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ATO to Target Crypto Traders Using International Data Agreements

July 9, 2018 |

ATO to Target Crypto Traders Using International Data Agreements

Australia’s financial press is expecting that the Australian Taxation Office (ATO) will take a hard stance on cryptocurrency investors this tax season, with the ATO recently vowing to leverage international data-matching agreements in order to track the taxation obligations of Australian cryptocurrency traders.

Also Read: The Weekly: Coinbase Custody Opens, Malta Adopts Crypto Law, Bittrex Invades Europe

ATO to Leverage International Data-Matching Agreements to Target Crypto Traders

ATO to Target Crypto Traders Using International Data AgreementsThe Australian Tax Office has announced that it will leverage data sharing agreements made between Australia and other nations to determine the tax obligations of Australian cryptocurrency investors.

“We’re alert to the potential compliance risks that arise from cryptocurrencies but we’re not really alarmed about them,” ATO acting deputy commissioner Martin Jacobs told Australian Financial Review.

“Where people attempt to deliberately avoid these obligations we will attempt to take action. We have a range of existing powers that are designed to address unexplained wealth and conspicuous consumption that may arise through profits derived through cryptocurrency investment,” Mr. Jacobs added.

Mr. Jacobs also emphasized that changes to anti-money laundering rules mandating that Australian crypto exchanges identify wallet holders “will enable data exchanges to collect cryptocurrency trading information, which we’ll be able to access and use in our engagement activities.”

Many Traders May be Unaware of Tax Obligations

ATO to Target Crypto Traders Using International Data AgreementsPaul Drum of accounting firm CPA Australia has speculated many Australian cryptocurrency users may not be fully aware of their tax obligations, stating “We’re at the pointy end of a financial year of seismic profits and if people were thinking they could fly under the radar, I’ve got bad news. […] People wrongly believe they’re getting a windfall gain that isn’t taxed. That could be a costly mistake.”

Mr. Drum also warned that many cryptocurrency traders are not aware of the tax event triggered by each “disposal” of virtual currency holdings, emphasizing that cryptocurrency-to-cryptocurrency trades require that traders declare any profits generated. “Even if you traded your ripples for bitcoin, you have to figure out whether you made a profit on the trade,” he said.

ATO Criticized Over Opaque Tax Guidance for Cryptocurrency Users

ATO to Target Crypto Traders Using International Data AgreementsAustralian Financial Review recently spoke to Adam Dimac of legal firm Hall and Wilcox, who are currently representing “Max” – an Australian lawyer who is currently in a dispute with the ATO regarding how his $ 7 million in cryptocurrency holdings should be taxed.

Mr. Dimac emphasized the lack of clarity surrounding the ATO’s regulations, stating “There are a lot of technical issues for which there is just no guidance at all. One example is initial coin offerings. From a tax point of view, there’s basically no guidance on how they are treated. It’s really new ground.”

Max’s lawyers are seeking to argue the personal use exemption. However, Mr. Dimac concedes that the team is “hearing it’s going to be hard to argue the personal use exemption. There are individuals who can genuinely say ‘yeah, I went into this out of intellectual curiosity and as a hobby. I’m a Millennial and this is how I think, I like to challenge the status quo. Five years later, it’s become $ 10 million.’ But nobody quite knows how the ATO is going to view it because everyone’s circumstances are different. And even then, the ATO is developing their thinking over time as they come to consider different scenarios and new cryptos come into the market.”

Laura Spencer of Sladen Legal also believes that the ATO has failed to provide sufficient guidance regarding the tax obligations of cryptocurrency investors, stating that “The insufficient guidelines and absence of case law in this area of tax leaves early adopters of cryptocurrencies in great uncertainty. As the treatment of cryptocurrencies will play an even greater role in the future, we await further comments from the commissioner.”

What is your response to the ATO’s decision to leverage international data-sharing agreements to target crypto investors? Share your thoughts in the comments section below!


Images courtesy of Shutterstock


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The post ATO to Target Crypto Traders Using International Data Agreements appeared first on Bitcoin News.

Bitcoin News

Global Data Report: Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

July 6, 2018 |

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

Cryptocurrencies – Thematic Research, a report recently issued by Global Data, is attempting to smash what it views as myths and huge untruths about the hype surrounding crypto. Among their findings, the company concludes cryptocurrencies are expensive, slow, mostly unspendable, and cannot scale to meet their projected demand.

