CoinDesk Reports

In this episode, Anna Baydakova and Danny Nelson speak with Kim Nilsson, a former user of the oldest (and long defunct) Mt. Gox crypto exchange. Nilsson has investigated the infamous crypto theft and has been watching the effort to repay the exchange’s creditors. 

When Mt. Gox stopped functioning and filed for bankruptcy, Nilsson didn’t just sit back and see what happened. He set up his own bitcoin node, coded software and tracked the stolen bitcoin to where it landed. He’s also been an active member of the Mt. Gox creditor community over the years. 

Nilsson explains why it takes so long to resolve all the seven-year-old situations, why most of the creditors are still holding on to their claims (instead of selling them) and what’s next for those who have been waiting for repayment since 2014. 

We also asked him to chat with us about the most interesting global crypto stories of last week. That was fun! 

For example, Canadian exchange Coinsquare was obliged by a federal court in Canada to disclose data on some of its 20,000 users to the national tax agency, the Canada Revenue Agency (CRA). The taxman is knocking on crypto exchanges’ doors, and that, Nilsson believes, is basically the end of privacy in crypto.

The rumor mill is working overtime in India: Will the nation ban all cryptocurrencies? Start blocking IP addresses of crypto exchanges? Maybe, maybe not. India is a big economy with a young and crypto-curious population, so the threat of crypto regulation has resounded.

Meanwhile in Turkey, the national currency, the lira, is tanking, and people are buying bitcoin to protect their savings. There are neither regulations nor a specific tax on crypto in the country, and the interest in bitcoin is surging in the time of fiscal uncertainty.   

Stories mentioned in this episode:

• WSJ: The Man Who Solved Bitcoin’s Most Notorious Heist
• CoinDesk: Mt. Gox
• CoinDesk: Mt. Gox Creditors to Vote on Draft Rehabilitation Plan
• CoinDesk: Crypto Exchange Coinsquare Ordered to Hand Thousands of Customers’ Records to Canadian Tax Agency
• CoinDesk: Crypto Is Not Regulated in Turkey, and It’s Thriving
• CoinDesk: India May Block IP Addresses of Crypto Exchanges: Report 

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In this week’s episode, CoinDesk’s Christine Kim and Will Foxley, along with Consensys’ Ben Edgington, discuss the latest proposals fast-tracking Ethereum’s transition to a proof-of-stake (PoS) consensus protocol. 

The promises of Ethereum 2.0 are changing in important ways. 

On Thursday, March 11, Ethereum founder Vitalik Buterin published a blog post detailing how the network’s transition from a proof-of-work (PoW) consensus protocol to PoS could be executed far more quickly than developers had originally planned. 

“It would leave a lot of loose ends that we’d have to work on and tidy up later, but it’s looking like this [transition] could be months rather than years [away],” said Edgington. 

There are several reasons why a move to PoS in the near term, rather than long term, looks attractive in the eyes of Ethereum developers. First, it would mean the resistance from proponents of the Ethereum miner community towards reductions in block reward through Ethereum Improvement Proposal 1559 and changes to the network’s consensus algorithm would be short-lived. With a PoS upgrade, miners would effectively be forked from the Ethereum protocol entirely and replaced with other network stakeholders known as “validators.” 

Second, Edgington noted there’s been “a big backlash” about the environmental impact of Ethereum’s PoW algorithm securing the value of several high-profile non-fungible tokens (NFTs). As the value on Ethereum grows through decentralized applications (dapps) and tokens, there is greater pressure to reduce the energy consumption of the underlying protocol and reduce the network’s environmental footprint through a switch to PoS. 

At the same time, there are equally important reasons why a move to PoS in the near term could negatively impact Ethereum. 

First, the process for coming to an agreement about the development roadmap and timeline for Eth 2.0 has been restricted to a comparatively small group of developers and researchers. Moving forward with a transition to PoS now would mean all decisions are made with a much larger community of network stakeholders and through a more complicated process of governance. This is likely to slow research and development for other innovative aspects of Eth 2.0 – namely, the scalability promises of this multi-year upgrade. 

The second reason for resisting a move to PoS for Ethereum in the near future is that in order to do so, core features and functionalities initially envisioned for the protocol would need to be delayed. For example, sharding, which is the primary scaling solution for Ethereum on a protocol layer, would have to wait in order for an Eth 2.0 transition to happen posthaste. 

Are protocol developers giving up too much of the grand vision originally outlined for Eth 2.0 in favor of a quick fix solution to PoS? Listen to the full podcast to hear from Kim, Foxley and Edgington on what’s at stake for Eth 2.0. 

