• U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were up most on the two-year, in the green 2.9%.

Read More: The Fed’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Related Stories

• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?
• Market Wrap: Stocks Tick Downward and so Does Bitcoin, to $9,200

A small bitcoin dip down to $9,100 recovered, but traders are unsure about further price appreciation.

• Bitcoin (BTC) trading around $9,240 as of 20:00 UTC (4 p.m. ET), gaining 0.25% over the previous 24 hours.
• Bitcoin’s 24-hour range: $9,118-$9,245
• BTC below 10-day and 50-day moving average, a bearish signal for market technicians.

The market at $9,200 per bitcoin erased gains earlier in the week when the world’s oldest cryptocurrency popped to $9,400 Wednesday. “Two days ago, bitcoin rallied 1.9% then dropped 2.1% and is now flat. Just another failed breakout,” said Elie Le Rest, partner at quantitative trading firm ExoAlpha. Still, traders buying when prices dip isn’t providing enough momentum to significantly move the market higher, Le Rest added. “There’s less and less amplitude to move, so we should see in the next couple of days how this resolves.”

Several traders pointed to $9,400, where momentum might turn into a bullish market. “The price of bitcoin again returned to the range of $9,000-$9,200 after the asset again failed to pass a key level at $9,392,” said Constatin Kogan, a partner at cryptocurrency fund BitBull Capital. Indeed, since the start of July bitcoin has struggled to break out of $9,000-$9,200 territory. 

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Josh Rager, a trader and adviser of crypto brokerage LevelInvest, says it will be hard to get back to Wednesday’s $9,400 price range for the time being. “I think bitcoin drops short of $9,400 to make another lower high on the trend,” he said.

However, bets in the options market overwhelmingly favor bitcoin higher than $9,200, with options on $11,250 per BTC especially popular.

Nonetheless, options volumes continued to trend down, changing the trader profile, noted Vishal Shah, founder of Alpha5. “This is only traders that play options on the high-end of the risk spectrum,” Shah said. 

Read More: Exchanges See Drop in Volumes as Bitcoin Volatility Approaches 2020 Low

Related: Bitcoin Reaches Record High Correlation to S&P 500

ExoAlpha’s Le Rest predicted a wide range where price might head into the weekend and beyond. “We’re pretty neutral as it could really go both ways – up to $9,450 on way to tackle $10,000 once again, or down to $8,200,” he said. 

Bitcoin locked in DeFi up 200%

The second-largest cryptocurrency by market capitalization, ether (ETH), was flat Friday, trading around $239 and in the red 0.10% in 24 hours as of 20:00 UTC (4:00 p.m. ET). Ether is up 84% in 2020, outperforming bitcoin’s 28% year-to-date gains. 

The amount of bitcoin on DeFi, which mostly runs on the Ethereum network, has risen from 5,000 to 15,000 BTC in the past month. That is a 200% increase, according to data aggregator DeFi Pulse. 

By locking bitcoin in DeFi, investors are able to earn a reward, or “yield,” without having to trade into another asset such as ether. In July’s low spot exchange volume environment, traders might be increasingly locking crypto rather than trading it. 

Read more: Nearly $60M in Bitcoin Moved to Ethereum in June

Other markets

Digital assets on the CoinDesk 20 are mixed Friday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• decred (DCR)+ 6%
• monero (XMR) + 3%
• lisk (LSK) + 0.55%

Read More: Kyber Token’s Eightfold Increase Reveals Bet on Future

Notable losers as of 20:00 UTC (4:00 p.m. ET):

• dogecoin (DOGE) – 14%
• cardano (ADA) – 3%
• stellar (XLM) – 2.5%

Read More: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

Equities:

• In Asia the Nikkei 225 ended the day down 1.06% as losses in the transportation and real estate sectors dragged the index lower. 
• Europe’s FTSE 100 index closed in the green 0.80% as financial sector stocks led gains for the day.
• The U.S. S&P 500 index gained 1%, with record highs in tech stocks and optimistic news on a possible coronavirus treatment.

Read More: Coinbase Plans First-Ever Investor Day Amid Talk It May Go Public

Commodities: 

• Oil is up 2.2%. Price per barrel of West Texas Intermediate crude: $40.49.
• Gold is still around $1,800 Friday, flat in the red 0.10% at $1,799 per ounce.

Read More: A Rare Glimpse Into How Crypto Is Really Used in Venezuela

Treasurys:

• U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were up most on the two-year, in the green 2.9%.

Read More: The Fed’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Related Stories

• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?
• Market Wrap: Stocks Tick Downward and so Does Bitcoin, to $9,200

For a decade, Michael Krieger’s Liberty Blitzkrieg has been an essential alternative financial and cultural voice. As outrage culture ramps up, here’s why it’s ending.

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

This episode is sponsored by Bitstamp and Crypto.com.

