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A lightning network payment has been making global rounds on Bitcoin’s secondary layer. The payment, slowly accumulating in value with each passing, is 2.8 ($96) million satoshis strong and still going. Dubbed the Lightning Torch, the payment has changed hands nearly 150 times across 39 countries.

Traditionally, participants announce their ownership over Twitter to seek out the next recipient. Hopeful torch bearers respond to the tweets with a lightning network invoice, and after choosing a user to trust, the current holder adds a discretionary amount to the payment’s sum and sends it to the next holder.

The experiment has been making an impression on the community; so far, Andreas Antonopoulos has been in on it, and most recently, at the time of this writing, Twitter co-founder Jack Dorsey even took up the flame from Matt Odell.

The phenomenon is an exercise in restraint, trust and altruism that personifies Bitcoin’s complicated relationship between trusted and trusteless operations and parties. In this way, it’s fitting. The remarkable origin of the initiative is equally as unconventional as its carrythrough: it all arose from the curiosity and educationally incentivized agency of an anonymous Twitter personality masquerading as an astronautical feline.

Kindling the Fire

Hodlonaut, a self-described “hodl enthusiast” who has been “fulltime bitcoin” since the middle of 2018, is represented by a space-suit-clad tomcat. Superimposed in front of a lunar backdrop, the tomcat’s expression and soft smile signal optimism. His suit is stitched with a BTC logo on the shoulder and NO2X (No Segwit 2X) and UASF (user-activated soft fork) acronyms on his right chest.

The diehard Bitcoin maximalist has been involved with Bitcoin since early 2013, and he’s racked up a respectable following on Twitter. He’s used this platform to ponder Bitcoin philosophy and evangelize like most of Crypto Twitter. But he’s also used it as a chance to put his ideas into action, most recently with the Lightning Torch initiative.

Speaking to Bitcoin Magazine, hodlonaut reflected on the experiment.

“It’s been interesting to see reactions from some parts of the community. Some scowled at this from the beginning because it was based on community trust,” instead of the same baked-into-the-code trust that inspires mantras like “Don’t trust; verify.”

Hodlonaut is more interested in actions than mantras, so he started testing out whether or not you could trust the community to hold itself accountable — if community overwatch could make a trust-dependent act trustless in its own way. The experiment began with a giveaway on Twitter, where hodlonaut said he would send satoshis through the lightning network to anyone who replied to his thread. 250 people replied, and good to his word, hodolonaut said he “brushed up on his typing skills and sent everyone some sats.”

This altruism was stoked by the excitement hodlonaut felt when he first bootstrapped his raspberry pi to run lightning.

“Transacting with lightning network is the exact same excitement I had with bitcoin when I first discovered it.”

He wanted to spread his excitement through the community, so he took the giveaway a little further. On January 19, he made the “spur-of-the-moment” decision to send 100k satoshis ($3.40 USD) to a randomly selected stranger who replied to the new giveaway.

“This thing,” as he called the idea behind the experiment, “just fell into my head. I had no ambitions and I just threw it out there.”

He may have haphazardly thrown it out, but the community very intentionally caught and carried it on. Hodlonaut’s impulsive act of experimentation has developed into a full-fledged social experiment and movement. After reaching its first bearer, the transnational torch has been routed through each continent (save Antarctica, which would be too impressive) and 39 countries, including the bulk of the EU. Despite its creator initially believing that it “would go 4, 5, 6 hops and someone would take it and no one would [care],” the torch has passed between 139 unique users 149 times.

Total capacity is up to 2.2 bitcoin, and hodlonaut is optimistic that it will reach the lightning network’s ~4.3 million satoshi limit before the experiment terminates, at which point, he intends to ask the final bearer to donate the funds to BTC Venezuela, a cryptocurrency charity.

Don’t Let the Flame Die Out

The flame, while still well fed and protected, has met trouble during its marathon across the world.

On two separate occasions, users have treated the torch as a personal boon rather than a community exercise, confirming hodlonaut’s fears that greed may put the torch out. These opportunists have claimed the funds for themselves, refusing to conform to the precedence of passing it along. Their attempts to snuff out the flame, however, have only made it stronger and emboldened the community’s resolve.

The first time, a few days in, the torch was lit with 250k satoshis ($8.60 USD), when one recipient took it for themselves. To salvage the situation, the sender decided to relight the torch with their own funds and resend it to a more trustworthy user. The same story happened the second go-around at 2.51 million satoshis ($86 USD). This time, the taker justified his actions with a tweet that read, “I’ll seize it because I can, and no one can stop me,” which hodlonaut interpreted as meaning that you shouldn’t trust anything but code.

Luckily, Klaus Lovgreen, the person who sent it to this opportunist, followed the example set the first time the torch was threatened and paid the loss out of pocket, sending it to a new user. His “good deed turned out to be profitable,” hodlonaut said, after he directed users to Lovgreen’s tippin.me page to compensate him for his good will.

Keep It Rolling

The torch has survived two potential roadblocks and has grown out of hodlonaut’s influence. But that’s just the way he’d like to have it, even when the torch was on the verge of being extinguished.

“I wouldn’t have restarted it because I think this needs to be organic.”

The organic nature of the initiative and the community’s willingness to sacrifice personal funds to keep it going have made the experiment in community trust a success. Hodlonaut said that this shows both an increasing interest in lightning and the resolve of a community sparked by an exciting new technology, even in the harsh market climate.

“A lot of people have been onboarded to lightning. Personally, this is the most community feeling I’ve felt with bitcoin for a long time. There are so many people out there who are willing to educate each other and help people,” he said, expressing that lightning is important for community morale in times of a bear market.

You can track the torch’s race to the lightning network cap here. If it makes it to the end, a handful of anonymous donors have said that they will match the final amount (just shy of $150 USD) to be donated to BTC Venezuela. If you are interested in donating to BTC Venezuela or matching the donation as well, please consult the charity’s website or reach out to hodlonaut on Twitter.

This article originally appeared on Bitcoin Magazine.