Links mentioned in this podcast: 

• What’s New In Eth2 (www.eth2.news)   

Valid Points (https://www.coindesk.com/newsletter/valid-points)  

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In this episode, Anna Baydakova and Danny Nelson speak with Kim Grauer, head of research at Chainalysis, about the blockchain analytics firm’s 2021 “Crypto Crime Report,” how to locate where scammers send their money, and the state of crypto regulation and adoption. 

The report, released in February, maps out major crime types associated with cryptocurrencies: crypto scams, ransomware attacks and money laundering, among others. Kim Grauer explains how Chainalysis comes to its conclusions about the geography of crypto transactions, what cyber crimes were on the rise in 2020 and why transaction-tracking software hates mixers. 

Also, we discuss Sandali Handagama’s report about a startup that helps savings groups in Africa, and particularly in Nigeria, to invest in stablecoins and protect against inflation of their national currencies. In Africa, many people don’t have access to banking services, and instead, they do collective savings. Could crypto make this practice easier? 

On the regulatory front: European crypto firm Bitcoin Suisse has failed in its bid to win a banking license. FINMA, the Swiss financial regulator, on Wednesday rejected Bitcoin Suisse’s charter application on grounds the company had weak anti-money laundering defenses. Bitcoin Suisse has been working with banks and regulators in Switzerland for years now, but looks like it’s not enough. 

Stories mentioned in this episode:

• Chainalysis: The Chainalysis 2021 Crypto Crime Report
• CoinDesk: Nigerians Turn to Stablecoins for Protection Against Inflation
• CoinDesk: Stellar Development Foundation Invests $750K in Nigeria Remittance Platform
• CoinDesk: Swiss Crypto Firm Bitcoin Suisse Turned Down on Banking License
• CoinDesk: EU Regulators Warn Again on Crypto Investment Risks

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An insider's look at how Bitcoin is making renewable energy sustainable featuring industry veterans Meltem Demirors and Harry Sudock.

As big banks, publicly traded corporations and some of the biggest names in finance become increasingly bullish on Bitcoin’s prospects, only a few objections really remain. These days on Wall Street it’s all about responsible investing as seen through the lens of “Environmental, Social and Governance,” (better known as ESG). On this episode of CoinDesk’s “Money Reimagined,” we speak with two of the top minds building out bitcoin mining in the U.S. for an insiders look at the real story on energy, money and sustainability. In this episode we’ll speak with Meltem Demirors, chief strategy officer of CoinShares, and Harry Sudock, vice president of Strategy at GRIID.

To set the stage, earlier this week on CoinDesk TV, fund manager and “Shark Tank” co-host Kevin O’Leary said Wall Street has to satisfy sustainability reporting requirements before it can buy wholesale into bitcoin. He estimated that only 10% of institutions that wanted to buy had bought in, partly because of climate concerns.

He continued, “All of these new providence concerns, which were not on anybody’s mind when crypto was simply the purvey of the hedge fund or the retail investor. Now it has to have a new standard. Where did it come from? How was it mined? Was it mined sustainably? How do I know I’m not supporting mining in a country where human rights are abused like China? All of these issues are at the fore for institutional clients.”

These are valid questions, but they’re certainly not new, much less unanswered. Demirors described the problem as “two facts and two fallacies,” saying:

“Fact #1 - Bitcoin mining is highly energy intensive. That is a fact. Bitcoin is the only network that I know of that documents its energy use and is extremely transparent about it, which I think makes Bitcoin a very easy target. It’s impossible for you to calculate how much energy the banking industry uses, how much energy the U.S. military uses. Most industries and sectors are very opaque about their energy usage. Bitcoin is not.

Fact #2 - A majority of bitcoin miners are located in China. That is still a fact, we are working on changing that but it is a fact.

From those two facts, some logical fallacies follow:

Fallacy #1 - The logic then goes: Bitcoin miners in China are using dirty, coal-based power. That’s actually false and we have proven that to be false through our bitcoin mining research report. We were the first firm in the industry to do this research. We spoke to all of the miners first-hand and did a bottoms-up calculation where we found that 77% of all bitcoin mining done in China was done with renewable energy that would otherwise not be utilized. So that’s fallacy number one.

Fallacy #2 is that bitcoin mining has an extreme carbon footprint. And that is something that’s also provably false, and I think an area that people who care about the bitcoin network are working to provide more data to make that extremely transparent. 

