Japan’s National Police: 537 Arrests for Money Laundering in 2019

Anti-money laundering regulations on cryptocurrency and blockchain transactions may be having a positive outcome in East Asia.
According to an article released by the Japanese newspaper Nikkei on Mar. 3, the National Police Agency of Japan brought criminal charges in 537 cases against financial institutions involving money laundering or other illegal transactions. These cases come from a total of 440,492 such suspicious transactions reported to the police in 2019.
Data from 300,786 transactions out of the 440,492 were determined to have grounds for investigations. Among all companies that were reported, depository institutions such as banks accounted for 80% of all cases, followed by credit card companies at 5.6%. The number of cryptocurrency operators reported was 5,996 (1.4%), down from 1,100 in 2018.
Technological advances have made it easier to report cases of money laundering in Japan, but also for people to find new ways to conduct illicit transactions. However, while the number of cases reported in Japan skyrocketed, the percentage resulting in charges continues to decrease.
Japan’s National Police Agency said there were more incident reports on illegal transactions in 2019 than ever before. The previous year, there were 417,465 cases.
What’s responsible for the increase in reports of money launderingConsidering the Japanese criminal justice system’s reputation for a 99% conviction rate following the decision to prosecute, the percentage of cases charged with illicit crypto transactions seems remarkably low.
As crypto adoption keeps growing and the number of use cases for cryptocurrency expands, illicit transactions on a percentage basis keep diminishing. For 2019, the National Police Agency attributed the increase in reporting of suspicious transactions involving money laundering to additional surveillance of financial institutions.

Reginald Fowler Pleads Not Guilty to New Crypto Capital Charges

Reginald Fowler has pleaded not guilty to a new charge of wire fraud during a March 6 hearing at the United States District Court for the Southern District of New York.
On Feb. 20, the U.S. government filed a superseding indictment against Fowler, adding wire fraud to existing charges of bank fraud, illegal money transfer and conspiracy stemming from Crypto Capital alleged shadow banking practices.
James McGovern, Fowler’s attorney, criticized the fresh indictment, asserting that he has “no idea what [Fowler has] been charged with,” such as when and how the alleged wire fraud took place.
“I've never really seen a superseding indictment when it provides less information than the one before,” McGovern told the court.
Fowler was previously offered a plea deal, with reports claiming that he had “appeared ready to plead guilty” to a single count on Jan. 15. However, by Jan. 31, the U.S. government announced that Fowler had rejected the offer, which it subsequently withdrew.
Fowler to face trial in JanuaryIn light of the rejected offer, U.S. attorney Jessica Fender indicated that the government wished to go to trial during April.
Fowler’s representation pushed back against the prospect of an April trial, stating: “The case is just changed dramatically by the inclusion of this new count.” McGovern claimed that there are 30,000 documents-worth of discovery that he has not yet received that require review before going to trial.
Judge Andrew Carter Jr. ruled in favor of Fowler, pushing the trial back until Jan. 11, 2021. The trial is expected to last between four and five weeks.
Crypto Capital provided shadow banking services to cryptocurrency exchangesThe former NFL team owner is accused of acting as an unlicensed money transmitter and deceiving financial institutions as to the purpose of his accounts held with them. Through Crypto Capital, he allegedly provided shadow banking services to numerous cryptocurrency exchanges, including Bitfinex, Binance, Cex.io, Coinapult and QuadrigaCX.
Crypto Capital reportedly began providing bank services to Bitfinex when the exchange was kicked out of Taiwan in 2017. For two years, Bitfinex customers were allegedly instructed to deposit funds to accounts held in the name of various Crypto Capital subsidiaries at financial institutions all over the world.
In October 2019, Crypto Capital executive Ivan Lee was arrested in Poland, with reports tying him to $350 million in funds that were seized by authorities from a Crypto Capital subsidiary during April 2018. The seized funds allegedly included money that the firm was laundering for a Colombian narcotics cartel.
Crypto Capital remains a centerpiece to the ongoing investigation by the New York State Office into Bitfinex’s failure to disclose the loss of $880 million customer funds and a subsequent loan from sister-company Tether.
Bitfinex and Tether claim that the funds are not lost, rather have been seized alongside the accounts of various Crypto Capital subsidiaries.

