All posts in “cryptocurrency”

Incentivai launches to simulate how hackers break blockchains

Cryptocurrency projects can crash and burn if developers don’t predict how humans will abuse their blockchains. Once a decentralized digital economy is released into the wild and the coins start to fly, it’s tough to implement fixes to the smart contracts that govern them. That’s why Incentivai is coming out of stealth today with its artificial intelligence simulations that test not just for security holes, but for how greedy or illogical humans can crater a blockchain community. Crypto developers can use Incentivai’s service to fix their systems before they go live.

“There are many ways to check the code of a smart contract, but there’s no way to make sure the economy you’ve created works as expected” says Incentivai’s solo founder Piotr Grudzień. “I came up with the idea to build a simulation with machine learning agents that behave like humans so you can look into the future and see what your system is likely to behave like.”

Incentivai will graduate from Y Combinator next week and already has a few customers. They can either pay Incentivai to audit their project and produce a report, or they can host the AI simulation tool like a software-as-a-service. The first deployments of blockchains it’s checked will go out in a few months, and the startup has released some case studies to prove its worth.

“People do theoretical work or logic to prove that under certain conditions, this is the optimal strategy for the user. But users are not rational. There’s lots of unpredictable behavior that’s difficult to model” Grudzień explains. Incentivai explores those illogical trading strategies so developers don’t have to tear their hair out trying to imagine them.

Protecting Crypto From The Human X-Factor

There’s no rewind button in the blockchain world. The immutable and irreversible qualities of this decentralized technology prevent inventors from meddling with it once in use, for better or worse. If developers don’t foresee how users could make false claims and bribe others to approve them, or take other actions to screw over the system, they might not be able to thwart the attack. But given the right open-ended incentives (hence the startup’s name), AI agents will try everything they can to earn the most money, exposing the conceptual flaws in the project’s architecture.

“The strategy is the same as what DeepMind does with AlphaGo, testing different strategies” Grudzień explains. He developed his AI chops earning a masters at Cambridge before working on natural language processing research for Microsoft.

Here’s how Incentivai works. First a developer writes the smart contracts they want to test for a product like selling insurance on the blockchain. Incentivai tells its AI agents what to optimize for and lays out all the possible actions they could take. The agents can have different identities, like a hacker trying to grab as much money as they can, a faker filing false claims, or a speculator that cares about maximizing coin price while ignoring its functionality.

Incentivai then tweaks these agents to make them more or less risk averse, or care more or less about whether they disrupt the blockchain system in its totality. The startup monitors the agents and pulls out insights about how to change the system.

For example, Incentivai might learn that uneven token distribution leads to pump and dump schemes, so the developer should more evenly divide tokens and give fewer to early users. Or it might find that an insurance product where users vote on what claims should be approved needs to increase its bond price that voters pay for verifying a false claim so that it’s not profitable for voters to take bribes from fraudsters.

Grudzień has done some predictions about his own startup too. He thinks that if the use of decentralized apps rises, there will be a lot of startups trying to copy his approach to security services. He says there are already some doing token engineering audits, incentive design, and consultancy, but he hasn’t seen anyone else with a functional simulation product that’s produced case studies. “As the industry matures, I think we’ll see more and more complex economic systems that need this.”

Inside the Vegas nightclub that launched its own cryptocurrency

It’s 11:15 p.m. on a Friday night and a man in a white button-down shirt named Joey just ordered me a shot of Fireball. It’s a little hard to hear him over the music blasting from the other side of the velvet ropes, but the club’s director of services leans in close to make sure I can hear him. 

“Excellence and hospitality in the crypto world,” Joey says in response to my request that he describe just what, exactly, is going on here. 

I’m sitting on a spacious couch in a private club, inside of another nightclub, inside of a casino, and we’re discussing Las Vegas’s first cryptocurrency nightclub: MORE Las Vegas. Launched in April by Peter Klamka — a man known for, among other things, his involvement with The Legends Room gentlemen’s club which allowed patrons to tip performers in bitcoin — the nightclub comes with all the trappings of a typical VIP Vegas destination. There’s the $250,000 bottles of champagne, high-heeled cocktail waitresses, and view of the Bellagio fountains that’s to die for. 

