How Cryptocurrencies Can Fight Global Poverty

Cryptocurrency. Even the word sounds complicated, and media coverage does nothing to dispell that image. Those involved in the industry know that far from being a restricted and technical product, crypto can be an instrument of social change to combat poverty. Over 2 billion people are classified as unbanked or underbanked, which means they lack access to basic financial services. These people also tend to distrust financial institutions. Lack of access to checking accounts and emergency loans leaves them vulnerable to predatory lending practices. These practices include loan sharking, and often involve extortionate interest rates, condemning victims to further financial instability.

There are also large numbers of people who do not have an established identity in the form of a credit or banking history. This is often due to an absence of consistent employment, especially in countries where a cash-centric informal economy remains strong. In Brasil for example, roughly 51% of the population is part of the informal cash economy. While this may help them avoid taxes, it also means that decades of advances in the finance industry has excluded the impoverished. People have effectively been left behind by globalisation because of where they live.

The Poverty Leapfrog

Poverty Leapfrog

In order to connect these people, one must first determine how to grant access to modern services using existing infrastructure. Computers and cellphones for personal use were widely available decades before the first smartphone was released. Compare this to developing nations, and you notice that there was no smooth transition. These communities may never have owned personal computers or cell phones, skipping them entirely and going directly to cheap smartphones.

Pre-2007, huge swathes of Kenya’s population were financially excluded due to low rural penetration. M-Pesa, a mobile payment system, saw an opportunity. Traditional banking is of little use to people who live day-to-day and mainly use cash for their expenses. Although most people in Kenya didn’t own a landline, the adoption of cheap Android smartphones allowed the proliferation of mobile payments. Users also did not have to carry cash on them, a relief in countries with high rates of violence or hyperinflationary currency. Circa 2016, 26.7 million had registered with mobile money transfer services (a whopping 61.3% of the entire population).

China’s population saw a similar boom in mobile payments due to the restrictive regulations of their government. Businesses forced to innovate to avoid constraints have turned the strictures into opportunities. Companies like WeChat and Alipay, now global names, entered the fintech space by creating closed e-payment systems. China now makes trillions of dollars in mobile payments every year, overshadowing countries with superior infrastructure. Users of mobile payments can do everything from making insurance payments to paying their restaurant bill using QR codes, much more advanced than mobile payment infrastructure in the U.S.

Blockchain: A Gateway Technology

Blockchain technology promises a similar leap in access to financial services. The same smartphones grant a gateway for mobile blockchain solutions. Banks can use handset data for credit scoring, and cryptocurrencies can enable direct payments without a third party.

Possibly one of the most important benefits of the blockchain is the potential to bolster transparency and contain corruption. The world loses an estimated 2 trillion dollars a year to corruption. Blockchain systems will introduce a secure record of financial transactions on a tamper-proof distributed ledger, thereby preventing fraud or theft. Japan and Sweden are already beginning test projects, the performance of which could spread the tech to other countries.

Finally, expect to see a huge proliferation of small and micro business loans. Helping small businesses grow is key to aiding and growing underserved, poverty-line areas. Not only do they provide an income stream for business owners, but they also provide services to the community. Money spent on these services also stays within the community, growing the local economy.

While blockchain is certainly making waves as an investment for huge businesses and wealthy investors, the number of use cases for global aid efforts continues to grow. From theft-proof donations to financial fraud prevention and transparency in kleptocratic governments, it’s clear that the biggest benefits will be seen in poverty-stricken developing countries. Ironically for an industry where the most outspoken names are mainly westerners, the dream of a national crypto-economy being espoused may first come to pass in Africa or South America.

 

Blockchain in Government: Making Operations More Efficient

Blockchain in Government: An Unlikely Match?

At the surface, blockchain in government operations doesn’t appear to be a likely match. There’s a common perception that technology and governments are competing against one another. This is likely due to the fact that cryptocurrencies, for example, reduce or even eliminate the need for centralized institutions.

Even though competition between blockchain projects and government institutions could be an issue to watch out for, looking only at this possibility doesn’t show the bigger picture. In reality, we’re beginning to see many nations trend towards greater utilization of blockchain technology for many reasons.

National Cryptocurrencies

Beginning in 2017, a number of nations began to consider implementing their own national cryptocurrencies. The Venezuelan Petro, Russian Cryptoruble, and Estonian Estcoin are all examples of governments utilizing blockchain to create cryptocurrencies. But as of June 2018, we haven’t seen much progress from these digital currencies.