CryptoKitties Developers Launch Playground for Developers

On March 5, CryptoKitties creator Dapper Labs announced the launch of Flow Playground — an interactive interface that lets developers experiment with developing applications on the company’s Flow blockchain.
Developers are able to write and run smart contracts, and will be able to explore Dapper Labs “new resource-oriented programming language” Cadence. The language is designed to simplify programming tokenized assets and includes features from Swift and Rust.
Flow Playground also lets users create non-fungible tokens, mint fungible tokens, and build a marketplace.
Flow blockchain built to alleviate “pain of implementing smart contracts”Dieter Shirley, the CTO of Dapper Labs, told Cointelegraph that “a lot of the teams that are active in the [non-fungible token] space” have expressed interest in experimenting with the platform.
Shirley added that the Flow blockchain was built to alleviate the “pain of implementing smart contracts” using other protocols.
The Flow blockchain was introduced in September 2019, with Dapper Labs describing it as a “developer-friendly blockchain built to support entire ecosystems of apps, games, and the digital assets that power them.”
Warner Music and UFC to launch digital assets on FlowSince launching Flow, Dapper Labs has inked several partnerships with major entertainment corporations to create tradeable blockchain-based merchandise.
In September 2019, Warner Music revealed that its blockchain team would work with Dapper Labs to create tokenized assets on its public chain.
On Feb. 26, 2020, Dapper Labs announced it would work with the UFC to launch blockchain-based assets accompanying a blockchain game for mixed martial arts fans. The game will allow fans to own “tokenized representations of their favorite fighters,” which they can then train and level up.
Shirley stated that he expects the game will spawn a flourishing digital ecosystem including secondary trading markets for the tokens.

Reserve Bank of India to Appeal Supreme Court’s Crypto Decision

The Reserve Bank of India (RBI) is planning to file a petition against the recent landmark judgment made by the Supreme Court that nullified the controversial banking ban it imposed on companies transacting in cryptocurrencies.
According to a report by The Economic Times on March 6, the RBI is worried that the court’s decision could lead to cryptocurrency trading and put the banking system at risk.
Challenging the Supreme Court’s decisionAs Cointelegraph reported, on March 4 the Supreme Court nullified the RBI’s blanket ban on banks dealing with crypto businesses. The central bank had initially enforced the ban in July 2018.
This led to petitions from industry players and public alike, until the challenge was brought to the Supreme Court by the Internet & Mobile Association of India (IAMAI), a not for profit industry body representing internet consumers and investors.
The Supreme Court’s decision to overturn the ban followed two weeks of hearings in January this year. The RBI will now seek a review of this ruling.
No proof that the banking system is at riskThe RBI’s concern that this may result in cryptocurrency trading may already be moot, as many Indian cryptocurrency exchanges already resumed fiat deposits and withdrawals within 24 hours of the ban being lifted.
However, the court ruling stated that RBI had not conclusively shown that cryptocurrency trading was damaging. Unless it can do so, the Supreme Court is unlikely to alter its decision, despite the central bank’s protests.
The central bank may also face another issue, as many companies were forced to cease trading after the ban and may seek compensation. As Abhishek Rastogi, a lawyer representing one of the cryptocurrency platforms explained:
“The Supreme Court may look at the RBI’s review petition but as of now the cryptocurrency platforms can operate in India. Many companies have even gone bankrupt after the RBI’s diktat and they may also look to initiate action in this regard.”

