The Bitcoin XT Trojan

Trojan_Horse

With the block size debate raging for weeks now, bitcoin has proven (again) that it is has grown up and is now subject to the unfortunate realities of the world, and politics. While we have been following the debate closely, we felt that it was not worthy of reporting on because of the childish behavior, remarks and slander which are completely unproductive when you are trying (as a community) to build the next global financial system. The sock puppets, censorship and social engineering fuckery have gotten way out of hand, and the community is starting to stray from the cohesion which it has maintained for so many years. While we don’t expect this to be the end of bitcoin, by any means, it it isn’t going anywhere fast until the current issues are sorted out and consensus on the block size is reached.

It is clear that there are certain agendas at play, and our goal is to help readers see through the bull shit to gain a clearer picture of what is actually going on. As we have stated multiple times, we are bitcoin believers, and our goal is to educate the community. The traditional bitcoin news sources are highly censored, controlled opposition or worse, and we strive to provide an oasis away from that garbage, for the intellectually inclined.

Our belief has long been that bitcoin’s only potential Achilles Heel (but not fatal flaw) lies with the politics of the developers. While it is an open source project, and anyone can view or modify the code, the developers are the “controllers” of bitcoin in a sense, and therefore are often viewed similar to political figures. Just like the conversations you unfortunately have to hear when walking down the street about Hillary or Jeb, Reddit is littered with posts of love, hate, passion and disdain for all of the core devs. It’s literally a minefield on some days (well, until censorship). In the “real world”, it has been shown time and time again that by influencing those in control, certain agendas can be carried out, often with little or no push back. Fortunately for bitcoin though, the open source nature of the project allows anyone with a computer and internet to audit the code. In the end, the “controllers” are only perceived to be in control, while the actual control lies with each and every one of us, the community.

A series of abnormal events have occurred in the last few months, which we will lay out below. While it may be clear to some what is going on, most of the community is still in the dark (as usual, what else is new).

1) The regulatory landscape surrounding bitcoin has been changing dramatically. The NY BitLicense has been implemented, many companies and exchanges are refusing to comply, and we can expect more regulation to be introduced in other parts of the globe sometime soon. Anyone reading this blog has read everything associated with these events, so we don’t feel the need the outline them further here.

As we know, bitcoin itself can not be regulated (unless it is hard coded, more on this below), so these current regulations are a patchwork of misdirected attempts to apply traditional regulatory logic to a vastly contrasting system. The at the “core” of the issue, is the bitcoin core itself, and the fact that without actually modifying this code, it is impossible to regulate bitcoin in any effective fashion.

 

2) The stress test in early July was a blatant attempt to draw the communities attention to the ongoing block size drama. After a series of less stressful stress tests, someone with a very thorough understanding of the bitcoin protocol performed a tx spam attack which slowed transaction time for many considerably. QnP4v32

More in:

Bitcoin Magazine

and some excellent coverage on Medium

The common thread that seemed to tie all media coverage together, especially “mainstream”, was that something needed to be done with the block size. Reddit was ablaze with people saying dumb shit (and some insightful things), and, as usual, no one saw through the fact that this all was just a big game of social manipulation. Sucks, huh?

 

3) Coinwallet.eu entered the scene a few months back, and immediately questions began to surface. Their about us page is shady, at best, and the business address which they list (78 York Street, London), is a virtual office. Reddit posts outlining this can be found here and here, with more details. Supposedly, their phone number doesn’t even work, their executives are all anonymous and it doesn’t seem as if they have are any satisfied customers (or customers at all).

After the first stress test, Coinwallet claimed responsibility, and more information became available. Finance Magnates does a great job covering that here. They also bring the anonymous aspect of the company to light for those who don’t compulsively check Reddit:

Others pointed to the fact that Coinwallet.EU, previously unheard of in the industry, is using the test to make its name known. Skeptics alleged that the company seems to have come into existence solely to conduct the test. Its website lists no physical address, and does not disclose the identities of its principals.

 

4) The introduction of Bitcoin XT has introduced about as much volatility into the community as the price has recently experienced. One of the most hotly debated aspects surrounding XT though (until now), has not been the software itself, but the blatant censorship and social engineering/manipulation which has occurred in every corner of the community. This clearly concentrated effort has just pissed off most people, but if you have a half a brain, you would think more into the situation. Why might this be going on? Why is there this HUGE push by some to stop XT in it’s tracks, while others are so eagerly pushing it along? What could each of their agenda’s be? What else could be at stake? Like everything else in the world, is this huge debate just cover for a much larger issue?

Before the spam attacks, the block size issue was raised by Gavin as being “urgent”. Until then, it was known to the community that modifications would needed in the future, but there was no sudden sense of urgency.

Is it a coincidence that the first Coinwallet.eu attack began shortly after Gavin started pushing the block size debate? Seems a little too well timed for us to think so. To be clear, we are NOT implying that Gavin has anything to do with the stress test. There are many other players to consider though.

 

5) The next spam attack by Coinwallet.eu, which is now being pushed by the msm. Some quotes from that article:

UK-based mining service CoinWallet is gearing up to conduct a stress test of the Bitcoin network in early September, which it said will likely render most standard wallet software “worthless” and create “nearly a 30-day backlog”.

A CoinWallet representative told IBTimes in an email exchange: “I don’t have a set date, but it will be early September. I’m too busy this month to fully devote a large amount of time to executing the ‘test’.

“As part of this test, I will be reconsolidating more than 150 Bitcoin that currently sits in these wallets.”

CoinWallet conducted a transaction to demonstrate what this will look like.

“As you can see from the transaction, there are 20 tiny inputs, with half going to miner fees, and half going to one of my CoinWallet addresses. This transaction is approximately 3kb, or 1/323rd of a block. In other words, for every ~323 of these I send, I fill up a block.

“These 20 servers push approximately 1 transaction per second. The plan is to fill them up to 50-100 Bitcoin in total. In theory, if all things go as planned, we will create a nearly 30-day backlog.”

“Of course, this won’t cripple Bitcoin entirely. Those who are smart enough to increase their fees will still manage to push transactions through. However, it will make it prohibitively expensive, and will likely render most standard wallet software, ranging from Multibit, to Mycellium, Blockchain.info and others completely worthless.

A debate has been raging for months over whether or not to increase the maximum size of a transaction block of data beyond 1 megabyte.

Bitcoin core developers Gavin Andresen and Mike Hearn are spearheading the drive to increase the block size, and have developed Bitcoin XT client to allow miners to opt out of the current 1MB limit. The majority of miners must adopt the protocol upgrade or else no change will come into effect.

“The fact that the XT fork hasn’t occurred yet is ridiculous,” CoinWallet said.

 

So “a Coinwallet representative”, but throughout the entire article he is quoted as referring to themself as “I”. Sounds like a one man show to us. The “representative” is very careful to outline the fact that their “test” attack will render most wallet software useless. Fear mongering, anyone? Their plan is to create a 30 day backlog in transactions, which they believe will shift perception towards the need for larger blocks, now. The end quote is just the icing on the cake, and clears up any conspiracy theories that community members may have had about Coinwallet’s intentions. They are pushing for an XT update, and flexing their digital biceps in order to push their agenda. How much more fucking political can you get with this? The kicker, they plan to start this “test” attack in early September, so like in a week and a half.

 

So, why does this all matter?