And then, the last logical, sort of “transitive property sum” that comes out of those four statements… Two facts, two idealogical fallacies is that “Bitcoin is bad,” which is a moral judgment.”  

Sudock, meanwhile, discussed his experience as a profit-oriented bitcoin miner who was sucked into environmentally responsible mining out of sheer necessity.

“We didn’t enter this industry with an eye towards becoming a renewable operator. We didn’t think that that was sort of our ‘edge,’ but what we quickly found through conversations with everybody from very very large, federal energy producers in the U.S. to very small hydro dams that are run by Mom and Pops who can’t afford upgrades to their turbines, is that everybody is looking for revenue enhancement strategies that will support the growth and resilience of the energy that they’re producing. And the need for those enhancement strategies are particularly acute when you start to look at renewable generation. Those conversations at this point for us are inbound. I spend less time reaching out to energy producers than energy producers spend reaching out to me. And that’s a huge change.”

All of this and more in this week’s episode of CoinDesk’s “Money Reimagined.”

Image credit: Master Wen/Unsplash

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In this week’s episode, CoinDesk’s Christine Kim and Consensys’ Ben Edgington are joined by “Superphiz,” the pseudonymous moderator and lead organizer of the Reddit ETH Staker Community. 

/r/EthStaker is an online community of investors, traders, users and developers dedicated to the education and exploration of topics related to Ethereum’s live transformation into a proof-of-stake (PoS) protocol. 

Since the launch of Ethereum’s parallel PoS blockchain back on Dec. 1, 2020, Superphiz and his fellow ETH Staker community members have been busy working on a number of projects meant to encourage user participation in the new network. 

First and foremost, there is the StakeHouse project aimed at reducing the complexity of staking on Ethereum 2.0. According to Superphiz, the biggest “hurdle” preventing people from becoming validators on Eth 2.0 is the client software installation process. 

In order to stake on Eth 2.0 and earn rewards as a validator on the network, users must choose one of four software clients to run on a computer. The StakeHouse team is currently building “a graphical one-click installer” that will remove the minute intricacies of loading a particular Eth 2.0 client onto a user’s device. 

“You load up a graphical interface and it says, ‘Which client do you want to install?’ You choose one through four. Press the button and then select the location of your key. Thank you. You’re done. It should be that easy,” said Superphiz. 

Second, there is the Ethereum Due Diligence Committee. Members of the ETH Staker community have created a website to evaluate the trustworthiness of several Eth 2.0 staking pools and will soon be publishing formal rating schemes by which to grade each staking service. 

In doing so, the motivation is to help train users on recognizing healthy staking pools and hold staking pools accountable to a shared standard of security and usability. 

Finally, the ETH Staker community also supports knowledge sharing and increased awareness about the development roadmap of Eth 2.0 through its Eth 2.0 Studymaster Program. Listen to the full podcast to hear from Superphiz on what the program entails and how it is set up. 

Links mentioned in this podcast: 

• /r/EthStaker (https://www.reddit.com/r/ethstaker/) 
• ETHStaker YouTube channel (https://www.youtube.com/channel/UCeHmYPRYZddrM1tfJLfLVDA) 
• Ethereum Study Master Program (https://ethereumstudymaster.com/courses/)  

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A collection of 5,000 .jpg files just sold at Christie’s for $69.3 million. Why? Because it’s art, it’s digital and it’s on a blockchain. Hosts Anna Baydakova and Danny Nelson dive into the non-fungible token (NFT) phenomenon and its wildest, eye-popping twist yet on “Borderless” this week, discussing what makes NFTs so valuable and whether they’re here to stay – potentially turning the art world on its head. Even hackers are paying attention.

The conversation then turns to Israel, where local media reported the Altschuler Shacham pension fund invested $100 million in Grayscale’s Bitcoin Trust at $21,000. (Grayscale is owned by CoinDesk parent company DCG). It’s the latest example of traditionally conservative money flowing into the historically volatile crypto. Danny and Anna discuss the trend. 

Finally, “Borderless” heads to New Zealand where a startup’s started minting one of the world’s earliest fully compliant stablecoin. With currency digitization sweeping across borders, the hosts consider how the future of money might be shaped by corporations and governments, too.

Articles in the podcast: 

https://www.coindesk.com/beeple-nft-christies-auction

https://www.coindesk.com/israeli-pension-giant-put-100m-into-grayscale-bitcoin-trust-report

https://www.coindesk.com/new-zealand-stablecoin-techemynt

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At the end of a high-energy week in the burgeoning digital art world, “Money Reimagined” brings you the third and (for now) final edition of our NFT series. 