Related: The Mixed Signals Economy: The Breakdown Weekly Recap

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Today on the Brief:

• Hong Kong re-closes schools based on COVID-19 growth
• Coinbase explores direct U.S. exchange listing
• China starts selling stock, easing massive rally

See also: Why the Robinhood Revolution Is the Future of Finance, Feat. Jill Carlson

Today’s Interview: Michael Krieger

Our main conversation is with Liberty Blitzkrieg creator and editor Michael Krieger. Michael announced just before recording that he is done publishing on the LB site. He and NLW discuss:

• How Michael became disaffected while working on Wall Street during the Great Financial Crisis
• How Zero Hedge amplified Liberty Blitzkrieg and sent Michael on a decade-long writing path
• How Michael discovered bitcoin and the bitcoin community in 2012
• Why social media platforms need to be regulated with the principles of the First Amendment 
• How all political parties use division to stay in power 
• How outrage culture has become endemic, commodified and co-opted by existing power 
• Why the only option to fight outrage culture is to opt out

Find our guest online:

Related: Bitcoin News Roundup for July 10, 2020

Website: libertyblitzkrieg.com

Twitter: @LibertyBlitz

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Related Stories

• Inequality, Social Chaos, Bankruptcy Rallies: The Best Insights From FinTwit June 2020
• Bitcoin News Roundup for July 9, 2020

For a decade, Michael Krieger’s Liberty Blitzkrieg has been an essential alternative financial and cultural voice. As outrage culture ramps up, here’s why it’s ending.

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

This episode is sponsored by Bitstamp and Crypto.com.

Related: Bitcoin News Roundup for July 10, 2020

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Today on the Brief:

• Hong Kong re-closes schools based on COVID-19 growth
• Coinbase explores direct U.S. exchange listing
• China starts selling stock, easing massive rally

See also: Why the Robinhood Revolution Is the Future of Finance, Feat. Jill Carlson

Today’s Interview: Michael Krieger

Our main conversation is with Liberty Blitzkrieg creator and editor Michael Krieger. Michael announced just before recording that he is done publishing on the LB site. He and NLW discuss:

• How Michael became disaffected while working on Wall Street during the Great Financial Crisis
• How Zero Hedge amplified Liberty Blitzkrieg and sent Michael on a decade-long writing path
• How Michael discovered bitcoin and the bitcoin community in 2012
• Why social media platforms need to be regulated with the principles of the First Amendment 
• How all political parties use division to stay in power 
• How outrage culture has become endemic, commodified and co-opted by existing power 
• Why the only option to fight outrage culture is to opt out

Find our guest online:

Related: Inequality, Social Chaos, Bankruptcy Rallies: The Best Insights From FinTwit June 2020

Website: libertyblitzkrieg.com

Twitter: @LibertyBlitz

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Related Stories

• Bitcoin News Roundup for July 9, 2020
• TikTok Let the Doge Out: Why TikTok Doge Is Everything About 2020 Finance in One Story

The social payments app Bottlepay (née Bottle Pay) aims to relaunch in the next few weeks, after shuttering due to regulations in December 2019. 

After restructuring the bitcoin wallet product to fit Europe’s anti-money laundering directive (AMLD5), the British startup is offering an exchange wallet with social features on Reddit, Twitter and Discord. Bottlepay co-founder Pete Cheyne said there are over 1,000 people on the waitlist for the closed beta relaunch in August. 

“Because we’re moving to an app-native product there’s a lot more we can do,” Cheyne said. “We’re also adding in the ability to have scheduled payments to buy more bitcoin.”

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Read more: Bitcoin App Bottle Pay Shuts Down Over Impending EU Money-Laundering Laws

Square’s Cash App and others already offer this feature in the United States, but in Europe, where Bottlepay is focused, there’s even an added feature that forwards the bitcoin to another wallet address if desired. This means users may choose custodial or non-custodial services. 

“Lightning works in the background, without users having to manage channels,” Cheyne added. “There will be a small fee for exchanging between fiat and bitcoin, and vice versa. … There will also be tiers because people are interested in our app for different use cases.”

Bottlepay CEO Mark Webster said his team of 11 employees has “constant funding” from their angel investors, who previously traded equity for $2 million in 2019. Webster added the company won’t support tokens in the near future, although it might someday. This year it is all about bitcoin. 

Related: Bitcoin Reaches Record High Correlation to S&P 500

“I think Lightning is at the core of the strategy,” Webster said, referring to the bitcoin scaling solution. “As consumer demand increases we can open more channels.”

Read more: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

As part of this shift, Webster said he is hiring, not tightening his belt for the recession, hoping to grow the team to roughly 35 people by 2021. Cheyne said several of the hires so far have been for the marketing and legal teams, which did a vast restructuring of the product. The added hassle of know-your-customer requirements also created an opportunity for wallet features.

“You can store a fiat balance,” Cheyne said. “Scan a Lightning code and pay that from your pound or euro balance.”

For now, Bottlepay will only open the beta program to users in Europe. But Webster said the company hopes to open the beta to Americans and reactivate Telegram options by 2021. When it does, it may be one of the few fiat-friendly wallets that leverages Lightning without any hassle for the user. In some ways, this is comparable to the American Lightning-powered consumer app Strike. 

“This time away has been valuable for the company to refine our strategy,” Webster said. “We’re still extremely focused on Lightning.” 

Related Stories

• Bitcoin Wallet Electrum Now Supports Lightning, Watchtowers and Submarine Swaps
• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

The social payments app Bottlepay (née Bottle Pay) aims to relaunch in the next few weeks, after shuttering due to regulations in December 2019. 

After restructuring the bitcoin wallet product to fit Europe’s anti-money laundering directive (AMLD5), the British startup is offering an exchange wallet with social features on Reddit, Twitter and Discord. Bottlepay co-founder Pete Cheyne said there are over 1,000 people on the waitlist for the closed beta relaunch in August. 