Unlike every other club in Las Vegas, however, this one has its own cryptocurrency — a currency you need to HODL to even get through the front door. 

Party through the Crypto Winter

It has not been a good year for the price of cryptocurrency. 

Bitcoin and ether are way down from their late 2017 and early 2018 highs, and most altcoins have fared significantly worse. Meanwhile, in the background, ICOs are revealed as scams at a disturbingly regular clip, and the SEC keeps dragging its heels on a proposed bitcoin ETF

The much-maligned talk of Lambos has shifted to progressively less convincing explanations as to why all of this is actually good for bitcoin. 

Still, some people are getting — or, if they sold at the right time, remain — undeniably rich. It is often that crew, the group who either through dumb luck or skill managed to retain its newfound wealth while the market bled, who feels the most committed to its bitcoin maximalist or Ethereum-world vision. 

Their livelihood depends on it, after all. And they like to party with each other. 

MORE Coin

It was with all this in mind that I accepted an invitation to check out MORE Las Vegas. I’d be in Vegas anyway for DEF CON, and this seemed like a great opportunity to see what a city that practically defines opulence does when it sticks its toes into the world of cryptocurrency. 

Well, what is does is MORE Las Vegas — a club with its own token that doubles as a de facto membership fee. Owning 5,000 MORE Coins or more makes you a MORE Las Vegas member. 

“[MORE Coin is] the intersection of nightlife and crypto demonstrating a real-world application of blockchain tech,” Klamka told me later that night.  

The coin trades on the Bittrex exchange, and was created at the behest of Klamka. At the time of this writing, the ERC-20 token built on the Ethereum blockchain is listed at just over 15 cents with a 24-hour trading volume of $201. 

For coin holders only.

For coin holders only.

Image: more las vegas

MORE Las Vegas is essentially a special VIP area inside of the Hyde nightclub, which itself is located inside of the Bellagio hotel and casino. To get in, you have to first reach out to Joey. This both gives you an opportunity to let the club know you’re coming, and to prove your stake in the coin.

The floor staff is trained to accept cryptocurrency as payment, though interestingly all the prices on the bottle-service menu are listed in USD. And the staff isn’t picky about how you pay. Want to send them $100,000 worth of bitcoin for that 15-liter bottle of Ace of Spades champagne? They’re happy to take it. 

Want to pay in MORE Coin? Well, that’s fine too.

According to a MORE Las Vegas spokesperson, the club has around 1,500 members — though, she emphasized, as the only thing that makes you a member is coin ownership, the number changes all the time.  

The place was about a third full when I arrived at 11 p.m. on Friday, which, in all fairness, is well before a Las Vegas club gets going. A look around at the clientele revealed what appeared to be typical Vegas nightclub goers: They were well-dressed and young with money to spend. 

Essentially, just like every other place on the Strip. Had crypto finally hit mainstream adoption?

But that changed shortly after we went outside to the club’s stunning private patio. Directly at ground level, it overlooked the Bellagio fountains and was clearly a big selling point for Klamka. Shortly after our interview concluded, Klamka left the patio to soon return with a group of young men that much more closely aligned with the stereotype of someone all in on crypto. 

One of the group, covered in various crypto tattoos, had a scrolling LED hat that brightly read “BITCOIN.” Below his shorts, high bitcoin-themed socks complimented some form of fuzzy slipper. 

The club had a strict dress code, and while it wasn’t clear if this new arrival’s garb fell within it, that clearly hadn’t stopped him from getting in. 

We struck up a conversation, and soon realized we were both in town for the DEF CON hacking convention. When I asked him if he was worried that his tattoos might make him a target for hackers, he shrugged off the possibility. 

He kept most of his crypto in cold storage, he assured me. His blinding hat made conversation difficult. 

When his friends settled the bill later in the night, they appeared to pay with a credit card. 

