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Microsoft’s Bitcoin-based decentralized identity tool, ION, went live with a beta version on mainnet Wednesday as one of many efforts by members of the Decentralized Identity Foundation (DIF) to fast-track tools anyone can use for COVID-19 crisis response programs. 

Microsoft and ConsenSys’s uPort project are both leading DIF members. Separately, Microsoft is also collaborating with the bitcoin startup Casa to create a user-friendly interface for managing multiple digital identities. 

“We’re excited to help ION take full advantage of technology like Bitcoin to vastly improve authentication, security and privacy on the internet,” Casa CEO Nick Neuman said in a press release.

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

“We are thrilled to have Casa collaborating on ION with us, which showcases the potential of building real-world applications that leverage the strong foundation Bitcoin provides,” Microsoft project lead Daniel Buchner said in a statement.

First announced last year, ION is meant to enable user-controlled logins that suit independent companies or services, rather than having system-providers (like Facebook) owning a user’s login credentials. ION can be used for many use cases that aren’t strictly related to health certificates or contact tracing, though the continued spread of coronavirus has influenced its potential usage. 

Read more: Microsoft Launches Decentralized Identity Tool on Bitcoin Blockchain

“Almost every group in the blockchain industry is coming up with use cases,” said ConsenSys employee and DIF leader Rouven Heck, referring to potential partnerships with government agencies. 

Related: First Mover: Bitcoin Bulls Might Get Negative Rates From Central Banks, Just Not the Fed

“There are conversations happening at the moment but it’s not a formal agreement,” Heck said. 

“Everybody wants to move fast and has a high interest in demonstrating this technology can be very powerful.”

The race is on for companies to work with governments on such high-tech emergency ID measures. There are generally two approaches, contact tracing and digitized medical records, while some Asian governments combine them. For example, dozens of blockchain startups joined forces to start creating an “immunity passport” approved by the World Wide Web Consortium (W3C) Verifiable Credentials standard. 

However, some people see both approaches as controversial, even dangerous. 

In May, attorney Elizabeth Renieris resigned from her advisory role at the ID2020 consortium for decentralized ID (DID) creators, including Microsoft, saying she “cannot be part of an organization overly influenced by commercial interests that only pays lip service to human rights.”

Read more: ‘Decentralized ID at All Costs’: Adviser Quits ID2020 Over Blockchain Fixation

Microsoft would not make executives available for an interview, though the company did provide a statement.

“Microsoft is continuing to work on the ION project, which has always included considerations on functionality for a wide range of use cases,” a Microsoft spokesperson told CoinDesk. “While there could be relevant software solutions inspired by new needs and current market demands, Microsoft believes in empowering people and protecting privacy and is committed to growing the open source community and industry standards.” 

Microsoft’s open source ION project uses the Bitcoin blockchain for something comparable to a coat-check ticket.

Rather than include all the data about the coat (or person), which would be hard to scale, it offers a Bitcoin-ledger reference number to the data’s chronology. The heavy data is actually stored between ION nodes using the InterPlanetary File System (IPFS). Whoever is anchoring the data pays a small fee to bitcoin miners to record the reference number.

“The focus is to make things highly interoperable,” Heck said, referring broadly to the urgent work being done on solutions across the space.

Part of the reason why organizations involved with DIF are working to make their technologies compatible across use cases and systems is interoperability might, at the very least, make it easier to build privacy features that apply across the spectrum. 

“Uport at ConsenSys are also working on projects,” Heck said. “Microsoft’s ION stack or Uport’s stack should be compatible.”

Even so, some privacy advocates say the project’s safeguards are lacking.

Read more: Israeli Bitcoiners See Surveillance as Unavoidable During Coronavirus Crisis

Former W3C employee Harry Halpin, now CEO of the privacy-tech startup Nym, said some of these efforts are simply repackaging previous work. 

“ID2020 is just the latest attempt to violate people’s privacy using feel-good rhetoric. It’s also part of a larger business plan. Microsoft and IBM’s entire bottom line is to build identity systems,” Halpin said. “Governments need to establish identities of who owns these keys, so they say, ‘OK, we’ll have an open standard, call it decentralized, and make it mandatory.’”

In the face of such harsh criticism, blockchain advocates are working to identify and minimize the ethical risks of the tools they continue to build. 

According to W3C member and nonprofit Blockchain Commons founder Christopher Allen, it’s not clear the contact tracing like Google and Apple are offering will work unless the vast majority of all Americans use them. Since it’s hard to get enough people on board for contact tracing to work, he worries the most salient result may simply be accelerated data collection.  

“Probably the most dangerous type of information, out of all types of personal information, is location data,” Allen said, explaining contact tracing would require privacy tech at multiple layers, from the app level on the phone to the internet infrastructure someone uses. 

“It’s incredibly hard to protect,” he said.

In reference to an open source emergency app in Israel, which does have privacy measures yet was operated in cooperation with various government entities, Allen said it’s clear “this data is already out there being collected and [location data] correlation is happening.”

Zcash Foundation researcher Henry de Valence agreed such systems are not the best use case for distributed ledger technology, or really any software. 

“I don’t think people should build those systems and I don’t think they would be effective at preventing the spread of disease,” he said, adding he does not see so-called immunity passports as any better. “There’s no cryptographically strong way to prove immunity one way or another.”

Read more: Immunity Passes Explained: Should We Worry About Privacy?

Some countries, like Honduras, have already implemented some type of blockchain solution for certificates that give people a type of ticket for medical services or free movement outdoors. 

However, in these cases, the government generally came up with a policy and found a startup to create the relevant tooling, rather than tech startups coming to policymakers with prospective offerings. One exception, which isn’t widely adopted so far and didn’t use blockchain technology, was NSO Group pitching surveillance technology to American police. Despite the societal risks, crypto companies are taking NSO Group’s proactive approach. 

Allen is slightly more optimistic about decentralized identity tools for self-sovereign medical records. 

“This architecture is ripe for solving this particular problem,” Allen said, warning this is only in reference to the digital certificate itself. (Whether the medical tests actually prove immunity is a different matter entirely.)  

As someone who collaborates with both immunity passport teams and companies involved with the DIF, he said they are taking disparate approaches based on their own evaluations of the tradeoffs. He’s not sure which will be better and hopes the market will decide. 

“We don’t know what the best answer is and we don’t have a strong rubric for what the best level of decentralization means,” Allen said of the immunity passport coalition. “Parties like DIF, with Microsoft and ConsenSys … [have] a different set of rubrics to decide the answer to their solution.”

On the other hand, Zcash’s de Valence remains skeptical.

“It’s the duty of technologists to ask what types of systems we’re creating and what kinds of social structures do those things create,” he said. 

Although Allen warned no technology offers a panacea, especially with regards to government overreach or recurring outbreaks, he expects some type of new “verifiable credential” technology will probably emerge from this crisis.

• Another Data Point Suggests Bitcoin Close to Prolonged Bull Market
• Market Wrap: DeFi Is Helping Ether Outpace Bitcoin This Year

Microsoft’s Bitcoin-based decentralized identity tool, ION, went live with a beta version on mainnet Wednesday as one of many efforts by members of the Decentralized Identity Foundation (DIF) to fast-track tools anyone can use for COVID-19 crisis response programs. 

Microsoft and ConsenSys’s uPort project are both leading DIF members. Separately, Microsoft is also collaborating with the bitcoin startup Casa to create a user-friendly interface for managing multiple digital identities. 

“We’re excited to help ION take full advantage of technology like Bitcoin to vastly improve authentication, security and privacy on the internet,” Casa CEO Nick Neuman said in a press release.

Related: First Mover: Bitcoin Bulls Might Get Negative Rates From Central Banks, Just Not the Fed

“We are thrilled to have Casa collaborating on ION with us, which showcases the potential of building real-world applications that leverage the strong foundation Bitcoin provides,” Microsoft project lead Daniel Buchner said in a statement.

First announced last year, ION is meant to enable user-controlled logins that suit independent companies or services, rather than having system-providers (like Facebook) owning a user’s login credentials. ION can be used for many use cases that aren’t strictly related to health certificates or contact tracing, though the continued spread of coronavirus has influenced its potential usage. 

Read more: Microsoft Launches Decentralized Identity Tool on Bitcoin Blockchain

“Almost every group in the blockchain industry is coming up with use cases,” said ConsenSys employee and DIF leader Rouven Heck, referring to potential partnerships with government agencies. 

Related: Another Data Point Suggests Bitcoin Close to Prolonged Bull Market

“There are conversations happening at the moment but it’s not a formal agreement,” Heck said. 

“Everybody wants to move fast and has a high interest in demonstrating this technology can be very powerful.”

The race is on for companies to work with governments on such high-tech emergency ID measures. There are generally two approaches, contact tracing and digitized medical records, while some Asian governments combine them. For example, dozens of blockchain startups joined forces to start creating an “immunity passport” approved by the World Wide Web Consortium (W3C) Verifiable Credentials standard. 

However, some people see both approaches as controversial, even dangerous. 

