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| May 26, 2019

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CNN

Pope issues new rules for reporting sexual abuse and cover-ups

May 9, 2019 |

Pope Francis issued new global rules Thursday for reporting sexual abuse in the Catholic Church, mandating for the first time that all dioceses set up systems for reporting abuse and cover-ups.
CNN.com – RSS Channel – World

TMZ

Britney Spears Reunites with Her Kids But Many Unresolved Mental Health Issues

April 26, 2019 |

Britney Spears will have a big reunion today … with her kids. Britney and Kevin Federline have joint custody of 13-year-old Sean and 12-year-old Jayden. The arrangement has been that she gets them 3 days, he gets them 3 days, she gets them 3 days,…

TMZ.com

Don’t believe the hype. UBS analyst issues Bitcoin warning

April 21, 2019 |

Don’t believe the hype. UBS analyst issues Bitcoin warningThe recent Bitcoin price rebound does not mean the cryptocurrency will be heading back to its all-time highs of near $ 20,000 any time soon, according to Kevin Dennean, tech analyst at UBS. “The argument here is that Bitcoin has gone through its bubble phase and is ready to rise phoenix-like from the ashes just as other assets and indices did in the past,” he wrote in a research note to clients. He flagged up previous bubbles such as the Dow Jones in the Great Depression, the Nikkei in 1989, the Dotcom Boom and Bust, oil in 2008, and China’s recent stock market crash. “We’re struck by how long it took other asset bubbles to recover their peak levels (as long as 22 The post Don’t believe the hype. UBS analyst issues Bitcoin warning appeared first on Coin Rivet.



Yahoo News – Latest News & Headlines

Trump Issues Another Veto

April 17, 2019 |

President Donald Trump on Tuesday vetoed a bill passed by Congress to end US military assistance in Saudi Arabia’s war in Yemen, the AP reports. In a break with the president, Congress voted for the first time earlier this month to invoke the War Powers Resolution to try to stop…
Newser

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees

March 30, 2019 |

Analysis Shows Lightning Network Suffers form Trust Issues and Rising Fees Makes it Worse

Over the last two years, the Lightning Network has been touted as the scaling solution for the Bitcoin Core (BTC) network. However, the solution has been heavily criticized for its lack of security, and on March 28, Bitcoin Unlimited’s chief scientist Peter Rizun wrote an interesting evaluation of the Lightning Network’s “dirty little secret.”

Also read: Mempool ‘Spam’ and Rising Fees: The Consequences of Veriblock’s Mainnet Launch

Visualizing the Lightning Network from a Different Perspective

This week, Bitcoin Unlimited’s Peter Rizun wrote a critique concerning the often controversial Lightning Network (LN). In delving into the project, Rizun asks the reader to visualize the LN as a string of beads (Fig. 1) extended between two individuals, Alice and Bob. In essence, Alice can send Bob funds by pushing one of her beads to Bob, utilizing the string which represents an LN channel.

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees
Fig. 1. Alice can send a payment to Carol by routing it through Bob. Because beads cannot leave the string they are on, Bob ends up with one more bead on his string with Alice, and one fewer bead on his string with Carol.

Rizun’s essay notes that the foundation of the network is the reason for LN liquidity problems because “the beads can move from side to side but cannot leave the string they’re on.” From there, Rizun discusses the LN security model which depends on Hash and Time-Lock Contracts (HTLCs).

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees
Fig. 2. The hash-lock opens when a password is entered that hashes to the specified value (45f8 in this case). The time-lock opens after the specified time has elapsed (48 hours in this case).

Essentially, HTLCs explain how the system prevents Bob from keeping the bead from Alice without sending one on to Carol. In order to bypass this issue, the LN project uses locks in the channel and in Rizun’s the locks are placed in the string in order to constrain the beads’ movements until the agreement’s conditions are met. “The hash and time-lock contracts (HTLCs) used in Lightning payments involve two types of locks (Fig. 2): the first is a lock that opens if presented with the correct password (we’ll call this a “hash-lock”), and the second is a lock that opens automatically after a time delay (we’ll call this a “time-lock”),” Rizun’s blog post details. The developer then returns to the example of a payment between Alice to Carol through Bob, and Rizun notes that in order to make the process “trustless,” Alice, Bob, and Carol need to be online simultaneously in order to settle the agreement.

“First, Alice asks Carol to think up a secret password and tell her the password’s hash. Let’s pretend the password Carol thought up was ‘boondoggle’ and its hash was ‘45f8’ — Next, Alice places a hash-lock between her and Bob, set to open when presented with a password that hashes to ‘45f8,’” runs Rizun’s critique. “At this point in time, neither Alice nor Bob can open the lock because neither knows the password — Alice then pushes a bead against the hash-lock. Lastly, she places a time-lock on the left side of the bead, set to automatically open after 48 hours (Fig. 3).”