Big Plans

In many ways, MORE Las Vegas is just another luxury nightclub in a city full of them. But, in the world of cryptocurrency, it is possibly something more. It’s an actual brick-and-mortar business, after all, in an industry that is flush with grand ideas but lacking in execution.  

Klamka spoke of plans to open additional locations in Miami and elsewhere, and described a business model where people buy and sell club memberships on the blockchain. This was a real-world application, albeit an extremely boozy one, of an ERC-20 token. 

It may not have been what Vitalik Buterin had in mind, but I can’t imagine that would bother Klamka too much. 

After all, he’s got a business to run and a coin to promote — and you’d better believe he’s HODLing. 

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Coinbase acquires Distributed Systems to build “Login with Coinbase”

Coinbase wants to be Facebook Connect for crypto. The blockchain giant plans to develop a “login with Coinbase” identity platform for decentralized app developers to make it much easier for users to sign up and connect their crypto wallets. To fuel that platform, today Coinbase announced it has acquired Distributed Systems, a startup founded last year that was building identity standard for dApps called the Clear Protocol.

The five-person Distributed Systems team and its technology will join Coinbase. Three of the team members will work with Coinbase’s Toshi decentralized mobile browser team, while CEO Nikhil Srinivasan and one other co-founder are forming the new decentralized identity team that will work on the “Login with Coinbase” product. They’ll be building it atop the “know your customer” anti-money laundering data Coinbase has on its 20 million customers. Srinivasan tells me the goal is to figure out “How can we allow that really rich identity data to enable a new class of applications?”

Distributed Systems had raised a $1.7 million seed round last year led by Floodgate and was considering raising a $4 million to $8 million round this summer. But Srinivasan says “No one really understood what we’re building”, and it wanted a partner with KYC data. It began talking to Coinbase Ventures about an investment, but after they saw Distributed Systems’ progress and vision, “they quickly tried to move to find a way to acquire us.”

Distributed Systems began to hold acquisition talks, and the CEO tells me it was deciding between going to “Facebook, or Robinhood, or Binance or Coinbase”. Coinbase “were able to convince us they were making big bets, weaving identity across their products.” The financial terms of the deal weren’t disclosed.

Coinbase’s plan to roll out the “Login with Coinbase” platform is an SDK that others apps could integrate, says Srinivasan. That mimics the way Facebook colonized the web with its SDK and login buttons that splashed its brand in front of tons of new and existing users. This made turned Facebook into a fundamental identity utility beyond its social network.

Developers eager to improve conversions on their sign up flow could turn to Coinbase instead of requiring users to set up whole new accounts and deal with crypto-specific headaches of complicated keys and procedures for connecting their wallet to make payments. One prominent dApp developer told me yesterday that forcing users to set up the MetaMask browser extension for identity was the part of their signup flow where they’re losing the most people.

Coinbase CEO Brian Armstrong confirmed this morning that it’s working on an identity SDK. When Coinbase investor Garry Tan of Initialized Capital wrote that “The main issue preventing dApp adoption is lack of native SDK so you can just download a mobile app and a clean fiat to crypto in one clean UX. Still have to download a browser plugin and transfer Eth to Metamask for now Too much friction”, Armstrong replied “On it :)”

In effect, Coinbase and Distributed Systems could build a safer version of identity than we get offline. As soon as you give your social security number to someone or it gets stolen, it can be used anywhere without your consent and that leads to identity theft. Coinbase wants to build a vision of identity where you can connect to decentralized apps while retaining control. “Decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity” writes Coinbase’s PM for identity. “If you stretch your imagination a little further, you can imagine this applying to your photos, social media posts, and maybe one day your passport too.”

Considering Decentralized Systems and Coinbase are following the Facebook playbook, they may soon have competition from the social network. It’s spun up its own blockchain team and an identity and single sign-on platform for dApps is one of the products I think Facebook is most likely to build. But given Coinbase’s strong reputation in the blockchain industry and its massive head start in terms of registered crypto users, today’s acquisition well positions it to be how we connect our offline identity with the rising decentralized economy.