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When I decided, maybe against my better judgement, to live on bitcoin for a week, the plan was met by a combination of cautions and jokes from friends and loved ones: “Just don’t starve,” “Well, it’s the New Year, a perfect time to start a new diet,” “Will you be able to eat?”, “Have you really thought about it?”

I had “really” thought about it and it seemed not only sensible but necessary. Nakamoto’s white paper calls Bitcoin an “Electronic Cash System,” and I hadn’t stressed the cryptocurrency’s utility as an actual method of payment.

My experiment would likely validate the strong opinions of skeptics (to whom bitcoin is either some nebulous scam at its worst or an outrageously valued trinket for prodigal hobbyists at its best) and that camp of maximalists who believe that bitcoin isn’t and never was digital cash.

It’s a problem that Kashmir Hill ran into when she did her own experiments, more so in 2013 than 2014. In 2013, her final conclusion was that she had “survived” the week, but by 2014, she had herself a ball spending bitcoin. She went from conquering San Francisco’s hilly landscape on foot and bike in 2013 (and the occasional, simple pleasure of pizza and cupcakes) to the luxury of Uber rides, wine tours and even a strip club visit just a year later.

She did well for herself the second go at it. I want to be able to do even better.

That as my mindset going into my own version of the experiment, picking up five years later from where Hill had left off. If she survived on her first attempt, then I damn well ought to be able to thrive, I thought, going into it.

Boy, was I dead wrong.

A day or two in was all it would take to break this expectation as I soon learned that my experience would be unlike either of Hill’s. I anticipated great merchant adoption and with it a greater variety of services through which to use my bitcoin. I thought I was walking into a more vibrant Bitcoin scene than half a decade ago, an opportunity rich with ways I could offload my coin.

Instead, I found (at least in San Francisco) that fewer merchants take bitcoin now than they did before and that the Bay area’s Bitcoin community, excepting those still active in it, had receded into altcoin enthusiasm and the flowering industry of “blockchain not Bitcoin” that had become the new darling of tech VCs and entrepreneurs.

Those still involved in the community took care of me though, and the week was just as easy or as difficult as I wanted to make it.


Living on Bitcoin Day 1: “That’s Not Going to Work”

I set out to live on bitcoin for a week in San Francisco.

Living On Bitcoin Day 2: Being “Unbanked” Has Been Easy … But Also Hard

On Day 2 of living on bitcoin experiment in San Francisco, I go on the hunt for some bitcoin-friendly eateries.

Living on Bitcoin Day 3: Brother, Can You Take a Sat?

I desperately comb the streets of San Francisco, hoping to find someone — anyone — who will accept payment in bitcoin on Day 3 of my experiment.

Living on Bitcoin Day 4: The Uphill Climb

Living on bitcoin has been a bit of an uphill battle. On Day 4, I try out some gift card options and move into the Crypto Castle.

Living on Bitcoin Day 5: An In-Store Buy At Last (Spoiler: It’s Pot-Related)

I finally make a point-of-sale purchase with bitcoin, hunt for Coinbase’s headquarters and chat with a young entrepreneur.

Living on Bitcoin Day 6: An Artist, a Dev and a Moon Boy Walk Into a Bar…

I continue my San Francisco experiment, spending bitcoin and attending a meetup in a crypto-friendly bar with some great, diverse company.

Living on Bitcoin Day 7: A Supposedly Fun Thing I’d Definitely Do Again

I finally wrap up my week of living on bitcoin in San Francisco with visits to 20 Mission and bitcoin artist cryptograffiti. But first, I’ll have to survive a storm out on the Bay.


Saying that I thrived while on bitcoin would be pushing it, but saying that I survived would be an embellishment.

So I’ll put it another way: I subsisted. Plain and simple, I got by without buying into a strip club’s tit-for-tat (tit-for-bit?) or splurging on a high-dollar meal like Kashmir Hill did in 2014 (though I could do that here in Nashville, dropping fat sats for a meal at Flyte). Sure, the drinks at Stookey’s weren’t cheap, but they weren’t a bottle of Dom either. I got by without even buying a meal from a merchant during my trip, relying on bitcoin-bought Uber Eats credit and friends to keep me fed.

My experience was both anticlimactic and blindsiding. I could have done it anywhere, something that I describe in the write-ups as fascinating and frustrating at the same time. I didn’t need San Francisco to spend my bitcoin (a city that, the week made quite clear, didn’t really want my bitcoin). Bitcoin didn’t need the merchants, though, to be useful; infrastructure, like Paxful and Bitrefill, made it useful.

As the series unfolded on social media, plenty of other bitcoin-to-gift-card services, like Fold App and Bidali, reached out to me on Twitter, reaching for a chance at a PR plug (don’t get me wrong, though — I respect the hustle). I used what I knew going into the experiment, though out of the three exchanges that I demoed (Paxful, Bitrefill and Gyft), I stuck with Bitrefill for its convenience and efficiency.

I probably should have tried some of the other options, and I fully support any company building this infrastructure because, without it, the experiment would have been over by day two (or I would have had to swallow the probability of a seven-day fast as I wrestled with how much I cared about my journalistic integrity).

