CryptoURANUS Economics

Saturday, August 11, 2018

Unregulated CryptoCurrency: Defined

OptEditor: Crypto Uranus,

SEC says cryptocurrency exchanges are an unregulated mess:

The U.S. "Securities and Exchange Commission",(SEC), issued a warning on cryptocurrency exchanges.
The SEC Warns:
Many exchanges are unregulated and can do whatever they want with your money.
SEC assumes cryptocurrencies and tokens offered through ICOs are securities.
As securities, cryptocurrency exchanges should follow the same rules as exchange.
ICO's should register through the SEC as a national securities exchange, an alternative trading system (ATS) or a broker-dealer.
SEC says that current situation is a mess.
“The SEC staff has issued concerns many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not”.
The SEC wrote: “Many platforms refer to themselves as ‘exchanges,’ which can give the impressionism to investors that they are regulated or meet the regulatory standards of a national securities exchange.”
Many exchanges have set up their own rules when it comes to listing new cryptocurrencies, and ONLY SEC makes rules through private banks.
The SEC has no say, no regulation, no control, and no taxation methods for private banking families.
The SEC issues warning in this process that can not guarantee that those are safe investments.
The SEC never reviews trading tools on cryptocurrency exchanges. The exchange could give priority to bigger investors or screw up the order book without any consequence.
The SEC reminded cryptocurrency exchanges that they’re supposed to register as an ATS for example.
After Circle’s acquisition of Poloniex Nathaniel Popper saw a confidential Circle presentation.

Circle plans to work with the SEC to register Poloniex:

“The SEC is favorable on this approach and indicated that they would not pursue any enforcement action for prior activity,” Circle wrote.
“They said we are the first and only company in the space to approach them, and were very progressive on working closely with us.”
So it seems like there could be a grace period for U.S.-based exchanges before an eventual crackdown.
Many U.S. investors rely on foreign exchanges to trade cryptocurrencies.
It’s unclear how the SEC plans to protect U.S. investors from creating accounts on foreign exchanges.

U.S. Government SEC’s issued list of questions to cryptocurrency investors to help them pick an exchange:

Do you trade securities on this platform? If so, is the platform registered as a national securities exchange (see our link to the list below)?
Does the platform operate as an ATS? If so, is the ATS registered as a broker-dealer and has it filed a Form ATS with the SEC (see our link to the list below)?
Is there information in FINRA’s BrokerCheck ® about any individuals or firms operating the platform?
How does the platform select digital assets for trading?
Who can trade on the platform?
What are the trading protocols?
How are prices set on the platform?
Are platform users treated equally?
What are the platform’s fees?
How does the platform safeguard users’ trading and personally identifying information?
What are the platform’s protections against cybersecurity threats, such as hacking or intrusions?
What other services does the platform provide? Is the platform registered with the SEC for these services?
Does the platform hold users’ assets? If so, how are these assets safeguarded?

U.S. (SEC) Chairmen, and (CFTC) testifies before Congress:
Date: Tuesday, February 6, 2018.
Time: 10:00 AM.
Location: Dirksen Senate Office Building 538.
Subject: CryptoCurrencies.

The message we will likely get from the chairmen won’t be apocalyptic.

