Blockchain in Banking & Finance – Presentations are online!

At the end of June there was the first Meetup of the Innovation Forum Blockchain with the topic Blockchain in Banking and Finance – a retrospective.

A few weeks ago the first Meetup of the innovation forum Blockchain on BTC-ECHO was announced. The Innovation Forum is a measure sponsored by the Ministry of Research, which is intended to lay the basis for new networks on specific topics.

Nobody from our team could be there live, but in the meantime the recorded lectures were put online. A review of the first Meetup of the Innovation Forum can be read on its weblog, at this point we would like to introduce the presentations to a larger audience.

Moritz Gerdes – Hype or Game Changer?

Blockchain-based innovations and future Bitcoin code scenarios

It started with a presentation by Moritz Gerdes, Innovation Manager at Comdirekt-Bank. In this presentation he presented the position of banks in relation to Bitcoin code technology: Bitcoin Code Review 2018 » Full Scam Check He emphasized that the banks are intensively concerned with the blockchain and are working on concrete proofs of concept in the case of the comdirekt bank. The return of equity is falling dramatically: It is assumed that this will amount to 0.8% in 2019, which is a small fraction compared to the 6.1% of 2014.

In his opinion, however, the banks will survive all threats – as long as they get involved with the new technology. Joi Ito, director of the MIT Lab, said some time ago “Blockchain will be the same for banks and authorities as the Internet was for media”. What’s interesting about his approach is that the question of which traditional industries, such as banking, would move the blockchain forward is not the question of possible use cases. The ultimate question is rather how one’s own business model must change in the face of the blockchain.

What is noticeable is the now fashionable differentiation between Bitcoin and Blockchain. Bitcoin is now only recognized as a first mover; the criminal stink, MtGox and current scaling problems lead him, like so many others, to distance himself from Bitcoin and instead look for prototype implementations. However, with all due understanding, it should not be forgotten that Bitcoin is currently the largest, perhaps the only, large-scale decentralized blockchain payment system. Nobody should be surprised that this accolade also causes problems.

Dr. Jörn Heckmann – Smart Contracts and Bitcoin code

Attorney Dr. Jörn Heckmann presented the communication difficulties between lawyers and technicians in the context of Bitcoin code. Here is more about the Bitcoin code review. In the course of the presentation, he defined a Smart Contract as software that controls and/or documents legally relevant actions that depend on digitally verifiable events and with the help of which contracts can be concluded. For non-technicians, he brought the Smart Contract concept a little closer by also explaining a “Hello World” example written in Solidity.

At the end of the lecture, he went into the DAO and the winged word “The Code is the Law”. The subject of law in digital times is a very interesting one. In the area of Smart Contracts, there is still a lot of catching up to do in terms of decisions with a margin of discretion. For example, there will continue to be a need for cooperation between lawyers and technicians in order to write technically and legally mature smart contracts.

Philipp Sandner – Blockchain adaptation of the banking sector

In the third presentation, Professor Dr. Philipp Sandner not only presented the Frankfurt School Blockchain Center, but also provided a good overview of the current state of the blockchain ecosystem. One thought was particularly interesting: To put it provocatively, crypto currencies should not be compared to fiat currencies, but rather to Fintech start-ups. At 32 billion euros, Bitcoin’s current market capital is hardly comparable to the money supply in Europe (11.6 trillion euros). In contrast, a rating of over thirty billion euros for a project is sensationally high – corporate giants like Merck with a market capital of 13 billion euros are not even half the value of a project.

Blockchain companies – gender gap even greater than in other tech companies

What about the female gender in the blockchain industry? The LongHash platform has addressed this question – and found something sobering about the gender gap. However, the research methods still have room for improvement.

In Germany, the proportion of women in management positions accounts for almost one third of all managers – according to the statistics. This is, of course, an average value and makes no statements about the situation in the individual sectors.