It appeared as if Gavin and Mike were doing the right thing by pressing forward with a solution when no one else would. They put a solution out there, and gave the community the right to decide how to move forward. Until a consensus is reached, the network will not be an XT alt, and we are safe. But piecing all of this together, there seems to be some sense of urgency to force users to switch to XT. Anyone who regularly sends coin, knows that the network works as promised at all times other than when these malicious events are taking place. Since the last stress test ended, the mempool has been pretty much empty, with the exception of what looked like a pre-test to this upcoming attack about a week ago. If there wasn’t going to be another stress test attack, people wouldn’t have any problem completing their transactions until bitcoin organically grew, and the user base started consistently filling 1mb blocks. The point being, other than this Coinwallet.eu FUD and their stress tests, there is no need for larger blocks right now, and there is no reason for anyone to rush and update to XT. So what is the ulterior motive?

 

As it turns out, some conspiracy theorists believe bitcoin has been hijacked. They feel as if a player has identified and attempted to exploit the one weakness which might actually harm the honey badger. Crashing price? No. Hackings, Goxxings, Ponzis and scams? No. Hijacking the code itself, creating FUD/a media shit storm surrounding the issue and then “creating a 30 day backlog of transactions” because the “fact that the XT fork hasn’t occurred yet is ridiculous”,  sounds like some Stuxnet style shit to us. An urgent (and artificial) timeline is being pushed on the community, to update their software in a rush, to a package which has much controversy surrounding it.

But has the code itself been hijacked? Is this just a conspiracy theory, or conspiracy fact.

In this linuxfoundation e-mail from yesterday, it is noted:

Bitcoin XT contains an unmentioned addition which periodically downloads
lists of Tor IP addresses for blacklisting, this has considerable privacy
implications for hapless users which are being prompted to use the
software. The feature is not clearly described, is enabled by default,
and has a switch name which intentionally downplays what it is doing
(disableipprio). Furthermore these claimed anti-DoS measures are
trivially bypassed and so offer absolutely no protection whatsoever.

Connections are made over clearnet even when using a proxy or
onlynet=tor, which leaks connections on the P2P network with the real
location of the node. Knowledge of this traffic along with uptime metrics
from bitnodes.io can allow observers to easily correlate the location and
identity of persons running Bitcoin nodes. Denial of service can also be
used to crash and force a restart of an interesting node, which will
cause them to make a new request to the blacklist endpoint via the
clearnet on relaunch at the same time their P2P connections are made
through a proxy. Requests to the blacklisting URL also use a custom
Bitcoin XT user agent which makes users distinct from other internet
traffic if you have access to the endpoints logs.

There is a great bitcointalk thread about the issue, which highlights the topic.

Some quotes from that thread:

Mike Hearn says it’s to ban people who use DoS attacks from the network, but obviously it can be used to blacklist anyone.

https://github.com/bitcoinxt/bitcoinxt/commit/73c9efe74c5cc8faea9c2b2c785a2f5b68aa4c23

I’m combing through the code and it’s not looking good.

Basically they will disconnect you if your address has ‘low priority’, which might hurt new addresses. If you have a negative priority score that means you’re an attacker according to them, and you are disconnected.

Also mapping the tor network, lots of code aside from this to break through the anonymity of TOR.

These changes are massive and BitcoinXT has not mentioned them at all, clearly the block size debate is a distraction.
We should start referring to XT as ‘PanoptiCoin.

This is disgusting, pages of code for the blacklist.

They’ve been mapping tor for months to get ready for this…. over 1000 IPs listed

 

And some of the more colorful posts from that thread:

Screen Shot 2015-08-19 at 3.43.33 PM Screen Shot 2015-08-19 at 3.44.44 PM Screen Shot 2015-08-19 at 3.42.45 PM Screen Shot 2015-08-19 at 3.43.19 PM Screen Shot 2015-08-19 at 3.52.45 PM Screen Shot 2015-08-19 at 3.53.10 PM

There are also some arguments against the supposed findings, we outline the most important and conclusive later in this article.

So after all of that conjecture and possible FUD, let’s break down the situation into it’s simplest form:

1) Gavin initiates and pushes urgency of block size issue

2) Regulations are put into place (BitLicense)

3) First spam attack takes place

4) Much community discussion takes place regarding block size

5) Larger spam attack takes place, Coinwallet.eu takes responsibility

6) Bitcoin XT is pushed out by developers and released in a hurry

7) The MSM pushes the XT/block size issue, after mostly negatively portraying bitoin in the past (but blockchain positively)

8) Coinwallet.eu threatens another spam attack, which will back up the network for 30 days. They also support and promote upgrading to XT immediately opently.

8) Questions arise about the purpose of some of the code in XT, or how it can be modified in the future for other/nefarious purposes. Is this an attempt to “regulate” the bitcoin core?

 

In all fairness to Mike and Gavin, we have to present the most compelling piece of evidence for their inclusion of the new features into the XT code.

Check out this link for the full thread.

The most important response from Mike:

This patch fixes the issue. It adds code that only runs when the node is full. As nodes are not supposed to get full unless there’s an attack, this code should ideally not run, or hardly ever run. If a node reaches its -maxconnections limit instead of rejecting all new connections, it calculates a priority score for each connection and if there are any lower than the new inbound connection, that lower scoring peer is disconnected to make room. And it adds a starting rule that gives Tor connections a lower score than clearnet connections. Hopefully there will be many other heuristics added over time.
The result is:   if and only if your node has run out of resources, and it has connections via Tor, then it will kick out the Tor connections one at a time to make room for non-Tor users.
This reflects the reality that Tor is much more attractive to attackers than real users:  nobody is going to DoS bitcoin from their home internet connection but people use Bitcoin from such connections all the time.
My patch is a tiny first step towards fixing a long standing problem with the design of Bitcoin’s DoS protection system:  it works by attempting to ban IPs that engage in “misbehaviour”. This has two problems:
  1. It’s possible to DoS a node without triggering the misbehaviour rules
  2. It assumes 1 IP = 1 person
The latter assumption isn’t valid for lots of users, like users on mobile phones, at hotels, at conferences, at some universities ……. and users behind Tor!
One of the misleading things I’ve seen a Blockstream employee say is that the Tor prioritisation patch “risks network partition”, which is a fancy way of saying users behind Tor might get disconnected entirely from the main network.
I have a problem with this argument for a couple of reasons.
The first is that anyone can already trigger such a partition. All you have to do is connect to each Bitcoin node from every Tor exit, and then “misbehave”. The exit will then get banned for 24 hours. New connections are then no longer possible. Existing nodes will keep their connections intact, but eventually people will have to restart their nodes, and then they’ll end up banned too. This results in a kind of slow motion network partition. The best fix for this is to replace the notion of banning IPs with something else …. like a more advanced form of priority.
The second is that it suggests Bitcoin should just not care about the attack I outlined above. The guy who has been saying this also believes that non-Bitcoin-Core P2P wallets are a bad idea, which is consistent with Blockstream’s vision of Bitcoin as a kind of clearing network between quasi-institutional entities. So, no surprise that he doesn’t care about attacks that affect mobile P2P users.
However, the Bitcoin XT project does care about them.
The third reason is that to force Tor users to be disconnected and make a partition unique to this patch, you would have to flood the network from non-Tor IPs. As you are probably breaking the law by doing that, you need to find some other shield. The framework is general so if someone does this via some other proxy network, we can give those networks even lower priority than Tor. Problem fixed.
Then you’d have to use botnets and the like, but I know from my time fighting hackers at Google that this is much harder to pull off than using something like Tor. Attacks getting harder, riskier and more expensive? That’s progress.
The new framework is very basic. There are many other heuristics we can add to make it work better, and eventually remove the Tor specific logic entirely.
One idea is to raise the priority of nodes that are doing useful stuff, like relaying us data.
Another idea is to extend the P2P protocol so clients that don’t have long lived connections and can’t provide services to the network (i.e. phones) can gain priority by proving they own bitcoins. It makes sense that a user who has 500 BTC in a 12 month old saving wallet should take priority (if need be) over a user who has no bitcoins at all.
Another quick heuristic is to do dialback on connect. One issue with connection prioritisation is that we have to decide fairly quickly and with low resources whether to service a new connection or not. A quick check if the connecting IP is accepting port 8333 would identify not only Tor but all proxy and botnet services    (running custom software on botnets is much harder/riskier than using their predefined services). Of course it’d also identify mobile/NATd users. So we’d want to combine it with the new protocol above and get wallets to implement it first.
Obviously, in a mostly anonymous system like Bitcoin, any heuristic can be gamed by an attacker who is willing to spend enough resources to simulate real users. All we can do is raise the costs.
So with those ideas combined we’d have a pretty nice general framework that doesn’t need any hints about specific IP ranges anymore. But it’d take a lot more work.
Outside of the fact that we now see a public disagreement between Mike and a Blockstream employee, he outlines an excellent reason for the inclusion of the new changes. It does seem to make sense on the surface, but we definitely see how this can be a very slippery slope which the community should be aware of. The inclusion of prioritizing by IP addresses, and future plans of possibly prioritizing by days destroyed (number of coins * days held in wallet) does open up very real privacy issues. Mike does say that this is just a framework, and that further changes will be made moving forward. What are those changes? Could a simple DDOS protection (which is clearly an IP white/black list scheme) evolve into something more elaborate and targeted? For the time being, we aren’t really concerned about these issues, as everything seems to be in the clear. This situation does bring up interesting questions though, and lots of thoughts for what the future of bitcoin might hold. As of now, there are lots of conspiracy theories, but with the unusual media coverage and coincidence of these events, will we some day find out that there is some conspiracy fact behind what is going on?
In the end, it is a bit shady that what seems to be a front company is threatening to create a 30 day backlog of transactions, essentially if people don’t update to XT. What else might researchers find in the XT code as they dig deeper? We hope nothing, but combined with the other events in recent months, we are left questioning the agenda’s being pushed. We hope that the community works together to maintain the original vision that Satoshi had for the project.
The following was aired on Bloomberg today (click image to bring you to video page):
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Symbiont Updates, XCP Rocket Ignited

