Autor Cointelegraph By Shiraz Jagati

FTX’s collapse could change crypto industry governance standards for good

FTX’s collapse could change crypto industry governance standards for good

Uverejnil používateľ | nov 25, 2022 |

The crypto market is often referred to as the Wild West of the finance world. However, the events that have unfolded within this space recently would put to shame even the hardiest of cowboys from the day of yore. As a quick refresher, on Nov. 8, FTX, the second-largest cryptocurrency exchange in the world till about a month ago, faced an unprecedented liquidity crunch after it came to light that the firm had been facilitating shady deals with its related firm Alameda Research.In this regard, as 2022 continues to be rough on the global economy, the crypto sector, in particular, has been ravaged by a series of meltdowns that have had a major impact on the financial outlook and investor confidence in relation to this maturing industry. To this point, since May, a growing number of prominent projects associated with this space— such as Celsius, Three Arrows Capital, Voyager, Vauld and Terra, among others — have collapsed within a matter of months.FTX’s downfall specifically has been extremely damaging for the industry, as evidenced by the fact that following the company’s dissolution, the price of most major crypto assets dipped majorly, having shown no signs of recovery thus far. For example, within just 72 hours of the development, the value of Bitcoin plummeted from $20,000 to approximately $16,000, with many experts suggesting that the flagship crypto may bottom out close to the $10,000–$12,000 range, a story that has been mirrored by several other assets.What lies ahead for cryptocurrency exchanges?One pertinent question that the recent turbulence has brought to the forefront is what the future now holds for digital asset exchanges, especially centralized exchanges (CEXs). To get a better overview of the matter, Cointelegraph reached out to Dennis Jarvis, CEO of Bitcoin exchange and cryptocurrency wallet developer Bitcoin.com. Recent: Bitcoin miners look to software to help balance the Texas gridIn his view, CEXs are being faced with a tremendous uphill battle right now, especially with revenues being low and stricter regulation waiting around the corner. In light of the current scenario, he pointed out that more and more people are and will continue to gravitate toward the use of self-custodial storage solutions, adding:“It’s obvious you can’t trust these centralized intermediaries. There will always be a place for CEXs, but over the long term, I believe they will play a minority role in the crypto ecosystem; certainly nothing like the outsized role they’ve enjoyed up to now.”Alex Andryunin, CEO of exchange market maker Gotbit, told Cointelegraph that there is already a major surge of institutional interest in decentralized exchange (DEX) trading. To this point, he highlighted that just a couple of months ago (i.e., September), his clients’ DEX-centric profits lay at $8 million but jumped to $11.8 million in subsequent months, signaling a 50% rise despite the bloodbath across the entire crypto industry. He added:“In my opinion, Binance, Coinbase, Kucoin and Kraken’s business models will survive the ongoing turbulence. However, even large entities like Coinbase are not currently competing with Binance. The company has no big competitors left. Even inside the U.S. market, Binance US is growing, while Coinbase, Gemini and Crypto.com are falling in DAU, as of Q3 2022.”Gracy Chen, managing director for cryptocurrency exchange Bitget, believes that we will now see trading ecosystems enter a consolidation phase, with these platforms being scrutinized more than ever before. In her view, this will create an opportunity for exchanges with strong balance sheets and solid risk management practices to cement their market share. “Ultimately, we believe there would be no more than 10 centralized exchanges with strong competitiveness in the industry,” she told Cointelegraph.Robert Quartly-Janeiro, chief strategy officer for cryptocurrency exchange Bitrue, shares a similar outlook. He told Cointelegraph that the collapse of FTX can and should be viewed as a historic moment for the industry, one that will force exchanges to become more professional and transparent in their day-to-day operations.