The History of the Bitter Debate Over Ethereum’s ProgPoW

In depth
The Ethereum (ETH) community has recently been engaged in a bitter debate sparked by a proposed mining algorithm change. Dubbed ProgPoW, the proposal would invalidate all currently existing ASICs to only allow mining Ethereum with a GPU.
While ProgPoW was born in 2018, it has seen alternate periods of stasis and active discussion during the two years of development. The latest round of debates was sparked by what, to some, seemed like a sudden reintroduction of ProgPoW into the Ethereum roadmap. During the Feb. 21 Dev call, Ethereum Improvement Proposal (EIP) 1057 — a formal ProgPoW specification — was marked as accepted and final.
Public dissent soon followed, eventually materializing into EIP 2538 on Feb. 25, which collected signatures from stakeholders opposed to the introduction of ProgPoW.
Cointelegraph tracked down Kristy Leigh-Minehan, one of the three original members of the IfDefElse group that created ProgPoW in 2018, to understand more about the algorithm and why it remains so divisive to this day. Cointelegraph also reached out to several Ethereum Foundation representatives, who declined to comment.
What is ProgPoW?Shorthand for Programmatic Proof of Work, ProgPoW is a novel mining algorithm designed to be as resistant to ASIC — Application Specific Integrated Circuit — machines as possible. These devices are specifically designed for the task of mining, which makes them much more efficient than consumer options such as CPUs and GPUs.
Making an algorithm that remains secure against optimized hardware has been traditionally a difficult task. The current algorithm used by Ethereum — Ethash — has also been designed for ASIC resistance, but its protection did not last for long. As Minehan recounted, rumors of an Ethereum ASIC were the initial motivation for her group’s work:
“ProgPoW was born out of the ASIC resistance threads in March 2018. An Ethereum contributor called Pipermerriam posted EIP 958, which was an EIP to modify the mining algorithm of Ethereum to be ASIC resistant. This was triggered by the discovery of the E3 ASIC miner by Bitmain, which had been leaked on CNBC.”
And even though it was later understood that the E3 was a crude device, with Minehan describing it as “a bunch of DDR 3 memory connected to their [Bitmain’s] Sophon chips,” the ball on ASIC resistance got rolling. Proponents of ProgPoW argue that it’s harder to manufacture specialized Ethereum ASICs, which will lead to fewer miners and subsequent centralization.
A poll by Vlad Zamfir, researcher at Ethereum Foundation (EF), concluded in April 2018 with 57% of votes in favor of a hard fork preserving ASIC resistance. Around the same time, EIP 969 proposed to make a small change in Ethash to break existing ASICs. Minehan continued:
“Those two EIPs, plus the constant discussion around ASIC resistance was what really spurred us — as IfDefElse — to start looking more into how would you go build a truly ASIC resistant algorithm.”
From a high level technical perspective, Minehan explained that ProgPoW works by tweaking Ethash to utilize 100% of a GPU chip. This was because ASIC manufacturers generally try to remove as many parts of it as possible, as she elaborated:
“The reason we do that is because currently when you go to build an ASIC, what you do is you strip away portions of a GPU. You basically say: ‘hey, here's the reference code, here's the GPU — which parts can we take away from the chip?’”
Ethash attempted to defend from this by trying to utilize the GPU as much as possible, which is why some of ProgPoW’s technical changes are small, but crucial alterations to Ethash that fix some of its inefficiencies and vulnerabilities. “I just think that whoever designed it [Ethash] wasn't a GPU programmer, so he missed some basic things,” she added.