So I learned that this experiment is either too easy or too impossible, depending on how you frame it. What else I learned (in a strictly Silicon Valley context):

  • The general public’s enthusiasm for Bitcoin has been dampened with the market.
  • Interest in altcoins and blockchain has, in part, replaced this enthusiasm.
  • Because of this interest, there’s at least one place (The Boba Tea Shop) that accepts a motley of altcoins but not bitcoin.
  • Fewer places accept bitcoin now than in 2013–2014.
  • Places stopped accepting bitcoin either because their payment processors went under or because transaction times and fees were outrageous during the peak of the 2017 bull run.
  • Transaction times were pretty quick and fees weren’t high (none of my transactions took over a minute the whole week unless I opted for a low fee).
  • Even if merchant adoption has waned, infrastructure using bitcoin to leverage services (e.g., Bitrefill, Paxful, etc. for buying gift cards) has progressed.
  • Bitcoin ATMs aren’t as cool as they sound.
  • Merchants who don’t accept bitcoin will either be annoyed/amused/confused when you ask if they do.
  • An unfortunate number of places that used to accept bitcoin don’t exist anymore.
  • You still can’t buy coffee with bitcoin (unless you buy a gift card first).
  • Pretty much all resources for locating bitcoin-accepting venues (like coinmap.org or Edge wallet’s merchant finder) are outdated.
  • Mobile wallets are still too clunky and unreliable for mass adoption.
  • You don’t need a payment processor to do a point of sale and I wish businesses would understand this.
  • Bitcoin OGs are still around.
  • If you decide to live on bitcoin for a week, they will help you out.
  • You could get hammered on bitcoin in San Francisco with liquor-by-the-drink (or bottle).
  • Bitcoin is (obviously) best as a store of value.
  • Because of this, it has its faults as a payment method, but the community is aware of these faults.
  • Coinbase has become a monolithic entity that is hard to penetrate.
  • This experiment is not all-encompassing and would play out much differently elsewhere.

That last point might be a bit foolhardy to make before I actually try it, but I was told on day one by a Czech booth exhibitor that Prague would be a breeze. Aaron van Wirdum corroborated this claim, adding that his home in the Netherlands (specifically Amsterdam and Rotterdam) would be a great testing ground for the experiment. Jared Harrell, a community manager at Quantstamp and Canadian native, told me Vancouver would be worth visiting while pouring praise on the Canadian bitcoin community’s constitution and significance (my editor, another proud bitcoin Canuck, has also implored me to have a go at it in Canada).

I’ll get there eventually (I hope). I intend to replicate this science experiment to get a larger sample size, and I have a hunch that I’ll get different results in different jurisdictions. For now, New York, Canada (Quebec/Ontario), Czech Republic (Prague), Netherlands (Rotterdam/Amsterdam) and the U.K. (London) are on my list of test subjects, and, for the new experiments, I’ll attempt a heightened level of difficulty for the variables (including not using Bitrefill, Paxful, Gyft, etc.).

Latin America is another place that comes to mind, probably the place that best exemplifies why this experiment is worthwhile. As the economic and political situations in Venezuela worsen, bitcoin’s relevance in the region is on prominent display, and its utility is infecting neighboring countries as a diaspora of Venezuelan refugees pours across the economically battered country’s borders.

At the end of my experiment, I had the privileges of eschewing my bitcoin wallet in favor of my real one and I was elated to get to use cash (whether physical or digital) again. For those (and they’re out there) living unbanked or under the duress of a faltering monetary system, the experiment never ends — it’s a struggle they reckon with daily.

So I also learned that, over the course of the week, I didn’t need to live on bitcoin, so the choice to was gratuitous and a bit opportunistic (it gave me something fabulous to write about and has supplied my cocktail-party-conversation reserves with endless new material). But I also learned that, if I needed to, I could live on bitcoin, just as a growing population of underserviced and financially neglected citizens across the globe could right now.

Bitcoin is monetary sovereignty, and this experiment is being stress-tested every day.

You didn’t need me to show and tell you that but that also doesn’t mean I won’t do it again.

If you have tips or places you think Colin should visit, drop him a line on Twitter (@AsILayHodling) or email ([email protected]).

This article originally appeared on Bitcoin Magazine.

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Binance has finally joined the fiat-on-ramp party, adding support for crypto purchases using credit cards. This is made possible through its integration with payment processor Simplex, according to a press release shared with Bitcoin Magazine.

The credit card option has a daily limit of $20,000 per user and $50,000 monthly limit per user. For every transaction that goes through the Simplex gateway, a user will be charged 3.5 percent of the transaction or a $10 flat fee, whichever is higher.

Users won’t be able to trade the fiat directly with other traders. Instead, they must go through Binance to exchange their fiat directly for bitcoin, ether, litecoin and xrp.

Binance is the largest cryptocurrency exchange by trading volume according to CoinMarketCap, accounting for over $650 million in trades every day. Before now, traders had to purchase bitcoin or a slew of other altcoins on another platform before transferring it to Binance for trading. With the new credit card integration, the idea is to have traders pay for any crypto of their choice with ease.

“The crypto industry is still in its early stages, and most of the world’s money is still in fiat. Building fiat gateways are what we need now to grow the ecosystem, increase adoption and introduce crypto to more users,” Binance CEO Changpeng Zhao remarked in the press release.

Nimrod Lehavi, co-founder and CEO of Simplex, also commented on the partnership, arguing that fast credit card payments are “a key factor in wider adoption of crypto in general.”

The service works in the U.S. except for six states, including New York and Washington State. Traders from Afghanistan, Iran, Libya, China and a handful of others are also restricted from using the service.

Binance has been opening fiat to crypto exchanges as of late. Three months ago, it opened Binance Uganda, a crypto platform that lets users trade crypto with Ugandan shillings. Earlier this month, it launched Binance Jersey — an exchange on the Island of Jersey that allows users to trade crypto with the British pound and the euro.

This article originally appeared on Bitcoin Magazine.

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It happened: Bitcoin is now an Ethereum token.

Wrapped Bitcoin (WBTC), an ERC-20 token with a 1-1 peg to bitcoin, went live on the Ethereum network on the final day of January, “the first token that makes Bitcoin compatible with the Ethereum chain,” its architects say.

Kyber Network, Bitgo and Ren spearheaded the “community led” initiative, which has spread its reach to AirSwap, BitGo, Blockfolio, Compound, DDEX / Hydro, Dharma, Gnosis, GOPAX, Kyber Network, Loopring Protocol, MakerDAO, OmiseGO, Prycto, Ren, Set Protocol, and TheOcean. These members of the WBTC DAO are a mixture of liquidity, infrastructure and custodial partners. The token’s network will rely on some of them to facilitate BTC to WBTC swaps for its users.