“It’s incumbent on exchanges to provide a better experience to crypto investors. They must become better and more trustworthy places to trade. Not all will make it, but those real pedigrees will survive. It’s also important to remember that the role of exchanges is to protect investors’ funds and provide a market — not be the market. FTX got that wrong,” he added.Can DEXs fill the void?While most experts believe that as long as centralized exchanges like Binance and Coinbase continue to maintain sensible balance sheets, there’s no reason for them not to benefit from their competition biting the dust. However, Jarvis believes that moving forward, these major crypto entities will feel the heat of competition from DeFi protocols, especially since many people have now started to wake up to the intrinsic problems associated with trusted intermediaries. He went on to add:“I think you’ll see a lot more CEXs begin to invest in DeFi versions of their CeFi products. It will be tough for them, though, because companies have been building products designed for self-custody and DeFi for a long time.”Similarly, Chen believes there will be new opportunities for decentralized finance (DeFi) in the near term, adding that a large portion of all centralized crypto services, especially lending/debt services, will cease to exist, stating that the CeFi lending model has proven to be relatively untrustworthy at this point. “DeFi will usher in huge development opportunities. Custody services, transparency and top-shelf risk management policies will become the norm for centralized services,” she said.However, Andryunin noted that most DeFi protocols are still not convenient for retail traders, adding that there are hardly any quality DEXs with features like limit orders today. If that wasn’t enough, in his view, most platforms operating within this realm today offer an extremely weak user experience.“Users need to understand concepts related to metamask and other extensions, with many experiencing difficulties related to fiat/crypto input. Even if the average retail trader uses DeFi, they will most likely return to some CEX with a high proof-of-reserve rating,” he added.Crypto’s future lies in the marriage of CeFi and DeFiAccording to Julian Hosp, founder of decentralized exchange DefiChain, transparency will be key to how customers continue to select exchanges henceforth. He suggested that pure DeFi will continue to be too difficult to use for most customers while pure CeFi will be too difficult to trust, adding:“Solid exchanges may be able to increase their stranglehold; however, we will see more and more platforms mixing DeFi and CeFi into CeDeFi, where customers have the same fantastic user experience from CeFi, but the transparency from DeFi. This will be the road forward for crypto.”Expounding his views further on the matter, he added that over the coming months and years, DeFi liquidity will no longer be concentrated on one dominant blockchain and will quite likely spread across multiple ecosystems and protocols, as evidenced throughout the history of this decade-old market.Lastly, Chen believes that in an ideal scenario, CeFi could provide better products with better margins and leverage, while DeFi could offer trustless custody services. However, as things stand within the CeFi area, there are neither on-chain custody services nor mature regulations like those present within the traditional finance industry.Moving forward, it will become imperative that the old and new crypto financial paradigms meet so that a liquidity superhighway can be devised for DeFi platforms to draw from. This is especially important since this market suffers from a lack of concentrated capital. However, for this to happen, existing players from both the centralized and decentralized industries will have to come together and work in conjunction with one another.History should serve as a lesson There is no doubt that the recent FTX disaster serves as a stark reminder that people should refrain from storing their wealth on exchanges that are not transparent. In this regard, Nana Obudadzie Oduwa, creator of digital currency Oduwacoin, told Cointelegraph that moving foward, it is a must that crypto enthusiasts realize the absolute importance of storing their assets on cold storage and hardware wallet solutions, adding:“There is no doubt that cryptocurrency is the future of money and blockchain-based technologies are doing their part in redefining transactions, much in the same way as the internet did to the telecommunications industry. However, people cannot trust their money in other people’s hands like exchanges, except when they are regulated with proof of insured funds.”Quartly-Janeiro believes that moving ahead, it is important that there is a level of institutional credibility and capability within the crypto landscape, adding that much like what happened with Lehman Brothers and Barclays back in 2008, liquidity can be an issue in any asset class.Recent: House on a hill: Top countries to buy real estate with crypto“While Coinbase and others will continue to attract customers, the size of an entity doesn’t immune it from risk by itself,” he noted.Lastly, Jarvis claims that over the past several years, the core tenets of crypto have been compromised because of money, market share and technological expediency. In his opinion, this recent wave of insolvency is an ongoing painful episode in crypto’s evolution, one that is probably for the best since it will set the industry on a better path — i.e., one that is rooted in the ethos of decentralization and transparency. Therefore, as we head into a future driven by decentralized crypto tech, it will be interesting to see how the market continues to evolve and grow from here on out.