In May, attorney Elizabeth Renieris resigned from her advisory role at the ID2020 consortium for decentralized ID (DID) creators, including Microsoft, saying she “cannot be part of an organization overly influenced by commercial interests that only pays lip service to human rights.”

Read more: ‘Decentralized ID at All Costs’: Adviser Quits ID2020 Over Blockchain Fixation

Microsoft would not make executives available for an interview, though the company did provide a statement.

“Microsoft is continuing to work on the ION project, which has always included considerations on functionality for a wide range of use cases,” a Microsoft spokesperson told CoinDesk. “While there could be relevant software solutions inspired by new needs and current market demands, Microsoft believes in empowering people and protecting privacy and is committed to growing the open source community and industry standards.” 

Microsoft’s open source ION project uses the Bitcoin blockchain for something comparable to a coat-check ticket.

Rather than include all the data about the coat (or person), which would be hard to scale, it offers a Bitcoin-ledger reference number to the data’s chronology. The heavy data is actually stored between ION nodes using the InterPlanetary File System (IPFS). Whoever is anchoring the data pays a small fee to bitcoin miners to record the reference number.

“The focus is to make things highly interoperable,” Heck said, referring broadly to the urgent work being done on solutions across the space.

Part of the reason why organizations involved with DIF are working to make their technologies compatible across use cases and systems is interoperability might, at the very least, make it easier to build privacy features that apply across the spectrum. 

“Uport at ConsenSys are also working on projects,” Heck said. “Microsoft’s ION stack or Uport’s stack should be compatible.”

Even so, some privacy advocates say the project’s safeguards are lacking.

Read more: Israeli Bitcoiners See Surveillance as Unavoidable During Coronavirus Crisis

Former W3C employee Harry Halpin, now CEO of the privacy-tech startup Nym, said some of these efforts are simply repackaging previous work. 

“ID2020 is just the latest attempt to violate people’s privacy using feel-good rhetoric. It’s also part of a larger business plan. Microsoft and IBM’s entire bottom line is to build identity systems,” Halpin said. “Governments need to establish identities of who owns these keys, so they say, ‘OK, we’ll have an open standard, call it decentralized, and make it mandatory.’”

In the face of such harsh criticism, blockchain advocates are working to identify and minimize the ethical risks of the tools they continue to build. 

According to W3C member and nonprofit Blockchain Commons founder Christopher Allen, it’s not clear the contact tracing like Google and Apple are offering will work unless the vast majority of all Americans use them. Since it’s hard to get enough people on board for contact tracing to work, he worries the most salient result may simply be accelerated data collection.  

“Probably the most dangerous type of information, out of all types of personal information, is location data,” Allen said, explaining contact tracing would require privacy tech at multiple layers, from the app level on the phone to the internet infrastructure someone uses. 

“It’s incredibly hard to protect,” he said.

In reference to an open source emergency app in Israel, which does have privacy measures yet was operated in cooperation with various government entities, Allen said it’s clear “this data is already out there being collected and [location data] correlation is happening.”

Zcash Foundation researcher Henry de Valence agreed such systems are not the best use case for distributed ledger technology, or really any software. 

“I don’t think people should build those systems and I don’t think they would be effective at preventing the spread of disease,” he said, adding he does not see so-called immunity passports as any better. “There’s no cryptographically strong way to prove immunity one way or another.”

Read more: Immunity Passes Explained: Should We Worry About Privacy?

Some countries, like Honduras, have already implemented some type of blockchain solution for certificates that give people a type of ticket for medical services or free movement outdoors. 

However, in these cases, the government generally came up with a policy and found a startup to create the relevant tooling, rather than tech startups coming to policymakers with prospective offerings. One exception, which isn’t widely adopted so far and didn’t use blockchain technology, was NSO Group pitching surveillance technology to American police. Despite the societal risks, crypto companies are taking NSO Group’s proactive approach. 

Allen is slightly more optimistic about decentralized identity tools for self-sovereign medical records. 

“This architecture is ripe for solving this particular problem,” Allen said, warning this is only in reference to the digital certificate itself. (Whether the medical tests actually prove immunity is a different matter entirely.)  

As someone who collaborates with both immunity passport teams and companies involved with the DIF, he said they are taking disparate approaches based on their own evaluations of the tradeoffs. He’s not sure which will be better and hopes the market will decide. 

“We don’t know what the best answer is and we don’t have a strong rubric for what the best level of decentralization means,” Allen said of the immunity passport coalition. “Parties like DIF, with Microsoft and ConsenSys … [have] a different set of rubrics to decide the answer to their solution.”

On the other hand, Zcash’s de Valence remains skeptical.

“It’s the duty of technologists to ask what types of systems we’re creating and what kinds of social structures do those things create,” he said. 

Although Allen warned no technology offers a panacea, especially with regards to government overreach or recurring outbreaks, he expects some type of new “verifiable credential” technology will probably emerge from this crisis.

• Market Wrap: DeFi Is Helping Ether Outpace Bitcoin This Year
• LocalBitcoins’ Volume Holds Steady Despite Stricter Compliance Procedures

New York congressional candidate Jonathan Herzog hosted a live YouTube broadcast with Ethereum creator Vitalik Buterin on Monday, along with author and activist Glen Weyl. 

Herzog is a Democrat who previously worked on Andrew Yang’s failed yet crypto-savvy presidential campaign earlier in 2020. 

These three white men talked about the protests erupting across the United States. To his credit, the Russian-Canadian Buterin spoke broadly instead of attempting to comment on inequality in American politics. He said the current generation is facing a global “crisis of legitimacy,” concerning both corporations and “many types of governments.” 

Related: ‘Whale’ Just Sent $130 in Cryptocurrency With a $2.6M Transaction Fee

“The challenge here is can we create systems that allow some groups of people to cooperate without that downside of a centralized or trusted actor having to be in the middle,” Buterin said. 

Buterin skillfully framed his software project as it relates to the current economic and political crisis. Yet this YouTube broadcast on Herzog’s campaign trail was hardly Buterin’s first brush with politics. 

Read more: The Crypto Community Needs to Stand Up and Fight Racism

Buterin met with Russian President Vladimir Putin in 2017 because the Ethereum movement is – as a threat to incumbent systems – inevitably political (as Ethereum developer Vlad Zamfir often tweets). Former Ethereum Foundation employee Virgil Griffith, Buterin’s American mentor, is even on trial for allegedly violating sanctions related to North Korea. Token evangelism is a type of diplomacy, for better or worse.

Related: ConsenSys Muscles Into Compliance With New Regulatory Product for DeFi

None of this is to say these men will achieve their vision, nor that they have the “right” vision for political reform. But as this underdog democratic candidate in New York revealed, it would be naive at this point to overlook how crypto pioneers have gone from trading magic internet money to influencing politicians around the world. 

Herzog literally asked for Buterin’s perspective on policy issues as part of this campaign broadcast. 

Buterin’s philosophical compatriot, Glen Weyl, is the Ethereum community’s latest ideological godfather (after both Griffith and Ethereum co-founder Joe Lubin). 

Weyl charmed diplomats and bankers at the World Economic Forum 2020 and inspired an activist movement promoted through the RadicalxChange Foundation. He takes Ayn Rand’s hyper-individualistic ideology and reshapes it to fit liberal morality. Equality can be achieved through free market auction, he argues in his economic manifesto “Radical Markets.” An organizer said more than 900 people are signed up for the upcoming RadicalxChange virtual conference starting June 19, where Buterin is also a headliner. 

“More than ever, in the time of COVID-19, the problems we face are collective, not individual. And if we each try to protect ourselves, rather than some notion of the public,” Weyl said on Monday. “It’s like trying to replace the military with a bunch of guards protecting individual buildings.”

Read more: How a Crypto Guru Shaped Harvard’s Roadmap for Reopening the US Economy

The key, he continued, is distribution mechanisms that come from pre-determined, historic hierarchies, aka structural bias. Together, the charismatic economist and crypto pioneer joined forces to argue in favor of quadratic funding and Ethereum governance, which Herzog compared to opportunities for American legal reform. 

In short, quadratic funding means a certain amount of money is committed to a cause or project then future donors can vote on how money is spent while increasing or matching funds. The donor engagement vehicle is seen as a way to encourage online donations.

For example, Weyl said, a government or philanthropist can match smaller donations, or eventually even an automated smart-contract managing funds. (CoinDesk experimented with quadratic funding during Consensus: Distributed, raising more than $107,000 for COVID-19 charity efforts.) 

Buterin said he was interested in ideas like socialism, libertarianism and bitcoin, which initially inspired his continued work on Ethereum. 

While he remains an active member of the bitcoin community, Buterin said he is moving Ethereum away from proof-of-work (PoW) mining to reduce the environmental harms of electricity consumption. Ethereum critics would argue there are environmentally friendly ways to mine bitcoin. Either way, the Ethereum creator uses both bitcoin and ether tokens as part of his activism. He’s experimented with quadratic funding, both academically and diplomatically. 