Cryptocurrency-rich make magic internet money rain in Vegas

It was late Saturday night at Caesars Palace in Las Vegas, and an extremely stoned man was trying to bribe his way into the city’s hottest cryptocurrency party — and it wasn’t working. 

To get to that point, he’d have already waited in a line for 30 minutes just to ride the elevator up to room 6116 in the hotel’s Forum Tower. It was clear he was past ready to start celebrating — this was Saturday night at the DEF CON hacker convention, after all — and someone else was footing the bill. 

That would be Monero, the popular privacy-focused cryptocurrency that’s been on a wild ride since it was released in 2014. It had skyrocketed in value from around $1 in the summer of 2016 to a high of almost $500 in January of this year, before falling back to about $80 today — making a host of early adopters incredibly wealthy in the process.  

And what do the newly crypto-rich do in Vegas if not spend absurd amounts of money? A lavish Monero suite party promoted on Reddit and hyped at DEF CON’s Monero BCOS Village, it would seem, was a no-brainer. 

That’s right, cryptocurrency and its disciples had come to Sin City, and by the time I got past the bouncer and down the beer-soaked flight of stairs, one of the latter was shooting fake $100 bills out of a money gun. 

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Which, frankly, was so on the nose, I was worried about breaking it. 

But the night, and the cryptocurrency-fueled excess, was just getting started — a sentiment apparently shared by the person next to me on the dance floor doing key bumps of cocaine. 

Yup.

Image: Jack Morse/mashable

The well-stocked open bar sat on the first level of the gigantic two-story suite sporting floor-to-ceiling windows looking out over Vegas. Nearby, a (at one point) shirtless DJ spun heavy-bass at throngs of crypto diehards and their respective entourages bouncing back and forth on the crowded dance floor.  

On this night, in this suite, the cryptocurrency market had never corrected from its late 2017 peaks, and everyone could close their eyes and picture Lambos. Spirits, and attendees, were high.

But a party is so much more than its dance floor, a fact made clear by a visit to the crowded upstairs bathroom located at the end of a wide hallway. There, in addition to an ice-filled bathtub stocked with Red Bull and beer, was a 20-something attendee hopping in the shower, getting naked, and lathering up — all while drinking beer — an act which earned him an over-the-stall cheers from another person waiting to use the private toilet. 

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The mood was a bit more subdued in the upstairs bedroom — perhaps the crowd had recently checked CoinMarketCap. With the lights out and people splayed across every soft surface, it looked exactly like an ecstasy-fueled cuddle puddle. And, well, that’s because it probably was. (The glow-bracelet headbands only added to my suspicion.)

But I suspected the real action was to be found in the party equivalent of a private cryptocurrency Telegram channel. That would be the rather large hallway closet, which interestingly had people coming and going at a semi-regular clip. After stepping in and a short conversation with some new arrivals, a decent amount of cocaine was poured out by one of the more intoxicated attendees. 

He said he’d bought it on the Strip.

It looked like baby powder.

My new friend was sweating profusely, and someone asked if he was high on molly. No, he assured us as he cut lines of the aforementioned coke on a high closet shelf. He was just very hot. 

It was a little hard to hear him over the bass vibrating through the closet wall. 

Making my way out, the party had picked up speed: The music was faster, the lights were darker, and the crowd was definitely drunker. Monero stickers littered the party, abandoned next to half-finished drinks and Kit Kat wrappers. 

Sad.

Image: jack Morse/mashable

Perhaps their perceived value had tanked since the start of the party. 

The Monero celebration was one of several happening that night in the same tower — just few flights up in a suite with an identical layout was another gathering hosted by the Salt Lake-based DEF CON group DC801, and, a few floors below, Queercon was throwing its own bash. 

Caesars’ security really had their work cut out for them. Work that, according to lead Monero developer Riccardo Spagni, included eventually shutting the Monero party down. 

The distributed Monero itself may be resistant to censorship, but the party wasn’t on the blockchain. 