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Is DOGE really worth the hype even after Musk’s Twitter buyout?

Is DOGE really worth the hype even after Musk’s Twitter buyout?

Uverejnil používateľ | nov 19, 2022 |

2022 continues to be a year of surprises, with one of the biggest so far being Elon Musk’s decision to acquire social media juggernaut Twitter for a whopping $44 billion. While the takeover has set into motion a whole host of debates — particularly those pertaining to Big Tech censorship — it has also called into question the future of Dogecoin (DOGE), a digital currency of which the billionaire has been a big proponent over the last couple of years.To put things into perspective, just hours before Musk tweeted that “the bird is freed” on Oct. 27, the price of DOGE was hovering around $0.07. However, by Nov. 1, it had surged to $0.16, bringing the total market capitalization of the so-called memecoin to a sizable $21 billion. And while DOGE is currently trading close to $0.08, its 30-day profit ratio is greater than 40%.It is also worth noting that every time Musk has tweeted in support of the digital asset, its value has skyrocketed quite dramatically. For example, throughout 2021, he continued to refer to DOGE as the “people’s crypto,” a message that sent the currency’s value flying by a whopping 4,000% over the course of the year.Moreover, Tesla — an American multinational automotive and clean energy company helmed by Musk — started accepting DOGE as payment for its merchandise in January 2022, including its “Giga Texas” belt buckles and miniature vehicle replicas. Furthermore, Musk’s recently released joke fragrance, Burnt Hair, could also be purchased with DOGE.A bleak future for DOGE?To get a better idea of whether Musk’s Twitter takeover and constant support of DOGE stand to make an indelible mark on the digital currency’s financial future, Cointelegraph reached out to Lior Yaffe, co-founder of Switzerland-based blockchain software company Jelurida. Yaffe does not have too much faith in Dogecoin, judging from the poor decision-making displayed by Musk so far, adding:“From paying too much for Twitter to causing companywide mayhem by firing many good employees and making terrible management decisions such as the blue check episode, I’m not optimistic about either Twitter or Dogecoin.”Furthermore, he claimed he would be surprised if Musk can bring any real use cases to Dogecoin, noting that even if Musk intends to somehow integrate Twitter with crypto payments — which is a very difficult task — he doubts they will be able to achieve such a dream in the near future. “Even if they do manage to build a payment system around Twitter, there are much better blockchain solutions than Dogecoin to choose from with regards to security, privacy, smart contracts and scaling,” he stated.Recent: Could Hong Kong really become China’s proxy in crypto?Henry Liu, CEO of cryptocurrency exchange BTSE, told Cointelegraph that after taking into consideration the current macroeconomic environment, he foresees the price of DOGE continuing to remain highly volatile, much in line with the crypto market.“We expect DOGE to stay speculative in the short run, and there should be reduced liquidity and trading volumes across various platforms. If DOGE can be given new utility regarding its collaboration with Twitter, we may foresee a spike driven by social media communities,” he said.Not everyone is so skepticalNikita Zuborev, chief analyst for cryptocurrency exchange BestChange, told Cointelegraph that while one cannot discount the fact that the growth of meme tokens often happens suddenly and unreasonably, Musk’s recent acquisition of Twitter could potentially boost DOGE’s price, mainly because one cannot rule out the possibility of the asset being integrated into the firm’s social network ecosystem in the future. He added:“If that happens, then the previously useless memecoin will turn into the platform’s central control token of sorts, reaching a massive audience in the process. Such a transformation will be able to bring the coin several use cases, something that many investors are betting on.”To further strengthen his argument, Zuborev pointed to the upcoming launch of the SpaceX-backed Doge-1 lunar satellite, which is directly related to the brand of the coin. “These kinds of moves stand to provoke high demand in DOGE’s market and price growth,” he claimed. That being said, he did concede that as long as the asset’s primary selling point remains rooted in its meme-centric outlook, it would only be wise to add the currency to one’s portfolio just to diversify it. However, as a standalone investment, he does not give much merit to DOGE.“Besides Dogecoin, Musk has repeatedly spoken quite positively about Bitcoin as well, a crypto that is far more stable and can be integrated into Twitter’s ecosystem easily. One can consider it as an alternative to DOGE, especially to capitalize on Musk’s continued market manipulations,” he said.DOGE’s utility is still minimal, and that’s a factThanks to Musk’s affinity for Dogecoin and his recent takeover of Twitter, it stands to reason that speculation regarding the asset’s price will run amok, at least for some more time. That being said, the fact remains that Dogecoin as a crypto project is still quite limited in its operational utility, a sentiment echoed by Daniel Elsawey, co-founder and CEO of decentralized exchange TideFi.Taking a more holistic view of the matter, he told Cointelegraph that cryptocurrencies in the digital asset space today fall into two distinct categories: those with smart contract capabilities and those without. In his opinion, the market as a whole is moving toward the tokenization of items in our day-to-day lives, and this is what stands to tip the adoption curve of digital assets toward one side or the other. He added:“Given that DOGE cannot directly interact with smart contracts as part of its original design, I would say that unless it’s specifically used as an option for payment, the use cases associated will continue to remain speculative.”Lastly, given that the crypto industry is still in its relative infancy, it continues to remain heavily dependent on Bitcoin (BTC), tracing its price movements quite heavily. Moreover, volatility continues to pervade the market due to the recent downfall of crypto exchange FTX, something that will have a direct effect on the price of most cryptocurrencies in the near to mid-term. “Dogecoin is no different in this respect. There is still a lot of uncertainty surrounding the asset,” Elsawey concluded.Recent: Banks still show interest in digital assets and DeFi amid market chaosAs we head into a future driven by a high degree of economic turbulence — across a myriad of financial sectors — it will be interesting to see how the future of Dogecoin plays out moving forward, especially as projects with limited use cases continue to be wiped out from the market seemingly with each passing day.