See also: The Unsolved Mystery of How to Fund Public Protocols 

Buterin’s Ethereum Foundation donated $150,000 to the United Nations Children’s Fund (UNICEF) in 2019. During the broadcast on Monday, Buterin said he’s fascinated with the quintessential question of politics: “how to fund public goods.” So far, the UNICEF donation is one such answer. 

As for Herzog, he asked the crypto pioneer to recommend a “path forward” in the “context of liberal democracy.” Regardless of whether Herzog wins a congressional seat in New York, Buterin’s political influence doesn’t appear to be fading any time soon.

• Vitalik Buterin
• Crypto Derivatives Exchange OKEx Launches Options on Ether

The Russian economy ministry is pushing back against the nation’s planned ban on cryptocurrency. 

In a letter to the country’s parliament, the nation’s Ministry of Economic Development criticized a package of draft bills recently introduced by lawmakers. If passed, Russia would at last have its first regulatory regime for crypto and digital assets – but would also effectively ban any businesses facilitating crypto transactions. 

According to the Russian newspaper Kommersant, which obtained the letter, the ministry points out that people will still be able to buy crypto assets elsewhere, but the current version of the bills would not allow the government to protect their rights. Crypto-oriented businesses would also be driven outside of the country, harming the economy.

Related: Libra Is Ready for the Digital Money ‘Space Race’: Dante Disparte

Instead, the new rules should take a different approach and work on creating a “controllable cryptocurrency market” in Russia, the ministry argues, according to the report.

The regulatory landscape around cryptocurrency has been quickly shifting across the world in the last year, with authorities and regulators paying closer attention to the industry, and the industry looking for ways to comply (or occasionally not). Yet, while Russia is a significant crypto market and the motherland of many blockchain developers, it has opted for an ultra-conservative approach, led by the country’s central bank. 

The more conciliatory stance on cryptocurrency from a government ministry, however, might be a sign Russia could yet tone down its hostile approach, which recently led to a loud outcry from the local crypto industry.

The draft legislation, introduced in late May as a supplement to the previous bill on digital assets, deems illegal any activities facilitating the issuance of, and operations with, virtual currencies and if Russian servers or websites registered by Russian providers are used. 

Related: Moscow Said to Hire Kaspersky to Build Voting Blockchain With Bitfury Software

This includes purchasing crypto for fiat currency and accepting it as a payment. However, owning crypto is legal if it’s inherited, transferred as a result of bankruptcy proceedings or seized as a result of a court decision. Also included is the potential to issue digital securities, but that must be done under the full control of the central bank.

“The Bank of Russia does not understand how to control crypto. Rule number one: if you can’t control something, ban it,” a source in the cryptocurrency mining industry, who participated in the working group drafting the bill and asked not to be named, told CoinDesk.

For many crypto businesses, the bills would not actually change much, the source added, as even now, exchanges and over-the-counter services with Russian origins prefer to register in other jurisdictions. And large amounts of cryptocurrency in the country are often purchased for cash. 

Sarkis Darbinyan, an IT-focused attorney at Moscow-based law firm the Digital Rights Center, believes that if the law is passed inits current form, cryptocurrency in Russia is going to go from the grey zone “into the darkness of the digital underground.” 

“In fact, bitcoin gets the same status as marijuana. You can use it in a limited fashion under the close eye of the state, but can’t talk or write about it,” Darbinyan said. 

Under the draft law, he continued, crypto owners would have to report their holdings for tax purposes, and that information would be readily available for the country’s law enforcement agencies. “In the Russian reality, only a crazy person would choose to keep the police posted about the state of their crypto accounts,” Darbinyan said. 

The proposed regulation looks problematic for Russia’s crypto miners, too. While mining is not explicitly mentioned in the draft, the draft bills’ ban on the digital asset “issuance” is likely to cover the sector. 

“This draft has been in the works for three years. We suggested some options to legalize crypto mining back in 2019 that was a lot of work, but it all got thrown out the window,” the industry source said,. The mining industry in Russia is yet not big enough to have strong lobbyists to help push their case, they added. 

Compounding matters, miners can’t be as nimble as over-the-counter brokers in shifting to other jurisdictions because relocating a building full of mining machines is a much greater logistical problem than moving an office.

However, bigger mining entities in Russia, which tend to keep their businesses secret, might have a quick and easy fix for their pending legal troubles. “You register a company abroad, say, in Hong Kong. This company puts the miners in a data center in Russia, and the Russia-registered company is not issuing crypto,” the source said.  

But not everyone can afford such tricks, and small miners may be forced to close or operate illegally. “Everyone who has less than $50,000 worth of mining equipment will be swept out of the market into the black – not even grey – zone,” they warned.

• Illegal Miners in Russia Stole $6.6M Worth of Electricity, Power Grid Firm Says
• New York, French Finance Watchdogs Open Doors for Each Other’s Fintech Startups

Algorand and Blockstack are collaborating on a new smart contract programming language that moves the two startups toward direct, inter-blockchain communications.

Called Clarity, the project will ultimately allow developers to write smart contracts that execute across their two blockchains – and others that might decide to join the open source initiative – without involving third-party interoperability protocols like Polkadot, executives at both companies told CoinDesk. 

The potential for direct inter-chain communications is likely as boundless as the ideas of the developers deploying smart contracts across the two very different platforms. Algorand’s proof-of-stake blockchain often caters to financial use cases, while Blockstack’s upcoming Stacks 2.0 “proof-of-transfer” blockchain looks more broadly at decentralized computing.

Related: Bug in ‘Timelocked’ Bitcoin Contracts Could Spur Miners to Steal From Each Other

“We believe it’s a multi-chain world,” said Steve Kokinos, chief executive at Algorand. “People are going to use different chains for different purposes and interoperability is going to be critical.”

Blockstack CEO Muneeb Ali said it was the similarity of his and Algorand’s smart contract design philosophies that brought them together. 

“We were already looking at the same properties,” Ali said.

Both are acutely interested in deploying “non-Turing complete” languages. Algorand 2.0’s TEAL smart contract language is non-Turing complete, as is Blockstack’s eponymous Clarity, already planned to debut on Stacks 2.0. Ali estimated the two languages had “80-90%” in common at the outset.

Related: Enigma Blockchain Has a New Name and a Privacy Boost in the Works

Non-Turing completeness means, in part, that a language’s programs cannot in theory run forever – and that, in practice, means its programs are somewhat more restrictive than ones written in a Turing-complete language.

But non-Turing complete languages are also far less prone to bugs than their computationally complete brethren because of that same property. Their smart contracts don’t need to be manually audited, Ali said. 

Read more: Who Will Pay for Turing-Complete Smart Contracts?

“Everything can be precise, everything can be verified,” Ali said, contrasting Clarity with potentially error-prone alternative languages that could put “hundreds of millions of dollars” of smart contract user funds at risk. 

The infamous DAO hack is perhaps the best-known example of the potential perils of buggy smart contracts written in a Turing-complete language. That 2016 heist cost users $50 million in ether, all because of a bug. 

“The number question for these smart contracts is actually just: Are they precise and secure?’ So the language has to be just focused on that, which  is what we have done here,” Ali said. 

Kokinos said Clarity provides a “philosophically different approach to smart contracts.”

Clarity will also make for simpler developer experiences, he said. “We’re providing people tools to make it less necessary for them to learn a lot about how the blockchain works and about the underlying parts of the system and just enable people to get their work done.”

• Market Wrap: Here’s Why Ether’s Price Has Jumped 65% So Far This Year
• Base Layer Blockchain Harmony Adds Staking to Open Up Validator Set

Two New York-based crypto companies hope to scoop up growing institutional demand for physical bitcoin.

Announced Wednesday, Galaxy Digital’s trading arm and regulated bitcoin futures provider Bakkt said the service will offer asset managers and other institutional investors a “white glove” trading and custody solution.

As part of the collaboration, Galaxy will provide all the trading services and functionalities, leveraging its existing plugins to 30 different exchange venues. Meanwhile, Bakkt will offer custody services through its Bakkt Warehouse, which it currently uses to facilitate physically settled bitcoin contracts.

Related: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Designed to work around the clock, the idea, according to Tim Plakas, Galaxy Digital Trading’s head of sales, is to offer a “safe, efficient and well-regulated route into physical bitcoin access, one that has been already proven successful in the macro hedge fund space.”

“We designed this partnership to service the uptick in demand our two firms have received from traditional asset managers seeking access to physical bitcoin,” Plakas added.

See also: Novogratz’s Crypto Investment Firm Galaxy Digital Shrinks Workforce 15%

While the idea of two big-name companies teaming up like this may seem like a titillating prospect, both Bakkt and Galaxy Digital have struggled to make much headway this year.

Related: Bitfinex Spin-Out Says Funds Are Lining Up for Its New Decentralized Exchange

As a merchant bank that invests in crypto companies as well as trades digital assets, Galaxy Digital has failed to make much, if any, revenue since it first launched in January 2018. It reported a net loss of $32.9 million in the final quarter of 2019 and warned further losses from the coronavirus.