rocket-clipart-nicubunu_Toy_rocketWhile it’s no secret that the world has been starting to see the light with “blockchain”, it has been pretty obvious from the multiple attempts by the msm to cover bitcoin already that this is going to take a while. Everyone else has their training wheels on, but for those of us who scoured bitcointalk years ago, got burned buy not selling AM shares near the ath and even those who have been around as recently as the Gox implosion, we don’t need to hear any more about miners solving complex math problems. We get it, and get where this is going. There is no blockchain without bitcoin, and once the sheep finally catch on to that, they still need to learn about alt coins, side chains, etc.

The point being, it’s going to be a while before the mainstream hears about, or cares to hear about something like XCP (Counterparty) (that’s cool though, we won’t mind selling to them). So, if this is the case, why has such as obscure corner of the digital cryptocurrency playpen been receiving massive attention from high profile Wall Street players and a significant amount of investment capital? Duh, it’s the future. Among many other initiatives in the space, SWIFT has a call for proposals out which is looking for information on blockchain securities settlement.

Just to cover this again. In plain English. Counterparty, and decentralized asset settlement in general, will become a backbone of the new financial system currently being built/deployed.

For a refresher, let’s visit Bloomberg:

Some Financial Heavyweights Just Invested in a Trading Platform Linked to Bitcoin

Symbiont, which plans to use bitcoin’s underlying technology to make it quicker and cheaper to transfer assets between buyers and sellers, has won the backing of several financial industry heavyweights.

The company, according to a statement Tuesday, has raised $1.25 million from a group including former New York Stock Exchange chief Duncan Niederauer, former Citadel LLC executive Matt Andresen, and two co-founders of high-frequency trading firm Getco LLC, Dan Tierney and Stephen Schuler.

 

A few weeks ago, we discussed the possibility to Front Run The XCP Pump. Here we are, a few weeks later, in the midst of what we at shitco.in believe to be the first leg of a major XCP pump (to continue on announcement of Series A funding). In our last XCP piece, we outlined that there would be a Series A round of funding coming in Q3 this year. Fast forward until last week, and Symbiont just received another round of funding from two more VC firms.

From PR Newswire:

Atlantic Merchant Capital Investors, LLC announced today that it has made an investment in conjunction with Celeridem Capital Management, LLC into Symbiont.io, Inc.

“The team at Symbiont is enthusiastic about our new capital partnership with Celeridem and Atlantic,” said Mark Smith.  “The capital they and other investors have provided will allow us to deliver production technology and clear the way to a Series A round later this year.  We are also excited about the opportunity to work with Shiv Govindan and Jeff Hunt [principal at Atlantic].  They bring more than capital to the table.”

Symbiont expects to issue the securities associated with this funding via its proprietary blockchain technology.

Most people only read headlines, and few will actually read an entire article or press release because, ADD. That part in bold up above is something that all investors should be paying close attention to. This latest round of fundraising (for an unspecified amount) is just leading up to their Series A.

Another interesting piece of information from Tampa Bay Business Journal:

Symbiont’s board now includes SenaHill Partners founder and former Goldman Sachs (NYSE: GS) global head of REDI product development Neil DeSena as well as Duncan Niederauer, former CEO of the New York Stock Exchange.

Can you get any more bullish than this? These guys literally live and breathe for money, and not only are they investing in, but are now on the board of Symbiont. Remember guys, the people who founded Symbiont are the same team that created Counterparty (XCP). While they have openly stated they are going to be working with many different solutions, we think that they are probably going to have the best results with the one they are most familiar with, the one they built.

Chart of the price action around both of the last investments can be found below.

Screen Shot 2015-08-02 at 2.15.25 PMWith their Series A coming up, what else have the Symbiont/Counterparty guys been up to?

Everyone was focusing on Blythe Master’s linguistic performances at the American Banker Conference, but few took the time to realize that the Symbiont team was heavily represented as well.

Bitcoin addresses with XCP have been on a steady rise since inception, and show no signs of slowing down.

Screen Shot 2015-08-02 at 3.13.31 PMDeloitte is exploring Counterparty:

Professional services firm Deloitte has revealed it is seeking to use blockchain technology to automate client auditing and crowdsource its consulting efforts, among other applications.

Piscini indicated that these clients are currently exploring different protocols built on top of bitcoin, including Blockstream, Counterparty and Factom. A key question that persists for many is whether to partner with these firms or build a private blockchain.

As for its own projects, Piscini said Deloitte hasn’t determined one specific working thesis for the technology, suggesting the firm is willing to select the blockchain best for its specific use cases.

“Our point of view, is ‘Let’s find use cases, where you can generate more revenue, generate a different customer experience or cut your costs.’ Then we can find the technology stack to address them,” he said.

So far, Deloitte has launched Rubix, a software platform that allows its clients to build applications on top of blockchain infrastructure.

The official website for the service lists four areas of interest, including reconsolidation between trading partners, real-time auditing, land registry and loyalty points. Internally, the company is focused on automating some of its auditing processing via a solution currently in stealth.

“On the consulting side, I think we’ll see the ecosystem adapt and change and move toward blockchain-based solutions,” he continued. “The potential for us is around the ability to source consulting services through a P2P crowdsourcing platform. Instead of saying, ‘Deloitte help us with that strategy’, you can request that service on the blockchain and the blockchain would match you with the right individuals to do that.”