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Hackers keeping stolen crypto: What is the long-term solution?

Hackers keeping stolen crypto: What is the long-term solution?

Uverejnil používateľ | nov 12, 2022 |

Even as the ongoing Binance-FTX saga continues to dominate the crypto airwaves, there has been a growing trend — an uneasy one at that — that has been garnering the attention of many digital currency enthusiasts in recent months, i.e., hackers returning partial funds for discovering exploits within a protocol. In this regard, just recently, the bad actors behind the $14.5 million Team Finance attack revealed that they would be allowed to stay in possession of 10% of the stolen funds as a bounty. Similarly, Mango Markets, a Solana-based decentralized finance (DeFi) network that was recently exploited to the tune of over $110 million, revealed that its community of backers was working toward reaching a consensus, one that would allow the hacker to be awarded $47 million as a reward for exposing the exploit.As this trend continues to garner more and more traction, Cointelegraph reached out to several industry observers to examine whether such a practice is healthy for the continued growth of the digital asset market, especially in the long run.A good practice, for nowRachel Lin, co-founder and CEO of SynFutures — a decentralized crypto derivatives exchange — told Cointelegraph that on one hand, the habit of encouraging “black hatters” to turn “white hat” encourages the industry to raise its standards of best practices, but it’s still not uncommon for popular protocols to be forked or simply copied and pasted, leaving them replete with hidden bugs. She added:“We’d be remiss to say that this is healthy where in an ideal world, there’d be only white hat hackers. But the transition we’re seeing in which hackers are returning some of the funds, which wasn’t previously the case, is a strong step forward, particularly in sensitive times like these where it’s becoming clearer that many projects and exchanges are connected and could impact the ecosystem as a whole.”On a somewhat similar note, Brian Pasfield, chief technical officer for decentralized money market Fringe Finance, told Cointelegraph that while the idea of giving hackers a fraction of the money they cart away for discovering loopholes can be seen as unhealthy and almost unsustainable, the fact of the matter remains that ultimately the hacked projects have no choice but to utilize this approach. “This is a better alternative than resorting to law enforcement’s approach to nab the perpetrators and recover the funds, which takes a very long time, if successful at all,” he added.Recent: What can blockchain do for increasing human longevity?Speaking more technically, Slava Demchuk, co-founder of crypto compliance firm AMLBot, told Cointelegraph that since everything is on-chain, all of a hacker’s actions are traceable, so much so that the hacker has almost a 0% chance of using the illegally obtained digital assets. He added:“When the hackers agree to return some of these stolen funds, not only does the project usually not prosecute the hacker, it even allows them to be able to use the remaining funds legally.” Lastly, Jasper Lee, audit tech lead at SOOHO.IO, a crypto auditing firm for several Fortune 500 companies, said that this kind of white hat behavior could be healthy for the blockchain industry in the long run since it provides the opportunity to identify vulnerabilities within DeFi protocols before they become too large. He further told Cointelegraph that out in non-blockchain industries, even if a hacker finds a vulnerability in a given code, it is difficult for them to go public with that information because it could cause severe legal issues. “In traditional hacking, it is very rare that a hacker returns the funds they have taken, as doing so would likely reveal their identity,” Lee said.Not everyone agreesDavid Carvalho, CEO at Naoris Protocol, a distributed cybersecurity ecosystem, stated in unequivocal terms that allowing hackers to keep funds in such a way not only undermines the entire ethos of a decentralized financial system but it promotes behavior that fosters distrust.