Opposition to ProgPoWMinehan noted that ProgPoW immediately received criticism for supposedly delaying the implementation of the Ethereum 2.0 roadmap. She said:
“A few people were against it initially, due to the pressure it would put on Casper's transition and the Casper Finality Gadget — which, as many people know, is now completely off Ethereum 1.0’s roadmap.”
Yet, she argued that opposition was mild in 2018, as ASIC resistance was still an important goal for the Ethereum community. She continued:
“In 2018 there actually weren't a lot of negative debates about ProgPoW. If you go back through the original EIPs, you'll see a lot of positive discussion and over one thousand people voted on GitHub for research into ASIC resistance.”
In September 2018, Linzhi Mining announced it would release a powerful Ethash ASIC, which signaled the beginning of what she called the “Linzhi saga.” The company actively and openly championed an anti-ProgPoW stance, which Minehan believes involved untruthful arguments, such as “weird posts” claiming they could design an ASIC for ProgPoW. She concluded:
“Linzhi created a lot of damage — and I think a lot of the political stress — around ProgPoW […] They have been oddly quiet since I’ve resigned from Core Scientific — no release updates, nothing on their Telegram […] I think there were special interests [from Linzhi] involved [in the debate] at the time in 2019.”
Some of the damage may have included rumors of ProgPoW being created by the two main GPU manufacturers — AMD and Nvidia — “which is complete crap” she said.
Spurred by the controversy in early 2019, a community vote on ProgPoW was held via a dedicated website. When the voting period ended in April 2019, over 93% of respondents controlling 2.93 million ETH stated their support for ProgPoW. While the Ethereum core team had repeatedly agreed and then backtracked on the proposal, it was eventually settled that ProgPoW would be implemented — provided it passed a stringent audit.
This was the last major event in the ProgPoW history, until 2020 and the apparently sudden inclusion of ProgPoW. Minehan explained:
“What had happened is ProgPoW had been scheduled for inclusion. It never actually fell off the EIP list and it passed its audits with, I would say, flying colours.”
Renewed debateMinehan believes that a lot of the current controversy stems from poor delivery of the news, a view that is also shared by Ethereum co-founder Vitalik Buterin. She also clarified that ProgPoW is still not fully accepted, saying that “the intention of the [developer meeting] was to basically set a date [of inclusion].”
Synthetix founder Kain Warwick, one of the signers of the anti-ProgPoW proposal, summarized his thoughts on the matter with Cointelegraph. He elaborated further on the perceived lack of communication:
“There seems to be a disconnect between the people building on Ethereum and the core devs building Ethereum […] I think the anti-ProgPoW side feels that they were not informed and listened to and so are making a point. But philosophically, contentiousness itself is a strong enough argument to block an EIP — irrespective of the origin of that contentiousness.”
While Minehan tentatively framed the current anti-ProgPoW side as decentralized finance (DeFi) stakeholders, Warwick believes that it is selection bias:
“Many people building on Ethereum are doing stuff in DeFi so you end up with the appearance that DeFi is against ProgPoW, when there is nothing particular about DeFi that implies opposition to ProgPoW.”
This may also be seen in a comparison with 2019 debates. Some of the more prominent opponents of ProgPoW today, like Gnosis’ Eric Conner or Martin Köppelmann, were also strongly opposed to it one year ago — when DeFi was still nascent.