To exchange their BTC for WBTC or vice versa, users must enter into a request with a WBTC merchant, someone who basically “sells” (or more accurately, distributes) WBTC to users in exchange for bitcoin (or bitcoin in exchange for WBTC) and go through KYC. These merchants act as a go-between for the user and the network’s liquidity pool, the custodians.

That merchant takes this request to a custodian, who will either deny or honor the request and mint or burn WBTC for the user. Minting and burning takes place directly between the merchant and the custodian through an atomic swap, a protocol that allows users to trustlessly trade assets cross-chain —in this case, BTC and WBTC.

To trigger the process, a merchant would submit a minting request to an Ethereum smart contract while simultaneously sending bitcoin to the custodian.

“The custodian then waits for 6 confirmations on the bitcoin chain, and approves the minting request on the Ethereum network, and the approval triggers the mint operation in which the merchant gets the WBTC,” Yaron Velner, the CTO of Kyber Network, told Bitcoin Magazine.

The user is not involved in this swap in this first swap in any way. To claim their tokens/bitcoin, the user then has to enter in either an atomic swap or a trusted exchange with the merchant.

Kyber Network and Republic Protocol will kickstart the network as its first merchants, and

Eight Wrapped Bitcoin community members(AirSwap, Dharma, ETHfinex, GOPAX, Kyber Network, Prycto, Ren and Set Protocol) will kickstart the network’s WBTC and BTC liquidity vehicle as merchants, while BitGo will be the sole custodian to start.

Members of the WBTC DAO will oversee a multisignature wallet that will handle the permissions and keys necessary for assigning or retracting merchant and custodian roles.

The (Peg) Ins and Outs

The project promises to bring Ethereum smart contract utility to bitcoin and the benefit of bitcoin’s liquidity to ether’s token market.

Currently, Ethereum dominates the decentralized exchange (DEX) landscape, and there’s no way for traders to directly trade their bitcoin for tokens (they have to go through centralized exchanges for that). Giving traders the option to import bitcoin to Ethereum to trade its value as an ERC-20 token, WBTC could unleash a sea of bitcoin liquidity into Ethereum’s Decentralized Exchanges — this is likely why IDEX, the largest DEX on Ethereum, is involved, along with Airswap, DDEX, ETHfinex and others).

As an ERC-20 token, WBTC can also execute smart contracts, meaning dApps could use the token (like WBTC community partners Compound, Dharma, dYdX, bZx, Gnosis, Maker and Set protocol), and developers can start building new applications on WBTC. Wholesale, the project sells itself as “[combing] the benefits of Ethereum and Bitcoin, making it simple to handle the wrapped currency with only the Ethereum node.”

It’s an ambitious project, bringing together crypto’s two most valued networks, one that wants to utilize the best of both cipher worlds. It’s one, though, that Wrapped Bitcoin is backing up with immediate utility and liquidity at launch, but it’s also one that comes with tradeoffs.

“Kyber Network and Ren have procured an initial amount of WBTC tokens from their own Bitcoin inventory to provide initial liquidity and make WBTC immediately available for swaps with users. BitGo will be the initial custodian,” a press release states.

“Eight initial merchants will be facilitating conversion between WBTC and BTC: AirSwap, Dharma, ETHfinex, GOPAX, Kyber Network, Prycto, Ren, and Set Protocol.”

The token service is starting centralized, and you have to go through KYC to be verified with merchants to submit token minting or burning requests. BitGo will be the sole custodian from the beginning, meaning that all swaps will be conducted by the blockchain and wallet services company.

“Various decentralized and centralized exchanges have also procured WBTC inventory to support liquidity for the token with the live supply of WBTC observable on the WBTC dashboard,” the press release also states.” WBTC will also have usage on a handful of dApps out the gate, including “bZx, Compound, Dharma, dYdX, and DApps and wallets integrated with Kyber Network.” CoinGecko, the project’s market data partner, will be covering WBTC data.

Cautions and Clarifications

The service is fairly centralized out of the gate, something the project recognizes in its whitepaper, describing its structure as a “federated governance model.” Even if the merchants are distributed (and sparsely at that for the time being), BitGo’s custody of pegged-in bitcoin is both a counterparty risk and single point of failure. Of course, BitGo has multisignature and cold wallet services to mitigate these risks.

But for a project that brands itself as giving users an out from centralized services like exchanges, it offers a similar degree of centralization with just a few more steps (instead of submitting your coins to the custody of a centralized exchange, you’re putting them in custody with a separate company and then using the tokens of credit this company gives you (instead of the credit you’d use on the centralized exchange) to trade them elsewhere.

Still a functional bitcoin-to-ethereum bridge is a novel addition to the industry's architecture, something that RSK is working on and Blockstream could theoretically build with Liquid. And, as Vitalik Buterin said on Twitter, Liquid’s federated sidechain is semi-subject to the same centralization as Wrapped Bitcoin, but Liquid’s liquidity partners are more evenly distributed (and don’t require a third party for custody).

WBTC, like Liquid, could sufficiently decentralize in the future given enough adoption, Buterin concludes.

Wrapped Bitcoin lists BitGo as its “initial” custodian, leaving a vague sense that more will come in the future, but they will have to be regulated to hold the bitcoin, the project’s whitepaper makes clear If its influence fans out, more merchants and custodians could provide some risk mitigation and help the project decentralize. Its website has open applications for partnerships, keeping with the initiative's claim to be a community-driven effort.

“The fundamental design of WBTC and the continuing commitment of all members to openness will form the essential building blocks for a transparent process framework and governance structure. Relying on these foundational principles, WBTC will remain a firmly community-led initiative into the future, focused on driving continued innovation for the enhancement of the entire ecosystem.”

This article originally appeared on Bitcoin Magazine.

chainalaysis hacking report

Two “prominent professional hacking groups” are responsible for the majority of publicly reported hacks of cryptocurrency exchanges and other cryptocurrency organizations, concludes a report published by blockchain data analytics firm Chainalysis this week. According to the report, simply called the Crypto Crime Report, the groups generated around $1 billion of hacking revenues for themselves so far.