Over time, Piscini said he sees the blockchain becoming a foundational layer for asset transfer, smart contracts and voting, but that different blockchains may be created that specialize in each of these use cases. He also suggested that he sees cryptocurrencies such as bitcoin will likely continue to play a role in the management of blockchains.

Although they are working with multiple possible solutions, we all know that Counterparty was the first working protocol. We also know that this gibberish about private blockchains is just them trying to borrow the bitcoin source code because it’s open source, pissed off they didn’t invent it themselves. Save yourselves some time and money guys, its not worth it.

There was a Counterparty update on July 24th, further cementing the point that Symbiont would be using XCP:

Over the last year and a half, Counterparty has evolved into the most advanced platform for creating financial instruments on top of Bitcoin, used by an increasing number of innovative projects. During the last couple of months, our goal was to wrap up the large scale improvements to the Counterparty software suite, complete comprehensive security audits, and once the protocol reaches a mature state start focusing on and building tools and services around it. Symbiont is a step in that direction, developing products that will be utilizing this technology, and we’re very excited to see it be put into use in systems that power modern finance.

 

Some interesting projects on bitcointalk/GitHub.

An interesting Reddit post, in which this comment stands out the most:

HFT is often about taking advantage of arbitrage opportunities and moving enough stocks to get fee discounts, so that money can be made even on small changes in price. The stock market is a network of connected stock exchanges etc. Nowadays this is all existing in the realm of highly regulated, centralized operations. In the future I’m confident that stocks will be tokenized either ontop of existing blockading such as counterparty on Bitcoin or on separate blockchains using technologies such as Peershares (/r/peershares) because its just so much more powerful. http://www.coindesk.com/smart-contracts-platform-symbiont-raises-1-25-million/ the question: “why would a company that is making money on inefficient stock markets invest in the next gen stock market? ” my guess would be that they are fully aware of what is about to happen. What is the difference between a stock IPO, VC investing in a startup and say Kickstarta? Save for the juridical differences there is a lot of differences, but that’s about to change as social communities and Bitcoin tech is about to merge. There are already several examples: Nubits, Etherium, Counterparty that is giving a glimpse of what is about to happen. This Bitcoin stuff doesn’t ask for permission and the killer app is the many ways in which it will creep into every aspect of our lives.

Last, but not least, this SEC filing which shows Symbiont sold 1.235 million in debt starting on June 30, 2015.

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For those of you unfamiliar with Form D:

Form D is a form to be used to file a notice of an exempt offering of securities with the Securities and Exchange Commission. Commission rules require the notice to be filed by companies and funds that have sold securities without registration under the Securities Act of 1933 in an offering based on a claim of exemption under Rule 504, 505 or 506 of Regulation D or Section 4(5) of that statute. Commission rules further require the notice to be filed within 15 days after the first sale of securities in the offering. For this purpose, the date of first sale is the date on which the first investor is irrevocably contractually committed to invest. If the due date falls on a Saturday, Sunday or holiday, it is moved to the next business day. The SEC does not charge any filing fee for a Form D notice or amendment.

 

All of you that are reading this blog can see the impact that “blockchain” is going to have on the traditional world of finance. If we didn’t, we clearly wouldn’t be involved in this absolutely insane world of bitcoin day in and day out. Each of these new protocols (except Etherium) relies on the bitcoin blockchain and a small token of btc to carry out each transaction. Naturally, this will slowly create a demand for btc and create more upward pressure on the price. At this point, it is safe to say that all major banks who have stated they are exploring blockchain technology are holding bitcoin (they couldn’t run their tests without it), which itself is a major milestone for the technology.

As we saw with the msm coverage of the NYSE outage a few weeks ago, the sheep are still being herded and misdirected. Nanex compiled this excellent report which is a must read. The ex-CEO of the NYSE investing into Symbiont during times like these is just too perfectly timed for us to believe it’s purely coincidence.

Interesting times we live in.

As earlier stated, we have been long XCP from the bottom and plan on selling some once the rocket takes off. Obviously we are also holding some as a long term investment.

The Wuestenrote (Wusitanluo) LTC Ponzi Was Crushed

With yesterday’s LTC pump, many traders have been talking about the possibility of another moonshot. In our experience, group think generally should be approached with caution, and traders should sort out the facts on their own before making any moves. With the possibility of making or losing a significant amount of money in the game of ltc hot potato, we decided to dig a bit deeper into the “Chinese Ponzi” that we outlined in this post.

Unfortunately, for traders, it looks like the fun might be over for the time being. It appears as if the suspected ponzi actually was a ponzi, and the people who were running it incurred massive losses and are now on the run. With over 400,000 ltc still in this address, we wonder what their next move will be. Without the upwards pressure of the ponzi on LTC, will the market collapse, or will other pumpers come in to take advantage of the hype around the block halving.

The first piece of information to focus on, this post from the group themselves which was made on July 22nd. We understand that it is a bit hard to read, but that’s Google Translate’s fault. You can easily get the idea of what is going/went on, and it isn’t good.

Wusitanluo Network Announcement:
Dear coins circle and investors you are good:
Since litecoin great investment value, recently sought after by the market, trading activity, rising rapidly. Frequent exchange transactions across multiple platforms, leading after the rapid rise, some investors eager to cash in quickly after frequent cause is thrown down.
The company has been the case of the parties conducted a survey research, set up an investigation team for the entire event carried out a detailed investigation. The occurrence of such a huge market fluctuations things, on behalf of the company for failing to deal promptly remind investors of risk and get the best revenue opportunities, deeply apologize! The company will serve as a reminder that in the future the investment process, to better improve service, increase opportunities and investor communications, increase litecoin trading knowledge training. However miss this opportunity, as well as heavy losses to investors caused by currency circle, we must acknowledge the error, it is wrong leadership of the company, things have happened, companies know that no amount of explanation is useless, only adjusted for market development at the same time in favor of the interests of investors all litecoin program. So please rest assured that the majority of investors! The existence of the event management problems, the company to extend my most sincere apologies to the members.
About uproar MLM event Wusitanluo litecoin recent online fund transfer, the company made the following explanation:
1. litecoin – digital currency in silver, five national ministries issued a document has acknowledged the same nature of virtual currency and stamp investment products;
The company did was to maximize the benefits to our own members, members to participate in the store come in the company to do buy low sell credits for the company and members of the benefit, but after the incident that we deeply appreciate the company’s promotion and incentives does have loopholes, the company is now working on improvements, will be promptly corrected, and safeguard the interests of members and coins circle stable and sustainable development. Increase the propaganda and investor training instructions explain litecoin development environment, the company operating conditions, so that investors from different sectors of society, we have a full understanding, differentiate the company is definitely not an illegal pyramid scheme organizations and other institutions. If the company deliberately fraud, no company disclosed the truth, so please credits circle of investors and members of my friends believe that: The company will gradually improve the business long-term orderly and healthy development continues!
The problem for business, we reflect on the comprehensive, currency experts gathered in the circle, the company’s practitioners admire your moral and technical level, you who are veterans, we circle the deficiencies currency, please timely corrected, we would like to fully cooperate for the greatest degree of meeting customer requirements, to achieve a win-win, and let us improve faster. We are willing and credits between companies in the same industry circles to establish a good cooperative relationship; analysis of everyone’s long-term sustainable development of a steady stream of money to bring new impetus to the development circle, currency prices rose only virtual currency using the procedure we have developed a necessary process, we increase investment late, modify extension model allows the company to achieve a virtuous cycle, please rest assured!
Since the 7.10 incident currency Circle in short Zapan cause our losses, we make the following summary: We have never experienced such an event, there is no ability to timely response and to corporate clients who bring serious losses, our market environment is too optimism did not adjust the tempo. About Wright currency fluctuations, we realized: favorable currency price rises for everyone; short only on a small part of speculators to bring short-term profit, most investors can not share the real benefits brought by the development of virtual currency. Many people even do not know the risks of leverage, resulting in greater losses! So our next step will be an effective and mutually beneficial and win-win to stay in business, please credits circle of colleagues and jointly create a harmonious market environment, maintaining good litecoin healthy development is our responsibility!

