Category Archives: Crypto

Tether Drives (up to 50%) of BTC’s Rise

Source: UT Austin, Jun 2018

This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom.

Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.

The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.

Related Reading: TrustNodes, Jun 2018

“From March 1, 2017 to March 31, 2018, the actual Bitcoin price rises from around $1190 to $7000 for a 488% return. In contrast, the price series without the 87 Tether-related hours ends at around $4100, a 245% rise.

Hence, the hours with the strongest lagged Tether flow, which account for less than 1% of the time-series, seem associated with 50% of the Bitcoin buy-and-hold return over the period,” they say.

The study finds significant correlations between tether printing and bitcoin’s price rise, with the authors arguing it applies more widely to other cryptos:

“The percentage of the buy-and-hold return that are attributable to the Tether-related hours range from 42% for Dash to 82% for Zcash.

Ethereum, for example, experienced near 2400% return during this period, while it would alternatively experience around 900% return if the Tether-related hours were excluded. Across the six other crypto currencies, returns are 64% smaller on average when removing the 87 Tether-related flow hours.”

There has been suspicion for some time that Tether was propping up bitcoin’s price with CFTC opening an investigation in January.  In March, however, they printed out 300 million USDT and in May printed out another 250 million.

Bloomberg, Jun 2018

Griffin’s paper describes several patterns uncovered in a yearlong period. First it found that flows weren’t symmetric. When Bitcoin’s price fell, purchases with Tether tended to increase, helping to reverse the decline. But during times when Bitcoin rose, Griffin said he didn’t see the reverse occur. That’s “suggestive of Tether being used to protect Bitcoin prices during downturns,” he wrote.

Price Thresholds
He zeroed in on 87 of the largest purchases of Bitcoin with Tether from March 2017 to March 2018. In the cases examined, new Tether had been issued within the prior three days, and Bitcoin’s price had fallen in the prior hour. What followed were increases in Bitcoin’s price — and those gains added up.

Even though the 87 examples account for less than 1 percent of the time period examined, they amounted to about 50 percent of Bitcoin’s compounded return over that year. In comparison, 10,000 simulations Griffin and Shams ran demonstrated “that this behavior never occurs randomly,” they wrote.

Griffin said one of the most notable trends he saw in the data was when Bitcoin traded near certain price thresholds, denominated in $500 increments.

Bitcoin purchases with Tether “strongly increase just below multiples of 500. This pattern is only present in periods following printing of Tether and not observed by other exchanges,” he wrote in the paper. To other investors, it gives the impression of a “price floor,” providing a signal for them to buy as well.

 

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‘Bitcoin whales’ control third of market with $37.5bn holdings

Source: FT, Jun 2018

A mysterious cluster of 1,600 investors known colloquially as “bitcoin whales” collectively hold $37.5bn of the cryptocurrency, or close to a third of the available total, revealing the extent to which wealth is concentrated in the nascent market.

Data from Chainalysis, a blockchain research company, seen by the Financial Times showed that in April this year, there were some 1,600 bitcoin “wallets” — the digital stores held by individual users — containing at least 1,000 bitcoin each.

Just under 100 wallets contained between 10,000 and 100,000 bitcoin, roughly worth between $75m and $750m at today’s prices.

That the bitcoin market is so tightly held stands at odds with bitcoin’s mission to democratise finance by setting up an alternative monetary systemfree of central bank control and open to all. It also brings risks for smaller speculators.

“This concentration of wealth means that bitcoin is at risk of volatility, as the moves of a small number of people will have a large effect (on the price),” said Philip Gradwell, Chainalysis’ chief economist.

Last November, the amount of bitcoin owned by those who held the asset for more than a year was roughly three times that held by short-term investors who traded more recently.

However, by April 2018, the data showed the amount held by long-term investors, at about 6m bitcoin, was much closer to matching the amount held by short-term speculators, with 5.1m bitcoin.

Chainalysis estimated that many longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.

Experts also warn there are opportunities particularly for larger players to engage in market manipulation owing to the lack of regulation and the existence of informal over-the-counter markets.

“A number of these larger holders do communicate with each other, they know [each other], they take stock of market activity,” said Dr Garrick Hileman, head of research at Blockchain and co-founder of Mosaic.io, a platform for market intelligence on crypto.

Hannah Murphy FT FT2 hours ago

@Dr Phil Hi Dr Phil, this data does not include the wallets that are run by crypto exchanges. Chainalysis estimates groups such as exchanges or merchant services held about 2.2m bitcoin in April. 

EOS Centralization

Source: Coinstaker, Jun 2018

The total distribution in EOS Addresses looks like this:

  • Block.one are holding 100,000,000 EOS tokens which are 10% of the total circulation. They are also the biggest EOS token holder.
  • From top 2 to top 1000 richest EOS Adresses are holding 758,120,383 of all EOS tokens, which is 75.81%

these EOS Addresses hold:

  • The top 10 EOS Addresses are holding 496,735,539 EOS Tokens or 49,67% of the total circulation
  • The top 100 EOS Addresses are holding 748,176,831 EOS Tokens or 74.82%
  • The top 1000 EOS Addresses are holding 858,120,383 EOS Tokens or 85.81%

Zero-Knowledge Proofs

Source: LinkedIn, date indeterminate

Using zkSNARKs, one can get proofs of any statement in a very efficient manner that is shorter than the classical mathematical way. What is a statement? At the moment, any computer program that reaches to a result, as long as it’s not too many cycles (e.g. more than 1-2M cycles). Probably in the future, zkSNARKs and its variants will be able to prove statements about any computer program being executed correctly.

The most important issues, in terms of practicality, are a) the trade-off that the prover pays a lot and the verifier pays very little and b) the trusted initial setup, a very critical phase that has to be carried out right using multi-party computation and a degree of tolerance on who we trust to run this setup.

by making a proof non-interactive we can support proof “transferability”, meaning that it can be sent to other verifiers as well. In the above coloured-balls example, you could only convince your friend and no-one else. To avoid repeating these challenges with every party and to verify signatures/proofs of the past (as most if not all of the blockchains require), we need transferable, non-interactive signatures and proofs.

0.03% of Ethereum Addresses Owe About 83% of Ethereum’s Value

Source: TokenAnalyst, Jun 2018

The top 10,000 addresses own 83.3% of total Ether! And if that’s not surprising enough — the top 10 addresses own 11.4% of Ether holdings.

What to do About Crypto Bugs

Source: Hacking Distributed, May 2018

The Setup

Imagine that there is a software project out there, developed by some group that is not you. Let’s assume that they have found a way to monetize this process. Maybe they are offering consulting services, maybe they are profiting directly by building a cryptocurrency and selling some tokens, maybe they are directing users to side services that they operate to finance this process. Somehow, they are making money off of this thing.

You, of course, are not making money off of their thing. You have no connection to them, no legal obligations. This post is about your ethical obligations, the things you have to do so you can sleep well at night and occasionally visit your relatives’ graves without feeling like an utter disappointment.

Now imagine that you know of a fundamental flaw in this project.

What do you do?

  1. Keep quiet, do nothing.
  2. Keep quiet and exploit the bug.
  3. Speak up and say something.

Cryptocurrencies Volatility (%)

Source: CoinGoLive.Com, Jun 2018

.. since all-time-high (ATH), etc …