This week in the news — 9 November 2018
What happens when citizens trust crypto more than their fiat currency? Why is there a war at Bitcoin Cash?
Here are some stories you might find interesting — and the links to find out more about them.
Cryptogem DEX opens in defiance of Zimbabwe ban
Source: Bitcoin News, Independent
Date: 9 November 2018
Cryptogem is a new decentralized crypto exchange being launched in Zimbabwe, in Southern Africa.
There’s nothing new about the launch of a new exchange, excepting that this one is in direct defiance of a 2018 Zimbabwe Government ban on cryptocurrencies. And this ban crippled two previously successful exchanges — Golix and Styx24.
What is also notable about this exchange is the amount that Zimbabweans are prepared to pay for the service. At a time when the average price for Bitcoin is about $6,500 the price on the Cryptogem exchange is between $20,000 and $24,000. In addition the exchange fees are pretty high at 0.9% for offers and 0.00005 BTC for deposits and withdrawals.
Anyone who believes that cryptocurrencies are risky and that governments and regulators are the answer to money security would have to pause and consider the story of Zimbabwe. Corruption in leadership and the application of idealistic political policies has led to total meltdown of the country’s fiat currency.
Fiat money has no intrinsic value. It is backed only by the government saying that it is legal tender. In effect, fiat is underwritten by the balance sheet of the country. When the economy of a country and therefore its balance sheet become suspect, this leads to hyperinflation and the crash of the currency.
When people lose trust in a fiat currency, its value is lost. In Zimbabwe, inflation reached nearly 500 billion percent in 2008. A trillion Zimbabwe dollars were worth about 0.40 USD. The Zimbabwe dollar was scrapped and replaced by the USD in 2009. Just recently, the Zimbabwe government has introduced a Government bond, claiming that it has 1:1 parity with the USD.
Zimbabweans are clearly not buying this promise. Instead many prefer to convert what money they have into cryptocurrencies, no matter how expensive this might be.
Tawanda Kembo, the founder of Golix, says that cryptocurrency is made for Africa, where it is extremely difficult to make international payments. Services such as PayPal generally do not exist and debit cards don’t work online across most African countries. So any cross-border payments are very expensive. This is particularly true for remittances sent from Zimbabweans living outside of Zimbabwe. This is the only income for many in Zimbabwe, where the unemployment rate is above 95%. Remittances provide about $2 billion into Zimbabwe each year.
At the beginning of 2018, the Reserve Bank of Zimbabwe tried to crack down on cryptocurrencies. The courts found that the Governor of the Reserve Bank had no jurisdiction over the crypto-landscape. The Bank retaliating by barring banks (over which it does have jurisdiction) from having any accounts with crypto-exchanges.
This led to bitcoin trading going underground in Zimbabwe. Many people also started using WhatsApp for P2P trading — obviously a very risky way of trading.
This is where Cryptogem has come in. It has sidestepped the ban on banks dealing with crypto exchanges, because it has no bank account in Zimbabwe — it deals only in cryptocurrencies. More than 300 people signed up in the first week.
Melissa Mwale, co-founder and chief executive officer of Cryptogem Global, has given the assurance that there are high levels of security on the exchange, with two-factor authentication on accounts, minimum amounts kept in hot wallets, third party security auditors and server information hidden behind a firewall.
The new Minister of Finance in Zimbabwe seems to be more open to technology and to cryptocurrencies. It will be interesting to see whether this will allow Cryptogem to survive.
But the Zimbabwe story certainly supports the contention that cryptocurrencies have value because people have decided they do, and are prepared to buy and sell with them.
What is going on in the Bitcoin Cash wars?
Source: CCN, Coindesk, Coinsutra
Date: 8 November 2018
Bitcoin Cash certainly seems to be associated with disagreement and wars of words. It was born in August 2017 out of disagreement about the proposed SegWit2x of Bitcoin as a means to address the scalability problem. The Bitcoin Cash fork split the blockchain in two, and the proponents of each have continued an acrimonious debate over which is better — BTC or BCH.