The Bitcoin formula platform has now investigated the gender distribution in the blockchain sector

LongHash has set itself the goal of accelerating the development of the blockchain and promoting an understanding of the Bitcoin formula technology:

“The results were… discouraging.”
The study considered 100 blockchain start-ups that were classified as “upcoming” on the ICO tracking page ICO Rating. In total, LongHash counted 1,062 team members, including 326 as founders or managers and 473 listed consultants. Three focal points were examined: the gender gap within the team, the number of women at management level and the number of women on advisory boards. LongHash summarises the sobering results as follows:

“The results were … discouraging. Only 14.5 percent of the members of the Blockchain start-up teams were women. In leadership roles, the numbers got worse. Only 7 percent of the blockchain start-up managers we considered were women, and only 8 percent of the consultants.”

In addition, 78 of the 100 start-ups surveyed did not have a single female manager. In 75 of them, female consultants were missing and 37 had not even female employees in the team.

Three possible Bitcoin trader sources of error

LongHash points out, however, that the figures do not have to be 100 percent correct due to the research method. The figures for team members, managers and Bitcoin trader come from the websites of the Bitcoin trader companies and could be outdated and selective. Therefore, there can be no guarantee of the accuracy of the information. Another source of error may be that the gender of the team members was not correctly assigned by LongHash when viewing the team members on the respective website. Cross-sex names such as Kim, Robin or Luca in combination with an image that does not clearly identify males or females may lead to such errors. The position information may also be outdated or inaccurate, so that some female managers may not (yet) have been identified as such.

However, it seems unlikely that the results would have spoken the opposite language without these sources of error. Technical industries are still dominated by men. However, LongHash notes that large technology companies in Silicon Valley employ at least 25 percent women. A 2017 survey conducted by the Carta software platform target=”_blank” rel=”nofollow noopener” found that about 29 percent of employees in small tech start-ups are female. Even if this is still far from an equal distribution, it is still twice as many women as in blockchain start-ups.

Although the results of the LongHash study cannot be trusted one hundred percent, they give the impression that the gender gap in the blockchain sector is even wider than it is in other technology companies. It would now be interesting to know why. However, this missing investigation should then focus less on own research than on concrete facts (e.g. from a survey) in order to give the results more trustworthiness.

That’s how much money you need for a Bitcoin 51% attack

Anyone who owns the infamous 51% of all hash power in the Bitcoin network can manipulate the network by injecting “fake” transactions in his favor. How difficult is it to carry out such an attack?

In short, the 51% attack means that more than 50% of the total computing power in the Bitcoin network can be used to infiltrate “fake” transactions by attaching them to the blockchain. Since more than 50% of the network finds these transactions correct, they are approved and attached to the blockchain. The attacker can then infiltrate many transactions that Bitcoins transfers to him from other addresses.

More details about the 51% attack can be found in our online Bitcoin trader guide

How much money does it take to get 51% of the hash power? Required Hashpower: Bitcoin Trader Review 2018 » Full Scam Check. As an example we would like to carry out a simple milkmaid calculation to find out with what amount of capital a 51% attack could be carried out. First we assume a mining performance of 2500TH/s, which comes very close to the current Bitcoin trader status.

Let us assume that the attacker has not yet connected any miners. Since he wants to gain 51%, he has to add computing power until he has the majority and the rest of the network is 49%. This means

49% = 2,500,000 TH/s (current computing power)

After the attacker has added his computing power, the total hashing power in the network is therefore (simple three-sentence):

100% = 5,102,000 TH/s, of which the attacker should have 2,602TH/s (51%).

Required miners
We are assuming an Antminer S9 here, which is quite efficient with its 14TH/s performance. For the performance of 2,602,000TH/s we need 185,857 S9 devices.

Money needed for the crypto trader (Miner)

An crypto trader Antminer S9 currently costs € 2,010. The total cost for the 185.857 devices is about 373,5 million Euro! €373,572,570 for hardware according to onlinebetrug. Electricity costs for one day (24h)
An S9 Miner consumes 1,375 watts, or 33 kWh per day. The electricity price is approx. 0.28 € per kWh.

33 kWh x 0,28 € = 9,24 € per day for a S9 Miner

For 185,867 devices this corresponds to a daily power consumption of 6,133,281 kWh x 0.28= 1,717,318 € per day for 185,857 S9 miners.

Electricity costs per day (24h)

Cost of a 51% attack for one day
At a pure hardware procurement price of 373.5 million euros and electricity costs of 1.7 million euros per day, a 51% attack would cost around 375.2 million euros per day.

