Paradoxically, Governmental Exchange Controls Help Bitcoin Adoption

Willmen Blanco
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Paradoxically, Governmental Exchange Controls Help Bitcoin Adoption

The cryptocurrency sector in Argentina grew during the exchange rate control from 2011 to 2015. The Bitcoin market could displace that of the “blue” dollar as an alternative to protect value.

Many times, governments’ decisions about economic and political matters have unexpected effects. These are imponderables that emerge and may even change forecast scenarios. This is what happens with exchange controls aimed at establishing a centralized control, since they have contributed to promoting decentralized tools such as Bitcoin and cryptocurrencies in general.

Prior to Bitcoin, the implementation of exchange control led to more or less predictable consequences, the most prominent of which is the emergence of parallel markets where to buy and sell currencies. With this, citizens and institutions seek alternatives to acquire and accumulate well-valued currencies, especially the dollar, to use them as a store of value.

Cryptocurrencies thus enter the scenario of exchange controls, without any government having proposed it. The old measure, implemented with an idea of centralization, then facilitates the growth of the new decentralized cryptocurrency market. The use of crypto assets, the same as parallel markets, is a decision of citizens who want to escape State control, with the advantage that it is a technology with different characteristics and actors.

Most governments have tried to regulate and manage all aspects of the economy, including the emerging cryptocurrency sector, with little success. Evidences show that, the more governments attempt to exert control, the more citizens seek tools to avoid restriction. In this context, crypto assets appear as the best investment alternatives.

Governments do not realize that they are favoring the advancement of Bitcoin through these exchange controls in countries like Venezuela, Argentina, and Zimbabwe. The most recent case is that of Argentina, where the economic issue is now entering the public arena, starting with the new currency management regime established on September 2nd.

“Blue” Dollar and Bitcoin Compete

As expected, with Mauricio Macri’s new exchange rate control the parallel market comes into play. However, Argentine parallel (“blue”) dollar market may not have enough liquidity in the face of an increased rise in demand. Therefore, experts predict a greater rise in the adoption of cryptocurrencies, with Bitcoin standing as the main option.

During the exchange rate control established in Cristina Kirchner’s government, cryptocurrencies made their appearance in Argentina. Exchange control was imposed in that country on October 31st, 2011. Since then, a significant wave of Bitcoin adoption has been registered although the cryptocurrency was barely two years old.

In that way, during this exchange rate control, which lasted until 2015, the cryptocurrency ecosystem grew rapidly. Argentina, which was under monetary control, became a pioneer in the use of Bitcoin in Latin America and is now a reference center for the development of cryptocurrency and blockchain technologies markets.

Given the accelerated inflationary system, the Bitcoin market competes with the “blue” dollar market, which is a reference of the price of the US currency. However, during the previous exchange rate control, its price rose up to three times above that of the “official” dollar, in peak periods.

Bitcoin thus becomes an alternative to protect value. In 2015, a study warned about it by establishing that countries with capital controls, unstable inflation prices, exchange barriers or low financial freedom, are the first candidates for Bitcoin use.

By Willmen Blanco

Bitcoin’s Privacy Dilemma and Alleged Use on Pedophile Networks

Willmen Blanco
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Bitcoin’s Privacy Dilemma and Alleged Use on Pedophile Networks

Although cryptocurrencies are associated with crime, no other type of payment is free from illegal uses. Privacy is a right, but the community must also be responsible for its consequences.

Some pedophile networks sell pornography in exchange for Bitcoin, using the privacy provided by this payment method. This illegal use of cryptocurrencies and money in general has tarnished Bitcoin’s reputation and has been its detractors’ main argument.

Belankazar, a Venezuelan modeling academy has allegedly sold girls’ photos on social networks in exchange for cryptocurrencies. On Tuesday, September 3rd, Twitter users reported the modeling academy for allegedly creating content for pedophiles.

On social networks, there are myriad complaints with screenshots of Russian pages with which the academy allegedly traded the photos. They also observed inappropriate comments from adult men to girls between 11 to 16 years old on the academy’s Facebook account. One of the most controversial data was the use of the Skrill platform, BTC, BCH, LTC and even ETH to process payments for videos and private photos.

The concern is totally valid but the arguments against Bitcoin are based on complete ignorance about blockchain and the favorite payment methods of criminals. Bitcoin is not responsible for the promotion of illegal activities but the people who use it for such purposes. Money (in the form of digital currencies, bank transfers or paper money) has criminals among its many friends.