According to Warwick, the main argument against ProgPoW is that it is a “poor trade-off in terms of risk.” He summarized the other side’s position:
“I think the pro-ProgPoW side feels at this point that a lot of time and effort has been put into ProgPoW and there are no really strong arguments against it on merits, and that sentiment with no substance is not sufficient to block an EIP.”
Warwick conceded that Ethereum protocol governance may need some specialization, as app builders are already involved in their own ecosystems and may struggle to keep up with both. Nevertheless, he believes that ProgPoW is unlikely to be implemented, as “the community is now pretty dug in on the principle of this issue.”
A recently found vulnerability is also driving differing points of view. Opponents of the change see it as a manifestation of its inherent risk, while Minehan sees it as strengthening the algorithm.
The importance of ASIC resistanceMinehan believes that the Ethereum community became gradually less interested in ASIC resistance since 2018, despite the fact that its yellow paper clearly opposed specialized mining devices. The ProgPoW debate is — according to her — also a struggle between those who wish to uphold Ethereum’s initial principles, and those who believe in the protocol’s evolution. “Very much a philosophical debate more than it is a technical one at this point,” she concluded.
Though some may see the example of Bitcoin as proof that ASICs are not a threat, she warned against such views:
“It's important people understand that each coin is like its own unique biome. […] In Bitcoin you want ASICs. Bitcoin ASICs have become so specialized that […] it's become the perfect hardware of choice to actually promote people to be aligned with the incentives of the network.”
She explained that Ethereum ASICs do not benefit from the many years of development and supply chain maturation for Bitcoin miners. During this time, she argues that the industry became mature enough that access to ASICs is no longer limited to a select few actors. “Ethereum doesn’t have ten years of proof of work development,” she noted.
Furthermore, she noted that Ethereum ASICs are very unlikely to become widely accessible, even with years of development. She explained:
“There is a big difference in skill gap between designing a memory-hard ASIC […] and building a SHA-256 ASIC. […] In Ethereum, if only a few people can pull off that highly specialized ASIC, it naturally becomes much more centralized.”
While she acknowledged that making competitive Bitcoin ASICs is also hard, ASICs for memory-hard algorithms such as Ethash pose unique challenges:
“Many people don't know this, but there are restrictions on memory controllers and memory parts. Certain chips have restrictions on which country they can be sold to. Thus, memory-based ASICs often have supply chain restrictions as well.”
The combination of the above factors, as well as poorly-known weaknesses in Ethash, make Ethereum ASICs a highly centralized commodity. She summarized:
“You don't want to have an algorithm that is in the middle. You either want to have an algorithm that's easy to make an ASIC for, or really hard to make an ASIC for.”
Debate continuesExhaustion from several years of debates is starting to show. Minehan believes that many of the original participants have since grown apathetic — including herself. “At this point, I am completely neutral,” she said. Vitalik Buterin also commented that he is “fine either way” with ProgPoW,
As the ProgPoW controversy still continues, Buterin highlighted that Ethereum lacks a mechanism to conclusively reject proposals — the exhaustion from continuous Twitter debates seems to be the currently accepted solution. “But that seems suboptimal,” he concluded.
The next stage in the ProPoW debate comes on Friday 14:00 UTC with a meeting of the Ethereum Core Developers. You can listen in here.