It was Galaxy Digital Trading, the branch now hooking up with Bakkt, that was responsible for pretty much wiping out Galaxy’s other revenue streams, losing a total $32.1 million in Q4.

See also: Bakkt CEO Mike Blandina Steps Down 4 Months After Taking Role

Bakkt, on the other hand, has struggled to attract much footfall. Launching in September 2019 after more than a year of delays, the exchange’s volumes have remained low.

For example, there was a week in January, and two weeks in late February, where not a single one of its options contracts traded. That contrasted with a broader derivative space that reported record volumes during the same timeframes.

So far this week, for instance, Bakkt’s total volume for monthly options contracts was stuck at zero. Bakkt’s futures have seen more volume, reaching record levels last month during Bitcoin’s halving, though it’s now returning to more typical levels.

UPDATE (June 10, 2020, 20:30 UTC): This article was updated for clarity.

• Galaxy Digital
• Behind ‘Prime Broker’ Buzzword Lies a Complex Strategy Game for Crypto Firms

Two New York-based crypto companies hope to scoop up growing institutional demand for physical bitcoin.

Announced Wednesday, Galaxy Digital’s trading arm and regulated bitcoin futures provider Bakkt said their new service – which has yet to be named – will offer asset managers and other institutional investors a new “white glove” trading and custody solution.

As part of the collaboration, Galaxy will provide all the trading services and functionalities, leveraging its existing plugins to 30 different exchange venues. Meanwhile, Bakkt will repurpose part of its Bakkt Warehouse, which it used to facilitate physically settled bitcoin contracts, as the service’s custody solution.

Related: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Designed to work around the clock, the idea, according to Tim Plakas, Galaxy Digital Trading’s head of sales, is to offer a “safe, efficient and well-regulated route into physical bitcoin access, one that has been already proven successful in the macro hedge fund space.”

“We designed this partnership to service the uptick in demand our two firms have received from traditional asset managers seeking access to physical bitcoin,” Plakas added.

See also: Novogratz’s Crypto Investment Firm Galaxy Digital Shrinks Workforce 15%

While the idea of two big-name companies teaming up like this may seem like a titillating prospect, both Bakkt and Galaxy Digital have struggled to make much headway this year.

Related: Bitfinex Spin-Out Says Funds Are Lining Up for Its New Decentralized Exchange

As a merchant bank that invests in crypto companies as well as trades digital assets, Galaxy Digital has failed to make much, if any, revenue since it first launched in January 2018. It reported a net loss of $32.9 million in the final quarter of 2019 and warned further losses from the coronavirus.

It was Galaxy Digital Trading, the branch now hooking up with Bakkt, that was responsible for pretty much wiping out Galaxy’s other revenue streams, losing a total $32.1 million in Q4.

See also: Bakkt CEO Mike Blandina Steps Down 4 Months After Taking Role

Bakkt, on the other hand, has struggled to attract much footfall. Launching in September 2019 after more than a year of delays, the exchange’s volumes have remained low.

For example, there was a week in January, and two weeks in late February, where not a single one of its options contracts traded. That contrasted with a broader derivative space that reported record volumes during the same timeframes.

So far this week, for instance, Bakkt’s total volume for monthly options contracts was stuck at zero. Bakkt’s futures have seen more volume, reaching record levels last month during Bitcoin’s halving, though it’s now returning to more typical levels.

• Galaxy Digital
• Behind ‘Prime Broker’ Buzzword Lies a Complex Strategy Game for Crypto Firms

Hacker Noon’s 4 million monthly readers are about to get a taste of crypto-powered micro-tipping firsthand. 

The tech publication has closed a $1 million strategic investment from micropayments firm Coil, a blockchain-agnostic product built on the Interledger protocol and headed by former Ripple CTO Stefan Thomas. 

The terms include a three-year partnership between the Colorado and San Francisco-based startups, including the use of Coil’s Web Monetization technology. 

Related: Bitcoin’s Lightning Becomes Latest Protocol to Court Publishers With Micropayments

“Avoiding something like a paywall with a microtransaction is extremely valuable,” Hacker Noon founder and CEO David Smooke said in a phone interview with CoinDesk. 

“Hacker Noon is home to an incredibly dedicated community of technologists and software developers,” Coil Chief Growth Officer Jonathan Greenglass said in a statement. “We’re thrilled to be working with Hacker Noon to provide its community with a simple way for readers and writers to participate in the value exchange between one another.”

Read more: Bitcoin’s Lightning Becomes Latest Protocol to Court Publishers With Micropayments

With a simple web tag, the Coil integration lets readers pay Hacker Noon writers based on their screen time, Smooke said. Coil memberships start at $5 per month which readers autostream payments from, Smooke said. Funds not directed toward individual writers will be pooled for charity, he added. 

Related: Hacker Noon Is Storing Content on a Blockchain After Ditching Medium

At first glance, microtransactions seem like an apt solution for journalism or any online publication: a happy compromise between subscription and ad-based revenue models. Yet to date, the tech has received little love.

Smooke, who founded Hacker Noon in 2016 with his wife, Linh Dao Smooke, and business partner, Jay Zalowitz, said it’s still too early to write off the option.

Read more: Hacker Noon Is Storing Content on a Blockchain After Ditching Medium

The Hacker Noon micro-tipping feature comes after the blogging platform left Medium in 2019 following managerial disagreements. Medium allocates portions of subscriber fees to writers based on its “claps” feature. 

Moreover, both Hacker Noon and Coil have pledged to support user privacy with the new payments feature. Smooke said Hacker Noon doesn’t “want to do the New York Times thing” and “collect social graphs” of its readers.

• Bitcoin Lightning Network Specs Pass First ‘Formal’ Security Test
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Hacker Noon’s 4 million monthly readers are about to get a taste of crypto-powered micro-tipping firsthand. 

The tech publication has closed a $1 million strategic investment from micropayments firm Coil, a blockchain-agnostic product built on the Interledger protocol and headed by former Ripple CTO Stefan Thomas. 

The terms include a three-year partnership between the Colorado and San Francisco-based firms, including the use of Coil’s Web Monetization technology. 

Related: Bitcoin’s Lightning Becomes Latest Protocol to Court Publishers With Micropayments

“Avoiding something like a paywall with a microtransaction is extremely valuable,” Hacker Noon founder and CEO David Smooke in a phone interview with CoinDesk. 

“Hacker Noon is home to an incredibly dedicated community of technologists and software developers,” Coil Chief Growth Officer Jonathan Greenglass said in a statement. “We’re thrilled to be working with Hacker Noon to provide its community with a simple way for readers and writers to participate in the value exchange between one another.”

Read more: Bitcoin’s Lightning Becomes Latest Protocol to Court Publishers With Micropayments

With a simple web tag, the Coil integration lets readers pay Hacker Noon writers based on their screen time, Smooke said. Those funds are first pulled from ad revenue generated by Hacker Noon sponsors. Funds not directed toward individual writers will be pooled for charity, Smooke said. Coil advertises memberships starting at $5 per month.

Related: Hacker Noon Is Storing Content on a Blockchain After Ditching Medium

At first glance, microtransactions seem like an apt solution for journalism or any online publication: a happy compromise between subscription and ad-based revenue models. Yet to date, the tech has received little love.

Smooke, who founded Hacker Noon in 2016 with his wife, Linh Dao Smooke, and business partner, Jay Zalowitz, said it’s still too early to write off the option.

Read more: Hacker Noon Is Storing Content on a Blockchain After Ditching Medium

The Hacker Noon micro-tipping feature comes after the blogging platform left Medium in 2019 following managerial disagreements. Medium allocates portions of subscriber fees to writers based on its “claps” feature. 

Moreover, both Hacker Noon and Coil have pledged to support user privacy with the new payments feature. Smooke said Hacker Noon doesn’t “want to do the New York Times thing” and “collect social graphs” of its readers.

• Bitcoin Lightning Network Specs Pass First ‘Formal’ Security Test
• You Can Now Buy Lightning-Powered Bitcoin With a Credit Card

As Federal Reserve Chair Jerome Powell steers U.S. monetary policymakers away from negative interest rates, he risks becoming increasingly isolated among the world’s top central bankers. 

Officials in the U.K., Europe and New Zealand are reportedly considering the once-unthinkable strategy of pushing interest rates below zero, seen as a form of economic stimulus. And bitcoin might be a beneficiary of looser monetary policy outside the U.S., even if the Fed never joins its foreign counterparts. 

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Another Data Point Suggests Bitcoin Close to Prolonged Bull Market

The divergence over the issue shows just how challenged central bankers are as they struggle to find consistent strategies for healing economies devastated by the coronavirus and related lockdowns. The World Bank on Monday forecast that global output will tumble by 5.2% this year, the worst recession since World War II.

With the situation so dire, more central bankers are willing to consider negative interest rates, which encourage people to spend money by making it more costly to deposit money in a bank account, as a viable monetary-policy tool. U.S. President Donald Trump joined the chorus last month, tweeting that “as long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT.’”