For example, the Venezuelan Petro was ruled unconstitutional by the Venezuelan National Assembly in March 2018. And many governments throughout the world have criticized this project. While Estcoin appeared to be a bit more promising, Estonia has since called off (or at least scaled back) plans of launching its national cryptocurrency after criticism from the European Central Bank.

Even though the implementation of national cryptocurrencies seen thus far hasn’t seemed to work, many people view the creation of these projects as inevitable in the long-term, which will bring more efficiency and transparency to national economies.

Better Voting Systems

Election fraud continues to be a major issue for governments around the world. Voting machine hacks and intentional voting miscounts from groups in power have led to rampant distrust amongst voters. Blockchain-based voting systems have the potential to solve these issues and gain widespread adoption.

Since votes on the blockchain are immutable and can be tracked in real-time, governments have the potential to determine election winners in a more efficient manner. Blockchain’s public structure also eliminates the possibility of election tampering. Follow My Vote and Polys are a few examples of blockchain projects working on such technologies.

It’s still unknown when we will see these systems implemented in nations like the US. However, some predict that 2019 or 2020 is a likely possibility.

Blockchain in Government

Blockchain improves voting systems.

Identity Management

Identity management is another example of an outdated system that benefits from new technological innovations. It’s still unknown how exactly to create official government-approved digital identities. But, a combination of blockchain and biometric technology (i.e. facial recognition or retina scans) could be part of the answer.

Currently, billions of people throughout the world are reliant upon national identity numbers (i.e. social security numbers in the US) to verify identity. However, these systems have rampant problems with fraud. Additionally, physical identity cards are limited in their uses for remote identity verification. Oftentimes, identity management requires in-person verification, which can lead to long waiting times at government offices, polling places, and many other locations.

Estonia is one nation aiming to change the future of identity management. Although Estonia has scaled back plans on implementing blockchain to create a national cryptocurrency, the government still has plans to use blockchain to create an improved identity management system. The government plans to use Estcoin as a part of Estonia’s e-residency, a program that simplifies the process for foreigners looking to establish residency in the country.

In this example, identity management with blockchain makes it easier for e-residents to sign official documents and set up companies remotely. Other governments around the world could use this example to transform their identity management systems and reduce barriers to voter participation, government-provided benefits, and more.

Taxes

While many governments are starting to tax cryptocurrency earnings, blockchain technology itself could also make taxation systems more efficient. The time it takes to process tax-related information could be reduced drastically from weeks or months to a matter of seconds. There are several factors that make this possible. One example, smart contracts could replace the current manually-executed intra-firm agreements.

Governments could also create blockchain-based taxation systems that automatically check for Missing Trader Intra–Community (MTIC) fraud, commonly known as ‘carousel fraud’, across EU member states. MTIC accounts for billions of Euros in lost tax revenue every year. By creating a digital ledger for all traded goods and services, governments can create a system for verified transactions, tying all the information in one, immutable chain.

Blockchain reduces or even eliminates the need for manual verification, allowing businesses to optimize their operations while also ensuring governments don’t lose potential tax revenue in the process. For employees, blockchain-based taxation also means that tax returns are processed much quicker.

blockchain taxes

Blockchain improves tax collection efficiency.

Blockchain in Government: The Future

In the early years of blockchain, many governments have been skeptical and even somewhat resistant to the public’s adoption. Nonetheless, we are beginning to see more interest as well as implementations of blockchain initiatives led by governments around the world. It appears that the sentiment towards blockchain is beginning to change.

As we continue to see blockchain advancements and a greater demand for innovation in government, the adoption of blockchain could soon move from a technology that’s “good to have” to one that’s necessary. Blockchain in government has the potential to give real meaning to overly-used political buzzwords like “transparency” and create noticeable improvements in efficiency overall.

Article by Delton Rhodes. This article was originally published on Coincentral

To keep up with the latest news, events, and developments in the cryptocurrency and blockchain sector, follow XCH4NGE on our social media platforms by clicking here.

 

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EOS Founder Wants to Scrap Constitution and Start Over

Two weeks after the EOS Mainnet launch, founder/architect Dan Larimer has proposed ‘scrapping’ the platform’s constitution. Amid mounting concern about the company’s on-chain governance system, Larimer has called the model “unwise” and says that he wants to build an entirely new one.