“It cannot continue to be seen as something to be tolerated on any level. The fundamentals of a safe and equitable financial system don’t change,” he told Cointelegraph, adding, “The premise that the only way to solve the hacking issue is to make the problem part of the solution is fatally flawed. It may fix a small crack for a short period of time, but the crack will continue to grow under the weight of the flimsy fixes and result in a destabilized market.” A similar sentiment is echoed by Tim Bos, co-founder and chairman of ShareRing — a blockchain-based ecosystem providing digital identity solutions — who believes that this is a terrible practice. “It’s akin to paying criminals who hold people hostage. All this does is makes the hackers realize that they can commit a huge crime, be rewarded for it, and then there are no repercussions,” he told Cointelegraph.Carvalho noted that just because a hacker is nice enough to return part of the funds doesn’t make it a good practice since these episodes still result in people and DeFi platforms losing a lot of money. “We can’t afford to associate decentralized finance with nefarious security fixes. For mass adoption by both enterprises and individuals, we need the security systems across the Web2 and Web3 ecosystems to be trusted and hackproof. Having a cohort of hackers ostensibly calling the shots in the cybersecurity space is crazy, to say the least, and does nothing to promote the industry,” he said. Setting a bad precedent for the industry?Lin noted that even among traditional Web2 companies — like the FAANGs of this world — hackers are incentivized to discover bugs and zero-day exploits in exchange for certain incentives. However, this often comes with strict requirements and having white hat hackers discover these loopholes is viewed as being healthy for the ecosystem. She noted:“Major exploits or discoveries typically put the industry as a whole and in-house security teams on alert. But it’s a slippery slope. I’d argue we’d need to define what a ‘white hat’ hacker is. For example, could you consider a hacker who’s cornered and reluctantly returns only 10% of the funds a white hat hacker?”Lee believes that these fat paychecks can serve as a significant impetus for white hats to carry out more such ploys. However, he pointed out that instead of seeing 100% of a protocol’s funds being hacked or disappearing for good, it’s always better for the protocol’s users that a portion of the appropriated funds are recovered.On a more optimistic note, Demchuk noted that the DeFi market is community-driven and, therefore, such actions could be viewed positively, as hackers themselves are often asked to work for the projects they exploited, making their activities real-life penetration tests. What’s the solution?It is no secret that a large portion of the Web3 ecosystem (and its associated cybersecurity solutions) still runs on yesterday’s Web2 architecture, making them highly centralized. This, in Carvalho’s opinion, is the elephant in the room that most Web3 platforms don’t want to talk about. He believes that if these pressing issues are not solved using decentralized solutions, the standards for smart contract execution and publishing will not be not fundamentally changed or improved, adding:“These types of breaches will continue to happen because there is no accountability or criminalization of hacking activity. I believe a ‘just pay the hacker’ approach is going to increase the risk for DeFi and other centralized/decentralized platforms because the fundamental weaknesses are not resolved.”Bos noted that the core problem here isn’t the hacking or the fake bounties that are rewarding the hackers but an apparent lack of audits, quality security processes and risk reviews, especially from those projects that have in their coffers millions of dollars worth of crypto assets. Recent: FTX collapse: The crypto industry’s Lehman Brothers moment“Established banks are virtually impossible to hack into because they spend a lot of money on security reviews, risk audits, etc. We need to see the same level of technical oversight in the crypto industry,” he concluded.Therefore, as we head into a future driven increasingly by decentralized technologies, one can say that the hackers are simply demonstrating how much more work the crypto sector as a whole needs to put into its security practices.

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Can internet outages really disrupt crypto networks?

Can internet outages really disrupt crypto networks?