“Because we’re moving to an app-native product there’s a lot more we can do,” Cheyne said. “We’re also adding in the ability to have scheduled payments to buy more bitcoin.”

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Read more: Bitcoin App Bottle Pay Shuts Down Over Impending EU Money-Laundering Laws

Square’s Cash App and others already offer this feature in the United States, but in Europe, where Bottlepay is focused, there’s even an added feature that forwards the bitcoin to another wallet address if desired. This means users may choose custodial or non-custodial services. 

“Lightning works in the background, without users having to manage channels,” Cheyne added. “There will be a small fee for exchanging between fiat and bitcoin, and vice versa. … There will also be tiers because people are interested in our app for different use cases.”

Bottlepay CEO Mark Webster said his team of 11 employees has “constant funding” from their angel investors, who previously traded equity for $2 million in 2019. Webster added the company won’t support tokens in the near future, although it might someday. This year it is all about bitcoin. 

Related: Bitcoin Reaches Record High Correlation to S&P 500

“I think Lightning is at the core of the strategy,” Webster said, referring to the bitcoin scaling solution. “As consumer demand increases we can open more channels.”

Read more: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

As part of this shift, Webster said he is hiring, not tightening his belt for the recession, hoping to grow the team to roughly 35 people by 2021. Cheyne said several of the hires so far have been for the marketing and legal teams, which did a vast restructuring of the product. The added hassle of know-your-customer requirements also created an opportunity for wallet features.

“You can store a fiat balance,” Cheyne said. “Scan a Lightning code and pay that from your pound or euro balance.”

For now, Bottlepay will only open the beta program to users in Europe. But Webster said the company hopes to open the beta to Americans and reactivate Telegram options by 2021. When it does, it may be one of the few fiat-friendly wallets that leverages Lightning without any hassle for the user. In some ways, this is comparable to the American Lightning-powered consumer app Strike. 

“This time away has been valuable for the company to refine our strategy,” Webster said. “We’re still extremely focused on Lightning.” 

Related Stories

• Bitcoin Wallet Electrum Now Supports Lightning, Watchtowers and Submarine Swaps
• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Bitcoin’s one-year correlation to the Standard & Poor’s 500 index hit record highs as the leading cryptocurrency continues to trade in lockstep with traditional financial markets.

The realized correlation, which measures the relationship between two assets, reached 0.367 on Thursday, up from -0.06 on January 1, according to data from Coin Metrics. Bitcoin’s correlation to the benchmark index of U.S. stocks has made new all-time highs for the past three consecutive trading days. Before this, the previous high was on July 5, which lasted for one day. 

It’s worth noting that a coefficient of 0.367 is not overwhelmingly strong, but correlations on shorter-term bases are significantly higher. The closer a correlation coefficient is to 1.0, the more likely two things are to move in the same direction.

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Bitcoin’s one-month correlation to the S&P, for example, reached a multi-year high of 0.79 on Wednesday, according to data from Skew, indicating a much stronger short-term correlation trend as levels of investor uncertainty and expected volatility remain high. Analysts expect the trend to continue and even strengthen.

Bitcoin’s strong performance from March lows has fueled demand to buy and trade bitcoin, even with the coronavirus pandemic battering the economy. Investors are increasingly looking for inflation hedges like gold or bitcoin amid aggressive expansionary monetary policy, which has also pushed equity prices higher at the same time. 

See also: The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Bitcoin has historically exhibited little to no correlation to traditional asset classes. But more consistent correlations are likely as the cryptocurrency space matures, according to Kevin Kelly, former equity analyst at Bloomberg and co-founder of cryptocurrency research firm Delphi Digital.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

“One of the biggest reasons we haven’t seen these develop already is the average investor profile is unlike traditional markets, where large institutional players dominate,” Kelly said in a letter to clients.

Related Stories

• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?
• Market Wrap: Stocks Tick Downward and so Does Bitcoin, to $9,200

Bitcoin’s one-year correlation to the Standard & Poor’s 500 index hit record highs as the leading cryptocurrency continues to trade in lockstep with traditional financial markets.

The realized correlation, which measures the relationship between two assets, reached 0.367 on Thursday, up from -0.06 on January 1, according to data from Coin Metrics. Bitcoin’s correlation to the benchmark index of U.S. stocks has made new all-time highs for the past three consecutive trading days. Before this, the previous high was on July 5, which lasted for one day. 

It’s worth noting that a coefficient of 0.367 is not overwhelmingly strong, but correlations on shorter-term bases are significantly higher. The closer a correlation coefficient is to 1.0, the more likely two things are to move in the same direction.

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Bitcoin’s one-month correlation to the S&P, for example, reached a multi-year high of 0.79 on Wednesday, according to data from Skew, indicating a much stronger short-term correlation trend as levels of investor uncertainty and expected volatility remain high. Analysts expect the trend to continue and even strengthen.

Bitcoin’s strong performance from March lows has fueled demand to buy and trade bitcoin, even with the coronavirus pandemic battering the economy. Investors are increasingly looking for inflation hedges like gold or bitcoin amid aggressive expansionary monetary policy, which has also pushed equity prices higher at the same time. 