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees

Lightning Network Micropayments Are Not Trustless at All

The study further explains why Bob would bother to participate in this settlement in the first place if Carol had not been cooperative. Basically, the theory assumed is that Alice will send Bob a fraction more than what she asks Bob to send to Carol, as a fee to compensate for risks. It also reveals the purpose the time-locks serve in order to protect someone’s funds if a payment fails. An example of this situation would be if Bob becomes uncooperative after Alice shifts her bead over and adds the two locks, Rizun adds, and remarks that time-locks give Alice the ability to retrieve the funds. His essay says that even though this is possible, the Lightning Network has a dirty little secret which can be seen when the channel state involves three outputs: Alice’s coins, Bob’s coins, and the coin “in flight.” The problem occurs if the value-in-flight is below the BTC dust threshold, in which case it can’t be used as a third output in the channel-state transaction.

“It is thus not possible to use hash- and time-locks to protect the payment if the payment is too small,” Rizun paper emphasizes. “It is not exactly true that the number of beads on a string is constant. There is actually a bucket beside each string labeled “Miner’s Fee” that contains small fractions of beads. The value in this bucket gets claimed by the miner who confirms the channel-state transaction, should the channel state be pushed to the blockchain. Fractions of beads can move from the string to the bucket, or from the bucket back to the string, but only if the persons on both sides of the channel agree.”

The paper continues:

Rather than locking the value in-flight with hash- and time-locks, for small payments Alice and Bob just move the value-in-flight into the fee bucket (Fig. 8). Bob trusts that Alice will cooperate with him to take the value-in-flight out of the fee bucket when he reveals Carol’s secret password.

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees

Bob can then dump the value-in-flight into another bucket he shares with Carol and manipulate the situation by asking Carol to tell Bob the secret password. Carol tells Bob the secret, and Bob and Carol together move the payment from the fee bucket to Carol’s side, Rizun states. Bob then goes back to Alice, tells her Carol’s secret, and if all goes well, Alice cooperates with him to take the value-in-flight out of the fee bucket and place it on Bob’s side of the string. The paper adds:

Unlike the HTLC scheme described earlier, this scheme relies on trust. For example, Carol could reveal the password to Bob, who could then leave the payment in the fee bucket yet still go to Alice and deliver the password in exchange for his payment.

Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees

According to a few individuals on social media and cryptocurrency forums, the problems associated with the trust issue and micropayments are well known. At the time of writing, the dust threshold is less than 600 satoshis which means if fees were to spike considerably again, the Lightning Network wouldn’t be a feasible option. Rizun’s paper notes that the issue adds unneeded friction from layer one to layer two by “forcing complex and poorly-understood work-arounds to the L2 protocol.” Moreover, those who have been cheering for higher network fees in order to bolster more Segwit use (were the dust limit is even lower) and forcefully pushing for LN adoption do not seem to understand how impractical that would be.

What do you think about the issues involved with LN and the added friction that layer two adds to common settlements compared to traditional layer one transactions? Let us know what you think about this subject in the comments section below.


Image credits: Shutterstock, and Bitcoin Unlimited’s Peter Rizun.


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The post Analysis Shows Lightning Network Suffers From Trust Issues Exacerbated by Rising Fees appeared first on Bitcoin News.

Bitcoin News

Bieber Puts Music Aside to Focus on ‘Deep-Rooted Issues’

March 27, 2019 |

Justin Bieber recently asked fans to pray for him , and now he says he’s come to a big decision: His music career is on the back burner while he focuses on his mental health. “So I read a lot of messages saying you want an album,” Bieber, 25, wrote on…
Newser

Trump Issues Defiant Tweet Over Mueller Report

March 24, 2019 |

President Trump is already crowing about the Mueller report . “No Collusion, No Obstruction, Complete and Total EXONERATION. KEEP AMERICA GREAT!” he tweeted . Robert Mueller, though, didn’t go quite that far in his report. While his team found no evidence of collusion between the Trump campaign and Russia in the 2016…
Newser

Stablecoins Are Threatened by These Two Major Issues

March 17, 2019 |

On the heels of recent commentary from the published correspondence between Securities and Exchange Commission (SEC) chairman Jay Clayton and representative Ted Budd, SEC senior advisor Valerie Szczepanik explained at Austin’s SXSW conference that stablecoins may be violating current securities laws.

Also read: Payglobal Provides Cryptocurrency to Fiat Transfers With Existing Bank Cards

Stablecoins May Live in the Land of Securities

Over the last two years, stablecoins have become an extremely hot topic while becoming popular vehicles for hedging against the volatility tied to cryptocurrency markets. Tether (USDT) has been king of the stablecoins for a while, and recently made headlines for a revision to the company’s website. The change caused uproar within the cryptocurrency community because instead of confirming that each Tether is backed by one USD, the terms were substantially revised.

“Every tether is always 100 percent backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities,” the website now reads.