€375 million
Total cost of a 51% attack

Why this calculation is daring
Of course, we have simplified this calculation considerably and made many assumptions, which are not always given in reality. On the one hand, it would probably be unlikely to order more than 185,000 devices at once without increasing the hash power in the entire network. On the other hand, it is to be expected that when suddenly feeding in huge computing capacities, some miners may decide after a few days to take their devices off the grid because the difficulty has increased so much that mining is no longer profitable enough for them at this moment.

And don’t forget: It doesn’t necessarily take 51% of the hash power to perform such an attack. They are only necessary if you want to perform it with almost 100% probability. You can try it with much smaller proportions, then the probability of success is lower. Why this is so, we have explained in the article What is a 51% attack.

Regulation ECHO – IWF against Bitcoin profit

In the past week, a lot has happened around the globe in terms of regulation. In our regulatory ECHO, we look back at the end of the week and summarize what was said, thought or decided, when, where and by whom.

Mexico: Central Bank announces stricter rules for Bitcoin profit

In Mexico, crypto exchanges and banks offering Bitcoin profit will have to obtain permission from the Banco de Mexico – Banxico for short – in future. The Mexican government has announced that the central bank will be responsible for controlling all crypto transactions in the future. In order to obtain Banxico’s permission, crypto companies must submit a Bitcoin profit business plan showing what services they offer and how they intend to verify the identity of their customers.

USA: Crypto companies set up lobby group
Several US crypto companies have come together in the US capital Washington D.C. to form an interest group. The group of prospective lobbyists includes Coinbase, Circle, Digital Currency Group, Polychain Capital and Protocol Labs. The aim of the group is to deepen the legislator’s understanding of the blockchain. They also want to remove barriers between the cryptoscene and politics.

South Korea: Questioning crypto start-ups about ICOs
Government authorities in South Korea are conducting a large-scale investigation into Initial Coin Offerings in the country. Among other things, they also make contact with local crypto exchanges and trading centres. As part of the survey, they are asked to take part in the wide-ranging survey with a total of 52 questions. Caution is required on the part of the stock exchanges – as ICOs are banned in South Korea, misconduct could lead to punishment on the part of the stock exchanges.

China: Government blocks WeChat accounts of Bitcoin profit crypto companies

The government is blocking more and more accounts of Bitcoin profit companies with the messaging app WeChat. Among the blocked channels are at least eight news Bitcoin profit sites about crypto currencies and also a channel of mining giant Bitmain. According to the official agency of Tencent – the parent company of the messaging app – the blocked channels would violate “national interests” and “public instructions”.

Japan: Financial market supervision expands crypto team
The Japanese Financial Services Agency (FSA) is once again selecting the personnel responsible for monitoring crypto activities. This is to take account of the fact that more and more block-chain companies are applying for the necessary licensing by the supervisory authority. So far, the FSA has been able to investigate 16 cases, while 160 are still waiting to be processed.

Bitcoin news make big waves and now also supports Smart Contracts

On September 10, the team behind Waves announced that they had implemented Smart Contracts on Main Net. The Waves course then rose by 30 percent. However, it will be about two weeks before Smart Contracts are finally launched on the network.

For some time now, Waves users have been able to issue their own tokens on the blockchain, which interested parties can trade on a built-in, decentralized exchange. Like the leasing function, which makes it easy to participate in the proof-of-stake consensus, all these functions are accessible to non-techies via an intuitive graphical user interface. More than a year ago, BTC-ECHO described in detail how you can issue or sell your own token on waves. The other functions also promise good accessibility.

Waves has now announced that the plan to integrate Smart Contracts into the existing system has entered the final phase. The timing could hardly be better: Ethereum is currently being threshed in from all sides and the suitability of the crypto currency for smart contracts is being questioned. However, Waves can position itself as an alternative platform for Smart Contracts. The Waves price responded accordingly: Since the announcement, the price has risen by 30 percent. Although the price has experienced a slight consolidation since then, it still ranks 20 percent above the original price.