In between recording this episode and publishing it two days later, a non-fungible token attached to a piece of digital art sold for a whopping $69.3 million. The sale, orchestrated by Christie’s, turned the digital creator known as Beeple into the third-highest paid living artist. It also represented a high point in the media attention now swirling around this new, crypto-based technology. 

So, it’s appropriate we end on a note that grounds things in the reality of the technology and its potential to transform the creator economy generally, rather than being caught up in the celebrity story and media sensations. To do so, we talk with Roham Gharegozlou, the CEO and founder of Dapper Labs, the startup that in many respects is responsible for kicking off the entire NFT phenomenon. 

We talk about the early days when Dapper created the ERC-721 standard on Ethereum and launched the popular CryptoKitties program. We talk about why the team made the decision to build its own blockchain, known as Flow, and to migrate the business there away from Ethereum. And we talk about where this rapidly evolving industry, with its competing platforms and wild debates over rights and opportunities, is going.

Join us for the conversation. 

Image credit:  Benjamin Suter on Unsplash, modified by CoinDesk

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In this special episode of “CoinDesk Reports,” Managing Editor of Podcasts Adam B. Levine took to Clubhouse, the audio-only social media platform, for hot takes and quick reactions from crypto enthusiasts. What he found was, well, a lot of confusion around why an image on the internet that anyone can see for free would be worth more than a 62-bedroom mansion in New Zealand, and frankly, most anything you might want to buy.

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In this week’s episode of “Mapping Out Eth 2.0,” CoinDesk’s Christine Kim and Will Foxley and Consensys’ Ben Edgington talk about the “sneak” update made to the Ethereum 2.0 protocol that will help enable trustless staking pools to emerge on the network. 

All Eth 2.0 validators after staking 32 ETH on the network are required to generate two cryptographic keys. One is used to sign off validator responsibilities such as attesting to blocks. The other, called the “withdrawal key,” is held until a validator exits the network and withdraws his or her staked ether. 

Up until mid-February, no user could be certain where funds would be deposited after a validator withdraws their stake. Developers have recently upgraded Eth 2.0 code so that withdrawals of validator funds can be linked to Ethereum accounts and wallets active on the original Ethereum blockchain. 

To be clear, the pathway for where validator funds would land has been specified in the Eth 2.0 protocol through this update, but withdrawals and ether transfers are still not enabled on the network. Clarity on where funds will go after validators can move their stake off the network is positive news for Eth 2.0 staking pools. 

The first code update of Eth 2.0 enables staking pools to set up trustless smart contracts on Ethereum to divide up earned rewards between participants. This, according to Edgington, is “a big deal” for decentralized staking services such as RocketPool that differentiate themselves from competitors by offering a transparent and distributed way to validate on Eth 2.0. 

The mechanism that allows validators funds to be withdrawn to existing Ethereum accounts also signals a change in the Eth 2.0 development timetable. 

“[The Eth1 and Eth2] merge has come forward in the timetable. Previously, it was envisaged at being quite distant after we’ve done sharding and after we’ve done some kind of execution environment technology. But now we are bringing the merge forward in the timetable and just putting Eth1 on top of the beacon chain,” said Edgington. 

The new plan is to “dock” Eth1 like a plane to Eth2. 

Listen to the full podcast episode to learn more about the docking plan for Ethereum. 

Links mentioned in this podcast: 

• What’s New In Eth2 (eth2.news)
• Valid Points (https://www.coindesk.com/newsletter/valid-points) 

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In this week’s “Money Reimagined” podcast episode, we take the discussion around central bank digital currencies (CBDCs) down from the high-level geopolitical themes we’ve addressed previously and into what the technology can do for people at the grassroots level. 

To do so, Sheila Warren and I talked to Serey Chea, director general at National Bank of Cambodia, and Makoto Takemiya, co-CEO of Tokyo-based blockchain technology provider Soramitsu, about Cambodia’s new “Bakong” central bank digital currency and payments system. 

They provide a thought-provoking look at how small economies can use CBDCs to leapfrog their otherwise underdeveloped financial systems into something far more advanced.

With the financial world obsessing about China’s launch of its new digital yuan and the competitive threat that poses to the U.S, which is now accelerating its work on a digital dollar, this is a reminder that there is real potential to do good with this technology in the realm of financial inclusion. 

However, there are real challenges – the impact on the banking system, privacy and security, to name a few. We address all of those and explore where this is going in this far-reaching conversation. 

Image credit: Paul Szewczyk via Unsplash modified by CoinDesk)

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