Fact is federal regulators have been thoughtfully on top of cryptocurrency issues for years.
If and when oversight is needed in digital currency markets then the power would best rest with the federal authorities and not the private institutions.
The SEC and the CFTC work overseeing digital currency.
The SEC shown several public sales of tokens inspired by bitcoin fit the definition of securities issuance, and should have been registered offerings.
The SEC and the CFTC started with a thoughtful investigative report last summer opposed to a fusillade of enforcement actions.
The SEC and the CFTC have since followed up with targeted enforcement actions.
The SEC and the CFTC have begun a process drawing a distinction between “initial coin offerings” that are securities on the one hand, and decentralized cryptocurrencies on the other.
Some cryptocurrencies are more suitably regulated as digital commodities as digital gold (bitcoin), digital fuel (ether), or digital real estate (filecoin/storj).
The CFTC has already classified bitcoin and similar cryptocurrencies as commodities and it has, accordingly, been regulating derivative financial products, such as swaps and futures offerings from several exchanges, such as the CME, CBOE and LedgerX.
The CFTC clarified that they have the authority to police cryptocurrency spot markets for fraud, market manipulation and insider trading — and investigations are underway.
Cryptocurrency is not unregulated.
There is, however, one thing that distinguishes a bitcoin spot market from a securities or commodities futures exchange: marketplace supervision.
The SEC only supervises exchanges that trade in securities.
The SEC has not determined all cryptocurrencies to be securities, and there are compelling legal and policy reasons why such sweeping classification is unreasonable.
Who is the issuer of bitcoin? Miners? Software developers?
This is like asking if gold is a security and then trying to determine who in the gold industry is the issuer of gold.
Gold, a valuable asset that exists in the world independent of any promises from a third party issuer or promoter, is rightly classified and regulated.
Gold is as a commodity, just like bitcoin and similar cryptocurrencies are and should be.
The CFTC, while it supervises commodities futures exchanges, only has after-the-fact enforcement authority over fraud in spot markets — it does not license and supervise those markets directly.
The supervisory regulators of digital currencies are a historical accident, state-by-state money transmission regulators.
Digital currency exchanges must acquire a license in each and every state in which it has customers, comply with each different state’s differing regulations.
Digital currency exchanges explain their business to over 50 different regulators.
If that seems odd and inefficient to you, you're not alone.
In a recent joint op-ed for the Wall Street Journal, Chairmen Clayton and Giancarlo said they “would support policy efforts to revisit these frameworks and ensure they are effective and efficient for the digital era.”
They’re right.
State-by-state regulation of inherently global internet money transmitters is inefficient and hurts innovation, financial inclusion, consumer protection and American competitiveness.
The big problem with respect to investor protection is that state money transmission licensing is focused pretty exclusively on solvency and custody risks, not markets.

Unbanked: Defined in CryptoCurrency

Unbanked: Defined:

Many reasons people may be unbanked including:

Unbanked are adults who do not or cannot use banks to store their money.
After experiencing a banking crisis, they may have a distrust of the banking system.
Some individuals don’t have enough money to meet the minimum requirements of a bank.
Illegal European Immigrants may not have the paperwork needed to open a bank account.
A small group of the unbanked are criminals who are trying to avoid the attention of law enforcement.
Some cryptocurrencies aim to help the unbanked by allowing them to store, use, and transfer their money with very few requirements.

What is Unbanked really?

DEFINITION of 'Unbanked':

"Unbanked" is a slang term regards those who do not use banks or banking institutions in any capacity.
Unbanked persons generally pay for things in cash or else purchase money orders.
Unbanked persons also typically do not have insurance, pensions or any other type of professional money-related services.
They may take advantage of alternative financial services, such as check-cashing and payday lending, if such services are available to them.

BREAKING DOWN 'Unbanked':

Estimated, 10 million American households are unbanked.
Nationwide, about 7.7 percent of households are unbanked.
The rate of unbanked citizens vary greatly from one state to the next.
Mississippi has the highest rate of unbanked, at 16.4 percent.
Rates of the unbanked in some U.S. cities and counties exceed 20 percent.
These places include Detroit; Newark, N.J.; Cameron County, Texas; Laredo, Texas; Hialeah, Fla.; Miami; and Starr County, Texas. Unbanked rates exceed 40 percent in Cleveland; Savannah, Ga.; Nashville; and Atlanta.
Half of the unbanked had a bank account previously, but are now choosing to conduct their financial lives without such exchanges do to interest rates and legal actions brought against them.