Uverejnil používateľ | nov 1, 2022 |

In the wee hours of Oct. 18, several parts of Europe, America and Asia were left without any internet due to several undersea internet cables being “cut,” causing a chain reaction of connectivity problems across the globe. France, Italy and Spain, in particular, were faced with significant outages, with many experts claiming that vandals were to be blamed for the same.According to Jay Chaudhary, CEO of Zscaler — an American cloud security company — there is no doubt that nefarious third-party agents were to be blamed for the cut cables that resulted in packet data losses as well as latency for various websites and applications, adding that despite their best efforts authorities have been unable to pin down the individuals responsible for the attacks. Furthermore, it bears mentioning that over the last couple of days, there has been a slew of cut internet cables in and around the United Kingdom. For example, on Oct. 20, an underwater submarine cable was slashed near the coast of northern Scotland. While several reports have suggested foul play from rival government agencies — with the tense geopolitical situation in Europe amid the Russian-Ukrainian war — there is no hard evidence to substantiate these claims. That being said, it is worth delving into the question of how events like these can potentially affect cryptocurrencies, especially from a network resiliency and security perspective.Internet cuts and their effects on digital assetsTo understand how internet outages, such as the one highlighted above, can affect cryptocurrencies, Cointelegraph reached out to Nikolay Angelov, head of blockchain for cryptocurrency lending institution Nexo. He started off by saying that the regions affected by recent cable disruptions (primarily France) account for just over 3% of Bitcoin nodes globally and just under 3% of Ethereum validators, adding that the decentralized nature of these two largest digital asset networks counters the effects of such attacks since the flow of transactions streams to nodes with internet access and connection to the blockchain. He then added:“Not to undermine the seriousness of the incident, but such localized events cannot have a lasting effect on cryptocurrencies, as blockchain transactions can still be validated by other active nodes. In other words — almost every single Bitcoin node has to lose internet connection for the Bitcoin blockchain to seize. Admittedly, it’s been a massive inconvenience, but a temporary one at that.”On a somewhat similar note, Nukri Basharuli, founder and CEO of SuperProtocol — a trustless and permissionless cloud infrastructure — told Cointelegraph that while people need to understand that decentralization is not a silver bullet: If you pull the plug, you’ll feel the consequences. Web3, by its very design, is highly resistant to breakdowns emanating from cable cuts. He pointed out that applications hosted on a decentralized network along with their users won’t even notice if some of their nodes go offline.“Such scenarios happen all the time where nodes constantly switch on and off while the data stored remains intact and fully accessible. The network will automatically reconfigure itself in order to provide the highest quality service possible,” he added.Some concerns do existAccording to Victor Ionescu, co-founder and chief technical officer at decentralized exchange Hashflow, when analyzing incidents like these, the main thing to worry about is the decentralization of the infrastructure versus the decentralization of the network’s stakeholders. Recent: Happy Halloween: The five spookiest stories in crypto in 2022To elaborate, he noted that as adoption scales up, many software companies will continue to utilize reusable infrastructures for running nodes, providing blockchain data feeds and other related tasks. He added:“These companies consolidating their infrastructures could spur a centralization of their networks. For example, if all Ethereum validators were to run in one AWS region, the region going down could take down the network. This problem is less prominent in Bitcoin, but I expect mining hubs to become targets over time.”Daniel Nagy, chief scientist and vice president for Swarm Foundation — the organization behind the Swarm decentralized storage and communication system — told Cointelegraph that such events might only be consequential for high transaction-density blockchains such as Solana. “The majority of networks below 100 TPS have enough redundancy not to be affected in any way by the loss