Here, also deeply grateful to all of concerned friends! In fact, the company was informed that after the incident, in addition to feel very ashamed and apologetic outside, but also gain a more moving and trust, thank the majority of investors have high hopes for the company! The future development of the company, and we closely co-prosperity loss, we already are familiar with the family, so I can better understand that you do not want us to make mistakes in their mood. You were criticized, is the driving force of the company can do better! We will gradually consolidate the business, scientific management company’s business development, allowing companies to develop more robust! & Nbsp; & nbsp; Our company is totally worth everyone has the strength to believe, as the new company litecoin industry, the company has a very strong economic and technical support. Business is like a child, growing up, will inevitably wrestling, make mistakes, then the parents will help one, carefully educate him. The company today, you need to like the parents who help a help, what help us to grow up healthy and strong! & Wusitanluo network announcement!

Source: 8btc

Secondary Source: BTCMan

Further on in the thread, information about the supposed leaders is posted, along with their pictures.

Screen Shot 2015-07-25 at 4.31.23 PMScreen Shot 2015-07-25 at 4.32.10 PMThe Chinese BTC media had been covering the story since earlier in July, more information below:

July 10, 2015, Wright currency prices from a month ago, hovering at 11 yuan, skyrocketing to 54 yuan, or nearly 400%. Investigate its soaring reason, most likely related to a strong sales organization suspected of pulling the disc. After the litecoin surge stirred the entire digital currency industry, in July 2015 at 10pm, litecoin suddenly began to fall from 54 yuan, as of press time, litecoin prices hovering at 27 yuan from top to bottom.

The previous day’s surge, probably only because a video.

Reporter join MLM organizations suspected of QQ group: Wusitanluo – litecoin

Just one day time, group number rose to 435 from 100 people up and down, and still keep up the trend. A large group of files named “Wusitanluo litecoin Fund Projects” “litecoin registration process” file.

Suspected MLM organizations to promote PPT

Wusitanluo litecoin Fund Project Description:

1, sentence description of the project The project requires investors to the market on their own (fire credits net) at market price to buy 500 litecoin, then 500 litecoin Wusitanluo to finance and investment companies, the company returned to 3 per day to 5 litecoin to your virtual currency wallet (fast purse), now return 5, after deducting 10% of the fee actual return 4.5, can be returned litecoin fire credits net trading cash to be held currency to be up.
Note: The contract with the company for 1 year
500 litecoin to the company of the night (the next morning) the return of the company will be able to receive 4.5 credits litecoin is the world’s second largest virtual currency, in China there are 12 exchanges of fire most traded currency net .
Fast is the most secure virtual wallet purse money, safe, convenient and compatible bitcoin
2, to help companies to promote Award
A, all of their recommended straight people can get 50% per person per day
B, straight recommended 10 people became broker (also available in their 5500 litecoin buy directly into the broker)
C, will become a broker, obtain the following rewards:
1–5 dezh dividend of 10%
5% dividend 6–10 dezh
11–15 dezh dividend of 2%
Note: Direct Push 1 get 2nd generation, direct push two people have two generations, direct push three people have three generations, so get up to 15 generations, every day, every day the dividend, too.
Your income = ROI + Promotion Rewards
3, Wusitanluo is a German company, is a diversified financial conglomerate, located at 1156 Forbes Global 2014 companies list, ranked 37 in Germany.
4. What is Wusitanluo litecoin fund?
International litecoin profitable global trading platform to buy low and sell high
5, this model is MLM it?
Your investment in a first, the company received on time if you return the money, proved to be true in the future, who would you most like to pass? You most certainly would like to vote on several accounts under his first order to obtain greater benefits. Their investments much more income than pull people to join.
6, there is no risk of such an investment?
Any investment has risk, but in this era of fast money, to get the maximum benefit is to grasp the opportunity in the short term.
7, was asked: I do not know you, money is how do you cheated?
A: You are mistaken, your money and coins not through my hand, you buy 500 litecoin litecoin directly with your wallet (fast purse) to call the company, I just recommend you to join it, you register Corporate Member When I will use my membership number.

Being thought of these, to be fleshed out later! Other issues your own Baidu, Baidu Post Bar has Wusitanluo it.
This is the latest investment projects, domestic just beginning, very few people do this, have not formed a team like Vicat currency, seize the opportunity to put their achievements as Vicat currency render such a successful teacher.
I am determined to do Wusitanluo first person in China, of course, you can also set up their own team, beyond their own!

OKCoin has been aware of the situation since at least July 11th, but has only made a full statement (that we could find) to their Chinese customers. I.e.: Something that said more than “don’t put yourself in traps”.

They also mention that this is just the latest of their investment projects, and the beginning of domestic projects. What does this mean? We suspect that they may have lost a substantial amount of funds due to their failed pump, and aren’t too convinced that there will be subsequent pumps yet. If anything, we would expect the market to deflate a bit while the ponzi tries to get things back in line, but do they have the buying power to pull themselves out from underwater.

These ponzi masters have gone so far as to imitate a German company, register the .com version of their domain name and put up a fake website in order to cover their tracks.

The companies correct website is: https://www.wuestenrot.de/

The fraud site was: https://www.wuestenrote.com/

Again, from 8btc:

Germany seems to really have the online search Wusitanluo this company, also great. However, and this litecoin MLM is certainly nothing to do. This is the MLM websites http://www.wuestenrote.com/ .
In million net Search Domain Information:

Oh, April 10, 2015 was registered.
However, some people may say is to not promote litecoin MLM ah, ah just registered! !
I continue to dig.
The bigger sites do actually quite bluffing. For example, the login screen can select the language. Very fast hardware thing, after all, is large international companies!
But I chose English actually let me choose it, people look down on the Asia-Pacific do not know English? ? ! !


Then I see the website source.
Develop people to effortlessly Reprogramming a German and English pages, when you want to change the English and German pop up directly not to change!

Yes, it is a direct pop, will not determine the country where ip oh ~

A Baidu thread with the ponzi “founders”, shows they have a very creative way of looking at what they are doing.

Screen Shot 2015-07-25 at 5.59.13 PM Screen Shot 2015-07-25 at 5.58.36 PM Screen Shot 2015-07-25 at 5.57.59 PMWe then turned to bitcointalk for information, and found plenty. Here is the most interesting and informative thread:

http://translate.google.com/translate?hl=en&sl=zh-CN&u=https://bitcointalk.org/index.php%3Ftopic%3D1126935.0&prev=search

You can view a video of the schemers promoting here – http://v.qq.com/cover/l/l9njr6tdhnl6nl2.html?vid=a0159sgq8mp

And for those of you wishing to see the ponzi schemer’s presentation (source):

123456789101112131415161718192021222325So what do we expect from here? Probably a ltc dump as this news propagates through the west, and traders realize that might be bag hodling for a while. If the ponzi group or another pump team step back into the market place though, we could be in for a wild ride.