Also read: Troll Slayer: Derek Magill Defends Peer-to-Peer Electronic Cash Against Defamation

Cryptocurrencies Expensive, Slow, Unspendable, Cannot Scale

Talk about kicking a fellow when he’s down (assuming cryptocurrencies are male). London-based research firm, founded in 2006, Global Data, released a 34 page study on exactly why they believe crypto won’t ever live up to its hype or promise.

Its Chief Analyst, Gary Barnett, gets to the heart of the matter, “Many of the most basic claims made by proponents of cryptocurrencies simply are not true. We are told that cryptocurrencies speed transfers up, that they help to eliminate middlemen and that they are free of cost, but none of this is true.” Anecdotes abound as to the veracity of his claim, especially as it relates to bitcoin core (BTC), the world’s most popular cryptocurrency, and the most well known. The ecosystem has famously chosen to employ ‘middlemen,’ the very same Satoshi Nakamoto’s white paper was written to avoid, such as banks (Coinbase) and other exchanges that are allowed to hold full control over a user’s coins and tokens.

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

“Cryptocurrency transactions are not free,” Mr. Barnett continues. “For example, at its peak the per transaction cost for bitcoin exceeded $ 50, which is not exactly a great way to buy $ 25 worth of groceries. While the cost per transaction hovers around $ 1 when the bitcoin network is not under load, it will inevitably rise if transaction volumes grow again.” Here again, the whipping boy is BTC, and no mention is made of viable alternatives in this regard like bitcoin cash (BCH) or others.

Perhaps most damning, when considering just what the ‘currency’ part of cryptocurrency means, Mr. Barnett fires “no cryptocurrency is widely accepted and transacted. The number of retailers and businesses that accept cryptocurrencies as payment for goods and services is vanishingly small, and those that do typically report very low volumes of cryptocurrency transactions by comparison to other means of payment.” This somewhat begs the question, but it might require Mr. Barnett and Global Data to be a little hipper when it comes to the more recent history of BTC in particular. Enthusiasts have taken nuanced sides as to the importance of claims like Mr. Barnett’s, and the differences are so profound in the crypto space entire projects exist to prove the others wrong. Plus, it is early days with regard to merchant adoption — constant mainstream media hectoring, along with governments the world over threatening ever tighter regulation, doesn’t help matters.

The Scaling Issue Continues to Haunt

Global Data hammers home a key bugaboo with regard to crypto, scaling. For ‘big blockers,’ this issue seems to trump most. With the advent of bitcoin cash (BCH), larger blocks allow for more transactions, less congestion, and ultimately lower fees and faster confirmations, at least in theory and so far.

Nevertheless, the report concludes “cryptocurrencies cannot scale. The Visa payment network is capable of supporting 24,000 transactions per second (tps) at peak rates and regularly averages in the region of 1,500 tps. Bitcoin, meanwhile, struggles to achieve a transaction rate over 10 tps, while bitcoin cash can handle around 60 tps. The only cryptocurrency which comes close to Visa’s average is Ripple, which is capable of 1,500 tps.”

Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale

And so, mainstream research firms such as Global Data are left to muse about the current state of crypto valuations. As “currently applied to cryptocurrencies,” Mr. Barnett stresses, they “have no basis in fact; cryptocurrencies represent a classic bubble, in which valuations are purely the result of speculation on the likely behavior of the market rather than a clear-eyed assessment of underlying value.” No mention is made of it being only near a decade in arriving at valuations, and how currencies such as BTC are up thousands of percents since their inception. Bubble doesn’t seem, yet, to describe crypto prices well.

The report’s lone sober take, though still mired in mainstream cynicism and assumptions, comes as a preface. “In fairness,” researchers note, “all currencies are a confidence trick. The US dollar, British pound, and the Euro all depend on nothing more than market confidence for their value. The extent to which a currency works effectively is a function of a range of factors and this report sets out to determine whether cryptocurrencies represent a serious alternative to the established fiat currencies.” Few crypto proponents would claim decentralized money to be quite there, but, then again, government money has had a huge head start.

Is crypto a failed, over-hyped experiment? Let us know in the comments section below. 


Images via the Pixabay, Global Data, Shutterstock.


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The post Global Data Report: Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale appeared first on Bitcoin News.