It’s unlikely that Powell will change his tune now, with Federal Reserve policymakers scheduled on Wednesday to announce the outcome of this week’s two-day, closed-door meeting. So far, the Fed’s response to economic crisis has been to cut interest rates to zero, roll out emergency-lending programs and inject trillions of dollars of new money into the financial system via asset purchases. 

As recently as month, Powell said that top Fed officials “do not see negative policy rates as likely to be an appropriate policy response here in the U.S.”

Related: Market Wrap: DeFi Is Helping Ether Outpace Bitcoin This Year

Bitcoin prices do appear to have risen in sync with this year’s announcements of new stimulus measures. According to the cryptocurrency research firm Delphi Digital, bitcoin began to “flirt” with the psychological $10,000 price threshold last week as the European Central Bank and Bank of Japan ramped up their asset-purchasing programs by a combined $1.5 trillion. 

And now the drumbeats are starting for negative rates. 

Last month, Bank of England Governor Andrew Bailey raised hackles when he told a parliamentary select committee that negative interest rates were under “active review” for the very first time in the bank’s 324-year history. The week before, he had explicitly ruled out the possibility. 

The U.K. central bank already has cut its base interest rate to a record low of 0.1%. 

Then there’s the European Central Bank, led by President Christine Lagarde, which opted last week to expand its stimulus measures by 600 billion euros. 

But central bank analysts still forecast an 8.5% contraction in the euro area this year, and ECB board member Isabel Schnabel said Tuesday that cutting rates below zero “remains an option.”

“Our experience with negative interest rates has been positive,” the German economist said in a Twitter Q&A, according to Reuters.

The Reserve Bank of New Zealand said last month that negative rates could “become an option in future,” possibly as early 2021.

Central banks’ dalliances with negative interest rates in the mid-2010s didn’t seem to affect bitcoin’s price. But the digital asset has grown since then, with a market capitalization that’s roughly 20 times where it stood when the ECB went negative in 2014. 

And while analysts in the past claimed that bitcoin was uncorrelated with most traditional assets, recent price action has shown an increasing connection between the cryptocurrency and broader economic and market developments. 

Bitcoin is now increasingly regarded as a hedge against inflation, and negative rates represent an aggressive form of monetary-policy easing that could ultimately help to push up consumer prices.

Another school of thought says that if banks try to set deposit rates at negative levels, many customers would just pull their money out to avoid charges. And rather than keeping cash under the mattress, some might instead decide to store the value as bitcoin in a digital wallet. 

More broadly, negative rates might simply highlight how experimental monetary policymaking has become in the coronavirus era, Stack Funds, a bitcoin index provider,  wrote in a report last month.

“By being in bitcoin, you’re opting into transparency,” Lewis Harland, founder of analytics site Formal Verification, told CoinDesk.

BTC: Price: $9,759 (BPI) | 24-Hr High: $9,838 | 24-Hr Low: $9,637

Trend: Bitcoin has rallied by nearly 150% in the last three months, but a long-term bullish breakout is yet to arrive.

That’s because the cryptocurrency is still contained within a 2.5-year long descending triangle represented by trendlines connecting the December 2017 and July 2019 highs and the December 2018 and March 2020 lows. 

According to the weekly chart, the triangle resistance (upper edge) is currently located at $10,260. A weekly close Sunday (midnight, UTC) above that level would confirm a long-term bearish-to-bullish trend change and open the doors for a rally to $20,000 by the year’s end. 

Bloomberg analysts expect the cryptocurrency to challenge record highs this year on the back of increased institutional participation and rise in haven demand. 

While $10,260 is the level to beat for the bulls, the June 2 low of $9,136 is key support currently. A breach there would invalidate a bullish lower-highs setup on the daily chart. Acceptance under $9,136 would likely yield a deeper decline to $8,630 (May 25 low).

The bearish divergence of the three-day chart’s relative strength index (RSI) suggests scope for a drop to $9,136. At press time, bitcoin is changing hands near $9,750, representing a 0.3% decline on the day. 

• LocalBitcoins’ Volume Holds Steady Despite Stricter Compliance Procedures
• Bitcoin News Roundup for June 9, 2020

UPDATE (12:29 UTC): Spark Pool says it has frozen the payout to miners in its pool.

Slip of the finger? Sadist? It’s not yet known. But at just before 10:00 UTC Wednesday, an unknown wallet holder sent 0.55 ether (around $133) with a 10,666 ETH transaction fee – currently worth just under $2.6 million.

The fee went to Chinese mining group Spark Pool, which processed the transaction and may distribute the millions to its members. A normal transaction fee would likely be up to $0.50 or so, but can be manually set higher by a sender if they want to push a transaction through more quickly.

Related: ConsenSys Muscles Into Compliance With New Regulatory Product for DeFi

The identities of both the sender and receiver are not yet known. But the sender has an ETH wallet balance worth more than $11 million – even after spending $2.6 million in transaction fees. In comparison, the receiver’s wallet is now empty, with past funds transferred out to other wallets.

Strangely, the sender’s wallet has been sending out transactions every minute in recent hours and with attached fees worth less than a dollar. As such, it’s possible the whale accidentally reversed the figures for this odd transaction.

See also: Bitcoin Transaction Fees Decline as Network Congestion Eases

This isn’t the first time Spark Pool has been on the receiving end of a transaction fee windfall.

Related: Crypto Derivatives Exchange OKEx Launches Options on Ether

Last year, the company froze a mysterious 2,100 ETH payment (then worth $300,000) it made for mining just one block – 600 times the average block reward at the time. After tracking down the sender, a South Korean blockchain firm, Spark Pool agreed to split the reward 50/50.

Regarding this latest transaction, Spark Pool spokesperson told CoinDesk it was following up and welcomed any potential leads about the identity of the sender just “in case it was sent by mistake.”

• ‘Careless’ Users Are Ruining Ethereum’s Privacy: Paper
• Ethereum Has Become Bitcoin’s Top Off-Chain Destination

Bitcoin could be on the verge of breaking into a multi-month bull run, according to a lesser-known data metric.

The percentage of bitcoin’s circulating supply in profit is currently hovering at 87%, according to data provided by blockchain analytics firm Glassnode. The metric is calculated by looking at the ratio of coins with a value that is higher now than when they were last moved. 

Essentially, over 16 million BTC out of the total circulating supply of 18.4 million is currently making gains. More importantly, the 87% level is close to that seen at the onset of the previous long-term bull markets.

Related: First Mover: Bitcoin Bulls Might Get Negative Rates From Central Banks, Just Not the Fed

“Historically, levels of 90% and higher have clearly marked pronounced bull markets,” noted Glassnode in its weekly insights report. 

For instance, the percentage of circulating supply in profit rose above 90% in October 2016 as the cryptocurrency rallied from the August low of $470 up to record highs above $1,100 in the first quarter of 2017.

Bitcoin continued to gain altitude and ultimately reached a record high of $20,000 in December 2017. Throughout the meteoric rally, the non-price metric hovered largely in the range of 80 to 99%.

Looking further back, the percentage of supply in profit crossed well above 90% in January 2013 and remained above that level for three months as bitcoin rose to clock highs near $250 in mid-April. A similar pattern was seen as prices rose to record highs above $1,000 in mid-November the same year. 

Related: Market Wrap: DeFi Is Helping Ether Outpace Bitcoin This Year

So, if history is a guide, bitcoin may embark on a stellar bull run if and when the percentage of supply in profit rises above 90%.

Bitcoin will likely cross that key level if prices rise above $10,000, reinforcing the argument put forward by analysts that $10,000 is the level to beat for the bulls. 

At press time, bitcoin is changing hands near $9,740, marginally down on the day. The cryptocurrency has rallied by nearly 150% over the past three months, lifting the percent supply in profit from 43% to 87%. 

The metric may be of help in identifying major price tops and bottoms. In the past, readings near 40% have marked bear market bottoms, while highs above 95% have coincided with market tops. 

Disclosure: The author holds no cryptocurrency at the time of writing.

• LocalBitcoins’ Volume Holds Steady Despite Stricter Compliance Procedures
• Bitcoin News Roundup for June 9, 2020

Coinbase’s former top legal advisor sold over $4 million in stock options when he left to take the helm at the U.S government’s banking supervisor.

Brian Brooks, who was the cryptocurrency exchange’s chief legal officer from late 2018 until last month, sold his stock options to become interim head at the Office of the Comptroller of the Currency (OCC) – a 3,600-person bureau in the U.S. Treasury Department.

Financial disclosures seen by Bloomberg show Brooks sold $4.6 million stock options in Coinbase, earned on top of a $1.4 million salary, to take up his new role as acting comptroller – a position that earns less than $300,000 a year.

Related: Crypto Payroll Startup Bitwage Lets Earners Sidestep Volatility With Stablecoin Payments

Brooks had joined the OCC back in March as chief operating officer and first deputy controller, but assumed the position of acting comptroller following the sudden departure of his predecessor, Joseph Otting, halfway through a five-year term, in May.