EOS & the Crypto-Government

The EOS model uses a system called delegated proof-of-stake (dPOS) to validate the blockchain. In the proof-of-work system that underpins Bitcoin for example, anyone with the correct hardware can mine blocks. Users of EOS can not simply verify transactions on the blockchain, however. There are only 21 block producers, and they are constantly rotating; users can vote every two minutes. EOS pays block producers $10,000 per day to maintain the blockchain. As such, it’s hardly a surprise that over 350 candidates compete for just 21 positions.

Together, the block producers form a group called EOS Core Arbitration Forum (ECAF). ECAF serves as the ‘governmental body’ that resolves disputes between token owners but has recently come under fire. Users concerns include the poorly defined role of the forum and the control that they have over network transactions. A large number of crypto users are anti-ECAF, claiming that the centralization of power is antithetical to the goals of the community.

The block producers themselves, however, reject this reasoning. They say that supporters want a blockchain that’s fast and cheap, but also has the governance structure to make decisions in the best interest of the users. While a noble idea, the low-quality of their efforts to date have undermined user confidence in the group. ECAF circulates verdicts over social media as hand-signed PDF screenshots rather than stored in a secure location. This has led some to accuse the block producers of achieving “consensus by conference call”.

Judge, Jury, and Executioner

These accusations have only become more fervent after several orders to freeze accounts compromised by hackers. ECAF can censor transactions, angering the crypto-sphere. Their processes are also held to be unprofessional, angering EOS users. Both groups have valid points. The producers are meant to be held to predictable and rational rules of governance, although this rulebook is still very much in development.

The top 21 Block Producers unanimously agreed to assist in the defense and recovery of property when member’s private keys were compromised through hacking or scamming. This June 17th pledge was called EOS911, an initiative designed to help users with compromised private keys. What they couldn’t foresee were the unintended consequences.

The first freeze order stopped 7 compromised accounts from making transactions through a unanimous intervention by block producers just three days after launch. An order to freeze another 27 accounts followed 5 days later, with no reason given other than a promise of future justification. After two days, an order was given to revoke tokens from a handful of addresses; this order, however, was a fraud.

The (understandable) confusion begot chaos, as major block producer EOS New York announced it could not execute any ECAF statement with any confidence. EOS New York also added that normal processing would only resume when “communications can be established on-chain”. Co-founder and head of strategy reportedly commented that ECAF needed to “figure their own shit out”, specifically referring to “rampant misunderstanding about what arbitration is” on the EOS network. He also suggested that ECAF needs to develop improved processes and increase their transparency.

Moving Forward

While troubling for the fifth largest cryptocurrency, the crisis appears to have spurred change. Telegram channels and forums abound with constructive conversation and debate about the future of the arbitration process. Sam Saopznick, who sent the second ECAF freeze order, previously stated that the arbitrator “is working… to address the outstanding issues”.

Block producers have been busy in the meantime. In South America, for example, EOS Argentina deployed network-based applications for document verification on the blockchain. Despite positive steps, the community may continue to thrash due to the widespread confusion over stakeholder and arbitration roles, compounded by the haphazard manner in which ECAF operates.

They have a website, but “you’d think it was some shady shell company,” according to Rose. That is exactly the sort of sloppiness that leads to misinformation (and indeed fraud) which still plagues the crypto-sphere.

A Fresh Start

The publicity appears to have spurred the shock announcement. Rose has started work on a new constitution, which only requires arbitration for the correction of smart contract intentions. Larimer explained “an arbitrator can render an opinion, and the parties can either comply or not and the arbitrator can indicate whether a party is in good standing … that is it.” He went on to say that an arbitrator should never have the unbridled power to control anything other than their own assets, and that such power is simply moving the potential for fraud up the ladder to the network governance level.

Many critics say that the EOS team should have foreseen this issue. Jameson Lopp, a Bitcoin dev, was less than shocked at the recent developments:

EOS
Jameson Lopp’s tweet pulls no punches.

The EOS community has, for the most part, met Larimer’s statement with relief and support. They shouldn’t rest easy yet; there is still a large hurdle to clear. The current constitution requires a minimum of 15% of token holders to make an amendment. Supporters must also outnumber those against the amendment by 10% for a period of 30 consecutive days within a 120-day period. Essentially, don’t expect to see any constitutional changes earlier than 3-4 months.