Bitcoin News

Federal agencies probe Facebook’s role in sharing data with Cambridge Analytica

July 3, 2018 |

A federal investigation into Facebook’s sharing of data with political consulting firm Cambridge Analytica has broadened to focus on the actions and statements of the tech giant and involves three agencies, including the Securities and Exchange Commission, according to people familiar with the…


L.A. Times – Business

Facebook document dump reveals it shared data with 52 companies, some based in China

July 2, 2018 |

Facebook has revealed that it shared user information with 52 companies that manufacture hardware and software, including some based in China.
FOX News

Segregated Witness Removes One of Bitcoin’s Data Integrity Checks

July 1, 2018 |

Segregated Witness Removes One of Bitcoin's Data Integrity Checks

The following opinion piece on Segregated Witness was written by Jonald Fyookball

In 2017, Dr. Peter Rizun noted that Segregated Witness (Segwit) changes the very definition of a Bitcoin as per the whitepaper: “We define an electronic coin as a chain of digital signatures.” In this article, I would like to expand on that topic and add a key observation: breaking the chain of digital signatures is actually removing an integrity check in the Bitcoin ledger. Bitcoin is a distributed ledger system — a form of database. When it comes to databases in general, there are many different kinds of data integrity. One type, user-defined integrity, refers to a set of rules for a specific application (in this case, Bitcoin).

Also read: Mainstream Media Believes Satoshi Nakamoto is Back

In Bitcoin, one of the most important types of data are the digital signatures that prove a coin was transferred properly. The fact that signatures cannot be forged is one reason that your coins in storage are safe, even if the network were to undergo a 51% attack.

By defining a coin as a chain of digital signatures (and by implementing Bitcoin to require the signature to be part of the transaction which then gets hashed into the input of the next transaction), Bitcoin establishes an important data integrity check.

To a user, the threat is always that of coins vanishing or being stolen. Bitcoin’s security model ensures that for a coin to move, a corresponding signature has to be produced, and it has to be included in a transaction and published on the blockchain.

Since producing a fake signature is assumed to be hard, no one can steal your coins unless they got a hold of your private keys. When a theft does occur, you can go look at the signature on the blockchain to verify that this is what happened.

This is true for all (non-Segwit) coins and transactions in Bitcoin; thus the integrity check is weaved into the fabric of the blockchain, ensuring the security model for all transactions.

How Segwit Removes the Integrity Check

How does the above description change under Segwit? To begin, I’ll quote Dr. Rizun: “In a Bitcoin, the signatures are an integral part of the chain. Carol can only verify the complete chain of ownership if all the signatures exist because if even a single signature is missing, the chain breaks down…there’s no way to follow it through. A Segwit coin is different because the signatures are all outside of the chain. If even none of the signatures exist, or maybe none of the signatures were even real to begin with, Carol can still validate the chain of custody. I’m using the word custody instead of the chain of ownership, because Segwit really only shows custody.”

So in Segwit, we still have the signature, but it is NOT required to be directly included in the input of the transaction. In fact, it’s explicitly excluded for the purposes of eliminating malleability. Instead, the signature (“witness data”) is placed elsewhere in its own special section. We still have the data, but what we DON’T have is the data integrity check since it’s not necessary to have the complete transaction (including the signatures) the next time the coin is spent.

How the Security Model Changes Under Segwit

Segwit requires the witness data to be published and committed to the block via a witness root hash. In simple terms, each block must contain a hash value representing the set of signatures for its Segwit transactions. In both the Segwit and the non-Segwit case, miners are responsible to make sure the signatures are correct before accepting a block. However, with Segwit, the signatures do not directly provide a linkage from one transaction to the next, which is why they are said to be “outside the chain of transactions”.

Segwit supporters justify this structure by pointing out that the consensus rules dictate that miners validate all the signatures, and breaking that model requires a 51% attack. While that may be true, the security model has undeniably changed. The interwoven integrity check has been discarded and replaced with a complete reliance on miners, rather than having both types of security. This is akin to wearing a belt AND suspenders for years to make sure your pants never fall down, then one day taking off the belt and proclaiming “I’m still wearing suspenders, what could go wrong?”

How the Threat Model Changes Under Segwit

If we revisit the threat model from the user perspective, what happens in Segwit if your coins go missing? I again give credit to Peter for asking the right question: “Can you prove a theft took place?”

In Bitcoin, the signature HAS to be on the chain, and you can look it up on any explorer. Today with Segwit, you can also see the Witness data on an explorer, but what if you didn’t see it?

A user could point to empty witness data on an explorer as evidence, but what if the website made some excuse for its absence and the chain continued anyway? To what lengths does the user have to go to, to convince himself and others of the problem? Philosophically speaking, it’s impossible to prove the non-existence of something. Now granted, realistically, it’s certainly possible that any disappearance of witness data will be a public anomaly that’s just as bad as a miner pretending an invalid signature is valid. Still, the model has changed.

