Blockchain Bites: Clearing the Record on Crypto Yellen Concerns and the Bitcoin Double Spending Fracas

After dropping 13% yesterday, bitcoin is once again on the rise. Meanwhile, Janet Yellen has offered a sharper look at crypto and Ethereum’s small mining pools are organizing a campaign against a possible network upgrade.

The top shelf

Rebellion of miners!
Eight Ethereum mining mines totaling about 30% of the network’s hash power have formed a semi-cartel to push back against a proposed blockchain update that would reduce their mining fees. The Ethereum Enhancement Proposal (EIP) 1559, as floated by Vitalik Buterin, would burn mining fees to help reduce the volatility of transaction costs. While larger mining mines, such as BitFly, F2Pool and Sparkpool, are ambivalent about the upgrade, smaller miners are calling to nix EIP 1559, according to CoinDesk technology correspondent Will Foxley.

Trust progress?
Grayscale Investments lays the foundation for what could be five new cryptocurrency trusts, for chain link, basic, decent coverage ticket, livepeer and tezos. Preliminary paperwork was filed by the company’s “statutory trustee,” though it does not guarantee that any of these irrecoverable products will see the light of day, according to CoinDesk’s Dan Palmer reports. (CoinDesk and Grayscale are owned by Digital Currency Group.)

Banking deposits
Signature Bank revealed $ 10 billion in deposits from clients of its cryptocurrency company, in an earnings call on Thursday. Representing 16% of the New York company’s total deposits, this amount is also twice the competitor’s Silvergate Bank, widely regarded as the first crypto-forward bank, CoinDesk’s Nathan DiCamillo reports. Without disclosing names, Signature’s chief executive said he was now banking the “five best crypto exchanges.”

Sweep crypto
The US government’s main investment watchdog drew attention to a series of unregistered cryptocurrency companies for allegedly cheating international investors mainly with false corporate information. Of the 28 suspect investment firms that called out the U.S. Securities and Exchange Commission (SEC) on Thursday, CoinDesk correspondent Danny Nelson found eight that appear to be targeting potential cryptocurrency investors.

Large in Japan
Following the US Securities Exchange Commission (SEC) lawsuit against Ripple, XRP stalls from Japan are left wondering. The cryptocurrency has gained traction in the country as a payment tool, is backed by one of Japan’s largest financial firms, SBI, and considered “cryptocurrency” – not security, arguably – by the regulator of the Japanese economy. “I feel the crypto community sees this as a big blow to them and as a kind of precursor to what might come in the future, that other companies are also vulnerable,” said Mike Kayamori, CEO Liquid Global, by Sandali Handagama by CoinDesk.

Quick bites

BITCOIN ETF: Five reasons why it should be approved. (Bloomberg Opinion)

HUMAN TRADERS: A (not crypto-specific) size pool gives people a chance. (Bloomberg)

ABOUT THE FAITH: Joe Weisenthal thinks bitcoin is a religion. Who is the Pope? (Bloomberg)

GREEN SKILLS? Jack Dorsey’s open-source social media platform released a 6-page overview of the decentralized ecosystem. (Blog)

BREAKDOWN: Bitcoin Core’s notable dev reflects on his time building and argues that Bitcoin needs to decentralize. (Blog)

Intel market

Efficient markets?
Two incidents that were bathed around to explain bitcoin’s 13% price fall on Thursday are a little more complicated than they appear on the surface. Yesterday, bitcoin experienced its largest intraday fall since March 12, 2020, when bitcoin fell 39%.

Looking for a case, some suggested that marketers should throw temper tantrums in response to rumors of double spending appearing in the wild, on the Bitcoin blockchain. That story was picked up by the mainstream press. Others, traders were stunned by comments made by Treasury Secretary nominee Janet Yellen, who raised concerns about the use of crypto in the underground criminal. That story was also raised by the mainstream press.

CoinDesk technology correspondent Colin Harper set the record straight: The transaction that looked like double spending – the exact phenomenon that Bitcoin was created to address – was a routine occurrence. The trouble was bubbling after BitMEX researchers found an orphan block containing a BTC transaction 0.00062063 that was also contained in a valid block mined to the blockchain.

But it really wasn’t a big deal. In what is known as block reorganization, Bitcoin dealt with the issue programmatically. Although the bitcoin is technically “double spent,” Harper points out, “no new coins were added to Bitcoin’s supply.”

Meanwhile, following a U.S. Senate hearing in which Yellen spoke briefly about money laundering and terrorist financing issues that plague bitcoin on Wednesday, the former Federal Reserve Chairman revealed a new view on crypto in a letter to the Senate Finance Committee a day lately.

To wit: “I think we need to look closely at how to encourage their use for lawful activities while reducing their use for malicious and illegal activities,” he wrote. “If ratified, I intend to work closely with the Federal Reserve Board and the other federal banking and securities regulators on how to implement an effective regulatory framework for these and other fintech innovations.”

It is likely to be confirmed today, said CoinDesk regulatory correspondent Nikhilesh De.

While neither the rumored double-spending concerns nor Yellen’s concerns are bad, they were both based on limited or faulty information raised, (including in yesterday’s Blockchain bites).

That said, no news items about the spat should be blamed on the market, nor should the new information in the public register be seen as leading to today’s price appreciation. Like Nic Carter as written, the efficient market assumption, the notion that asset prices reflect all available information, is complex.

For now, as during the panic in March, it’s best to remember that “time in the market beats the timing of the market.”

At stake

Bitcoin support
Yesterday was a show of solidarity in the Bitcoin community, after nChain Chief Scientist Craig Wright pushed for cultural touchstones, Bitcoin.org and Bitcoincore.org, to remove the first cryptocurrency whitepaper from their websites.

Wright, who has long claimed to be the creator of Bitcoin pseudonym, Satoshi Nakamoto, has filed for patents over Bitcoin’s earliest documentation and Bitcoin intellectual property. The highly rambunctious developer, law student and academic is also the creator of Bitcoin SV (for Satoshi Vision), a fork of Bitcoin Cash and a competitor’s coin.

Bitcoin.org overruled Wright’s legal challenge and kept the document up, though Bitcoincore.org – the main repository for the Bitcoin code base – took it down.

No matter, as CoinDesk Managing Editor Zack Seward reported, some of crypto’s most prominent voices have decided to maintain mirror copy. Among them are Square, Coin Center, Novi’s Facebook subsidiary and CoinDesk, among dozens more companies, nonprofits and individuals. It has also been uploaded to the “Irrecoverable” Arweave platform as well as an Internet alternative to the Interplanetary File System (IFPS).

According to Bitcoin.org, a Bitcoin white paper was issued under an open MIT license by Nakamoto, making it a public domain document. “There is no doubt” people have the legal right to maintain the white paper, says the nonprofit.

Wright has long been a thorn in the side of the Bitcoin community, launching several lawsuits against prominent personalities who questioned his claims of being the authentic Nakamoto. Hodlnaut, the nickname account behind the lightning torch trial and sued for defamation, was buried in the spotlight in 2019 with a wave of bitcoin enthusiasts adopting his cartoon cat avatar for their Twitter profile pictures.

While the incident shows that Bitcoin can still rally together, the real issue at play is far more than Wright’s copyright claims. Dozens of businesses have patented key technologies off, or that support, this open source system. In a sense, some would argue, copyright is simply anathema to Bitcoin’s core ideal of permissiveness.

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