Most criminals do illegal activities to satisfy their desires (buying child pornography) or earn dishonest money (creating child pornography). Like any other activity, it is a cycle that sustains itself economically, and the problem is not cryptocurrencies, since all forms of money can be used in the black market.

Bitcoin Anonymity Is a Fallacy

Cryptocurrencies like Bitcoin, whose blockchain has a totally public transaction log, do not have anonymous users. Any transaction in Bitcoin is recorded immutably in the eyes of anyone can use a blockchain browser. In other words, if a page on the Deep Web is processing payments for child pornography, users can follow the movement of this money in the network.

It is true that it is not easy to discover a Bitcoin user’s identity, but it is not an impossible task either. Some researchers have developed methods to track transactions in the network, used by law enforcement organizations worldwide.

Cybersecurity startups such as Chainalysis are dedicated to using blockchains such as Bitcoin to prevent human trafficking or child abuse. Since 2016, the company has collaborated with foundations and government authorities to stop criminals from hiding behind Bitcoin’s “anonymity.”

Responsible Privacy

It is true that privacy has many benefits. Cryptocurrencies are preferred as a payment method to avoid censorship, centralized power and personal data theft. However, cryptocurrencies are not the only payment method used by pedophiles.

Chainalysis estimates that, by July 2019, USD 1 billion had already been used on the Deep Web to buy drugs, weapons or child pornography. The United Nations (UN) Organization also noted that the introduction of cryptocurrencies to the pedophilia market complicates police work.

Faced with these figures and cases such as Belankazar, it is questionable that certain users take advantage of an unregulated cryptocurrency ecosystem for objectionable purposes. This community cannot be built on selfishness and convenience, so it is important to respect everyone’s rights, including those of exploited children.

By Willmen Blanco

SNICKER: CoinJoin variant that improves privacy in Bitcoin

Willmen Blanco
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SNICKER: CoinJoin variant that improves privacy in Bitcoin

SNICKER would send a message to the wallet of the user that was selected for the coinjoin. The proposal was devised two years ago and would have a better performance with Taproot.

Bitcoin developer Adam Gibson posted to the Bitcoin-Dev mailing list a proposal to implement Simple Non-Interactive Coinjoin with Keys for Encryption Reused (SNICKER). CoinJoin is a method to perform private transactions in Bitcoin, which prevents the tracking of addresses within the blockchain, since it uses multiple payments that are incorporated into a single transaction.

This solution was described by Gibson almost two years ago, but it was reviewed in September 4th by the Bitcoin Optech team. SNICKER works in two steps: a proposer step and a receiver step. In the proposer step, one of the parties uses the blockchain and the set of Bitcoin UTXOs (unspent transaction outputs) to find those UTXOs from which the owner’s public key can be inferred thanks to SNICKER, which scans the blocks received by the proposer node. It selects one of those UTXOs whose value is less than the amount that its wallet manages and creates three outputs, which are the result of joining that found UTXO with the proposer’s UTXOs.

The first coinjoin output goes to the party that is proposing the coinjoin. The second coinjoin output is addressed to the owner of the selected UTXO or receiver, and both coinjoin outputs pay the same amount, so that they are indistinguishable on the blockchain. In the third output, the proposer receives back any amount of money that exceeds the amount of coinjoin.

As the addresses already having a transaction history do not allow taking advantage of the privacy benefits of CoinJoin, the proposer generates new unique addresses for its two outputs. Given that the receiver cannot tell the proposer which address to use, then the proposer uses the receiver’s public key and the Elliptical Curve Diffie Hellman (ECDH) to generate a shared secret. This secret, when combined with the receiver’s public key, creates a new public key that only the receiver can sign.

The new public key allows creating the new address for the receiver’s coinjoin output. This ensures the privacy of the transaction as no one, apart from the proposer and the receiver, can notice the difference in the transactions.

To complete the proposer step, it creates a partially signed Bitcoin transaction (PSBT) with the information obtained, which contains the signatures for its UTXO. This transaction is then uploaded to a public server.

If the receiver accepts the message received on its keychain with the text New coinjoin proposals found. Check?, it can then evaluate the partially signed transaction in order to confirm that it is correct, add its signature to its UTXO and transmit the transaction to the network to complete the coinjoin.