A slide from Dr. Peter Rizun’s speech at the Future of Bitcoin conference

What Are the Real Security Issues?

First, consider the scenario of a miner that fails to publish all the witness data due to a software bug or hardware problem. It might be possible for other miners to accept the block but not all the witness data gets published. If this were ever to happen even once, it would decrease the impact of missing signatures in the future.

Second, what if there someday really is a 51% attack? What if, for whatever reason, 51% of the miners decide to keep building on a block that doesn’t necessarily have all the signatures? In the traditional Bitcoin security model, there have never been any instances of an invalid signature being accepted because the anomaly would be provable.

An actual 51% majority may not even be necessary if Segwit shifts the incentives so that not all the miners are validating the signatures.

What if political pressure is applied to mining pools to steal some funds without a signature? After a certain number of blocks, would other miners capitulate or would the chain split? You could argue that the same thing could happen without Segwit (an invalid signature is accepted as valid), but it seems less likely that this chain would continue.

Concessions

Although I am not pro-Segwit, I want to be as objective and fair as possible and not overstate the problem. In practice, so far, there haven’t been any problems with Segwit that I’m aware of. The signatures are still there, even though the integrity check might not be. No database design is perfect. There are always trade-offs and some may consider Segwit to be an acceptable trade-off, perhaps arguing that Bitcoin has enough redundancy with a large number of archival nodes so that missing witness data is never a problem.

Miners still provide good security, and the threats outlined here might never come to pass.

Contradictions in the Core Roadmap

Segregated Witness is a product of the Bitcoin Core development team and is strongly supported by their followers. Aside from everything written so far, I find there are some “interesting” contradictions in the way they think about things.

I’ll wrap this article up by giving you two of them:

  • “Validation”. This is a group that heavily emphasizes the importance of running a full node and “validating everything yourself”. They discourage the SPV security model, and one of the Core developers (Luke Jr) has even said on multiple occasions that if you’re not running a full node, you’re not using Bitcoin. Other BTC supporters rarely if ever contest these statements. Yet these same people are perfectly ok with tossing out the window the basic assurance that comes from validating each transaction’s signature as a required linkage in the chain. That makes no sense to me.
  • The Role of Miners. This is also a group that loves developers and (non-mining) “full node” operators, but are mistrustful of miners. They have even said that miners don’t get to enforce consensus; that they are only there to “ensure transaction ordering”. Isn’t it funny how they now support a security model that depends on the miners more than ever?

What do you think about Segwit removing critical data from bitcoin transactions? Let us know in the comments below.

Disclaimer: This OP/ED was written by Jonald Fyookball. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Bitcoin.com.


Images via Shutterstock, Dr. Peter Rizun’s slideshow, and Pixabay.


Why not keep track of the price with one of Bitcoin.com’s widget services.

The post Segregated Witness Removes One of Bitcoin’s Data Integrity Checks appeared first on Bitcoin News.

Bitcoin News

Analysis: Trump’s top economic advisor says deficit is ‘coming down rapidly,’ contradicting virtually all available data

June 29, 2018 |

President Trump’s top economic advisor said Friday that the federal deficit is “coming down rapidly,” contradicting estimates by nonpartisan analysts, Congress’ official scorekeeper and a branch of the White House.

Larry Kudlow, director of the White House’s National Economic Council, said on Fox…


L.A. Times – Business

Tesla Sues Ex-Employee Who Allegedly Stole Gigs of Data

June 20, 2018 |

Tesla has filed a lawsuit against a former employee whom the company has accused of stealing “gigabytes” of confidential data and allegedly hacking into the computers of its Nevada battery factory. According to Bloomberg , the suit identifies Martin Tripp of Sparks as the employee, who reportedly admitted to investigators that…
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Verizon and AT&T vow to stop selling cellphone location data to brokers

June 19, 2018 |

Verizon and AT&T have pledged to stop providing information on phone owners’ locations to data brokers, stepping back from a business practice that has drawn criticism for endangering privacy.

The data has apparently allowed outside companies to pinpoint the location of wireless devices without…


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Verizon to Cut Off Data Providers That Gave Up Customer Locations

June 19, 2018 |

Verizon Communications will end a location-sharing program after it found at least one company revealed its subscribers’ whereabouts without their consent.
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Librarian Wins Lawsuit Against Equifax After Huge Data Breach

June 15, 2018 |

A Vermont librarian who sued consumer credit bureau giant Equifax following a massive 2017 breach of private data has been awarded $ 600. The largely symbolic suit by Jessamyn West was her way of showing people they have the power to arm themselves in the fight for data security, even when…
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