of one cable in the internet backbone infrastructure,” he noted.That said, it is worth highlighting that we currently live in a technologically advanced era, one where vulnerabilities associated with cable internet connections could soon become a thing of the past thanks to the advent of innovations like Starlink, which stand to counter acts of vandalism.Safety implications of outages on digital assetsHerbert Sim, an adviser at Solidus AI Tec — an AI infrastructure provider — told Cointelegraph that the only way major outages can have an effect on a digital asset is if a large mass of computers that make up the network are affected at the same time, something that is extremely rare and hard to pull off, adding:“Major blockchains have millions of users around the world. What this means, in essence, is that unless this sort of outage simultaneously affects millions of computers in different parts of the world at once, it does not have a chance of affecting the safety of digital assets.”Similarly, Angelov believes that these outages present safety risks to crypto networks, primarily in theory rather than in practice, since most blockchains are capable of adjusting their performance to reflect geographical power and/or internet outages by lowering their mining difficulty when the number of active nodes decreases because of said outages. “This, in turn, can pose risks to network security, as transaction verification is executed by less nodes or validators, but as mentioned above, a great many nodes must be affected for this to happen, which is not the case currently. Transaction processing times are less likely to be impacted as in Bitcoin’sinstance, its blockchain is designed to decrease mining difficulty when the hash power lowers to maintain a steady number of transaction blocks,” he said.Providing a technical take on the matter, Basharuli claims that when it comes to security, connectivity issues such as the one mentioned above could potentially open an attack angle for malicious actors, one where they could imitate the behavior of the nodes that went off the grid and convince others that some transactions are valid. “Then again, making such an attack impossible is part of the design 101 rulebook for decentralized networks,” he added. To counter such issues, Basharuli claims that developers could leverage the latest technologies available in the market (such as IntelSGX) designed to make confidential computing possible. He closed out by saying:“Confidential computing protects the data in the very moment it’s being processed, which leaves no entry point for the malicious actor to somehow temper with it, or even get a glimpse of what’s going on inside the system.”Ionescu believes that as a result of these outages, being able to attack a statistically significant number of validators could pose problems for specific networks. One concerning factor is the fact that a majority of infrastructure for several projects lies in the cloud, and the cloud provider space is split among two or three major players. Among these players, some locations are generally preferred by developers due to their proximity to the development hub. Recent: 14 years since the Bitcoin white paper: Why it mattersFor example, United States east coast developers tend to prefer servers in Virginia. The usage of cloud data centers thus tends to be distributed in correlation with the locations of the development teams. Moreover, network partitions at scale are not something that developers have in mind when devising systems. “Network connectivity has been a luxury that we have been taking for granted. In reality, we need truly decentralized cloud infrastructure, but the technology isn’t there yet,” he said.The future is decentralized, and rightly soOne of the more fascinating aspects of blockchain technology is that it corrects some of the most significant flaws of traditional computer networks, i.e., a lack of decentralization. In this regard, Sim believes that as long as we continue to have the power of different networks concentrated in a few computers, outages will always have an effect on them. “Because the blockchain is distributed across so many computers worldwide, it is immune to it. That is why you rarely, if ever, hear of a blockchain collapsing,” he concluded.Therefore, as we head into a future potentially being affected by internet outages and other such issues, it stands to reason that more and more developers will continue to understand the true potential of blockchain technology and move in a decentralized direction.