See also: The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Bitcoin has historically exhibited little to no correlation to traditional asset classes. But more consistent correlations are likely as the cryptocurrency space matures, according to Kevin Kelly, former equity analyst at Bloomberg and co-founder of cryptocurrency research firm Delphi Digital.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

“One of the biggest reasons we haven’t seen these develop already is the average investor profile is unlike traditional markets, where large institutional players dominate,” Kelly said in a letter to clients.

Related Stories

• The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?
• Market Wrap: Stocks Tick Downward and so Does Bitcoin, to $9,200

One of the most popular Bitcoin wallets, Electrum, now supports Lightning Network payments.

The latest swathe of major changes was released in version 4.0, one of its biggest upgrades since the Bitcoin wallet launched in 2011. (Note: Since the 4.0 release, some bug fixes have been added.) Lightning payments are seen as the future of Bitcoin because they’re cheaper and would allow many more users to make bitcoin cryptocurrency transactions at once. 

This makes Electrum the oldest wallet to have adopted Lightning payments so far.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Lightning support in Electrum is a long time coming. Electrum founder Thomas Voegtlin first told CoinDesk last summer that Lightning would make it into the next release.

“[We] decided to adopt Lightning because we see it as the way forward for Bitcoin. Lightning is quite complicated and not without its issues but ultimately it is the most promising currently known way of scaling Bitcoin. It also allows fast, cheap and more private payments,” pseudonymous Electrum developer SomberNight told CoinDesk in an email.

Read more: What is Bitcoin’s Lightning Network?

In order to support Lightning transactions, the developers actually wrote an entirely new implementation of the Lightning protocol “from scratch,” SomberNight said, instead of using a popular implementation, such as Lightning Labs’ LND or Blockstream’s c-lightning. That’s one reason the release took so long.

An Electrum watchtower

Related: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

In addition to support for Lightning payments, Electrum 4.0.2 now supports a number of other innovations with this new release that could make using Lightning more secure and less bumpy for users.

For one, Electrum has implemented its own Lightning watchtower, an important component of the Lightning Network, which scans the Bitcoin blockchain in order to detect and prevent fraud.

Read more: Bitcoin Lightning Fraud? Laolu Is Building a ‘Watchtower’ to Fight It

Though there are a few watchtower implementations out there now, they still aren’t commonly used yet across the Lightning Network, despite being an important piece. In this way, Electrum’s watchtower support is a step toward a better Lightning Network. 

Submarine swaps

Then, there are “submarine swaps.” Accepting payments is still a tricky part of the Lightning Network because users need what’s called “incoming capacity” to receive payments, which means funds need to be placed in a certain part of a person’s Lightning “channel,” which is sort of like an account . 

The irony is users “will not be able to receive payments until they spend some money,” as SomberNight put it.

“To solve this, we implemented ‘submarine swaps,’ which are atomic exchanges of on-chain and Lightning bitcoins,” SomberNight told CoinDesk. In other words, submarine swaps makes it possible to send normal bitcoin to a Lightning channel, offering one way for users to fill up their incoming capacity.

“Electrum Technologies runs a central server that facilitates these swaps, for a fee. This allows users to buy incoming capacity to be able to receive Lightning payments,” the developer added.

Hardware support for Lightning

Electrum also integrated Lightning with hardware support. Because hardware wallets store bitcoin offline beyond the reach of hackers they are considered one of the best ways of securing bitcoin.

“You can [now] use Lightning directly with your hardware wallet: Channel-opens and channel-closes can directly pay from and to addresses backed by a hardware device. Your Lightning balance, while in channels, will not be secured by the hardware but all your on-chain balance will be, and it’s very convenient to have a shared single wallet that you can use to pay both on-chain and Lightning,” SomberNight told CoinDesk.

The Electrum team has been working on other features too. Electrum wallet users can view the full release notes here.

Related Stories

• Bitcoin’s Lightning Network Is Vulnerable to ‘Looting’: New Research Explains
• Researchers Expose Flaw in Bitcoin Wallets That Could Be Exploited for Double-Spending

One of the most popular Bitcoin wallets, Electrum, now supports Lightning Network payments.

The latest swathe of major changes was released in version 4.0, one of its biggest upgrades since the Bitcoin wallet launched in 2011. (Note: Since the 4.0 release, some bug fixes have been added.) Lightning payments are seen as the future of Bitcoin because they’re cheaper and would allow many more users to make bitcoin cryptocurrency transactions at once. 

This makes Electrum the oldest wallet to have adopted Lightning payments so far.

Related: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

Lightning support in Electrum is a long time coming. Electrum founder Thomas Voegtlin first told CoinDesk last summer that Lightning would make it into the next release.

“[We] decided to adopt Lightning because we see it as the way forward for Bitcoin. Lightning is quite complicated and not without its issues but ultimately it is the most promising currently known way of scaling Bitcoin. It also allows fast, cheap and more private payments,” pseudonymous Electrum developer SomberNight told CoinDesk in an email.

Read more: What is Bitcoin’s Lightning Network?

In order to support Lightning transactions, the developers actually wrote an entirely new implementation of the Lightning protocol “from scratch,” SomberNight said, instead of using a popular implementation, such as Lightning Labs’ LND or Blockstream’s c-lightning. That’s one reason the release took so long.