The bottom line is that the ponzi pump team didn’t execute their pump as expected, and it appears as if they are now on the run after incurring massive losses. Whether this is true, or FUD to get the ltc price back to a level where they can buy back in and pump is to be seen. With the upcoming block halving, and OKC double witching in September, we have some dates on our calendar to watch.

 

BFX Bot Gone Wild

It appears as if trading is slowed or suspended on BFX, after a rogue bot seemingly took over ltc/btc trading for a period of 35 minutes. The intense volume and consistent range of the trades suggests that this was not human error (unless they were wasted).

Screen Shot 2015-07-17 at 12.07.57 PM

The impact could be seen on the ltc/usd market, as correctly functioning arb bots (which were obviously also trading the ltc/btc pair vs the rogue bot) took advantage of the situation. Quick traders using their old fashion fingers certainly took advantage of the opportunity as well.

 

Screen Shot 2015-07-17 at 12.08.33 PMThere was some funny activity in the drk/btc market as well, but nothing conclusive. Could have been a bot, could have been a fomo trader.

Now back to your regularly scheduled programming of watching OKC lead the LTC market.

#rekt

The LTC Pump, Dump and ? A Post-Mortem For Both Bulls And Bears

Mickey_Mouse_normal

In our last post, we outlined some of the shenanigans that were occurring in the LTC marketplace (specifically on BFX). A week and a half later, both bulls and bears are in tears, after some of the most extreme volatility the LTC market has seen in years. We don’t expect this volatility to die down any time soon (a gift for traders), but we feel that the community at large should have a more thorough understanding of the underlying fundamentals of the price action that we have been seeing.

We have been performing a thorough analysis of the different market forces acting on the LTC (and to a lesser extent BTC) markets over the last few weeks, and are attempting to assemble the pieces so that traders can make an educated decision on what their next trades should be. There is a worrisome element to all of this (outlined in 1, below), and the last thing that the crypto community needs at a time when it is finally going mainstream is more traders/investors to get burned and have disdain for the crypto community because of a malicious actor.

1. The Chinese LTC ponzi (surprising, eh?)

2. Pump Team 6

3. Return of old players

4. New interest in Crypto/media coverage/Greece = new money

5. Irrational exuberance and margin trading

 

Of what we outlined above, we only consider point 1, the ponzi scheme, to be a malicious actor. The others are viewed as forces in the free market.

More details on each below:

1. The Chinese LTC Ponzi – Our friends over at BitMEX published an excellent blog post two days ago outlining the ongoing LTC ponzi scheme in China. This is the address which is being used for the scheme, it has now received over 8.5 million LTC. Bitcoin Magazine goes a bit more in depth on the scheme, and the statements different exchanges have made in response.

An analysis of the wallet address shows that the deposits and withdraws are still increasing dramatically, so the scheme is still ongoing.

687cbd1b-db5c-4645-9074-78eb93461120h/t: @Legion for the data, you can view it for yourself here

As stated in the Bitcoin Magazine article, some of the more customer oriented exchanges have taken steps to mitigate any damage from the ponzi, and have reached out to traders/investors to warn them of the unusual trading activity. Huobi posted the attached.

While we believe that the LTC ponzi group has contributed partially to the dramatic LTC price and volatility explosion, we believe that the other market forces acting in parallel have amplified both the upward and downward moves of LTC, creating a potentially hazardous trading environment for those who are ill-informed.

It is our belief that the LTC ponzi masters are the least sophisticated of the actors involved in the market gyrations.

 

2. Pump Team 6 – Starting on May 22, 2015, it started to become clear that LTC was beginning to undergo a somewhat sophisticated crypto pump. The coin had been beaten down during the bear market, and was primed for some upward movement. Subsequent pumps in PPC and NMC seem to exhibit similar characteristics, which may be a coincidence or may be totally unrelated.

The pump team seems to be extremely sophisticated and precise with their actions, utilizing a variety of strategies across multiple exchanges in order to achieve their goals. It is our belief that the primary goal of the pump team is to accumulate BTC, with USD gains coming secondary.

Between May 22 and July 9, 2015, we saw the btc price (on bfx) rise from $240, to ~$296. This is a roughly 23% increase.

Screen Shot 2015-07-13 at 2.41.00 PMDuring the same time period, LTC saw a substantially more dramatic rise from $1.50 to ~$8.90, a roughly 493% rise.

Screen Shot 2015-07-13 at 2.40.38 PMTraders have been talking about the “decoupling” of ltc and btc over the last few weeks, but is it coincidence? Our take is, no. Watching the market action over the last few weeks during the ltc pump, it became clear that an actor was cashing out cheap ltc that they had purchased for btc, with 1k – 5k ask walls on ltc/btc strategically placed the entire way up. Similar size ask walls were chewed through on ltc/usd, providing some small breathers in the bull market. At the same time, iceberg btc asks were being thrown on okc and hidden btc asks on bfx during periods of significant upward ltc price movement.

What would the purpose of this be? If the pump team was able to successfully hold down the bitcoin market while pumping ltc, their btc earnings from the pump (via the ltc/btc pair) would be significantly greater than if btc were to pump at a somewhat steady rate during the same time period. One advantage of using leverage and/or futures to suppress the bitcoin market is that a player can have a significant impact with a small number of coins (this is why market manipulation in most markets ie: precious metals, is through futures). As long as the number of coins the pump team was accumulating through their ltc pump and subsequent ltc/btc sells was significantly more than what they were throwing at the market, it would be worth their while to perform this tactic even if their “shorts” were to be margin called later.

Around the time of OKC futures settlement last week, the speed of the ltc pump began to die down, and traders started to wonder when it would end. News of the Chinese ponzi was leaking out, and mysteriously, exchanges began to be DDOSed. It was clear that the pump team had made their exit, and margin traders high on hopeium started to sober up to reality, and realize that they were going to be fucked when they couldn’t close their FOMO long in time to escape.

As we believe that it was the ultimate goal of Pump Team 6 to acquire as many btc as possible, this is where we believe the second part of their plan came into play. Like we saw with their earlier ltc actions (reserving all swaps then pumping), these guys are experts. It is our belief, that at this time, they begun closing all of their btc “shorts”, while simultaneously pumping btc with the usd that they had earned during the ltc pump. You can see a large number of shorts which were closed at the time.

Screen Shot 2015-07-14 at 1.00.38 AMThis generated a large amount of btc buy volume across all exchanges, which coincided with DDOS attacks and the situation we are all too familiar with regarding OKC’s margin calls.

Our question is, did someone else realize what the pump team was up to, understand that they may be in a position to incur massive losses, and orchestrate some events in an attempt to mitigate getting rekt? New money is clearing coming into bfx, which has been leading the market as shady Chinese exchanges fade into obscurity. As victims (oops, we mean “traders”) migrate to other platforms, what lengths might actors in the bitcoin eco-system go to in order to attempt to save themselves?

These questions may go unanswered for the time being, but as more information leaks in, it is beginning to seem as if some of the tin foil theories might not be too far off.

 

3. Return of old players – There has been a recent return of old players to the crypto community. Fontas is a regular on tv, and his return alone has hyped traders up enough to jump on the ltc bandwagon. While we feel that this impact may be minimum, it is important to note because there definitely has been a buzz around buying when he is present. Maybe this is just the newbs that weren’t around for his first rodeo, but either way this element can’t be ignored.