“Hacking dwarfs all other forms of crypto crime, and it is dominated by two prominent, professional hacking groups,” the report states. “Together, these two groups are responsible for stealing around $1 billion to date, at least 60% of all publicly reported hacks.”

Hacks

Exchanges, wallet providers and other custodial services have been prime targets for cybercriminals for years. From the MyBicoin theft and Bitcoinica hacks in Bitcoin’s early days, to the infamous Mt. Gox collapse due to stolen funds and the Bitstamp and Bitfinex hacks more recently, to the Cryptopia theft just several weeks ago, hacks and thefts are a recurring theme in the cryptocurrency space.

Now, Chainalysis’ report suggests that many of the same people may be responsible for most of these kinds of hacks. By tracing the movement of funds on from hack to exit point (the exchange where funds were ultimately converted into fiat currency), Chainalysis believes it has been able to pinpoint two prominent hacking groups. Dubbed “Alpha” and “Beta” by the blockchain analytics firm, these two groups, together, would have been responsible for about 60 percent of publicly reported hacks, worth a total of $1 billion, with an average of $90 million per hack.

Furthermore, the Chainalysis report notes that both Alpha and Beta went through lengths to shuffle the coins they stole, seemingly in an attempt to obfuscate the source of the funds. This mostly involved a huge amount of transactions moving the stolen funds from address to address, the report notes: “The hackers typically move stolen funds through a complex array of wallets and exchanges in an attempt to disguise the funds’ criminal origins. On average, the hackers move funds at least 5,000 times.”

This shuffling was combined with periods of inactivity, presumably to wait until interest in the hacks would die down before converting the cryptocurrency proceeds into fiat currency.

Motives

Interestingly, Chainalysis did find that Alpha and Beta are shuffling their loot around using different, independently distinguishable strategies. The blockchain data analytics firm even believes this reveals something about the nature and intent of the two groups.

“[W]e suspect that […] Alpha, is a giant, tightly controlled organization partly driven by nonmonetary goals,” writes Chainalysis. “They appear as eager to create havoc as to maximize profits. Alpha seems much more sophisticated, expertly shuffling funds around in a way that suggests they want to avoid detection.”

Meanwhile, Beta — the smaller of the two — appears less organized, less skilled at moving the funds around, and more focused on the money itself, according to the report: “They don’t appear to care very much about evading detection, just about getting a clear route to convert illicit assets to clean cash.” In one case, Beta is said to have cashed out more than $32 million in one go.

Both groups have been successful in funneling much of their proceeds to exchange it for fiat currency, Chainalysis writes, as more than half of all the hacked funds were converted in less than four months, and about three quarters of the hacked funds were cashed out within six months. This was largely done by using regular exchanges, according to the report, which Chainalysis believes was possible because “exchanges and law enforcement have had limited ability to track hacked funds.”

The report does not detail which hacks were analyzed, where the proceeds were cashed out, or any more identifying information about the Alpha or Beta groups. Chainalysis did not respond to inquiries by Bitcoin Magazine before time of publication.

You can download the Chainalysis report here.

This article originally appeared on Bitcoin Magazine.

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Darknet markets are going as strong as ever, if Chainalysis data is to be believed.

In its latest Crypto Crime Report, published earlier this week, blockchain analytics firm Chainalysis reports that darknet market activity has nearly doubled throughout 2018. After a slump in late 2017 and early 2018 due to the closure of two major online marketplaces for illicit activity — AlphaBay and Hansa — volume has since almost completely recovered to early-2017’s all-time high levels, surpassing $600 million worth of bitcoin for the year.

“Law enforcement has been working hard to stop illicit activity on darknet markets, and there have been some notable successes like the closure of AlphaBay,” the report notes. “Overall, these markets continue to thrive, however, as participants simply move their business to other platforms and technologies.”

Whack-A-Mole

Darknet markets, the online market places for illicit goods and services that operate on hidden services and use bitcoin (and sometimes altcoins like litecoin and monero) for payments, have been around in their current form since 2011, when Ross Ulbricht founded Silk Road.

Although this pioneering darknet market was shut down by law enforcement in 2013, others have since taken its place. What’s more, the size and volume of these markets have only grown over the years. According to Chainalysis data, trading volume at identified darknet markets was over $700 million dollars worth in 2017 — where Silk Road never accounted for more than $200 million a year.

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The Silk Road’s biggest and best-known successor, other than Silk Road 2.0, may have been AlphaBay, with Hansa following closely behind. In the summer of 2017, both AlphaBay and Hansa joined in Silk Road’s fate, however, and were closed down by law enforcement. Silk Road 2.0 had already been shut down in 2014.

Yet, once again, in the greater scheme of countering darknet markets, this only proved to be a stop-gap solution. In what Chainalysis describes as “playing whack-a-mole with darknet markets,” alternative and new platforms took the place of the old, and after an initial drop, overall trading volume rebounded as well. Throughout 2018, this totaled over $600 million, Chainalysis estimates, with more than $2 million a day toward the end of the year.

“Darknet market activity has been remarkably resilient over the last few years, despite continued efforts by law enforcement to shut down illicit activities,” Chainalysis writes in its report. “When one darknet market closes, others pop up to take its place.”

Chainalysis points to the Russian-language Hydra as one of the main successors of AlphaBay, which has doubled its activity since the latter was closed in 2017. Other major darknet markets that are active today include Dream Market and Wall Street Market.

Bitcoin and Darknet Markets

While bitcoin is still the currency of choice on most darknet markets, Chainalysis does believe that this type of activity has come to constitute a much smaller share of total bitcoin usage over time. While up to 7 percent of transacted bitcoin value in 2012 and 2013 — the peak of the Silk Road — was related to darknet markets, this is now well below 1 percent, Chainalysis estimates.

The blockchain data analytics firm also found that the bitcoin price has little effect on its use for these kinds of illicit activities.

“Darknet market activity is relatively price inelastic; that is, you don’t see a drop in this type of activity when cryptocurrency prices fall. In fact, in 2018, when Bitcoin volumes dropped by 78%, darknet market activity nearly doubled,” the report notes.