But we can’t imagine the attendees were too upset. This was Vegas, after all, and the newly crypto-rich still had plenty of magic internet money to spend. Thankfully for them, World Crypto Con is hitting the Strip this October. 

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Cryptocoins are worth less than $200 billion for the first time since 2017

In May 2017, I’ve called some experts and asked them “Why are Bitcoin and Ethereum growing so fast?” This was after an intense period of growth for both popular cryptocurrencies, especially Ethereum, which was up 1,400% in three months. The market cap of all cryptocurrencies put together at the time seemed unreal: 80 billion dollars. Then — and throughout 2017 — the experts I spoke to invariably advised caution, saying the prices might have risen too high, too fast. 

But the prices kept rising. 

Throughout 2017, crypto prices continued to rise. At one point the crypto market cap was over $800 billion, and one Bitcoin was worth nearly twenty thousand dollars. 

In January this year, the trend reversed. The prices started falling, and they kept at it. Now, it feels like we’ve reached full circle. The collective market cap of all cryptocurrencies is at $191 billion — the first time it went below $200 billion since Nov. 2017. 

The price action on the cryptocurrency market in the last couple of days can easily be described as a bloodbath. Bitcoin is currently trading at $6,007, down 14.42% in the last week. Ethereum is at $264, down a whopping 35.28% in a week. Other major cryptocurrencies, such as Ripple, Bitcoin Cash and EOS, are down double digits as well. 

Not looking very good today, I'm afraid.

Not looking very good today, I’m afraid.

There’s no clear trigger for this price decline, at least not in the news. The U.S. Securities and Exchange Commission needs to make its mind up about a few proposed Bitcoin Exchange Traded Funds (ETFs) but the fact that it’s taking a little longer cannot be the sole reason behind the extremely negative sentiment of the market.

Charles Hayter, the CEO of CryptoCompare, told me via email that SEC’s decision to decline one Bitcoin ETF has “snowballed negative investor sentiment.” 

“It has to be remembered that Bitcoin and its ilk are opening up a new arena of finance. The hope and speculation that gripped the market last year has been eroded in the last few months,” he said. 

The price drop of ether, the currency of Ethereum, is especially interesting. Ethereum has been the platform of choice to kickstart blockchain projects via initial coin offerings (ICOs) in the past year, and thousands of projects managed to raise millions of dollars this way. 

Now, it’s in a bit of a death spiral. According to data collected by research company Santiment, which tracks how ICOs handle their ether, a large number of startups that raised money in ether is likely selling it for dollars and euros, and fast. This drives the price down, but since the price of tokens built on the Ethereum platform typically follows the price of ether, the market capitalizations of those projects are going down even faster. 

In a bizarre twist, numerous ICO-funded startups now have market caps that are significantly lower than the amount of money they raised in ICO. Crypto mining startup Envion, for example, raised $100 million dollars worth of ether in January, but all of its tokens put together are currently worth below $7 million. 

When will the bleeding stop? It may happen when cryptocurrencies finally reach the mainstream — whatever that means. 

“Under the hood, a lot of work has been moving ahead to form the routes to incumbent institutions and to provide them with tools, mechanisms and assurances for entering the crypto space,” said Hayter. “It’s only a matter of time before the cryptosphere becomes a part of the mainstream but it needs to do a lot of growing up in the process.”

The sentiment is echoed by many who are actively building things in the space. Don’t look at the price, they say, look at the stuff that we’re working on. But that’s easier said than done.

Even in this carnage, there have been experts who said that a big price cryptocurrency price rise is still possible as early as this year. Arthur Hayes, co-founder and CEO of cryptocurrency exchange Bitmex, said in July that Bitcoin needs to go down before it goes up, and he was definitely right about that. He also said that Bitcoin might still rally to $50,000 by year’s end. 

Note, however, that very few people, including experts, were able to accurately predict how high Bitcoin and Ethereum will go in 2017. It’s quite possible that they won’t be able to predict how low they will go, either.  

Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.

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