Brooks was confirmed as acting comptroller on May 29.

The OCC’s primary role is to maintain the integrity of the U.S. banking system, encourage greater competition and innovation as well as ensuring full regulatory compliance.

In the past, the OCC has been accused of becoming too cozy with the financial institutions it is supposed to watch over. In late 2017, in his second week in the job, Otting scrapped longstanding plans to move hundreds of OCC staff out of the Manhattan offices of JPMorgan, Citigroup and other large-scale lenders. At the time, he said the move was “not practical.”

Related: ‘Inherently Borderless’: Acting OCC Chief Talks Crypto, State Licenses and DeFi

See also: US Bank Regulator OCC Asks for Public Input on Cryptocurrency Use in Financial Sector

In his inaugural statement, Brooks said he planned to foster innovation in the banking sector: “We should support banks’ use of new technology, products, and models that safely and fairly accelerate the velocity of money, create greater financial inclusion, and empower consumers and businesses with more control over their financial affairs.”

In an interview with CoinDesk, Brooks went further: “My job here is not to protect incumbents, and it’s not to preserve the status quo … The job I have is to make sure that the bank charter’s flexible enough to maintain a safe, sound, strong American economy and the shape of banking has to be flexible to accommodate.”

As he is only acting comptroller, Brooks doesn’t yet face the same ethics restrictions he would if he led the regulator permanently. Still, he has assured the OCC’s ethics department he will stay away from any investments that could present any conflict of interest, which include tech firms such as Amazon and Coinbase.

See also: Capitol Controls: From Coinbase to the OCC, How Brian Brooks Is Changing Regulation

In a letter, Sunday, U.S. Senator and former presidential candidate Elizabeth Warren urged Brooks to undo some of the actions from the previous OCC administration which, she said, had been “tainted by Comptroller Otting’s own conflicts of interest.”

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The first Libra white paper published in June 2019 had the temerity to threaten the monetary authority of central banks and governments. The empire struck back.

That’s why an updated white paper from April 2020 has taken a belt and braces approach to regulatory compliance, said Dante Disparte, head of policy and communications at the Libra Association. The new technical document comes replete with buttoned-up hires and a pending payments license through the Swiss Financial Market Supervisory Authority (FINMA).

Libra’s watering-down of its global stablecoin to a series of fiat-backed stablecoins has prompted some commentators to say the project has lost its soul. Meanwhile, Libra has been written off by crypto purists (who didn’t like it anyway) and there is at least one U.S. lawmaker calling Libra’s revamp insufficient. 

Related: Digital Currencies Could Replace Low-Interest Bank Accounts, Says UN-Linked Expert

Whatever you thought of the “unfortunate” positioning of Libra’s first white paper, as Disparte put it, the effort undoubtedly triggered a “space race,” he said, particularly regarding central bank digital currencies (CBDCs). 

And a world where 70% of central banks are exploring CBDCs presents an opportunity, he said.

“When they [central banks] take the leap beyond wholesale, which is where most CBDC work is going, and start thinking about retail applications, then we will be in a better world for the fact networks like Libra exist,” Disparte told CoinDesk in a recent interview. 

According to the updated white paper, Libra hopes that “these CBDCs could be directly integrated with the Libra Network, removing the need for Libra Networks to manage the associated Reserves, thus reducing credit and custody risk.”

Related: New York, French Finance Watchdogs Open Doors for Each Other’s Fintech Startups

Read more: Libra Scales Back Global Currency Ambitions in Concession to Regulators

Further down the road, it would be possible to offer the central bank of Ghana, for example, a way of “creating a cross-chain trading window between you and the currency you issue, and user-level applications that are interoperable,” Disparte said.

As well as shaking up central banks, Libra has spawned some direct competitors such as the Andreessen Horowitz-backed Celo Alliance and the Google- and Gates Foundation-backed Mojaloop Foundation, which aims to interconnect privately siloed forms of mobile money such as M-Pesa in Sub-Saharan Africa and India.

But the elephant in the room is China, said Disparte, where WeChat Pay, Alipay and the People’s Bank of China (PBoC) digital payments efforts are serving hundreds of millions of users.

In this particular race, Libra appears to be extending its hand to the U.S. and offering a way to get a CBDC into the hands of consumers. 

“You can be NASA, [Libra is] telling the Federal Reserve, and we’ll be the Space-X of money,” is how author and digital money expert Dave Birch put it in a recent article. 

“I think there would be nothing better for the world and for poverty alleviation if, in fact, we started to trigger a bit of a space race on compliance to address the 1.7 billion people who are unbanked and underbanked,” Disparate said. “So from my point of view, there is no monopoly on this work. Let others enter this process and let the race begin.”

Cynics have scoffed at Libra’s stated mission to help the planet’s unbanked population. 

But one-size-fits-all compliance regimes that can inadvertently shut people out of the financial system – and regulatory dead zones where users lack verifiable identities to pass know-your-customer (KYC) checks – is where Libra is taking its fight now. 

In such cases, every inch gained helps “expand the perimeter of the formal economy,” said Kiva Chief Strategy Officer Matthew Davie. (Davie is on the board of Libra and Kiva is one of the Libra Association’s founding social-impact partners.)

However, the first phase of Libra’s rollout, which commences in Q4 of this year, Disparate said, will require permission to join the network instead of it being open and relying solely on monitoring, as was promised in last year’s plans. In other words, the phase 1will not move the needle on reaching the unbanked.

The first phase will be closely tied to the licensing of crypto companies in regulated jurisdictions such as the U.S., Europe and Singapore, and will also apply the Financial Action Task Force (FATF) recommendations for regulated virtual asset service providers (VASPs) involving things like the “Travel Rule.”

But Libra knows financial inclusion can only really start to be driven by phase 2, at which time the network will start adding so-called “unhosted wallets,” not connected to regulated VASPs or in countries where that option is not available. 

Libra could not say exactly when the second phase is expected to begin, but allowing unhosted wallets to create accounts directly on the network is “something the project feels very strongly about from a financial inclusion perspective,” said Mandeep Walia, chief compliance officer of Novi, the Facebook subsidiary formerly known as Calibra.

Read more: Facebook’s Calibra Rebrands to Novi, Details Wallet Tie-Up With WhatsApp

“Obviously, there is a certain risk associated with that if there is no KYC done and no real compliance happening directly on that particular account,” said Walia. “There are other controls we have been talking about, such as creating some kind of a protocol-level automated balance limit/transaction limit so that damage from any potential bad activity is relatively mitigated.” 

The FATF Travel Rule’s $1,000 threshold on transactions could be a starting point for discussions around setting a ceiling for limits, and Libra has some ideas in mind, said Disparte, but at the end of the day, the Association is not the rule maker, he added.

In an interview with CoinDesk, Tom Neylan, FATF’s senior policy analyst, said the AML watchdog was open to talking with Libra about tiered customer due diligence, which would include things like limited accounts, where users can transact a certain amount of business in a certain period.

“If you think about the average remittance outflow from many countries around the world, it’s a low amount even on an annualized basis,” said Disparte. 

On the subject of connectivity between participants on the Libra network and users of Facebook services like WhatsApp with its end-to-end encryption, Walia said Novi users will have to perform a standalone KYC check. 

“We are having conversations, data field by data field, with those teams to make sure that we are clear regarding what the stance will be for each of the requirements on both sides,” he said.

In addition, Libra will operate financial investigation units using the capabilities of firms like Chainalysis and Elliptic and a range of tools looking at IP addresses, geo-location and so on.

Allowing unhosted wallets on the network is an important on-ramp for the financially excluded, said Kiva’s Davie, but it’s only part of the journey. 

Extending the perimeter for KYC checks is the most exciting innovation Libra can offer, he said. This is extremely difficult, especially where people have limited documentation, and it’s expensive for what amounts to a low-value account.

But systems like Libra can dramatically reduce the cost of compliance and enable full KYC inclusion for people who don’t have a national identity or couldn’t pass a KYC check, said Davie.

Read more: Crypto ‘Gray’ Markets Could Be Unintended Consequence of FATF Travel Rule

“We can actually reduce the barrier to bring compliance to where it’s not,” he said. “Because most actors outside the perimeter are very good actors. Kiva has been deploying millions of dollars in the unbanked sector for 15 years. Our default rate is lower than U.S. credit card default, and none of those people have ever passed a KYC check.” 

In places where people may lack a paper ID, they may have access to Facebook. Could that digital credential be combined with something like a $20-a-day transaction limit to get those people into the financial system?

“I would love to see regulators think about it that way,” said Davie. “Setting an appropriate transaction limit is a sovereign decision and a regulator’s decision. But look, 70% of the world’s adult population makes less than $10 a day. So you are not talking about big amounts of money: $10 or $15 or $100 as an account limit and you include a whole bunch of people under that regime.”

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Can build a better blockchain by paying people to burn one down?

Beniamin Mincu, Transylvanian chief executive and founder of the Elrond Network, is in the midst of a 15-day campaign to do just that. Nearly two years after first revealing his “secure proof-of-stake” sharding protocol in a technical white paper, Mincu and Elrond’s now 24-person developer team will offer up to $60,000 to node-runners who can successfully wreak havoc upon their code. 

