Decentralized Crypto Exchange is Solution to Hacks, Will They be Ready?

bitcoin cryptocurrency exchange hack

Not long after the successful hacking attempts on crypto exchanges Bithumb and Coincheck, Japan’s Zaif was hacked, losing $60 million in user funds. All three exchanges were found to have poor security measures.

Coincheck in particular, which lost more than $500 million in XEM, the native cryptocurrency of NEM, outraged investors in Japan after the company’s CEO Koichiro Wada admitted that the firm did not have enough security experts overseeing the exchange.

“We were aware we didn’t have enough people working on internal checks, management and system risk. We strived to expand using headhunters and agencies, but ended up in this situation,” said Wada.

The NEM team also stated in an official statement that while it has deployed an automatic tagging system to trace lost funds for the investors of Coincheck, the team emphasized that the exchange had extremely poor security systems in place.

Bithumb was similarly criticized by the government of South Korea and local security firms, which ultimately led the exchange to close down for over a month and overhaul its internal management systems.

Decentralized Exchanges Can Solve These Issues

ledger cryptocurrency walletLedger wallet

Ethereum-based decentralized crypto exchanges like IDEX utilize smart contracts on an immutable blockchain network to process trades in a peer-to-peer manner. Decentralized exchanges are protected from hacking attempts and security breaches because hackers cannot possibly hack into a peer-to-peer network.

On a decentralized exchange like IDEX, users trade crypto with non-custodial wallets like Trezor, Ledger, and MetaMask. Hence, at all times, users have complete control over their funds by connecting their non-custodial wallets to exchanges.

Funds do not leave the wallets of users unless trades are executed on the mainnet of Ethereum, which is irreversible. As such, user funds are never in danger or vulnerable to external attacks.

Decentralized exchanges have already started to appeal to a niche group of traders that are interested in investing in newly launched crypto with low liquidity prior to their integration on centralized exchanges.

Newly created ERC20 tokens and crypto deploy their assets on peer-to-peer digital asset trading platforms first to gain liquidity, as it costs no capital to do so, and then aim for centralized exchange integration.

As for user experience and usability, because most decentralized exchanges are compatible with Ethereum wallets, it is not that much more complex than centralized exchanges. While it requires several more steps, traders that are already technically literate can easily shift to decentralized alternatives.

Can Decentralized Exchanges Compete Against Centralized Exchanges?

As CCN reported, US Securities and Exchange Commission (SEC) commissioner Hester Peirce previously stated that “only a very particular type of investor can pursue the diversification opportunities such assets can provide,” stating that it requires a specific set of skills and knowledge to trade cryptocurrencies in the market.

Given that cryptocurrency trading on exchanges is already a niche market of its own, it is possible that with better user interface and more incentives, users will explore decentralized exchanges as alternatives.

Images from Shutterstock

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RBS Blockchain Team Jumps Ship to Build New Startups Using R3’s Corda

A team from Royal Bank of Scotland (RBS) has left to start a blockchain “venture studio” called Chorum.

Revealed exclusively to CoinDesk, Richard Crook, who headed up the RBS innovation team, takes with him engineers Mark Simpson, Ben Wyeth and Farzad Pezeshkpour.

Their move is the latest in a string of departures by enterprise blockchain professionals from financial institutions to startups this year. Others include Amber Baldet, who left JPMorgan Chase to start Clovyr, and Julio Faura and Ed Budd, who quit Santander and Deutsche Bank, respectively, to form Adhara.

But Chorum stands out in at least one way. Normally, when blockchain-minded bankers jump ship, it’s to exercise a free rein with some variant of ethereum, often by way of joining the umbrella of ConsenSys, another venture production studio.

However, Crook and his team, which developed the Cordite token project on R3’s Corda platform, will continue to work closely with that software in the new Chorum studio.

Asked why he was leaving the bank, Crook told CoinDesk:

“RBS has been a tremendous sponsor and employer. However the blockchain space has outgrown and outpaced the incumbents including RBS. We wanted to be part of this wave of disruption to both the financial and other industries.”

Crook said he has left RBS with a robust blockchain strategy, noting that the bank has an investment in R3 and have got a number of enterprise projects on the go including some relating to Cordite enterprise tokens.

But he conceded that for now at least, “RBS’s blockchain capability has very much now left the bank.” RBS representatives did not respond to requests for comment by press time.