4. New interest in crypto/media coverage – This one should be obvious. Check out /r/bitcoin any day and you will see coverage by every major news media outlet. The situation in Greece, possible bail-ins and the msm pushing bitcoin have definitely had an impact on the market place. How much new money is actually flowing in? This is difficult to tell, but we suspect it isn’t a large sum at this time. As the bull market continues, we expect to see more new money flow in, and geo-political/financial events can always have a sudden positive impact in the amount of money flowing into crypto.

5. Irrational exuberance and margin trading – As with any mania, tears are shed by those left holding bags when we get a 404 buyers not found error. Combine the ease of margin trading in the crypto space with inexperienced traders and you have a recipe for disaster. Many got rekt buying the top, and hopefully will not be turned off to crypto forever from the experience.

 

So, where do we go from here? What should we expect?

The Chinese LTC ponzi doesn’t seem to have slowed down, but we question what their end game is. All ponzi’s must collapse some time, but what is their proposed exit strategy? Were they screwed when everything collapsed? Did they realize that LTC was being pumped at the same time by other actors? The continuation of transactions to their wallet suggests the scheme is ongoing, but the price action in the market place (specifically on exchanges which made statements regarding the ponzi) seems to show that they are struggling with their own scare walls, and less dynamic forces acting on the market.

We saw the ltc price continue to dip after the initial shock, suggesting that many traders cut their losses, but how many?

Screen Shot 2015-07-14 at 1.23.48 AMWe expect there to be some pretty massive overhead pressure on ltc for the time being, but don’t discount the possibility of a move up as btc continues to gain traction. Our suggestion to new traders is to play the ltc/btc pair, unleveraged for the time being, in order to take advantage of price movement in the market place. For more experienced traders, play the markets as you normally would, but be cautions of the potential forces you may be dealing with. Although we all love making money off of that guy who buys our asks on the ponzi spike, the overall health of the crypto community is more important than making a few dollars. Every trader that is turned off to the space after being absolutely obliterated, is one less player in our daily game of stealing each others money. While we don’t suspect that the pump team planned on this collapsing as hard as it did, we wonder exactly who else knew what was going on? These questions should be answered in the coming days, as more information comes in regarding the “Mouse Group” and how OKC is going to end up settling with their customers. So far, as is clear on Reddit, everyone is getting shafted.

 

Underlying FOMO + Creative Thinking = LTC Pump

21.-ops.-Scrooge-McDuck.-Azizonomics

After weeks of almost completely flat trading, and and months of the $220-$240 range, it looks like at least some crypto volatility is back. Although Greek people are not buying bitcoin en masse, the psychological implications of a Greek bank holiday have triggered buying from other parts of the globe. We outlined what you can expect in the US/UK here, in our last post. There is an underlying FOMO in the crypto markets.

With traders back on exchanges, bitcoin was up to it’s usual pumps, dumps and general fuckery. While the MSM has been covering bitcoin, the real action has been in Litecoin (and some of the other alt-coin markets – which we don’t trade).

On Monday, there was a massive upward move in Litecoin (specifically on BFX), which ended up closing (possibly via margin call) a large number of the actual shorts which were open on the exchange. We are going to dig a bit deeper into this move, the previous tests which had been run on the exchange to see if it would be possible and how to identify such behavior in the future.

First, let’s take a look at the overall move (5m chart shown):

Screen Shot 2015-07-01 at 7.51.21 PMThe nearly 20% move mostly occurred during a short 20 minute time span (hey 1%/minute isn’t bad), congrats to those who were able to catch it.

So, why did this happen? What else was occurring? Bitcoin was feeling generally bullish, the (incorrect) msm stories of Greece buying bitcoin were flowing in, and everyone was screaming moon. With some underlying momentum, and general LTC bullishness after large recent gains, this was the perfect time for someone to execute their “plan”.

We first were clued into this person’s activities on June 14th, when we saw some unusual activity in LTC swaps on BFX.

Screen Shot 2015-07-01 at 7.45.52 PMAt this time, we saw a LTC pump (more below), accompanied with a large, rapid rise in LTC swaps, and then a subsequent rapid decrease in swaps. It immediately seemed clear what was going on, and it is absolutely genius. Anyone who trades on BFX knows that if you try to place an order on margin and there aren’t enough swaps left, you order vaporizes. If a person who is “bullish” (aka pumping) reserves all of the LTC swaps, then any asks in the order book will vaporize when they are reached, resulting in a far less stacked order book than appears on the surface. Couple that with underlying FOMO, stop loss triggers and margin calls, you are setting the market up for a nice move upward.

We then saw the same thing 2 days later.

Screen Shot 2015-07-01 at 7.45.59 PMAnd then the most recent (and hopefully not final) pump:

Screen Shot 2015-07-01 at 7.42.41 PMLined up with price, we can see the impact of this trader’s actions:

Screen Shot 2015-07-01 at 8.01.34 PMSo what actually went on here, simplified:

1) Trader borrows all of the LTC swaps available on BFX.

2) Trader runs panicbuyltc.exe (starts panic buying) LTC on BFX.

3) Any asks which aren’t actual LTC, but were to be placed on margin, disappear as the order book and stop losses are eaten through.

4) Profit

 

It appears as if the goal of this actor was to force margin calls/stop losses. If so, they succeeded massively. With LTC more than doubling in price, in less than a month, this actor has created themselves a nice Scrooge McDuck pile of cash to dive into. Thank you random trader, for you have helped bring back some excitement and volatility to the marketplace. If you were short, our condolences, but come on. There were over 200k LTC shorts on BFX a few weeks ago, and the price was maybe ~$2? You can only short something until 0, so what the fuck are you doing short a coin that actually has a community behind it, and has been battered down from ~$50 highs? Sorry bears, but you have had your fun, and definitely will again, but that number of leveraged shorts at this price is beyond silly.

Is Greece The Only Country About To Get Cyprussed?

Everyone is focused on Greece. We obviously didn’t have to tell you that, because you have internet connectivity if you are reading this. Bubble talk has already begun in the bitcoin community, and the pumps and dumps of the last 48 hours may be remembered as “the Reuters roller coaster” (although they should fact check before publishing). A novel idea, but we don’t believe that many Greeks are moving their trash cash into BTC at a rate that’s likely to impact the market. If you are Greek and reading this though, we suggest you head over to Coinbase and secure your wealth. While the msm is going to have a field day trying to tie bitcoin to Greece (as they did with Cyprus), let’s dig a bit deeper into the possible global implications of the upcoming (possible) “Lehman weekend”, and why not just the Greeks should be buying the coin hand over fist.

The capital controls narrative has been pushed all week, so it would be surprising if they weren’t implemented soon after all of the conditioning and herding the sheep have been going through. Of course, they are for our own protection, but for those who like to have control of their wealth, there is always plan ฿.