Mincu’s goal with the so-called “Battle of the Nodes: Unchained” campaign is, of course, to have white hats expose every bug, attack vector, vulnerability and critical breakpoint on Elrond before unsanctioned hackers do so themselves. This testnet trial-by-fire will prove if the network is ready for mainnet launch, he said.

Related: Pentagon War Game Envisioned a Generation-Z Rebellion Funded by Bitcoin

“When we have 15 days without interruption of the network despite this kind of attacks and stress testing, at that point we know Elrond is finally prepared and good – robust enough to go live,” Mincu told CoinDesk.

Elrond’s 15-day clock resets when the “interrupters” manage to take the network down. Nobody has yet: Elrond’s protocol has foiled three attacks so far. Underminers have nevertheless uncovered plenty of lower-level bugs worth fixing, and that’s enough to keep nodes in contention for a slice of the $60,000 plunder, paid out in the ERD token.

“We’re on a daily basis discovering some things that we can improve from the validators,” said Mincu. “We usually do one or two releases per day,” patching the bugs, clarity issues and other pain points that the battle’s 1,700 node participants dredge up.

But the effort is not just about the money and the bugs, Mincu said – it’s also a competition for mainnet validator slots. Some 34% of Elrond’s initial 1,500 nodes (500 for each sharding pool and an additional 500 for the metachain) will go in part to “trusted” parties who helped the hunt for flaws. 

Related: Ukraine Arrests Hacker Accused of Selling Personal Data, Crypto Wallet Info

It also gives Elrond a chance to flex its network specs. By Tuesday, the blockchain – which has a “divide and conquer” consensus mechanism that randomly assigns validator work to members of the two sharding groups – was posting a peak transactions-per-second (TPS) rate of 712. Mincu claimed Elrond can handle 10,000 TPS at full tilt. 

The 1,700 nodes far outstrips Mincu’s original projection of 700-800 participants when he announced the bug bounty battle with hardly a week’s notice. All those eager blockchain breakers are potential developers who can contribute to the project over time, Mincu said.

• EU Supercomputers Hijacked From COVID-19 Research to Mine Cryptocurrency
• North Korean Hackers Ramp Up Efforts to Steal Crypto Amid Coronavirus Pandemic

Bitcoin payroll provider Bitwage has begun offering employees a way of receiving wages paid in cryptocurrency, but without the volatility.

Announced Wednesday, company clients can now sign up to the Bitwage platform in order to pay their workers using the USD Coin (USDC) stablecoin, which is linked to the price of the U.S. dollar. Salaried workers or freelancers can also sign up to receive wages from employers in the coin.

The move comes at a time when global markets have been in turmoil resulting from the ongoing uncertainty relating to the recovery from coronavirus-affected communities, and many national currencies have lost value against the dollar.

Related: Coinbase’s Ex-Lead Lawyer Sold $4.6M in Stock to Lead US Banking Watchdog

USDC is a fiat-collateralized stablecoin that was launched in October 2018 by the CENTRE consortium, comprising of a partnership between P2P payments fintech firm Circle and U.S.-based crypto exchange Coinbase. The consortium was formed to develop price-stable crypto assets and network protocols.

The stablecoin is issued as an ERC-20 standard token on the Ethereum blockchain and is backed by corresponding USD held in accounts, subject to regular public reporting of reserves.

The ability to pay employees in cryptocurrency isn’t new as Bitwage has been engaged in crypto-related wage activity since at least 2014. In addition to bitcoin (BTC) and bitcoin cash (BCH), it started offering payments in ether (ETH) last June. Employees and freelancers are able to choose a percentage distribution of their payments in crypto or fiat.

See also: Bitcoin in Emerging Markets: Latin America

Related: Coinbase

Using stablecoins for payments is a relatively recent, but fast-growing, trend. They remove the risk to earners’ salaries from the volatile movements of cryptocurrencies like bitcoin and ether, meaning workers won’t risk having lost a percentage by the time the funds have arrived and been exchanged.

The fiat-backed tokens are, according to Bitwage, becoming more popular in South America, where inflation has severely impacted the value of government backed fiat currency in some nations.

The Venezuelan bolivar, for example, has depreciated significantly since June of last year and is down by more than 3000% against the dollar, opening up the potential for USD-backed stablecoins to provide more stability for communities.

“During our testing, we have seen a lot of interest in the Latin American communities around stablecoin wages. We are excited to see how this will improve the lives of communities with struggling financial systems around the world,” Jonathan Chester, Bitwage CEO, said.

See also: Bitwage Rolls Out Bitcoin 401(k) Plan With Help From Gemini

Bitwage is headquartered in San Francisco, with payroll service operations in the U.S., Europe, Latin America and Asia. Bitwage recently launched a company-sponsored bitcoin 401k with Leading Retirement Solutions, Gemini and Kingdom Trust.

• Coinbase Outlines Tech Plan to Help Avert Future Outages
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London-based investment firm ETC Group plans to list a bitcoin-backed security on the German electronic trading market later this month. 

The firm announced Tuesday the exchange-traded product (ETP), called the Bitcoin Exchange Traded Crypto (BTCE), is the world’s first centrally cleared derivative crypto asset, and would be listed on Deutsche Borse’s Xetra market based in Frankfurt, Germany. 

Central clearing is a tool used in the European derivatives market to bolster stability by ensuring a financial institution takes on counterparty credit-risk. The crypto security is also backed by bitcoin, with each share giving the holder a claim to a specific amount of the cryptocurrency. According to the company, the physical bitcoin would be stored in a cold vault, meaning one not connected to the internet, operated by Palo Alto, Calif.-based custodian BitGo.

Related: Crypto Long & Short: How Oil Going Negative Could Open the Door for Bitcoin ETFs

“Investors get the benefit of trading and owning bitcoin through a regulated security, while having the option to redeem bitcoin if they choose,” said Bradley Duke, CEO of ETC Group, in a press statement emailed to CoinDesk. 

“It really is a hybrid ETP product that has the same features as an ETF [exchange-traded product]. Because it’s a single asset instrument it doesn’t qualify to be an ETF according to the European fund regime,”  explained ETC in an emailed statement.

The novel security is also bound to cost slightly more than traditional ETFs, with an expense ratio of 2% compared to anywhere between 0.5 to 0.7% charged by most ETFs.

According to ETC, “Bringing a product like this into regulated markets is not an easy task, and this is reflected in the premium.”

Related: Tokenized US T-Bond Fund Seeks Foothold in $17T Market

The unveiling of this new security comes after the German financial authority, BaFin, announced in March it would officially recognize cryptocurrencies as financial instruments. The security will be distributed on the HANetf platform joining other products including a cloud-computing ETF and a medical cannabis ETF.

The bitcoin-backed security will be available in Germany and has also been passported to the UK, Italy and Austria, meaning users in these countries will be able to hold or trade the BTCE shares.

• SEC Rejects Latest Bitcoin ETF Bid
• SEC to Decide the Fate of Another Bitcoin ETF Proposal This Week

Bitcoin and ether are soundly beating nearly all major global equities indices on the year. Of the two, ether is handily beating bitcoin’s price performance when the market is moving higher. 

The second-largest cryptocurrency by market capitalization, ether (ETH) is trading around $243 and climbed less than a percent in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

At 00:00 UTC on Tuesday (8:00 p.m. ET Monday), ether was hit with high selling volume on exchanges like Coinbase. Its price swung between $239 and $249 within an hour. Since then, ether has been changing hands at around $243, slightly above its 50-day and 10-day moving averages, a bullish technical indicator were it to last.

Related: LocalBitcoins’ Volume Holds Steady Despite Stricter Compliance Procedures

Since January, ether’s price performance has been steadily outpacing that of bitcoin (BTC). With over 90% in gains since 2020 started, ether holders are beating bitcoin investors because the world’s largest cryptocurrency by market capitalization is up by just over 30% since January.

One of the reasons for ether’s boost is the increasing use of decentralized finance, or DeFi, said Peter Chan, a trader for Hong Kong-based crypto firm OneBit Quant. DeFi is used for lending and trading, including derivatives, using the Ethereum network’s smart contract technology instead of third parties providing centralized software.

“This explains why we see bigger pumps on ether than bitcoin when the market moves upwards,” Chan added. “Ethereum is evolving much faster than bitcoin with the rapid growth in DeFi.”

See also: ‘Inherently Borderless’: Acting OCC Chief Talks Crypto, State Licenses and DeFi

Related: Bitcoin News Roundup for June 9, 2020

Indeed, while dipping considerably during March’s market crash, the amount of U.S. dollar value locked in DeFi has recently surpassed $1 billion once again.

While the amount of price appreciation may have diverged, both bitcoin and ether markets seem to operate in tandem. Since the start of 2020, ether and bitcoin have been heavily correlated.