Now Bitcoin Cash itself is facing a fork on 15 November — and this could lead to another chain split.
The original plan was that there would be 6-monthly forks on the BCH chain to allow for planned protocol upgrades, provided that there was consensus. However, it seems that consensus is not happening, and there are now two distinct sides in an argument.
The ABC proposal
Bitcoin ABC is a full node implementation of the Bit Cash protocol. Its lead developer has made some proposals about changes to opcode to allow for validation of messages from outside the blockchain. This would introduce the use of oracles and cross-chain atomic contracts. The proposal included the introduction of “canonical transaction ordering” to lay the foundation for massive scaling in the future. The block size should remain at 32 MB.
The purpose is to make BCH “the most scalable, usable and extensible blockchain”. It would also open the doors for non-cash transactions on the blockchain.
Bitmain — controlling 22.3% of BCH mining power — has sided with Bitcoin ABC.
The SV proposal
The ABC proposals are opposed by Dr Craig S Wright and his company nChain. They don’t want non-cash transactions or canonical transactions. They reason that they are not needed and neither are they sufficiently tested. Craig Wright has released the “Satoshi Version” (SV) option, with none of the ABC options and with an increase in the size of the blocks. (Craig Wright, by the way, has claimed to be the original Satoshi Nakamoto.)
nChain is being supported by CoinGeek, one of the biggest BCH miners, with 25.4% of BCH hash power. They don’t support canonical transactions. They also want some changes to take BCH back to the original BTC design and they want the block size to be raised to 128 MB.
Other voices
Other miners control 52% of the hash power. It’s not sure which side they will take.
Many supporters of Bitcoin Cash are asking why it is necessary to have a fork at all at this stage, as Bitcoin Cash has hardly settled down from its first fork. They believe that any fork now would lead to chaos in the industry and that many people would lose money.
Roger Ver is the CEO of Bitcoin.com, a Bitcoin Cash mining pool. He has been a major proponent of Bitcoin Cash. He has publicly backed the ABC version, and has, as a result, been subjected to some profanity and wild accusations from Craig Wright. Ver has in the past supported Wright’s vision of cryptocurrencies. Now he is questioning Wright’s technical ability. He says that if Wright does indeed turn out to be the original Satoshi, this would only lower his opinion of Satoshi, not elevate his opinion of Wright!
Vitalik Buterin, the creator of the Ethereum Blockchain has come down very strongly on the side of a fork, if only so that Bitcoin Cash can rid itself of Craig Wright. He tweets that “Bitcoin Craig (BCC) can go take the ticker symbol from the now defunct cryptocurrency to which it is a fitting successor”.
Poloniex Exchange says that it will “remain neutral and allow the community to decide which chain to support, and we want to empower the community to demonstrate their support through trading activity”. It is allowing pre-fork trading, with Bitcoin Cash being deposited on the Poloniex platform and then being split into “Bitcoin Cash ABC” and “Bitcoin Cash SV”. Users can convert back to BCH if they want to withdraw their coins, but BCHSV and BCHABC cannot be withdrawn until after the fork.
There is a risk here that malicious users will broadcast a transaction on both sides of the fork — what Ethereum calls the “Nothing-at-stake” problem. Craig Wright has also threatened that SV miners would blacklist addresses that spend funds on the ABC chain.
The market. Poloniex is allowing the competing BCH coins to trade with Bitcoin (BTC) and the USD Coin (USDC). This will allow traders to have a voice in which fork they consider to be most viable. The fork is only due to happen in a week’s time, but so far traders are coming down firmly on the side of the ABC version, with the BCHABC trading at $535, six times higher than BCHSV at $90.
Where to from here?
We can only wait to see what happens on 15 November.
In the meantime we can perhaps wonder what happened to the vision of Bitcoin as the ability to mutually build and support a collaborative platform upon which to transact, free from the prying eyes and inference of corporate intermediaries.