Stablecoins Are Threatened by These Two Major Issues

Following Tether’s recent website update, on March 15, SEC senior advisor Valerie Szczepanik explained that due to the inherent nature of stablecoins, the tokens could “raise issues under securities laws.” Szczepanik explained that stablecoins are broken down into categories which include tethering the tokens to “some real asset, like real estate or gold and oil — Coins tied to a fiat currency held in reserve, and a third category that could become problematic under the law.” The SEC advisor added while on stage at SXSW: “I’ve seen stablecoins that purport to control price through some kind of pricing mechanism, whether it’s tied to the issuance, creation or redemption of another type of digital asset tied to it, or whether it is controlled through supply and demand in some way to keep the price within a certain band.”

Szczepanik continued:

It’s these kinds of projects where there is one central party controlling the price fluctuation over time that might be getting into the land of securities.

The recent statements from the SEC senior advisor and chairman Jay Clayton’s statements last week could mean that stablecoins fall into the security category. Stablecoins, no matter whether they are backed by reserves held in a bank, or use the over-collateralization method favored by the Maker network, are essentially promises. Skeptics take issue with claimed tether (USDT) reserves because they believe the company has failed to prove its backing. Tether’s recent website change provoked popular finance author Frances Coppola to write: “Tether’s U.S. dollar peg is no longer credible,” in a seething critique.

Coppola’s assessment continued:

Perhaps crypto enthusiasts should read up on the fate of Reserve Primary Fund in 2008. Or perhaps Venezuela — After all, an exchange rate peg only holds until the reserves run out.

Stablecoins Are Threatened by These Two Major Issues

A Crypto Flash Crash Scenario Could Put a Heavy Strain on Stablecoins

Other stablecoins are based on promises as well and some have the stamp of U.S. regulators in order to make the pledge more robust. Trusttoken (TUSD) has tried to tackle transparency by allowing TUSD owners a “real-time view” of the company’s reserves. According to the Trusttoken team, accounting firm Armanino has developed a platform that allows users to verify the TUSD dollar collateral. Dai has over-collateralization, so there’s some safety net there, but critics believe that if the price of ethereum (ETH) plummeted in a flash, the stablecoin would have issues unless the team sold the collateral quickly.

A flash drop in overall fiat value within the cryptoconomy really puts a strain on stablecoins and when bitcoin and a few other digital assets dropped significantly in value last October this was quite noticeable. The belief that stablecoins can hold their stability would truly be put to the test if there was a flash crash throughout the crypto markets.

Stablecoins Are Threatened by These Two Major Issues

Just like their fiat cousins, all stablecoins are only as good as their promises and a flash crash and severe lack of liquidity could ultimately wreak havoc on digital promissory notes. On October 15, when the cryptoconomy shuddered with another price crash, tether (USDT) dipped below the $ 1 mark. However, despite concerns over coins like tether, Szczepanik asserted at SXSW that “algorithmic stablecoins” raise the most issues because there is a lack of any real collateral.

“You’re talking about folks who are buying into that ecosystem, or are buying this coin, with the expectation that somebody else is going to be holding a profit, or guaranteeing a profit or holding the price at a certain level. Again, that could raise issues under securities laws.”

Stablecoins Are Threatened by These Two Major Issues

Stablecoins Face a Future That Falls Under Securities Laws

At the moment, stablecoins face some significant hurdles and two major issues. One is the promise to hold to constant stability and liquidity especially during a big market crash. The other issue is whether stablecoins, whose legal status is currently being questioned, will pass the scrutiny of regulators. Stablecoin startup Basis knows these dangers only too well as the company was forced to close operations in December due to fears its product would be deemed a security.

“Folks like to put labels on things, but we’ll always look behind the label to see exactly what’s happening,” Szczepanik said. “So you can call it a utility coin, call it a stablecoin, call it a consumptive coin or some other coin — We’re [SEC] going to look at the characteristics.”

What do you think about the issues that stablecoins face in the future? Let us know what you think about this subject in the comments section below.

Disclaimer: This article is for informational purposes only. Bitcoin.com does not endorse or support any stablecoin and its affiliated companies. Readers should do their own due diligence before taking any actions related to the mentioned companies, creators, associates, or any of its affiliates or services. Bitcoin.com and the author are not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.


Image credits: Pixabay, Bitcoin.com, Shutterstock, and various stablecoin logos.


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The post Stablecoins Are Threatened by These Two Major Issues appeared first on Bitcoin News.

Bitcoin News

Shares Plunge After LaCroix CEO Issues Weird Report

March 10, 2019 |

In another setback, the maker of LaCroix sparkling water saw shares plummet after releasing a bleak earnings report Thursday—but the CEO’s odd language is getting as much attention, CNBC reports. “We are truly sorry for these results stated above,” National Beverage CEO Nick Caporella writes in the quarterly report…
Newser