Why Persons Become Unbanked:

Most unbanked are white, native-born Americans: but many immigrants, legal and illegal, are also unbanked.
People can choose to be unbanked for many reasons. Criminals avoid using financial institutions because law enforcement officials can track their actions in their accounts.
Survived of global the Great Depression have deep distrust for financial institutions.
Great depression survivors do not trust, nor use private financial institutionalized banks.
Recent immigrants who experienced banking crises in their countries of origin are the same consensus.
Extremely poor individuals may also have no need for the banking system.
Those below and slightly above the poverty-line survive bearly day-to-day with little to no money for food and poor to no housing inthe United States.
Many citizens living in poverty find being unable maintaining minimum bank-account balances, to afford bank-account fees, or arrange for vehicle-transportation to and from bank branches during banking hours.

Initiatives to Help the Unbanked:

State and federal level politicians have attempted to help the unbanked gain financial literacy, benefit from banking services, and the banks fail them 93% time..
Former California Gov. Arnold Schwarzenegger’s, (AKA: Terminator), Bank on California Initiative, and the FDIC’s Money Smart program.
The U.S. Treasury Department’s Section 326 regulations, which allow banks and credit unions to accept identification issued by foreign governments, seeks to help undocumented aliens become banked and to collect social-security benifits.
The U.S. Treasury Department makes federal payments to unbanked federal benefits recipients using a MasterCard prepaid debit card.

TRUSTED VS TRUSTLESS: Defined in CryptoCurrency

Truth in the means of stock-exhange and cryptocurrency operations

It means you don’t need a trusted party to settle transactions.

When you send funds you trust the banks to send it for you.

Settling a financial agreement between two parties involves both the bank of the sender as well as the bank of the receiver.

Cryptocurrencies like Bitcoin cut out the need of this middle man role.

It has nothing to do with trusting the seller. Neither does a bank if you pay upfront and the seller refuses to send the goods. Then it’s become a civil case.

Just like with bank statements you can prove on the blockchain that you transferred funds to the address the seller gave to you.

‘Trustless’ has become a rallying cry for Bitcoin evangelists, focusing public attention on the fact that Bitcoin enables P2P transactions without the participation of a trusted third party acting as an intermediary.

Before Bitcoin, to use digital money, we needed a trusted third-party to keep a ledger of who owned how much. Examples of this trusted third-party are MasterCard, VISA, your bank or your MNO if you use mobile money. So if Alice sent Bob $100, this trusted third-party would debit Alice's account and credit Bob's account - they would update their ledger and we all had to trust this 'trusted' third-party to do the right thing and be good stewards of our money.

Now with Bitcoin, everyone has a copy of this ledger so we mo longer need to trust a single entity/organisation/third-party because there is no need to trust when you can just verify against this ledger because you have a copy of it. This decentralised ledger is called the Blockchain BTW.

And the other thing is that everyone using is following the same rules we are so we don't even need to trust them because we know that Bitcoin was built to make it impossible to break the rules.

Bitcoin makes it possible to conduct money transfers without intermediaries. Intermediaries who could otherwise gain control over funds in a transaction, censor transactions or act as points of failure.

Does this give grounds to assert that Bitcoin and other cryptocurrencies are a form of money that does not require trust? Is it possible to completely eliminate trust from monetary relations, and is there even a need to? This article is devoted to the study of the role of trust in monetary transactions (including cryptocurrencies), and its main conclusion is that this role is hard to overestimate.

The article is divided into four sections. First, we analyze the role of trust in monetary relations, including the role of trust in Bitcoin’s functioning, and show that trust is necessary for any money. Next, we proceed to justify the need for credit and credit money, which cannot exist without trust.

Transaction [TX-ID]: Defined in CryptoCurrency

Transaction [TX-ID]: Defined in CryptoCurrency

A Transaction ID, or TX ID is defined as a unique string of letters and numbers used to identify an exchange of cryptocurrency between two people.

Because blockchains are public data, many websites have been built to let you explore the data. These are known as blockchain explorers. Using a blockchain explorer, you can copy/paste your transaction ID and easily find the status of your transaction.