Let’s refer to the following paper:

Resolving Globally Active, Systemically Important, Financial Institutions

We recommend reading the entire document, as it contains a large amount of good information. The paper outlines both the US and UK’s bail-in plans, and how the failure of a SIFI (systemically important financial institution) will be resolved. A quick Google search will result in similar results for most, if not all, G20 nations. See Canada and Australia.
Note: Investopedia definition of an unsecured creditor – An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan.
I.e.: Anyone who has fiat money that they “deposit” into a bank.
From the paper’s executive summary:
Screen Shot 2015-06-18 at 8.55.10 AM
Screen Shot 2015-06-18 at 8.55.18 AM As the paper notes, “The unsecured debt holders can expect that their claims would be written down to reflect any losses that shareholders cannot cover”. This is mentioned again, a page later.
Screen Shot 2015-06-18 at 9.02.09 AM
Note (in the following excerpt), that the goal is to “[avoid] the need for a bailout by taxpayers”.
Screen Shot 2015-06-18 at 8.56.49 AM Screen Shot 2015-06-18 at 9.02.17 AM
And again, more about the strategies being developed, and how losses will be apportioned to shareholders and unsecured creditors. The goal is clearly stated, that such a resolution will not have any cost to taxpayers (via government bail outs). Why go after money after it has been paid in taxes, when you can just grab it right from accounts?
Screen Shot 2015-06-18 at 9.02.33 AM Screen Shot 2015-06-18 at 9.03.11 AMAnd then that miserable, hyphenated word shows up, “bail-in”. This is in reference to the UK regime’s strategy.
Screen Shot 2015-06-18 at 10.24.23 AM
And, although wordy, the US strategy is equally bad, if not worse (if you are a creditor or equity holder of any kind).
Screen Shot 2015-06-18 at 10.28.24 AMNo need to summarize any of this, it’s all written in their own words.
There is plenty more of interest in the document, but for the sake of brevity let’s stop here.
Now how does this all relate to Greece? Whether or not capital controls are implemented or bail-ins are initiated this weekend, when it happens, it shouldn’t be news. The writing has been on the wall for years, and anyone with a little Google-fu can find the relevant information on the internet, sourced directly from the Central Banks and financial institutions themselves. While the MSM is pumping “this weekend” as some type of big event, they are kind of like the weather man in the sense that they can always be wrong and never get fired. But, just like the weather, that freak storm is going to come one day.
Unless you are already in Bitcoin, you don’t own your money. At least they are nice enough to tell you that though, right on the paper it says “note”.
DEFINITION of ‘Debt Instrument’A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower.Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.
In summary: While the people of Greece may not have a significant impact in BTC buy volume in the coming days, the psychological impacts felt globally after they are Cyprussed should start to push educated investor’s money into non bail-inable crypto-currencies. When we look back on these interesting times we live in, many will wish they bought BTC at $1,200 and rode it all the way down (then back up again), rather than having unspecified amounts directly taken from their bank accounts. As the famous saying goes, “if you don’t hold it, you don’t own it”. Holding bitcoin, and your own private keys securely, is an excellent hedge against upcoming financial turmoil. Just remember, if you decide to go boating, don’t bring a paper wallet. If you do, make sure it’s laminated. We wouldn’t want any accidents to happen.
Screen Shot 2015-06-18 at 11.14.21 AM

Life Is A Pump And Dump, Front Run The XCP Pump

Spend enough time in the right niches of the bitcoin community, and you are bound to hear “life is a pump and dump” almost too frequently. Unfortunately for traders, the only pumping bitcoin has been doing recently has been in the amount of outstanding USD swaps and margin longs on BFX. Three months of stability, but not everywhere. Some of the more savvy traders have moved over to 1broker to take advantage of the side effects of Central Banking Gone Wild (Summer Edition), but there has still been plenty of action in crypto. A quick look at the Altcoin section of Bitcoin Wisdom shows that quite a few of the “leading” alts have been pumped, and are now being dumped, by bitcoiners with a lot more free time on their hands than we have.

Screen Shot 2015-06-13 at 2.53.50 AMOur focus at shitco.in is on the technology that will revolutionize finance, not some shitty, illiquid altcoin that’s going to be dumped on a new cryptocoiner, likely giving them negative feelings about the whole space.

Last week, while everyone was Reddit arguing over the block size non-issue, a rather substantial piece of news slipped under the radar.

But one thing first about the block size argument, because the drama there is almost worse than the OKC drama (we are waiting for more). Keep arguing and making yourself look bad people, it’s excellent theater. If a suitable conclusion isn’t reached, I’m sure Satoshi will re-appear (re: Dorian situation) and give us the answer (and maybe even GitHub the code for us).

Anyway, so back to that news headline: Symbiont Raises $1.25M Seed Funding from Former NYSE CEO for ‘Smart Securities’ on the Blockchain

We recommend reading all of these full articles for full context.

As Bitcoin Magazine reports:

In March, Bitcoin Magazine reported that Counterparty founders had joined with MathMoney f(x) and its founder Mark Smith as co-founders of the new fintech company Symbiont

Symbiont has announced that it has secured $1.25 million of seed funding from influential financial market leaders including Duncan Niederauer, former CEO of the New York Stock Exchange (NYSE). A ‘Series A’ round of institutional investment is expected to close in the third quarter of 2015.

So why is this a big deal? Anyone who follows Counterparty would have seen this post on March 10: Announcing Symbiont – Building the Next-Generation Platform for Financial Markets

From that blog post:

[in regards to Counterparty]

With the approaching release of the Turing Complete smart contracts system on mainnet, we are at the point where less work needs to be done on the core protocol and more on tools and services that make use of it.

Symbiont is our next step in that direction. Because Symbiont’s technology platform will be based around Counterparty, the core Counterparty technology will remain open source, and will benefit from the greatly increased resources and sustainability this change brings.

We’re all very excited about the potential positive impacts not only to Counterparty, but to the blockchain’s adoption in the systems that power modern finance…

And then on March 31st, this was released: Symbiont Creates Ripple Gateway for Counterparty XCP

Symbiont.io, the blockchain based FinTech startup bridging the gap between mainstream finance and crypto-financial technology, has announced its first product: a Ripple Gateway for Counterparty, over which XCP, Counterparty’s native currency, or any other Counterparty asset may be sent.

“Symbiont is proficient with all of the most advanced technologies in crypto-finance, and is always ready to use the right tool for the job. With this marriage of the Counterparty and Ripple networks, each benefits from compatibility with the other, and the whole is greater than the sum of its parts,”…

In summary, Symbiont is working with all of the leading technologies in crypto-finance (so others besides Counterparty too). Being that the founders of Symbiont are also the founders of Counterparty, we would expect a large number of their projects to be XCP based. They also have an intimate knowledge of the technology, being that they built it.

For anyone who doesn’t know the intimate inner workings of Counterparty, here is a fact worth knowing (in regards to scarcity):

XCP is the fuel for smart contracts. When smart contracts are running, fuel is used for each execution step. Appropriately enough, this fuel is burned (destroyed). This means that the supply of XCP is continously decreasing. However, the cost of fuel adjusts proportionally as the supply of XCP goes down, so that it cannot reach 0.

So how does this relate to pumps and dumps? While everyone was busy fucking around with worthless alt coins, investors who look at the fundamentals and pay attention to worthy news, were busy accumulating XCP.

In addition to the data points mentioned above, also consider this. On February 4, 2015, Coindesk confirmed that the Counterparty developers had left Overstock’s Medici project.

Screen Shot 2015-06-13 at 3.33.17 AMFor perspective, here is the all time XCP chart:

Screen Shot 2015-06-13 at 3.55.56 AMIt’s pretty clear, with the XCP price near all time lows the last few months, that anyone who believes in the Counterparty technology should have been taking advantage of the sale. With a $1.25m seed round from very prominent investors, and a Series A coming in Q3 (estimated), Symbiont has plenty of funding and backing to pursue a variety of Counterparty based projects. The XCP all time high spike was caused by the Medici news, which was far less significant than the recent news regarding Symbiont, and the relationship they have with Counterparty. Granted, that ATH spike was definitely attributed to some FOMO from the simultaneous BTC bubble, we see at least some upward movement from here. We don’t have a target, don’t care to make one, aren’t investment advisers and don’t give investment advice.

By the way, can someone please make a decent charting website for XCP?

Disclaimer: We are long XCP. While everyone was out chasing unicorn dust in alts, we have been accumulating XCP, bitchez.