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What does the global energy crisis mean for crypto markets?

What does the global energy crisis mean for crypto markets?

Uverejnil používateľ | okt 25, 2022 |

There’s no denying that the world is currently facing an unprecedented energy crisis, one that has compounded severely in the aftermath of the COVID-19 pandemic so much so that countries across the globe — especially across Europe and North America — are witnessing severe shortages and steep spikes in the price of oil, gas and electricity.Limited gas supplies, in particular, stemming from the ongoing Russia-Ukraine conflict, have caused the price of essential commodities like fertilizer to shoot up dramatically. Not only that, but it has also resulted in the heightened use of coal and other natural resources. Coal consumption within Europe alone surged by 14% last year and is expected to rise by another 17% by the end of 2022.To expound on the matter further, it is worth noting that European gas prices are now about 10 times higher than their average level over the past decade, reaching a record high of approximately $335 per megawatt-hour during late August. Similarly, the United States Energy Information Administration’s recently published winter fuel outlook for 2022 suggests that the average cost of fuel for Americans will increase by a whopping 28% as compared to last year, rising up to a staggering $931.With such eye-opening data out in the open, it is worth delving into the question of how this ongoing energy shortage can potentially affect the crypto sector and whether its adverse effects will recede anytime soon.The experts weigh in on the matterMatthijs de Vries, founder and chief technical officer for AllianceBlock — a blockchain firm bridging the gap between decentralized finance (DeFi) and traditional finance — told Cointelegraph that the global economy is in bad shape thanks to a multitude of factors including the power crisis, looming recession, surging inflation and rising geopolitical tensions. He added:“These issues are interlinked, primarily in the way that capital flows in and out of impactful industries. The worse the macroeconomic climate, the lower the capital (liquidity) that flows in and out of the digital asset industry. This liquidity is what enables the incentivization mechanisms of blockchain to continue working. So, for miners, if there is a shortage of liquidity, this means fewer transactions for them to confirm, lesser fees and decreased incentives.”Moreover, de Vries believes that rising energy costs could provide additional incentives for miners to move toward the validator ecosystem of Ethereum 2.0 that relies on a far more energy-efficient proof-of-stake (PoS) mechanism.Recent: The Madeira Bitcoin adoption experiment takes flightA somewhat similar sentiment is echoed by Yuriy Snigur, CEO of Extrachain — an infrastructure provider for distributed applications, blockchains and decentralized autonomous organization (DAO) platforms — who believes that the ongoing energy price surge will impact proof-of-work (PoW) blockchains the most.“They are the most dependent on the energy sector. In my opinion, the value of a blockchain should not come from the meaningless burning of energy, which is why PoW is doomed eventually,” he noted. Worsening macroeconomic climate will hurt crypto in near termNero Jay, founder of the crypto YouTube channel Dapp Centre, told Cointelegraph that the challenges being witnessed will continue to have an overall negative impact on the crypto market, as a result of which most investors will continue to look at this yet nascent sector as being speculative and risky, at least for the foreseeable future.However, as a silver lining, he noted that the aforementioned challenges could serve as an opportunity for increased crypto adoption, especially as many countries like Venezuela, Turkey, Argentina, Zimbabwe and Sudan continue to be ravaged by hyperinflation and sanctions, which may give crypto assets more utility and use cases.Lastly, Jay believes that the worsening energy situation could result in increased scrutiny of the mining sector, especially since proponents of the zero carbon emission campaign will now have more fuel to criticize the space.“Many are questioning the impact that crypto mining may have on the environment. The great news is we are already seeing many cryptocurrency projects, including Ethereum, that are making their blockchain platforms very efficient and low carbon emission based,” he said.Bitcoin’s price and its relationship with the energy market From the outside looking in, increased energy prices will raise costs for miners, which in turn could force them to sell their held Bitcoin (BTC), thereby pushing down prices. Furthermore, heightened production can result in miners demanding higher prices to cover their daily operational costs and, in some cases, even forcing them to shut down their operations entirely or sell their equipment.Also, even if miners continue to go out of business, the total volume of BTC being mined will remain the same. However, the block rewards will be distributed among fewer individuals. This suggests that miners who can stave off the bearish pressure induced by rising energy costs stand to make massive profits. Andrew Weiner, vice president for cryptocurrency exchange MEXC, told Cointelegraph:“Electricity shortages can lead to higher electricity prices, raising the cost of Bitcoin mining substantially. In the event of a regional long-term power shortage, it will cause the migration of miners to other jurisdictions where relatively cheap electricity prices offer safety and stability.”Hope still remains for a trend reversalWeiner said that, while the energy crisis could put pressure on Bitcoin’s price, the poor lackluster state of the global economy could potentially counter this.In Weiner’s view, the U.S. Federal Reserve’s monetary policy in the current global economic environment has had the most significant influence on the cryptocurrency market, adding:“Beginning with the implementation of loose monetary policy by the Federal Reserve in 2020, institutions have digitally transformed their back-offices and accelerated their purchases of Bitcoin. When fiat depreciates, institutions adjust their strategy to allocate bitcoin as value-preserving assets.”He further noted that the cryptocurrency market, especially Bitcoin, is becoming increasingly correlated with Nasdaq and the S&P 500, while its correlation with energy, oil and electricity will not be significant unless BTC mining becomes affected by a future global electricity shortage.Moreover, the ongoing energy crisis can potentially trigger more government spending programs resulting the them “printing” more money to get themselves out of trouble. This can potentially result in a loss of confidence in fiat assets and more demand for digital currencies. This trend is not beyond the realm of possibilities since it is already being witnessed across several third-world nations and could even permeate into certain larger economies as well.Recent: Ethereum at the center of centralization debate as SEC lays claimJust a couple of months ago, inflation in the eurozone scaled up to an all-time high of 8.9%, a situation that was also witnessed in the United States, where inflation surged to a forty-year high of 8.5% back in August. And, while many individuals continue to be divided on the positive/negative impact of the stimulus packages on the global economy, the fear of increased inflation alone stands to raise the demand for cryptocurrencies.Therefore, as we head into a future plagued by potential energy shortages and price surges, it will be interesting to see how the future of the digital asset market continues to play out, especially as rising geopolitical tensions and worsening market conditions continue to make matters worse.

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