Just make sure you’re using a blockchain explorer that has access to your blockchain. Some blockchain explorers only have access to one blockchain, like bitcoin.

Is TXID the hash of a transaction's data? Yes!

A TXID (Transaction ID) is basically an identification number for a bitcoin transaction.

Examples:

f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16 - First ever Bitcoin transaction to Hal Finney in 2010.

a1075db55d416d3ca199f55b6084e2115b9345e16c5cf302fc80e9d5fbf5d48d - Pizza transaction for 10,000 BTC in 2010.

4ce18f49ba153a51bcda9bb80d7f978e3de6e81b5fc326f00465464530c052f4 - The transaction containing the first donation I received for making this website.

SO, A TXID is always 32 bytes (64 characters) and hexadecimal.

NOW, this hiw how we create a TXID below:

AND... you get a TXID by hashing transaction data via SHA256 twice.

0100000001c997a5e56e104102fa209c6a852dd90660a20b2d9c352423edce25857fcd3704000000004847304402204e45e16932b8af514961a1d3a1a25fdf3f4f7732e9d624c6c61548ab5fb8cd410220181522ec8eca07de4860a4acdd12909d831cc56cbbac4622082221a8768d1d0901ffffffff0200ca9a3b00000000434104ae1a62fe09c5f51b13905f07f06b99a2f7159b2225f374cd378d71302fa28414e7aab37397f554a7df5f142c21c1b7303b8a0626f1baded5c72a704f7e6cd84cac00286bee0000000043410411db93e1dcdb8a016b49840f8c53bc1eb68a382e97b1482ecad7b148a6909a5cb2e0eaddfb84ccf9744464f82e160bfa9b8b64f9d4c03f999b8643f656b412a3ac00000000

169e1e83e930853391bc6f35f605c6754cfead57cf8387639d3b4096c54f18f4 (Note: reverse the byte order first if you want to find this transaction in the blockchain...)

What about searching for TXIDs in the blockchain?

If you have just hashed a transaction data and want to search for a TXID in the blockchain, you have to search for it in reverse byte order.

The TXID (original): 169e1e83e930853391bc6f35f605c6754cfead57cf8387639d3b4096c54f18f4

The TXID (searching): f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

Why?
Because, this is cryptocurrency, welcome to Bitcoin.
The tx and block hashes that bitcoin core uses are byte-reversed.

Where are TXIDs used?

1. Searching the blockchain.
If you've just made a transaction, you can use the TXID to find it in the blockchain. For example:

bitcoin-cli getrawtransaction 0e3e2357e806b6cdb1f70b54c3a3a17b6714ee1f0e68bebb44a74b1efd512098

The console window in the Bitcoin Core Wallet

The console window in the Bitcoin Core Wallet

If you have been given a TXID by your bitcoin wallet, it's probably already in its "searchable" format (reverse byte order).

2. Spending outputs.
You use a TXID when you want to use an existing output as an input in a new transaction.
To refer to an existing output, you use the txid it was created in, along with the vout number for that transaction.

To refer to an existing output, you use the txid it was created in, along with the vout number for that transaction.

Because after all, a TXID is a unique identifier1 for a transaction.

Why hash twice? Why not once?

Things often get hashed twice in bitcoin for extra security.

Hash functions, like SHA256, for creating identification numbers are fast and secure.

Coinbase transactions having the same TXID.
There has been a situation where two "different" coinbase transactions had the same TXID, because the other is a backup and user-friendly.