SNICKER helps Bitcoin wallets to create coinjoins in a non-interactive manner. Non-interaction implies that the parties involved in the transaction do not meet, synchronize, or need to know who they are in the future. In the relationship between the parties, one of them would limit to posting an encrypted message whereas the other would only read it in its key. If reasonable anonymity measures are followed when transmitting the final transaction, then the parties’ privacy is preserved.

By Willmen Blanco

Annual averages reflect a steady growth in Bitcoin’s price

Willmen Blanco
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Annual averages reflect a steady growth in Bitcoin’s price

If the price maintains current levels, this year will also close with a higher average. Despite the bearish market of 2018, the average was higher than that of 2017.

In addition to the well-known volatility of Bitcoin’s price, there are certain constants in its market behavior. For instance, the annual averages of Bitcoin’s price have grown steadily, even with the bearish market of 2018 after approaching USD 20,000, at its all-time high reached in late 2017.

Analyzing historical data of Bitcoin’s price in Buy Bitcoin Worldwide, we find this increase in annual averages, beyond the highs and lows that in each of those years, since mid-2010. In those beginnings of Bitcoin, between August and late 2010, the cryptocurrency’s average value was USD 0.14.

In 2011 there was already a significant increase in that average. During those 12 months, Bitcoin’s average value was about USD 5.5 per unit. The difference of that price compared to the previous year represents an increase of over 3,800%. That year, Bitcoin’s price experienced its best moment in mid-June, when it was very close to reaching USD 30.

For 2012, Bitcoin’s average price was above USD 8.2. Although it was higher than that of the previous year, during 2012 the price never reached the highest levels of 2011. In fact, Bitcoin’s value in the market did not even reach USD 15 in that 12-month period.

In 2013, a significant percentage increase was experienced again, since the average price was more than USD 200. That same year, Bitcoin first approached the USD 1,000 barrier in early December, but it fell short. In 2014, there was a new jump, exceeding USD 500 on average, after having started the year above USD 800.

The only year when the average fell with respect to the previous 12 months was 2015. That year, Bitcoin’s price averaged around 50% less than in 2014, barely surpassing USD 250. The following year the price recovered again and the average went above USD 570.

Only in 2015, Bitcoin’s average price fell compared to the previous year, according to data from Buy Bitcoin Worldwide.

All-Time Highs, Bearish Market and Current Affairs

During the last months of the next year, the largest bullish rally in Bitcoin’s history occurred, approaching USD 20,000 toward the end of the year. In 2017, the average was at just over USD 4,000, considering that that barrier had not yet been surpassed until August. In fact, until May of that year Bitcoin price had not even reached USD 2,000.

In 2018, the market maintained a bearish trend with respect to late 2019. In fact, by the end of 2018, Bitcoin’s price had already fallen to the USD 4,000 barrier. However, the average price was around 75% of increase compared to 2017, with more than USD 7,000.

Until now in 2019, the average is close to that of last year until the end of August. To lower that average, Bitcoin’s price would have to fall from almost USD 11,000 to below USD 7,000 and remain so until the end of the year. The pace that it has maintained so far this year is the opposite, even having experienced low levels of volatility in recent weeks. It was only between January and February when there was a drop in the average price.

By Willmen Blanco

Bitcoin Minimum Prices Per Year Show the Cryptocurrency’s Long-Term Potential

Willmen Blanco
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Bitcoin Minimum Prices Per Year Show the Cryptocurrency’s Long-Term Potential

The minimum price of Bitcoin in 2014 implied an increase of 2,300% compared to 2013. Since 2013, the first cryptocurrency has never been below USD 177 again.

Among Bitcoin’s qualities is the growth of its value with respect to fiat currencies throughout its history. Although volatility has been a prominent factor among cryptocurrency detractors, an analysis of its behavior since 2010 shows that the minimum value of BTC per year has increased steadily.

According to data from Buy Bitcoin Worldwide, the minimum value of BTC with respect to the US dollar has been growing, with only one exception. Between 2014 and 2015, the minimum price of the pioneering cryptocurrency in the ecosystem fell from USD 319.64 to USD 177.28. As for the rest, every year there has been an increase with respect to the previous 365 days.

For instance, the lowest value recorded in 2010, the year after Satoshi Nakamoto created Bitcoin, was USD 0.06. For the following year, the lowest price was almost 5 times higher, and it was never below USD 0.29.

In 2012, the growth was even greater. Throughout that year, the lowest price of Bitcoin in the market was USD 4.22, which represents an increase of 1,355% with respect to the previous year.