London Blockchain Summit: Crypto Meets Coronavirus

Event Recap
Day One, March 5The world has a fever. A fever for blockchain. But that’s not the only infectious substance in the room. The spectre of the spiralling Coronavirus crisis looms large over today’s conference in the United Kingdom. London has sold out of hand sanitizer and some of blockchain’s biggest names are fist-bumping and elbow-tapping at London Blockchain Week to avoid hand contact.
Although the summit is about extolling the virtues of blockchain, coronavirus is the elephant in the room. And there’s certainly room for an elephant in the cavernous main hall of 8 Northumberland Avenue, in the beating heart of the U.K. capital, with many of the speakers subject to travel bans or self-isolation.
But organisers of the event are taking a rosy view of a grim situation, and that’s not only due to the intense pink neon lighting that illuminates the venue. Organizer Dr. Jane Thomason kicked off the blockchain bonanza by acknowledging the impact of coronavirus on the event:
‘We’ve had a lot of dropouts, a lot of our international speakers haven’t been able to make it. No one knows what’s going on but you need to wash your hands a lot and don’t sneeze on anyone!”
Blockchain is changing finance and our online realityFounder and CEO of Outlier Ventures Jamie Burke, opened proceedings by ribbing the audience about the fact they were even there in the first place, “I wondered who’d be stupid enough to come to a conference now. I didn’t have a choice!” he said.
Burke spoke passionately about the potential for blockchain to bring about Web 3.0, a new phase in which advanced machine learning fundamentally changes the way in which the internet functions.
Burke told the audience that blockchain can alter the way that predatory platforms use our data, often without consent. “Sovereign software restores the world,” Burke said, adding that Web 3.0 could see a “Cambrian explosion of machine learning,” in which users would experience a new internet framework where it was possible to “bring your own data.”
He doesn’t think we will have to wait long to see big changes: “Sovereign identity will be the thing this year to catalyse web 3.0,” he said.
The industry can’t rest on its laurelsYou might expect a blockchain conference to be full of slavish boosterism, but London Blockchain Week included some pointed criticisms. While crypto media often gives the impression that nothing stands in the way of blockchain technology, some heavy-hitters in today’s conference were cautious about how much impact crypto and blockchain will have in the short term.
Parim Solutions Pty Managing Director Joanne Thornton said that despite the progress that has been made, there was still a long way to go before wholesale investors are ready to get involved in a meaningful way:
“Wholesale investors require regulatory certainty and a high degree of liquidity. There isn’t sufficient liquidity, and a lot of evolution is required for the majority of wholesale investors to be involved in that space.”
Swen Werner, Managing Director of State Street, echoed Thornton’s reservations about the lack of a concrete regulatory framework and insufficient liquidity. Rockaway Capital managing partner Viktor Ficher added: “Liquidity is still the endgame that we are trying to reach. The biggest point is the lack of good assets to invest in.”
DeFi needs more workDeFi, or decentralized finance, is fast becoming one of the buzzwords of 2020. But speakers today were split over the issue. Jonathan Dunsmoor, founder and principal of Dunsmoor Law, P.C., asked the audience how many of them had a digital wallet and suggested the fact that nearly half did not as evidence there’s still much more work to be done for DeFi to become a reality.
Not one to mince words, Dunsmoor was the enfant terrible of the day, stating that digital currencies are an unsuitable basis for DeFi due to their volatility. Dunsmoor’s provocative statements drew criticism from the crowd, with one attendee bellowing “Bull—-”.
Daniel Coheur, COO of Luxembourg-based Tokeny, criticised the term ‘DeFi ‘and argued the direction the burgeoning industry was going in was toxic for growth:
“I think we should stop talking about DeFi. What we do is centralized finance on a decentralized network. What we must avoid is fragmentation. This market will never grow if we start building silos. We need something standardized because it is killing the market. We need critical mass.”
Francesco Roda, Chief Risk Officer at Koine, agreed. “There are so many different initiatives taking place,” she said. “Interoperability is the key element for adoption. We should have critical mass on one particular standard.
ConclusionFor now, it seems the conference will soldier on despite the impact Coronavirus has had. But since I sat down to write this update, the UK has announced its first death from Covid-19. The day’s first speaker Jamie Burke, had ended on a morbid note, telling attendees he would “try and see you next year, no guarantees on that.”
My next update from London Blockchain Week is due tomorrow. Let’s see how that pans out.

Trident Crypto Fund Data Breach: 266,000 Passwords Stolen

In a major privacy breach, the usernames and passwords of more than a quarter of a million Trident Crypto Fund customers have been stolen and published online.
Technical director of cybersecurity firm DeviceLock Ashot Oganesyan told Russian news outlet IZ the database — which contains email addresses, cellphone numbers, encrypted passwords and IP addresses — had been uploaded to various file sharing websites on February 20.
Earlier this week, hackers decrypted and published close to 120,000 of the passwords, potentially enabling them to log into affected users’ accounts and access their funds.
10,000 Russians affectedOganesyan said that while attacks on cryptocurrency exchanges and funds occur quite often, this hack was particularly noteworthy for having a major impact on Russian citizens. He said the database contained the data of about 10,000 Russians:
“Apparently, Russian citizens might already have got their data leaked before. However, no one has taken them into account before, and personal data leakage of 10,000 Trident Crypto Fund users can be considered the first major personal data leak of Russian crypto investors.”
Crypto platform data leaks on the riseSensitive data leaks at cryptocurrency-related businesses are happening ever more frequently. As Cointelegraph reported yesterday, Seychelles-based crypto derivatives exchange Digitex plans to remove its KYC identification processes this week in response to a major user data leak that happened last month.
In August last year, Binance admitted that it had discovered a hacker had obtained access to the KYC data of its customers that had been processed by a partner of the exchange.