A nightmare for any organisation, this disarray is doubly embarrassing for one of the only cryptocurrencies with a governance system. Instead of showing the way forward, EOS has taken a big step backward. For network users, the new constitution cannot come quickly enough; they too are acutely aware the whole world is watching.

 

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Quantum Computing | Bitcoin’s Doomsday Maker

Government intervention, poor usability, high network fees – which one of these poses the most significant threat to Bitcoin? The answer may be none of them.

Although the Bitcoin network is incredibly secure under the current condition of computers, there’s an even greater threat looming overhead. Quantum computers have the potential to make Bitcoin’s security measures obsolete, effectively destroying the once dominant cryptocurrency.

What is Quantum Computing?

Simply put, a quantum computer is a supercomputer held at near absolute zero temperatures (-459.67°F). At this temperature, the subatomic particles in the computer’s processor act in ways that aren’t possible under normal conditions.

Contrary to popular belief, quantum computers aren’t necessarily faster than traditional ones. So, unfortunately, they won’t improve the speed of your Netflix stream.

But the quantum anomalies that occur at freezing temperatures do enable them to perform calculations that are theoretically impossible for ordinary computers to execute in an acceptable time frame. Some use-cases of these calculations include the simulation of molecules, protein folding, and logistics optimization.

But how exactly does a quantum computer accomplish this?

quantum computer
Inside a Quantum Computer. Credit: IBM Research

Superpositioning and Entanglement

Quantum computers have two properties that give them the ability to perform complex calculations at an efficient rate. The first is superpositioning.

Traditional computers store information as a series of 0’s and 1’s. Quantum computers, on the other hand, store their data using a set of qubits – superpositions of 0 and 1. The qubits effectively exist in two states at once.

When you connect these qubits in a system, the number of states grows exponentially. One qubit has two states, two have four states, four have eight, and so on. The number of states directly follows the equation:

# of states = 2   where “n” is the number of qubits.

The second property of quantum computers is entanglement. When two qubits are entangled with each other, measuring the value of one qubit will automatically tell you the value of the other qubit as well. Entangling all the superpositioned qubits of a quantum computer will give you every possible state involved.

How Does Quantum Computing Affect Bitcoin?

Quantum computers are exceptionally skilled at solving cryptographic calculations. To fully understand the threat that this poses to Bitcoin (and other cryptocurrencies), we should first rehash public keys, private keys, and how Bitcoin links the two together.

A Quick Bitcoin Refresher

Every Bitcoin wallet has a private key and a public key. Your public key is the wallet address to which you receive funds, and it’s created from your private key. Your private key is effectively the “password” you need to send funds.

To send funds, specifically bitcoin, you sign each transaction using an elliptic curve signature scheme. This scheme proves to others that you own the private key without having to broadcast what it is. The math behind this scheme also makes creating a public key from a private one easy while doing the reverse is nearly impossible.

That may change soon, though, with quantum computers.

Quantum Calculations

A common misconception: One quantum computer could provide enough hashing power to perform a 51% attack on the Bitcoin network.

The reality: ASIC miners are, and will be for at least ten years, much more efficient at mining than quantum computers. There’s little to no risk of a quantum computer sabotaging the Bitcoin network through a 51% attack. The real threat lies in a quantum computers ability to deride private keys from the network’s public keys.

The inefficiencies of today’s computers keep the private keys that elliptic curve signatures generate relatively safe. It wouldn’t be worth the time or resources to guess private keys through brute force.

A traditional computer would need to perform 2128 or 340,282,366,920,938,463,463,374,607,431,768,211,456 basic operations to derive a Bitcoin private key from a public address.

However, using Shor’s algorithm, a significantly large quantum computer needs just 1283 or 2,097,152 operations to figure out a private key. That’s multiple orders of magnitude less, making the task of figuring out key relationships a possibility.

How Screwed is Bitcoin?

The good news: Bitcoin should be fine. Quantum computers that are efficient enough to calculate Bitcoin’s key relationships are still many years out. And solutions aren’t as complicated as they may seem.

One-time Addresses

The simplest, but not so feasible, solution is to only use each Bitcoin address once. When following this practice, your public address is only visible between the time you initiate your transaction to when it enters a block. People rarely change their address with each transaction, though.

Signature Algorithm Change

The recommended solution is to change Bitcoin’s public key algorithm from elliptic curve signatures to an algorithm that’s quantum resistant.