An Electrum watchtower

Related: Bitcoin’s Lightning Network Is Vulnerable to ‘Looting’: New Research Explains

In addition to support for Lightning payments, Electrum 4.0.2 now supports a number of other innovations with this new release that could make using Lightning more secure and less bumpy for users.

For one, Electrum has implemented its own Lightning watchtower, an important component of the Lightning Network, which scans the Bitcoin blockchain in order to detect and prevent fraud.

Read more: Bitcoin Lightning Fraud? Laolu Is Building a ‘Watchtower’ to Fight It

Though there are a few watchtower implementations out there now, they still aren’t commonly used yet across the Lightning Network, despite being an important piece. In this way, Electrum’s watchtower support is a step toward a better Lightning Network. 

Submarine swaps

Then, there are “submarine swaps.” Accepting payments is still a tricky part of the Lightning Network because users need what’s called “incoming capacity” to receive payments, which means funds need to be placed in a certain part of a person’s Lightning “channel,” which is sort of like an account . 

The irony is users “will not be able to receive payments until they spend some money,” as SomberNight put it.

“To solve this, we implemented ‘submarine swaps,’ which are atomic exchanges of on-chain and Lightning bitcoins,” SomberNight told CoinDesk. In other words, submarine swaps makes it possible to send normal bitcoin to a Lightning channel, offering one way for users to fill up their incoming capacity.

“Electrum Technologies runs a central server that facilitates these swaps, for a fee. This allows users to buy incoming capacity to be able to receive Lightning payments,” the developer added.

Hardware support for Lightning

Electrum also integrated Lightning with hardware support. Because hardware wallets store bitcoin offline beyond the reach of hackers they are considered one of the best ways of securing bitcoin.

“You can [now] use Lightning directly with your hardware wallet: Channel-opens and channel-closes can directly pay from and to addresses backed by a hardware device. Your Lightning balance, while in channels, will not be secured by the hardware but all your on-chain balance will be, and it’s very convenient to have a shared single wallet that you can use to pay both on-chain and Lightning,” SomberNight told CoinDesk.

The Electrum team has been working on other features too. Electrum wallet users can view the full release notes here.

Related Stories

• Researchers Expose Flaw in Bitcoin Wallets That Could Be Exploited for Double-Spending
• Cryptography Startup Brings Private Payment Channels to Tezos Blockchain

Coinbase will host its first investor day, New York State prosecutors won a jurisdictional dispute involving Bitfinex and a protocol arms race is unfolding in Latin America. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Not Your Traditional Investor Day
On the same day Reuters reported Coinbase is looking to go public, the exchange scheduled its first-ever investor day, for Aug. 14. Investor days can often signal a planned direct listing, Jamie McGurk, a former operating partner at Andreessen Horowitz, has said. “This will not be a traditional investor day, but rather an opportunity to hear our perspective on the cryptoeconomy and learn about Coinbase’s role in the ecosystem,” said Coinbase spokesperson Daniel Harrison.

Related: First Mover: Kyber Token’s Eightfold Increase Reveals Bet on Future Market-Share Growth

Employment Kerfuffle
Former Tron Foundation employees are challenging a court order allowing the  foundation to settle a lawsuit through arbitration, rather than in court. The initial complaint centers around allegations of wrongful termination and hostile work practices at BitTorrent, a file-sharing service acquired by the Tron Foundation.

Appeal Denied
Bitfinex will have to face allegations from New York State prosecutors that it lost $850 million in client and corporate funds and tried to cover this hole with funds from the affiliated tether stablecoin, according to a ruling by the State Supreme Court’s Appellate Division on Thursday. The exchange’s parent iFinex initially claimed the prosecutors didn’t have jurisdiction over the Hong Kong-headquartered firm, which the appeals court rejected. The court also dismissed the argument that tether was neither a commodity nor a security.

Canaan Shakeup
Three Canaan Creative directors were dropped from the company’s business registry, prompting speculation of a power grab. For months an internal power struggle between co-founders Micree Zhan and Jihan Wu has wracked the Nasdaq-listed firm, which has been suffering growing competition and reduced profits following the Bitcoin network’s programmatic halving. 

Ethereum v. EOS
Ethereum and EOSIO are battling it out over enterprise blockchain business across Latin America. The square up pits ConsenSys in one corner and LatamLink in the other, a project backed by the Inter-American Development Bank, over which decentralized protocol will win the arms race.

Quick bites

• WikiLeaks online store now accepts Bitcoin Lightning payments
• Crypto "giveaway" scams continue to flourish on YouTube
• A 35-year-old programmer pleaded guilty to a $722 million (in bitcoin) Ponzi scheme

The big picture

Related: Blockchain Bites: CENTRE’s Blacklist, Brazil’s Stablecoin Boom and Coinbase Is Going Public?

Venezuela’s Real Use Case
After airdropping cryptocurrency to 60,000 users in Venezuela, an AirTM survey gives a snapshot of how crypto is actually used in the economically troubled nation.

Venezuela is often a proving ground for do-gooding crypto companies and protocols. Payments network Dash, for one, famously made headway in the nation beset by hyperinflation. 

AirTM distributed approximately $300,000 worth of crypto to Venezuelans, and while only 57% of recipients engaged with the funds, many were able to successfully use the donations to buy food and medicines. Others began treating the AirTM platform as a personal bank. 