Red Swan and Polymath Tokenize $2.2 Billion of High End Real Estate

Texas-based Commercial Real Estate (CRE) marketplace Red Swan has tokenized $2.2 billion worth of real estate assets in partnership with security tokenization firm Polymath.
Red Swan said it has 30,000 accredited investors already registered to use its platform, and has plans to tokenize a further $4 billion in property over the longer term. Red Swan will profit by keeping a percentage of the equity sold.
The issued tokens represent 16 top-tier properties including mid-rise and high-rise apartments in California, New York, and Texas, and a 150-acre hemp farm in Canada’s Ontario province. Tokens worth $780 million will be sold in a pre-sale to accredited investors in what is believed to comprise the world’s largest sale of tokenized real estate to date.
Token sale to target investors with $500K to $10 millionThe token sale will target investors seeking to deploy between $500,000 and $10 million — who lack the capital to purchase top level ‘Class A’ commercial real estate in traditional markets, and have been forced to consider lower-grade, riskier investment opportunities.
Red Swan believes that the tokenization of real estate will allow capital to circulate faster and more freely within the property market, unlocking equity that would otherwise be unable to circulate for long periods of time.
Real estate tokens come of age in 2020Tokenization of real estate has seen a strong start to 2020.
On Feb. 8, African tokenization platform Flyt announced plans to conduct the continent’s first security token offering (STO) for real estate. The company’s FLYT token will be used to redeem shares in the Flyt hospitality Fund — a South African-registered fund that invests in hospitality property and apartment-hotels.
On Jan. 15, blockchain real estate company BrickMark purchased an 80% stake 1,600-square-metre commercial office located in the central business district of Zurich in Switzerland. The purchase was made in exchange for $135 million worth of its BrickMark tokens.

White Label Exchange Provider AlphaPoint Raises $5.6 Million

New York-based white label exchange provider AlphaPoint has raised a further $5.6 million from investors to help scale its exchange technology.
AlphaPoint’s tech is currently used as the backend for 150 exchanges across 35 countries, servicing more than a million end users. The funding will be used for platform development and to roll out more sophisticated exchange features like margin trading, integrated advanced brokerage capabilities, and better liquidity solutions.
Co-founder and CEO of AlphaPoint Igor Telyatnikov said these features are just the tip of the iceberg:
“Stay tuned in 2020 as we will soon announce the release of a series of new liquidity, leverage, and lending products and solutions to our customers.”
Two year gap between funding roundsThis latest funding round comes two years after AlphaPoint drew in $15 million from Mike Novogratz's Galaxy Digital Ventures in 2018 to grow its standing as a digital asset marketplace. In total, the company has raised $23.9 million since it was launched in 2013.
Telyatnikov described the infusion of capital as an effective short-term solution for their current needs:
“This capital injection enables AlphaPoint to continue delivering on our mission to enable access to digital assets globally. We are still in the early days of adoption and utilization of blockchain technology.”
Fresh blood at AlphaPoint The company is also adding two new members to their board of directors and advisory board. Tim Scheve, President and CEO of Janney Montgomery Scott, will join AlphaPoint as an advisor alongside Jan Mayle, founder and CEO of The Mayle Group.