This inelasticity is in large part because users of these markets often merely use bitcoin as a vehicle to move value around — not for speculative purposes. Consumers buy bitcoin with fiat currency on one end of the trade, and dealers sell the bitcoin for fiat currency on the other. Indeed, Chainalysis found that more funds were flowing to darknet markets toward the end of the week (as buyers move to purchase goods), while dealers generally move their bitcoin out on Mondays to cash in their proceeds.

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Finally, Chainalysis describes how, as law enforcement is getting better at shutting down darknet markets, a new and potentially even more resilient model for darknet market activity is emerging. Moving away from centralized platforms, the analytics firm reports that an increasing amount of trading is taking place on encrypted messaging apps.

“Top law enforcement officials tell us that criminals are migrating increasingly to encrypted messaging apps including Telegram and WhatsApp to execute illegal transactions. When conducted through these apps, transaction activity is decentralized and person-to-person; there’s little risk that law enforcement will shut down the entire network by closing a website,” the report reads.

You can download the Chainalysis report here.

This article originally appeared on Bitcoin Magazine.

Bitcoin 2019: A Peer-to-Peer Conference for the Whole Bitcoin Community

The first major Bitcoin conference, Bitcoin 2013, was held in San Jose, California. Organized by the Bitcoin Foundation, it was centered on Bitcoin specifically and the more pragmatic issues that Bitcoin was trying to solve, particularly in the areas of Bitcoin technology, Bitcoin mining, Bitcoin business and regulatory issues.

Writing for Bitcoin Magazine at the time, Vitalik Buterin commented, “For long-time Bitcoin users, events like this are particularly emotional; here, for the first time, we are able to see fellow Bitcoin users, whom we have loved, worked with and had heated arguments with over forums or Skype/IRC chat for many months or years as something more than just a username. Entire companies, existing only ‘on the cloud’ before this day, are finally reunited.”

This summer, billed as “A Peer-to-Peer Conference,” Bitcoin 2019 will be held at Pier 35 in San Francisco, California, hosted by BTC Inc., from June 25–26, 2019. In a blog post announcing the event, BTC Inc CEO David Bailey noted that Bitcoin 2019 was so named to harken back to that earlier conference “when the Bitcoin community was unified and nerds filled the hotel lobby until the early morning while dreaming of what Bitcoin could become.”

The Bitcoin community has grown considerably since 2013, and it has experienced its share of growing pains along the way. People who are passionate about the technology have had differing viewpoints about its direction. As a result, even as Bitcoin has matured and the blockchain ecosystem has evolved, the community itself has become somewhat fractured.

Bailey sees Bitcoin 2019 as an opportunity to help rekindle the “sense of shared wonder and spontaneous commitment to realizing Bitcoin’s potential,” as it was back in 2013.

“We want to be able to provide a platform that brings together leaders in the Bitcoin community, along with creators, developers, newbies and enthusiasts, in order to allow for new ideas to freely flow among the people who care most about building the Bitcoin of the future,” Bailey told Bitcoin Magazine.

“We want to help drive the conversation beyond simply scaling Bitcoin. We want to showcase what’s possible to build with Bitcoin, without breaking BTC’s consensus rules, which are rigid.”

Attracting and Supporting New Growth in Bitcoin

Bailey’s hope is that this event will bring together people from across Bitcoin’s ideological and political spectrum. He is quick to point out that this is not a “Bitcoin Maximalist” or an “anti-any-other-crypto-or-fork” event; however, it is unmistakably a Bitcoin/BTC conference.

“We’re working hard to help curate the content of the conference so that people who aim to be unifying with fresh ideas and cool projects built on Bitcoin are able to have their voices heard,” he says. “We’re not here to argue how big a block needs to be or what Satoshi’s original vision was — that debate has already happened. BTC is BTC. Everything else is not BTC, and this is an event for BTC.”

He added, “We are coming at this from the perspective that this is a Bitcoin BTC event, but it’s not ‘anti-other-crypto.’ Regardless of what other projects people have worked on or supported, we want people to not feel excluded from Bitcoin. Just check everything else at the door and come build Bitcoin with us … at least for a couple of days at the conference.”

To that end, Bitcoin 2019 has reached out to a wide array of industry leaders and developers to participate in the event. Among the preliminary list of speakers are Bill Barhydt, Matt Corallo, Diego Gutierrez, Dan Held, Jimmy Song, Erik Voorhees, Jihan Wu, and Bitcoin Magazine’s own Aaron van Wirdum. More speakers will be announced in the near future.

“This is not a pay-to-play event,” Bailey emphasizes. “The easy part is finding the showcase-worthy projects. We actively seek out and learn about the cool things that are going on. We talk to people all over the world constantly about their new projects they’re working on. The hard part will be deciding which ones we will be able to carve out time for at the conference.”

Anyone interested in participating in Bitcoin 2019 as a speaker, panelist or presenter is encouraged to contact the organizers.

In order to make the conference accessible to the greatest number of people possible, tickets will initially be priced at $100. There is also a virtual hackathon “for ideas built atop and around Bitcoin and the Lightning Network” associated with the event in the works.

Bitcoin 2019 is powered by Bitcoin Magazine and produced by BTC Inc.

This article originally appeared on Bitcoin Magazine.

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This is the seventh instalment of reporter Colin Harper's "Living on Bitcoin" experience in San Francisco. Find out what happened to him earlier on Day 1 , on Day 2 , on Day 3 , onDay 4, on Day 5 and on Day 6.

I woke to the sound of thin but consistent rain against the sailboat. A gentle storm soon rolled in to softly rock the harbor’s rustbucket bedfellows, a few spurts of lightning distant and crackling across the bay.

Dustin wasn’t up yet so I made a cup of coffee (gods be praised) and went above the deck of the Velela — the name Dustin’s sailboat came with when he bought it four years ago. The previous owner (a marine biologist) was inspired by the jellyfish of the same name, which can hoist a sail-like fin in the air to propel itself more quickly through the water.