The bigger picture is coming into focus: Crypto only becomes a viable alternative to traditional financial systems if there is robust infrastructure to support it. “If Venezuela offers an example of bitcoin usage, then it appears there is user demand for bitcoin-friendly services provided by a regular fintech company,” CoinDesk’s Leigh Cuen reports.

Market intel

Balance Sheet Contractions. Bullish for Bitcoin?
As the U.S. Federal Reserve begins to unwind its balance sheet, contracting $88 billion to $6.97 trillion (-1.5%) in the week ending July 8, some crypto observers are saying this could have negative consequences for bitcoin’s price. That’s because in recent months bitcoin has been positively correlated with traditional assets, which have rallied on the back of the Fed’s balance sheet expansion. But that’s far from the consensus view. “Zooming into the details of the Fed’s balance sheet reveals the reduction has been primarily driven by a drop in demand for emergency liquidity measures, a sign the coronavirus-induced stress in the financial system has eased,” CoinDesk’s Omkar Godbole writes. 

Opinion

Blockchain Credentials, Not Credentialism
Blockchain certification can verify expertise and experience, making transferring schools and changing jobs easier. But certificate proliferation may be a bigger problem, argues Stephanie Hurder, a CoinDesk columnist and founding economist at Prysm Group. “Non-degree credentials, such as badges and certificates, in particular are rapidly multiplying because they can now be digitally transmitted and verified at a minimal cost,” she writes.

Podcast corner

Inequality, Social Chaos, Bankruptcy Rallies
From the “Robinhood Rally” to the most profit-disconnected stock market in history, these are the most interesting ideas from FinTwit last month.

Who won #CryptoTwitter? Related Stories

• First Mover: Pie Anyone? DeFi Pushes ETF-Style Investing Toward Decentralization
• Blockchain Bites: DiDi to Trial the Digital Yuan and a Look at Chainlink’s Gains

Coinbase will host its first investor day, New York State prosecutors won a jurisdictional dispute involving Bitfinex and a protocol arms race is unfolding in Latin America. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Not Your Traditional Investor Day
On the same day Reuters reported Coinbase is looking to go public, the exchange scheduled its first-ever investor day, for Aug. 14. Investor days can often signal a planned direct listing, Jamie McGurk, a former operating partner at Andreessen Horowitz, has said. “This will not be a traditional investor day, but rather an opportunity to hear our perspective on the cryptoeconomy and learn about Coinbase’s role in the ecosystem,” said Coinbase spokesperson Daniel Harrison.

Related: First Mover: Kyber Token’s Eightfold Increase Reveals Bet on Future Market-Share Growth

Employment Kerfuffle
Former Tron Foundation employees are challenging a court order allowing the  foundation to settle a lawsuit through arbitration, rather than in court. The initial complaint centers around allegations of wrongful termination and hostile work practices at BitTorrent, a file-sharing service acquired by the Tron Foundation.

Appeal Denied
Bitfinex will have to face allegations from New York State prosecutors that it lost $850 million in client and corporate funds and tried to cover this hole with funds from the affiliated tether stablecoin, according to a ruling by the State Supreme Court’s Appellate Division on Thursday. The exchange’s parent iFinex initially claimed the prosecutors didn’t have jurisdiction over the Hong Kong-headquartered firm, which the appeals court rejected. The court also dismissed the argument that tether was neither a commodity nor a security.

Canaan Shakeup
Three Canaan Creative directors were dropped from the company’s business registry, prompting speculation of a power grab. For months an internal power struggle between co-founders Micree Zhan and Jihan Wu has wracked the Nasdaq-listed firm, which has been suffering growing competition and reduced profits following the Bitcoin network’s programmatic halving. 

Ethereum v. EOS
Ethereum and EOSIO are battling it out over enterprise blockchain business across Latin America. The square up pits ConsenSys in one corner and LatamLink in the other, a project backed by the Inter-American Development Bank, over which decentralized protocol will win the arms race.

Quick bites

• WikiLeaks online store now accepts Bitcoin Lightning payments
• Crypto "giveaway" scams continue to flourish on YouTube
• A 35-year-old programmer pleaded guilty to a $722 million (in bitcoin) Ponzi scheme

The big picture

Related: Blockchain Bites: CENTRE’s Blacklist, Brazil’s Stablecoin Boom and Coinbase Is Going Public?

Venezuela’s Real Use Case
After airdropping cryptocurrency to 60,000 users in Venezuela, an AirTM survey gives a snapshot of how crypto is actually used in the economically troubled nation.

Venezuela is often a proving ground for do-gooding crypto companies and protocols. Payments network Dash, for one, famously made headway in the nation beset by hyperinflation. 

AirTM distributed approximately $300,000 worth of crypto to Venezuelans, and while only 57% of recipients engaged with the funds, many were able to successfully use the donations to buy food and medicines. Others began treating the AirTM platform as a personal bank. 

The bigger picture is coming into focus: Crypto only becomes a viable alternative to traditional financial systems if there is robust infrastructure to support it. “If Venezuela offers an example of bitcoin usage, then it appears there is user demand for bitcoin-friendly services provided by a regular fintech company,” CoinDesk’s Leigh Cuen reports.