The Steem Takeover and the Coming Proof-of-Stake Crisis

The Steem blockchain reportedly experienced a troubling episode recently, whereby the blockchain’s entire governance system was disturbed. Tron founder Justin Sun, new owner of the Steemit social network based on the Steem token, appears to have successfully executed a takeover of Steem by leveraging not only tokens directly controlled, but also tokens held on several major exchanges, in order to vote out the previous delegates (Steem uses a delegated proof-of-stake system) and install new ones. This means that customers of these exchanges likely had their funds used without their consent in this blockchain power struggle.
While it was an unfortunate episode and certainly fascinating to watch play out, the Steem takeover may have just outlined a critical vulnerability in all proof-of-stake cryptocurrencies — exchanges.
What this means for proof-of-stakeWhat does this mean for proof-of-stake consensus models? In short: they may be more vulnerable than advertised. Proof-of-stake distributes power to holders of the currency, with ownership over more tokens equaling more control over the network. This essentially makes a well-distributed coin supply a necessary component of its security model, with fewer parties owning a significant portion of the supply and no single party able to control and attack the network without massive expense. However, this model assumes holders are using their tokens as they were intended to be used — that is, without trusting third parties with their funds. Unfortunately, this does not always happen, especially with one case in particular: exchanges.
Related: The History and Evolution of Proof-of-Stake
Centralized exchanges tend to control the private keys to large chunks of various cryptocurrencies, often consisting of the largest holder addresses. This means that the practical cost to attack a proof-of-stake network is actually quite a bit lower with the right connections. A malicious actor now has to acquire a relatively smaller portion of the coin supply in order to attack the network if they can either leverage relationships with large (and undoubtedly, morally unscrupulous) exchanges, or exert coercive force against them, either criminal or from a state actor.
Related: Centralized Cryptocurrency Exchanges, Explained
This actually makes factors such as speed, usability and economic use cases vital to the base security of the network. The primary present-day use case for cryptocurrency remains speculative, encouraging the average user to keep their funds on exchanges in order to more easily profit from trading opportunities. This can be compounded by a difficult user experience turning users off from staking on their own, particularly as more and more exchanges now offer staking for users. Few use cases for the coin outside of trading as well as slower transaction speeds in getting coins on and off of exchanges further compound this issue.
Proof-of-work has its own problemsNow, while this raises plenty of concerns as to the viability of purely proof-of-stake consensus models, that isn’t to say that proof-of-work escapes unscathed as the paragon of decentralized security.
Mining, both in the actual control over hashrate and in the production of mining equipment, is notoriously centralized in China among a few large players. An in-depth discussion on potential proof-of-work vulnerabilities is a topic for another day, but suffice to say that a hostile actor could theoretically add to the currently-held hashrate by compromising via force or collusion the hashrate of any of the large mining pools located in China.
Related: The Dangers of Mining Pools: Centralization and Security Issues
This is very similar to the threat posed by centralized exchanges with proof-of-stake, with both cases involving a system which may be decentralized on paper, but in practice congregates control over the network in the hands of a few large players.
What’s the solution? So, how can we fix this problem? In short: it’s difficult and complicated, and to solve it would mean to solidly win in the one area which justifies cryptocurrency’s entire existence. However, there are a few things we can do.
First is to employ hybrid systems mixing elements of proof-of-work and proof-of-stake to reduce the likelihood that a central actor can compromise one of these systems and attack the network as a whole. One key example of such is Dash (DASH). It uses proof-of-work mining combined with a technology called ChainLocks, which leverages collateralized nodes called masternodes to lock-in the blockchain and prevent chain reorganizations in the event that a single miner manages to control over half the network’s hashpower. This is compounded by Dash’s instant transaction settlement functionality, which allows traders to more easily move funds on and off exchanges (reducing the risk of exchanges spinning up a plurality of masternodes using customer funds), as well as the project’s focus on use for payments rather than speculation. However, because masternodes require holding 1,000 units of Dash, smaller holders may pool their funds into staking services on exchanges and similar platforms, exacerbating the centralization of funds onto trusted platforms. Further, even with projects that get it right in both security model and non-speculative usefulness, exchanges will always factor heavily in the crypto economy, and no solution will be comprehensive before relatively decentralized exchange platforms that are both easy to use and address liquidity issues are developed.
Steem’s troubles have woken the crypto world up to the inherent vulnerabilities of proof-of-stake based systems in a world where centralized exchanges control large amounts of funds. Ultimately, this problem will take many steps to fix, including using hybrid security models, increasing non-speculative use cases, and decentralizing exchanges, which will take some time to get right. In the meantime, remember: Not your keys, not your crypto.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Joël Valenzuela is a veteran independent journalist and podcaster, living unbanked off of cryptocurrency since 2016. He previously worked for the Dash decentralized autonomous organization, and now primarily writes and podcasts for the Digital Cash Network on the LBRY decentralized content platform.