“With insight, ether has been a better investment than bitcoin from a pure performance point of view so far this year,” said David Lifchitz, chief investment officer at Paris-based quant firm ExoAlpha. “But on the downside, they both behaved identically on downward slides.” 

Sasha Goldberg, a senior trading specialist for crypto firm Efficient Frontier, notes ether may rise more than bitcoin but has also dropped more than it, too. “Although it seems that ether outperforms bitcoin, when you look at the bigger picture, bitcoin is down 51% from its all time high while ether is down 83%,” he said.

Read More: Hard Fork Set for Ethereum Classic’s Second Departure From Ethereum

In early 2018, bitcoin traded around  $17,900 on spot exchanges on the day ether touched its all-time high of $1,432. The bigger question may be which one has the highest price ceiling the next time crypto prices break out as they did in late 2017. 

Digital assets on CoinDesk’s big board are mixed Tuesday. Bitcoin was trading around $9,735 as of 20:00 UTC (4 p.m. ET), gaining less than a percent over the previous 24 hours. 

The biggest cryptocurrency winners on the day included iota (IOTA) climbing 2.6%, nem (XEM) up 2.4% and neo (NEO) in the green 1%. Losers included cardano (ADA) down 1.8% and stellar (XLM) in the red 1.4%. All price changes were as of 20:00 UTC (4:00 p.m. EDT).

Read More: Bitcoin Price Volatility Hits 3-Month Low

In commodities, oil is up 1.2% with a barrel of crude was priced at $38 as of press time. Gold climbed 1%, trading around $1,715 for the day. 

The S&P 500 index in the United States slipped less than a percent, dragged down by travel and retail stocks.

The FTSE 100 index of top companies in Europe fell 2.1% Tuesday on forecasts the global economy will contract in 2020. 

Read More: Crypto Broker Voyager’s Stock Has Doubled This Year, Beating Bitcoin

In Asia, Japan’s Nikkei 225 of top companies ended the day down less than a percent, weighed down by auto and chip manufacturing stocks.

U.S. Treasury bonds all slipped Tuesday. Yields, which move in the opposite direction as price, were down the most on the two-year bond, in the red 10%.

• Bitcoin Price Volatility Hits 3-Month Low
• Market Wrap: $10,000 Remains Bitcoin’s Price to Beat

Voting and blockchain have been a controversial couple but Moscow appears determined to use the technology for a national referendum involving President Vladimir Putin.

Russia will vote on changing its constitution, adopted in 1993, on July 1. The main issue to be decided is whether to allow Russia’s president to stay in power for more than the current limit of two consecutive six-year terms.

Most of the nation will use traditional paper ballots, but residents of Moscow and the Nizhny Novgorod region will have the option of casting their votes electronically and, at least in the Muscovites’ case, having them recorded on a blockchain. 

Related: Illegal Miners in Russia Stole $6.6M Worth of Electricity, Power Grid Firm Says

According to an official page dedicated to electronic voting, Moscow’s Department of Information Technologies, which is working on the technical solution, plans to use Bitfury’s open-source enterprise blockchain, Exonum. 

“The blockchain technology is working in the Proof of Authority mode,” the page says in Russian. “A smart contract for the ballot ledger will be recording the votes in the system, and after the voting is complete it will decode them and publish them in the blockchain system.” 

The Department of Information Systems did not respond to CoinDesk’s request for comment by press time. Bitfury’s spokesperson declined to comment on the company’s involvement in the project.

See also: Bitfury Latest to Donate Crypto Mining Power to Coronavirus Research

Related: Russia Is About to Drop the Crypto ‘Iron Curtain,’ Industry Warns

“Blockchain-based voting is one of the most important applications of Exonum and blockchain technology overall,” the spokesperson said. “We do not have anything to share at this time, but we will stay in touch with future announcements.”

According to several people familiar with the electronic voting project, the company that built the solution for the Moscow authorities was Kaspersky Lab, the popular anti-virus software vendor that has turned to consulting in the blockchain space in recent years. A Kaspersky spokesperson declined to comment.

Moscow’s previous experience with blockchain voting did not go smoothly.

In September, residents of several Moscow districts could vote electronically in city council elections. When the code for the system was published, French security researcher Pierrick Gaudry showed that it could be easily hacked. After the voting was complete one of the losing candidates criticized the system, saying the offline results were not consistent with those submitted electronically. 

See also: Bank of Russia Wants to Put Mortgage Issuance on a Blockchain

Roman Yuneman, an independent candidate who ran for a city council seat, published a report describing the weaknesses of the system built by the Moscow authorities. According to the report, the voting had been down for nearly 30% of the time, and Yuneman’s team received 70 complaints from people who could not cast their votes electronically.

Russian news outlet Meduza wrote that the private key for decoding the votes was written into one of the transactions and could be easily retrieved from it, which made it possible to figure out how particular people voted. At the same time, around 12,000 voters’ records were leaked by the system, Meduza reported.

In addition, all the data was collected on servers belonging to the Moscow authorities and was under their complete control, Yuneman wrote. Independent observers could not check the authenticity of the vote count, and in one neighborhood, the offline and online results showed opposite results. 

“Electronic voting has a lot of issues even without blockchain, and that was clearly demonstrated during the Moscow elections,” said Sergey Tikhomirov, a blockchain researcher and a PhD candidate at the University of Luxembourg. 

“There was no technical way to observe it and the administrators of the voting could forge the data at any time. And, unlike with the paper ballots, in this case the forgery leaves no traces,” he said.

Blockchain-based voting has proved a tough nut to crack in other countries as well.

One of the best-known blockchain voting apps, Voatz, was blasted after several pilot tests, with the U.S. Department of Homeland Security pointing out the app’s vulnerabilities. So did researchers at MIT. 

See also: West Virginia Ditches Blockchain Voting App Provider Voatz

Still, governments around the world have been experimenting with the concept, and blockchain voting tests have been underway in Thailand, South Korea, Sierra Leone and India.

Nir Kshetri, professor of management at the University of North Carolina in Greensboro, wrote in October that despite hopes blockchain could make elections more transparent and fair, “there’s no evidence yet that it is better at preventing election fraud.”

At the end, it’s the people in power who decide what will be the design of a blockchain voting system and who will have access. The technology does not resolve the issue of trust in the political system, Tikhomirov said.

“If people do trust the election system as such, any method of voting would work, even though the electronic one is riskier anyway. But if there is no trust, the electronic vote makes it even harder to check if the vote count was fair or not,” he said.

Russia has a history of election result falsifications on all levels over the past decade, which has prompted a nationwide movement of volunteer election monitors who report voting irregularities during each election cycle.

• Bank of Russia Wants to Put Mortgage Issuance on a Blockchain
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Alchemy has built a new push notification system for blockchain developers.

Announced Monday, Alchemy Notify is a product designed to enhance the user experience (UX) of various crypto platforms by providing real-time notifications for transactions and events.

Blockchain UX often relies on constant attention from the user, which can be off-putting for those who want to engage in a seamless transaction process. Alchemy Notify is hoping to change that through push notifications to smart devices.

Related: Blockchain.com

“Extremely simple and intuitive user experiences are crucial to the mass adoption of blockchain applications,” said Alchemy CEO and co-founder Nikil Viswanathan. “Alchemy Notify provides a key building block for a great user experience – notifications.”

It functions by replacing the nodes businesses use to read and write on blockchains with more expedient and scalable infrastructure. It’s meant to coexist alongside the developer platform, which offers tools for monitoring, alerting and debugging crypto software.

“Notify requires extremely technical and nuanced infrastructure to provide the notification capabilities to developers,” Alchemy CTO and co-founder Joe Lau told CoinDesk via Telegram. “Notify is powered by the Alchemy Platform, which took years of research and development to build.”

The San Francisco-based firm raised $15 million late last year from Pantera Capital, Coinbase Ventures, Samsung, SignalFire and others.

Related: Blockchain Firms Flocked to Hong Kong in 2019: Report

“In order to bring blockchain to a billion people, we as a community need to focus on building products that are accessible to normal people,” Lau added. “Great user experience is an absolute must – users expect blockchain products to be at least as good as, if not better than, traditional web and mobile products.”

Read more: Torus Goes Blockchain-Agnostic With New DirectAuth Dapp Login Tool

That focus is why large names including Augur, 0x, CryptoKitties, Kyber and the Opera browser rely on Alchemy’s blockchain developer platform to solve their UX and design challenges.

Research conducted by Airship suggests push notifications can increase user retention by up to 820% compared to users who receive no push notifications. The data was collected via 63 million app users to determine how they interacted with their smart devices.

Alchemy is betting this can apply to the blockchain ecosystem as well. Events and transactions – such as interest earned, timed events, contracts, token swaps and in-game actions – can be confusing to understand for new users.

“Making it easier to build great user experiences is absolutely crucial for the success of the blockchain industry,” said Pantera Capital’s Paul Veradittakit. “Alchemy’s developer platform continually innovates on empowering developers with new building blocks. Notify will be a game changer for the industry. Just look at what notifications have done for the mobile app ecosystem.”

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