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The Velela resting in the harbor.

After Dustin got up (and we wolfed down some bacon-n-egg burritos), we made preparations, which included stuffing a rubber skiff into his Honda Fit, and we set out on the open water. The day was graying as we left the docking area, with a misting of rain so faint you could barely feel it on your skin.

Once we’d motored out far enough, Dustin hoisted the sails. Swelling with the bay’s untamable winds, the sails vaulted us forward and pushed the boat to the right — a bit more than I would have liked.

“This is safe, right? It’s not going to tip over?” I asked apprehensively.

“I wouldn’t exactly call sailing a safe activity,” Dustin said with a smile that managed to be both carefree and severe.

“But it’s not going to tip over, is it?”

“Probably not,” he joked. “But really, there’s a huge weight in the middle of the hull, so we’ll be fine.”

We were headed for the city’s waterfront, a 10-mile trek, give or take. The wind was against us, though, so we had to get there by tacking, a maritime navigation technique that involves sailing diagonally with the wind and cutting an angle to switch back toward your destination (basically making a zigzag pattern).

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Roughly 10 miles out from San Francisco, the city’s skyline faintly visible to the right.

Dustin pulled out what he called the autohelm, a smart tablet ((Even the boats in Silicon Valley have iPads) that keeps track of speed, depth, GPS, trajectory and supposedly can even steer the ship using this USB-plunger attachment on the wheel, which looks uncannily like the suction sections of those automatic pumps for milking cows.

He put it to work, the mechanic whir and churn of the plunger struggling to keep the boat on course as the weather worsened. I had the feeling that, under conditions, the autohelm would have performed admirably.

The heavy force of the wind and waves, though, eventually overpowered the automaton’s control over the boat. Dustin “fired” it and took the wheel.

Looking out to my right, I noticed a blackened cloud, dark and gnarly, billowing up, the kind that looks ready to dump at any moment. The rain was falling a bit more steadily (though not too heavily), and the wind was picking up, causing the waves to chop savagely away at the haul.

Before I could convey my concerns, Mother Nature decided to blow them into the open. A gust of wind bruised the sails and sent the ship tipping and the cabin’s contents flying below. The ship was at an angle when the clatter of Dustin’s belongings became audible as they were flung about below.

Should have kept that skiff at hand. And now that I think about it, where are the life vests?

“Let out that line!” Dustin commanded, taking on the urgent persona of a captain as he strained to turn the boat against the lean. “As much as you can!”

I released a line connected to the bow’s sail and it went slack. Dustin rushed to the midsection while I took over the wheel and he let down the mainsail, finally disarming the wind. The entire ordeal, which felt like it took some time, probably lasted a minute at most.

“I think we should turn back,” I observed brilliantly.

“You think so?” he said with a heave of nervous laughter.

We got back (thankfully) right before the boat’s motor died, but we were still eight spots away from Dustin’s space in the dock. With the help of two good samaritans, we towed the sailboat back to its place with painstaking attentiveness. Dustin didn’t relax until she was safely moored.

“Whew! I’m still up on adrenaline!” he hollered when the boat was docked

Most people get stressed into a knot when their car battery dies. Imagine that happening except it’s a boat in open water and it almost capsizes. Oh, and the boat is also your house.


I said goodbye to Dustin over another burrito and sent him some sats for the trouble. After we parted ways, I grabbed a Lyft and headed just south of the Tenderloin district to cryptografitti’s place.

The apartment is on brand for an artist. Sterile, with neutral tones of chrome and white across each room, the flat was extremely well kept. Art of various styles decorates the place: a postmodern painting detailing San Franciscan life, which he had commissioned by a local artist, hangs above a tannish-brown, leather sectional; a puzzle-piece coffee table to accompany the couch; and a metal-matted two-piece fixture in the kitchen with a surface that looks like cells under a microscope that his sister made for him;.

And, of course, his own art is on display in his studio.

One original, United Nodes x 100, hangs directly behind his work desk, while two variants of Currency Exchange lie in the back-left corner and on the desk. Next to the one on the desk is one of his latest: the abstract of the Bitcoin white paper made from USD.

The rest of his office is lined with shelves that are stuffed with various supplies, including the white gloves he wears in each of his videos. On one of the shelves, a bag of hundreds of credit cards for a piece he made to commemorate the late Hal Finney. I was curious as to how he got his hands on that many cancelled credit cards.

“It’s a trade secret. They’re all used,” he said. (You can buy them on eBay, by the way).

We talked art, bitcoin culture and the experiment in a conversation that seemed to intertwine all these topics together.

“To me, it’s all about teaching people about bitcoin through art. I wanted to anchor the work in something that people were already familiar,” he said.

He’s certainly made an impact. The former DJ subsists off the money he makes from his art, and he takes regular commissions, mainly from wealthy, fellow enthusiasts who want an original of the subversive fusion of fiat and digital economies that cryptografitti’s art represents.

“I want to remind people that the materials I use in the work are short-lived and, therefore, so is the entire status quo. And if the old monetary realm is no longer, what should the new one look like and why?”

Carrying on the conversation we had the night before at Stookey’s, he said again that it’s not all that surprising fewer merchants accept bitcoin now. The party’s over and everyone’s gone home. The people who were just there for the good times left with the bull market; but, in the bear, the people who really give a damn are sticking around to deal with the aftermath.

“It’s like when you have a party and your good friends stick around afterward to help clean up after the revelers have left. Go to Bitcoin meetups nowadays and you’ll find the people that care and are willing to put in the work,” he said.

He doesn’t think enthusiasm is dead, it’s just dampened and embodied in a very dedicated core community.

“The excitement is still there, it’s just shifted focus to Lightning,” he said. It’s likely that Lighting is the very thing that may make my experiment easier, if I choose to do it again in the (distant) future.

Black Swan, one of his latest pieces, exemplifies this excitement. The Lightning Network-only auction had 100 plus participants and sold to the lowest bidder — less than 1/100th of a penny. Part-performance, part-visual art, cryptograffiti said he wanted the piece to provoke people to appreciate innovation without fretting about price.