Market intel

Balance Sheet Contractions. Bullish for Bitcoin?
As the U.S. Federal Reserve begins to unwind its balance sheet, contracting $88 billion to $6.97 trillion (-1.5%) in the week ending July 8, some crypto observers are saying this could have negative consequences for bitcoin’s price. That’s because in recent months bitcoin has been positively correlated with traditional assets, which have rallied on the back of the Fed’s balance sheet expansion. But that’s far from the consensus view. “Zooming into the details of the Fed’s balance sheet reveals the reduction has been primarily driven by a drop in demand for emergency liquidity measures, a sign the coronavirus-induced stress in the financial system has eased,” CoinDesk’s Omkar Godbole writes. 

Opinion

Blockchain Credentials, Not Credentialism
Blockchain certification can verify expertise and experience, making transferring schools and changing jobs easier. But certificate proliferation may be a bigger problem, argues Stephanie Hurder, a CoinDesk columnist and founding economist at Prysm Group. “Non-degree credentials, such as badges and certificates, in particular are rapidly multiplying because they can now be digitally transmitted and verified at a minimal cost,” she writes.

Podcast corner

Inequality, Social Chaos, Bankruptcy Rallies
From the “Robinhood Rally” to the most profit-disconnected stock market in history, these are the most interesting ideas from FinTwit last month.

Who won #CryptoTwitter? Related Stories

• First Mover: Pie Anyone? DeFi Pushes ETF-Style Investing Toward Decentralization
• Blockchain Bites: DiDi to Trial the Digital Yuan and a Look at Chainlink’s Gains

In his most recent video, Charles Hoskinson frets that massive egos and bitter conflicts threaten to undermine the cryptocurrency community. But, with a touch of Trumpian hyperbole, he suggests that journalists and rivals are trying to keep his project down.

“Are we being too overzealous with Cardano?” the IOHK CEO mulls at the start of the YouTube talk.

He’s in a cluttered home study. Tribal masks leer down from the walls and a six-foot reprint of Jean-Leon Gerome’s “Pollice Verso” with its vanquishing gladiator hangs to the left.

Related: Cardano at One-Year High on Shelley Upgrade

Hoskinson leans forward on his desk, folding his arms: “Let’s be honest, as a community we’ve been really treated unfairly, we’ve been [urinated] on, [defecated] on, ‘scam, scam, scam, scam, no working product’ … everything that could be said, has been said.”

“In particular, crypto media has got it wrong a lot,” he says, looking directly at the camera.

For the past year, the chief of IOHK, the developer house for blockchain platform Cardano, has used YouTube extensively to communicate directly to his followers. Sometimes these videos are basic protocol updates or “ask me anything” sessions (AMAs). Other times it’s to hit back at perceived criticism.

This week’s animus surrounds a video that made the rounds on social media last week, which showed a marketing group promoting the Cardano project in a rural province of China. Both the Cardano project and Hoskinson said they have no affiliation with the group.

Shelley-shocked

Related: IOHK Invests Six-Figure Sum Into Crypto Asset Manager Wave Financial

Similarly, Hoskinson talks about an article from industry news site Crypto Briefing that argued the upcoming launch of staking protocol Shelley would not suffice to give Cardano the edge it needs over rival blockchain platforms such as TRON or EOS.

Following the article’s publication, he took to Twitter to call Crypto Briefing a “dumpster fire of a publication.”

See also: Cardano Developer IOHK Launches $20M Fund for Ecosystem Startups

In this video, Hoskinson’s head sways as he speaks, eyes still fixed on the camera. Journalists, podcasters and other influential figures, he says, have taken a definitive hard stance against Cardano; many of them won’t retract what they’ve said because they’re concerned about losing credibility with their audiences.

“You know, this is where Trump derangement syndrome came from,” Hoskinson says, pensively stroking his beard. The U.S. president is a “horrible human being … but everyone kinda just wrote him off and then, when he won, everyone went a little crazy about that and said we have to remediate this grievous mistake.”

Hoskinson goes on: “Well, similarly there is a bit of a Cardano derangement syndrome in the cryptocurrency space. People said our ideas will never work, we’ll never deliver, we’ll never actually ship anything, we’ve never actually accomplished anything. They just sometimes misrepresent reality completely.”

The tempo rises. Cardano’s been going for five years, he says. The critics have ignored everything the project has accomplished and a complex of rival project leads and media entities – he doesn’t specify who – have never ceased calling it a scam or a fraud.

Close to home

Hoskinson’s brows knit. The criticism is personal: “How would you feel if someone came up to you and said: ‘so when did you stop beating your wife? When did you stop being a child molester?’”

See also: Coinbase Custody to Support Secure Cardano Staking This Year

Still, he concedes, the digital asset industry has a serious problem with over-inflated egos and a lack of respect towards others. If this isn’t addressed soon, he warns, then the Amazons and the Googles will swoop in and co-opt crypto for themselves.

In the spirit of reconciliation, he says Cardano will try harder to connect with other projects. Possibly even build some sort of cross-chain operability with Litecoin. “It’ll be fun project – they think about it, we think about it, why not?”

But that doesn’t mean Hoskinson will ever stop speaking out publicly, especially when he feels “my community” is being attacked.

“Every now and then I’m going to kick people in the teeth on Twitter, it’s my style, I’m Italian, my grandmother’s Italian. It’s who I am, it’s where I come from, it’s how I think,” he says.