Crook said Chorum (the name relates to a choir, and was used in the original Corda white paper) will operate as a blockchain venture studio from which full-blown startups an be spun out (a similar model to ConsenSys).

He also said Chorum will be working closely with R3 co-founder Todd McDonald, who is focused on tokenizing assets on the Corda platform.

Token sale

David Williams, the former chief executive and co-founder of broadband satellite operator Avanti Communications, will steer Crook and his engineers as CEO of Chorum.

Williams explained that Chorum’s flagship protocol is a blockchain and ecosystem for enterprises called Arqit. He claimed Arqit is quantum-resistant, meaning it would be secure from attack even from a powerful future quantum computer (a long-term existential worry in the blockchain world).

Arqit has just received a “significant investment” in a token pre-sale from Singapore-based crypto fund Neo Global Capital (NGC), which is part of Chinese blockchain giant Neo, Williams said.

The project uses the open source Corda code base, and a secret sauce of “proof of performance” consensus (“a method of fairly distributing fees to nodes”), with added quantum encryption, he said.

“Our approach is to build blockchain systems at our own cost, either by ourselves or as consortiums, and then look at an industry or marketplace and offer that blockchain in a software-as-a-service model,” said Williams.

Regarding the token sale, Williams said it uses the etherem ERC-20 standard and Arqit will migrate to a native coin when the mainnet, or live version of its blockchain, launches. He said the hard cap for sale proceeds is $30 million, and the early indication is raising that amount will not be a problem thanks to NGC’s support.

He also framed the project with a nationalistic twist, telling CoinDesk:

“We are going to build a British public blockchain, the infrastructure of the U.K. I don’t think there’s anyone else in London with their own protocol.”

Photo via Shutterstock.

Source: Coindesk


California’s Campaign Watchdog Bans Political Donations with Bitcoin

The Fair Political Practices Commission, California’s campaign watchdog arm, has voted 3-1 to ban political donations with any cryptocurrency, including Bitcoin, because of transparency issues.The vote follows similar decisions made by other states in the country such as South Carolina. Others, like Colorado and Montana, allow cryptocurrency donations with restrictions.In May 2014, the Federal Elections Commission stated that political campaigns could accept a $100 contribution limit per person and per electoral cycle, but didn’t address larger bitcoin contributions.California Ban on Bitcoin Donations Follows Example of South CarolinaThe Fair Political Practices Commission in California made four different proposals before going to a vote, with the first one being the total prohibition of any contribution in cryptocurrency, the Associated Press reported.The second option would allow cryptocurrency contributions as cash contributions, limited to contributions of less than $100 from any source, and requiring cryptocurrency. The Political Reform Act (“Act”) already prohibits persons from making, and committees from receiving, cash contributions of $100 or more.The Option Three would permit digital currency contributions as in-kind contributions, but requiring a conversion to cash upon receipt and deposited into the campaign bank account. The fourth option intended to allow in-kind contributions in cryptocurrency without conversion to cash. Furthermore, committees making contributions would maintain a separate cryptocurrency account and make expenditures from the account.In April 2018, the House Legislative Ethics Committee of South Carolina decided that the State’s law “does not include “virtual” or “digital currency” in its definition of contribution.” The watchdog thus recommended that only legislation could change the state’s campaign donation practices.“The Committee determined that it is not permissible for candidates for and Members of the South Carolina House of Representatives to receive campaign contributions in the form of Bitcoin or other digital currency. The Committee notes that there are many issues that need to be resolved regarding the acceptance of Bitcoin as a contribution to a political campaign for House office.”In early 2015, the state of Tennessee changed the definition of “contribution” to include “digital currency” in order to officially allow political donations with Bitcoin et al. In August 2018, Oregon adopted a rule permitting Bitcoin contributions. In Montana, Bitcoin is accepted for political donation purposes, but it must be valued and converted to U.S. dollars or used to purchase some service or product.The Kansas Governmental Ethics Commission stated that “the digital currency known as Bitcoin is too secretive to be allowed as a form of campaign contributions in state and local elections.” Washington D.C. accepts cryptocurrency as an in-kind contribution to be reported as received at the date it is liquidated into U.S. dollars. Colorado formally accepts cryptocurrency as contribution since July 2018 “up to the acceptable limit for a cash or coin contribution [$100].”Featured image from Shutterstock.