For 2013, the minimum levels had an increase of more than 200%, going to USD 13.30. In 2014, the cryptocurrency had the largest increase of this type in its history. In total, the lowest price of BTC in the whole year was 2,303.31% higher than the one registered in 2013. At its worst time during the year, the value of Bitcoin was USD 319.64.

In 2015, BTC experienced its only annual downturn with respect to its minimum price. In the following years, the rate of gains was resumed. In 2016, the lowest price was USD 358.77, then Bitcoin had its worst time in 2017 at USD 775.98, and last year the lowest price was USD 3,214.39.

Until now in 2019, after finishing the first 8 months, the bullish trend has remained. The lowest price has been USD 3,385.97, according to Buy Bitcoin Worldwide, which is 5.34% above the previous record.

Although the current value of Bitcoin is over USD 10,220, at the time of writing this note, the cryptocurrency is far from its all-time high. In late 2017, the price of Bitcoin was close to USD 20,000, as indicated by CoinMarketCap.

Bitcoin Volatility in the Cryptocurrency Market

Volatility is a characteristic of the cryptocurrency market. However, Messari analysts estimate that Bitcoin and other cryptocurrencies with high market capitalization are less susceptible to these price fluctuations, compared to cryptocurrencies with lower market capitalization.

According to recent research published by Messari a few weeks ago, cryptocurrencies with greater market capitalization have an annual volatility of around 90%. Messari researchers add that this percentage keeps growing as capitalizations become lower.

Regarding the volatility of Bitcoin in recent weeks, there has been a significant fall. According to figures from Blockforce Capital and Digital Asset Data, the cryptocurrency’s 30-day volatility dropped more than 50% between July and August of this year, from 131% on July 19th to 64% on August 25th.

By Willmen Blanco

Huobi University Will Work alongside the University of Gibraltar to Conduct Blockchain Research

Andres Chavez
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Huobi University Will Work alongside the University of Gibraltar to Conduct Blockchain Research

Huobi is one of the most widely known cryptocurrency exchanges in the planet, offering a wide array of services and making them available in several locations. It also has a research and education branch dubbed Huobi University, in charge of investigating everything about the blockchain technology, its applications, and digital assets.

As it turns out, Huobi University will be collaborating with the University of Gibraltar, as both entities will work to create and develop innovative blockchain solutions and initiatives, according to an announcement made by the exchange’s research arm.

The First Formal Collaboration with a Western University

To be precise, it was the Huobi Group, the parent company of both the exchange and the education entities, the one that made the announcement. The firm explained that the recently formed partnership will be the first “formal collaboration with a Western university” for the famous enterprise.

Gibraltar is cementing its place as one of the blockchain technology’s primary contributors. The government, collaborating with the University of Gibraltar, developed an advisory group that would focus on the creation of blockchain-related educational lessons and courses, back in 2018.

The press release informed that Albert Isola, the Minister for Commerce in Gibraltar, put pen to paper on a MoU (memorandum of understanding) on behalf of the University of Gibraltar, effectively enabling the partnership. Jianing Yu, President of the Huobi University, also signed the mentioned document.

Accelerating the Establishment of High-Quality Blockchain Research

Yu made it clear that the Huobi University was thrilled to form such a partnership as the Group tries to unveil more secrets and possible applications of the blockchain technology, the one that is slowly changing the world.

“We are very excited at the prospect of future collaborations between Huobi University and the University of Gibraltar, particularly as a means of accelerating the establishment of high quality blockchain-focused educational initiatives. […] Both parties share an ambition to promote high level academic research around the burgeoning DLT landscape, and I look forward to seeing this vision take shape,” he said.

According to Yu, he expects the alliance will result in mutual sharing of blockchain progress between two different worlds: China and the Western civilization. The release also explains that, among the future partnerships, there could be several academic programs, courses, and also research projects.

Some of the subjects that could be explored as part of the strategic alliance, according to Yu, are digital assets investment, wealth management, and distributed business models, with blockchain interfacing with 5G and Internet of Things and the application of blockchain technology in several fields also discussed as alternatives.

Huobi points out that in the long-term, it plans to come up with a set of English-oriented courses directed to entrepreneurs and investors around the planet.

Cryptocurrencies and blockchain technologies are being increasingly explored and discussed in educational institutions in the planet. Coinbase, another top crypto exchange, conducted a study that revealed more than half of the top 50 universities worldwide (56 percent to be exact) offer at least one lesson related to those technologies.

By Andres Chavez

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