Lamport signatures are a common suggestion for the replacement. These signatures are much larger than their elliptic curve counterparts, though (about 169 times larger). This size difference hinders scalability, even with the implementation of the Lightning Network.

Additionally, Lamport signature keys still have a limited amount of use before you’d need to create a new key pair. This number may even be as low as one use.

With any change to the public key algorithm, you would also need to soft fork Bitcoin and have all users transfer their funds to the new address type. Any funds left behind would be at risk for theft.

New Cryptocurrency

Some teams are building out their cryptocurrency with quantum resistance in mind.

IOTA, for example, uses one-time Winternitz signatures to create key pairs. This strategy renders addresses useless almost instantaneously after sending funds, leaving your address susceptible to quantum attack for a few seconds at most.

The Nexus team advertises their 3D-blockchain as the “first truly quantum-resistant blockchain.” It updates and obscures your keys after every transaction with a scheme the team calls “signature chains.”

Another project, Hcash applies BLISS signatures to prevent quantum computing.

The Future of Quantum Computing & Resistance

These projects aren’t alone in their fight against quantum computing, though. Even though you don’t hear much about quantum resistance in association with other projects, they’re still working on it. Ethereum, for one, has proposals that would enable different types of signature algorithms for each user.

With high-powered quantum computers still years away, most projects should have plenty of time to build up their defenses. So you can rest easy at night knowing that Bitcoin should be here to stay.


Article by Steven Buchko. This article was originally posted at Coincentral.com

To keep up with the latest news, events, and developments in the cryptocurrency and blockchain sector, follow XCH4NGE on our social media platforms by clicking here.

 

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Is Cryptocurrency the New “Dot-com” Bubble?

The Dot-com bubble during early adoption of public internet has become the go-to argument of crypto sceptics. Do they have a point?

The Boom

Everyone who’s dipped their toes into the crypto and blockchain arena has encountered it. The knowing looks between friends and family, the authoritative “be careful, it’s just a bubble”. Doubters love to compare Bitcoin to the dot-com bubble, but often they fail to think it through.

Just as billions are pouring into ICO’s, investors once flocked to anything internet related with open checkbooks. Investors have pumped more into ICO’s in the first half of 2018 than all of 2017 despite the lack of regulatory oversight, and there are no signs of a slow down. There’s no question that the signs all point to a bubble, but the real question is, is this a bad thing?

The New Internet?

With every great step forward in tech, there have been doubters. Personal computers? Who would want one of those enormous machines in their house! The internet? Just a novelty. Scepticism is normal, healthy even, but it does mean that the general public rarely grasps exactly how deeply integrated new technology may be in their daily lives.

The current surge in crypto investment is different from the dot-com boom in one crucial way; the internet. Public internet had not yet reached maturity, and investment opportunities were often found through traditional media. Today there are hundreds of news sites for every niche imaginable, all competing to tell you about the next big thing. According to eToro CEO Yoni Assia, this extensive and far-reaching distribution network has changed the game.

You have something that you’ve never had before, not even in the dotcom bubble: if you have a genius idea now and you put a whitepaper on it and suddenly you have 100,000 millionaires reading it and saying ‘hmm, that’s a really good idea.’ If 1,000 put in $10,000 — which is not a lot of money for those 100,000 — you just raised $10 million for your ICO. That scale has never happened before.

Unfortunately, not every idea that attracts funding is going to be a genius idea. As with the Dot-com bubble, many shady ICO’s have little more to offer than an idea and a vague whitepaper. Investors will inevitably lose large amounts of money on dubious projects. While unfortunate for those investors, the projects that remain will be stronger for it.

Bubbles are Relative

While casualties of the dot-com bubble are often touted as a cautionary tale for investors, it’s just as important to remember what remained afterwards. The concepts of digital business and e-commerce didn’t disappear, but websites and businesses that couldn’t support themselves did.

This sort of survival of the fittest scenario is usually a precursor to huge, exponential changes. When we think about the companies that survived the bubble, monsters like Apple, Amazon, Google, we can understand the huge roles they have played in how many of us lead our lives. As such, it would be foolish to not expect at least a few crypto projects to do the same.

In fact, this time around investors and developers have much, much faster and more powerful technology, as well as the bonus of hindsight. Many will crumble, sure, but the ones that remain may change the world.

 

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