Reason is the transaction data is the same along with the TXIDs. Here are the transactions and the blocks they were included in:

e3bf3d07d4b0375638d5f1db5255fe07ba2c4cb067cd81b84ee974b6585fb468
block 91,722: 00000000000271a2dc26e7667f8419f2e15416dc6955e5a6c6cdf3f2574dd08e
block 91,880: 00000000000743f190a18c5577a3c2d2a1f610ae9601ac046a38084ccb7cd721

d5d27987d2a3dfc724e359870c6644b40e497bdc0589a033220fe15429d88599
block 91,812: 00000000000af0aed4792b1acee3d966af36cf5def14935db8de83d6f9306f2f
block 91,842: 00000000000a4d0a398161ffc163c503763b1f4360639393e0e4c8e300e0caec

The Bitcoin Administrators made a BiP-34 Fix

BIP 30 introduced a rule preventing blocks from containing a TXID that already exists. BIP 34 requires coinbase transactions to include block height of mining into the transaction data. Hence, coinbase transactions now are different...

Transaction Fee [TX Fee]: Defined in CryptoCurrency

A transaction fee is defined as payment made to people who do the work of keeping an accurate, up-to-date financial system when money is being sent and received.

Typically, when you send money using banks or receive money as a business, you pay the bank a fee. This fee covers their costs for hiring people to do the work involved in your transaction.

With cryptocurrencies, there are no banks. Instead, people use their computers to verify transactions are correct and then record this information in the blockchain. Because there are thousands of transactions happening every minute, fees motivate these people to do this computer work.

If you provide a larger fee, typically your transaction can jump the line and get recorded first. In other words, the larger the fee, the greater the chance of your transaction going through sooner than the rest.

Tokens-(Security and Equity)

Token:

A token is defined as something that represents value, services, or a product.

There are three main types of tokens built with blockchain technology:
Utility Token: Defined in CryptoCurrency that provides access to a product or service including software, digital content, etc.

A security token that represents a real-world, physical asset.
An equity token that represents partial ownership in a company.

All three types of tokens are bought and sold with the hope of gaining a profit.
The words “crypto asset” and “digital asset” can also be used to describe tokens.

Tokens is a digital asset that lives on a cryptocurrency. The term token is often used in the meaning of user issued token, in opposition to native token that comes into existence along with the cryptocurrency itself.
See also: Cryptocurrencies supported by Trezor

Native and user tokens

All cryptocurrencies have at least one token. This is a native token which is created along with the cryptocurrency, is essential to its function and is often synonymous to it. For example Bitcoin has bitcoin (BTC) as its native token, while Ethereum has ether (ETH).
Some cryptocurrencies also support user asset issuance. Such assets are reffered to as a user tokens. For example Ethereum has a growing number of ERC20 tokens issued by individual users and companies during ICOs or crowdsales.

It is quite common, that native tokens are referred to as cryptocurrencies (or less formally as coins), while user tokens are called just tokens.

Like Trezor? Get one here!

Thursday, August 9, 2018

Private-Key

Private-Key:
Defined in Cryptocurrency

A Private-Key is a randomly generated secret number that must only be known to the owner of the associated address, and no-one else.

Private-keys are contained in a wallet and are mathematically linked to the corresponding public-keys.

A Private-Key can be used to spend the funds that are associated with a specific address and should always be kept private.

Publicly sharing a Private-Key will result in a loss of funds; -i.e. most likely theft.

Private-Key are generated locally on your Trezor-device and never leave the device.

The Private-Key is defined as a string of letters and numbers known only by the owner that is used to spend cryptocurrency.

NEVER SHARE your Private-Key with anyone unless you want someone else to be able to theft, and-or own all of your money!

Your Private-Key is your most prized possession as your password is to access your cryptocurrency account(s) and must always be in private.

Compare a Private-Key with a Public-Key and address:
Your Public-Key is rarely ever used, but you can use it to receive cryptocurrency in trust.

Your address is a safer version of your Public-Key and is what you should use to receive money.

Private-Key for Trezor devices are generated based on a recovery-seed and (optional) passphrase.

In addition to creating and signing transactions, Private-Key can be used in the Trezor-Wallet to sign messages from a specific address to prove ownership of that address.

See also Account private key

Like Trezor? Get one here!

Anti-AdBlocker