Bitcoin news: Secure Processes Instead of Turing Completeness

Unlike Ethereum’s case, the focus is on simplicity. The Bitcoin news team describes their vision of Smart Contracts with “Smart Accounts”. These can be imagined as templates for Bitcoin news, which can quickly be used for various application areas. Technically speaking, these are Turing incomplete Smart Contracts. Users can write simple scripts, but the developers have deliberately not implemented things like their own functions, loops or recursions to exclude them as possible sources of error and attack possibilities.

With the help of smart accounts, various things should be possible: In addition to multi-signature wallets, i.e. wallets managed by several accounts, interested parties should also be able to set up Atomic swaps or oracles. Token issuers can specify a certain time period during which buyers cannot sell these tokens – which can counteract pump-and-dump schemes in the early stages of a project. Finally, whitelist voting should enable users to quickly implement different forms of voting processes on waves.

It will take another two weeks until Bitcoin news can be implemented

With these five core functions, a large part of the interesting Bitcoin news can also be mapped without Turing completeness: Multi-signature wallets allow both two-factor authentication and the opening of a decentralised fund. With the help of Oracle and whitelist voting, prediction markets can be implemented quickly. By freezing tokens, you have a little more security about the price of the tokens when selling them. Things that are currently not realizable on the Bitcoin news blockchain can be realized by Atomic swaps on other blockchains.

The whole thing is to be set up via a user-friendly graphical user interface. The approach fits in with the strategy of high usability pursued so far. Another special feature is that the fees for these smart accounts should be completely predictable. A Waves counterpart to a gas, Ram or bandwidth market is therefore not to be expected.

But before you want to try out the corresponding Smart Contracts right now, there is good reason to talk about the final phase. At least two weeks must elapse before the final release, in which a vote on the new functions takes place. 80 percent of the generated blocks have to agree to the innovation within the electoral period, which lasts 10,000 block cycles or about a week. Only when this is the case can the new feature be activated, which in turn takes another 10,000 block cycles. Anyone who would like to find out more about the technical details behind Waves Smart Contracts should read the white paper.

Bitcoin price slumps above 15%

Actually, everything looked very rosy for the Bitcoin price. Despite the SEC’s rejection of the Winklevoss brothers’ Bitcoin ETF a week ago, the Bitcoin price recovered steadily. The price quickly jumped back above the $1250 mark and it seemed that the Bitcoin price could not be affected.

But then the attention began to shift from the Bitcoin ETF to the scaling debate and the associated problems in the Bitcoin network. As we already reported yesterday, there is a lot of tension in the community as there is a hard fork in the room to finally counteract the overload of the network. Transaction costs have risen massively and the processing time has increased massively – the network is literally crying out for a solution in the scaling debate.

Nevertheless, the pressure on the Bitcoin development teams is great

Understandably, such turning points bring with them a great deal of uncertainty. If the proponents of a hard fork prevail, this would have an enormous impact on the future of the Bitcoin network. Exactly this escalation of the conflict, we can see in the significant collapse of the Bitcoin price:

In the last 24 hours, the Bitcoin rate has slumped by over 15%. A descent that we did not even experience during the riots in China a few weeks ago, when the Chinese central bank’s actions unsettled the Bitcoin market and the Bitcoin stock exchanges.

Their decisions will influence the Bitcoin share price

Accordingly, it is to be hoped that the disputing parties, Bitcoin Core and Bitcoin Unlimited, will show a willingness to compromise in order not to further unsettle the market. Their decisions will influence the Bitcoin share price, at least in the short to medium term, more than anything else that can be ignored at the present value.

Looking back into the past, it was precisely the solved problems that led to Bitcoin’s strengthening. It is precisely in such crises that the strength of an asset or a currency becomes apparent. Consequently, it is to be expected that after a solution, no matter what it looks like, there will be more clarity again, which in turn will lead to more trust and confidence in the network.

In retrospect, we can speak of luck that the Bitcoin ETF was rejected. If this had been approved, it would have led to an enormous hype and inflow of funds into the Bitcoin network. However, the network is already at its limit when it comes to processing transactions. The short-term price rally that would probably have been triggered might have brought the Bitcoin network to its limits for good. In the end, overtaxing the Bitcoin network would have caused more damage than the increase in popularity and capital.