“I’ll never apologize for kicking people in the teeth that call my community bad.”

Talking to CoinDesk about the use of such strong rhetoric, Hoskinson said, while he may have said and done things that are “counter-productive or regrettable,” these came from the strain of “operating in a low empathy medium where people don’t even attempt to understand each other.”

Plus, what he considered unfair media coverage over the years, “does create a bit of bitterness and disappointment.”

In the end, Hoskinson said, “You should never forget that these ecosystems aren’t just protocols. They are people.”

Disclosure: The author previously worked at Crypto Briefing.

Related Stories

• Coinbase Custody to Support Secure Cardano Staking This Year
• Cardano Developer IOHK Launches $20M Fund for Ecosystem Startups

In his most recent video, Charles Hoskinson frets that massive egos and bitter conflicts threaten to undermine the cryptocurrency community. But, with a touch of Trumpian hyperbole, he suggests that journalists and rivals are trying to keep his project down.

“Are we being too overzealous with Cardano?” the IOHK CEO mulls at the start of the YouTube talk.

He’s in a cluttered home study. Tribal masks leer down from the walls and a six-foot reprint of Jean-Leon Gerome’s “Pollice Verso” with its vanquishing gladiator hangs to the left.

Related: Cardano at One-Year High on Shelley Upgrade

Hoskinson leans forward on his desk, folding his arms: “Let’s be honest, as a community we’ve been really treated unfairly, we’ve been [urinated] on, [defecated] on, ‘scam, scam, scam, scam, no working product’ … everything that could be said, has been said.”

“In particular, crypto media has got it wrong a lot,” he says, looking directly at the camera.

For the past year, the chief of IOHK, the developer house for blockchain platform Cardano, has used YouTube extensively to communicate directly to his followers. Sometimes these videos are basic protocol updates or “ask me anything” sessions (AMAs). Other times it’s to hit back at perceived criticism.

This week’s animus surrounds a video that made the rounds on social media last week, which showed a marketing group promoting the Cardano project in a rural province of China. Both the Cardano project and Hoskinson said they have no affiliation with the group.

Shelley-shocked

Related: IOHK Invests Six-Figure Sum Into Crypto Asset Manager Wave Financial

Similarly, Hoskinson talks about an article from industry news site Crypto Briefing that argued the upcoming launch of staking protocol Shelley would not suffice to give Cardano the edge it needs over rival blockchain platforms such as TRON or EOS.

Following the article’s publication, he took to Twitter to call Crypto Briefing a “dumpster fire of a publication.”

See also: Cardano Developer IOHK Launches $20M Fund for Ecosystem Startups

In this video, Hoskinson’s head sways as he speaks, eyes still fixed on the camera. Journalists, podcasters and other influential figures, he says, have taken a definitive hard stance against Cardano; many of them won’t retract what they’ve said because they’re concerned about losing credibility with their audiences.

“You know, this is where Trump derangement syndrome came from,” Hoskinson says, pensively stroking his beard. The U.S. president is a “horrible human being … but everyone kinda just wrote him off and then, when he won, everyone went a little crazy about that and said we have to remediate this grievous mistake.”

Hoskinson goes on: “Well, similarly there is a bit of a Cardano derangement syndrome in the cryptocurrency space. People said our ideas will never work, we’ll never deliver, we’ll never actually ship anything, we’ve never actually accomplished anything. They just sometimes misrepresent reality completely.”

The tempo rises. Cardano’s been going for five years, he says. The critics have ignored everything the project has accomplished and a complex of rival project leads and media entities – he doesn’t specify who – have never ceased calling it a scam or a fraud.

Close to home

Hoskinson’s brows knit. The criticism is personal: “How would you feel if someone came up to you and said: ‘so when did you stop beating your wife? When did you stop being a child molester?’”

See also: Coinbase Custody to Support Secure Cardano Staking This Year

Still, he concedes, the digital asset industry has a serious problem with over-inflated egos and a lack of respect towards others. If this isn’t addressed soon, he warns, then the Amazons and the Googles will swoop in and co-opt crypto for themselves.

In the spirit of reconciliation, he says Cardano will try harder to connect with other projects. Possibly even build some sort of cross-chain operability with Litecoin. “It’ll be fun project – they think about it, we think about it, why not?”

But that doesn’t mean Hoskinson will ever stop speaking out publicly, especially when he feels “my community” is being attacked.

“Every now and then I’m going to kick people in the teeth on Twitter, it’s my style, I’m Italian, my grandmother’s Italian. It’s who I am, it’s where I come from, it’s how I think,” he says.

“I’ll never apologize for kicking people in the teeth that call my community bad.”

Talking to CoinDesk about the use of such strong rhetoric, Hoskinson said, while he may have said and done things that are “counter-productive or regrettable,” these came from the strain of “operating in a low empathy medium where people don’t even attempt to understand each other.”

Plus, what he considered unfair media coverage over the years, “does create a bit of bitterness and disappointment.”

In the end, Hoskinson said, “You should never forget that these ecosystems aren’t just protocols. They are people.”

Disclosure: The author previously worked at Crypto Briefing.

Related Stories

• Coinbase Custody to Support Secure Cardano Staking This Year
• Cardano Developer IOHK Launches $20M Fund for Ecosystem Startups