“My work is rooted in activism. When I can motivate people to get involved, it brings more awareness to whatever I am trying to convey. In this case, a lowest-bidder-wins auction was my way of ensuring participation/reach in the project while highlighting the capabilities of the lightning network.

“The fancified promo video that accompanied the art was meant to contrast with the absurdly low micropayments and poke fun at MSM who tend to focus more on price than the groundbreaking tech being built,” he said.


Catching a few hours of R&R, I still had one thing to do before I could call the week quits. I couldn’t get a room at 20 Mission due to San Francisco boarding codes, but I was still game to visit the hacker community house that Kashmir Hill shacked up in during the weekend of her week on bitcoin. I had made arrangements with Berkeley, the community’s head honcho, to visit that night.

The Uber that took me there was yet another Prius, the fifth (maybe sixth) I’ve ridden in this week.

I buzzed myself in with the house’s callbox, entered the foyer and made my way upstairs to a labyrinth of hallways and rooms (the community houses 40 or so people).

A resident came in shortly after, toting an LED-glowing electric unicycle that had an extended handle like a rolling suitcase. I asked him if he knew where Berkeley was, and he pointed me in the right direction.

We made introductions and Berkeley offered me a La Croix, another in a set of San Franciscan constants that include whole bean coffee, 20-somethings ripping Juuls, and Uber rides in Priuses.

Berkeley actually helped Jered Kenna, the cofounder and now owner of 20 Mission, found Tradehill, a once-upon-a-time bitcoin exchange that accounted for 15 percent of the coin’s daily trading volume back in the day when Mt. Gox accounted for 80 percent.

He reiterated some of what Hill talks about in her piece: how 20 Mission was much worse for wear before Kenna first cleaned it up.

“Before that it was basically a seedy crack hotel. Squatters lived there, but it was abandoned for something like 18 years,” said Berkeley.

As we talked, we walked around the house and I surveyed the murals that decorated each hallway. Local artists had done them, including the ones that enliven the house’s glorified courtyard: an open-air space in the middle of the building that’s accessible only through windows and is floored with roofing tiles.

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One of the house’s many murals.

At the corners of some of the hallways, street signs with titles like “Litecoin Lane,” “Ethereum Blvd.” and — thank God — “Coinye West.”

The signs made me wonder if the house has an active crypto and general tech community, seeing as it’s billed as a hacker community. They still accept bitcoin for room and board, but the house’s tech focus shouldn’t be overstated, Berkeley told me.

“We have some people working on crypto, but it’s not like everyone is in crypto. For example, we just had a guy here who is a doctor, so it’s a mix.”

Doctors, lawyers, professors, service workers, developers — folks of all kind live in the community.

“With 40 rooms, there are lots of different people. We’re decentralized.”

Unfortunately, none of the crypto-focused professionals were around to chat, either by virtue of being busy or because they were hiding from “the media.” That was all right by me; I understand their need for privacy, and given America’s current media climate and public sentiment, I didn’t find it shocking that they didn’t want to show their faces to a nosy reporter (the industry’s professionals seem to approach the press with serious skepticism).

Satisfied with the tour and the talk, I thanked Berkley and went on my way.

Back at the castle, I had a last supper from Curry Up Now (courtesy, as always, of Bitrefill-funded Uber Eats), relaxed and, just like that, the week was over.

I went to bed thankful I’d be able to use my fiat debit card in the morning.


As Kashmir Hill did in her original journey, Colin is accepting BTC tips to help him along the way.

Tip jar: 3CnLhqitCjUN4HPYf6Qa2MmvCpSoBiFfBN

This article originally appeared on Bitcoin Magazine.

Bitcoin Price Analysis

After weeks of consolidation, bitcoin finally broke through support. The market now finds itself cruising toward prior lows. On expanding volume and spread, the bitcoin market appears ripe for a continuation of the downtrend:

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Figure 1: BTC-USD, Daily Candles, Broken Support

Although the current daily candle has yet to close, unless there is a strong influx of demand hitting the market, it stands to reason that bitcoin will be closing a new daily low for the first time since mid-December. Following the stopping action in the low $3,000s, the bitcoin market remained coiled for over a month. However, today marks the first break of these levels once marked as support. To illustrate how coiled the market was and how potentially large the following move could be, check out the 3-Day Bollinger Bands (bbands):

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Figure 2: BTC-USD, 3-Day Candles, Bollinger Bands

The figure above shows a very tightly wound, consolidated market — a market that previously took several months to consolidate. In just over two months, bitcoin has found itself prepped for another potentially large move. The first logical pitstop on its move is the retest of the prior low in the low $3,000 area. As we move up in timeframes, the weekly candles are showing a zone of support between $3,000 and $3,150:

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Figure 3: BTC-USD, Weekly Candles, Next Macro Support Level

The $3,000 level is one of the few established levels that has proven to hold up during a support retest. And, since we have already seen major, climactic volume from the last major sell-off to $3,100, it seems logical that we’ll get a slightly deeper test of the $3,000 values.

From there, we will have to reassess and see how the macro view looks if we can manage a retest of that support zone. A weekly close below that level is a decisively bearish move so we will have to keep an eye out for where the weekly candles close. It’s entirely possible that this level will hold up well under a test given how much buyer interest there was last time around. But for now, we will have to play it candle by candle and see how the bulls react to a retest of the low.

Summary:

  1. Bitcoin finally broke its multi-week support level.
  2. The break came about on expanding volume and price spread. Expanding volume and spread coupled with a major support break is a sign of bullish exhaustion and will likely lead to a test of deeper support.
  3. There is a major support level just below a current low in the $3,000 area. There will likely be buyer interest in this zone, but we will have to measure the response to a test of deeper lows as the market presents itself.

Trading and investing in digital assets like bitcoin is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

This article originally appeared on Bitcoin Magazine.

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A new point-of-sale (PoS) app released by Zap allows merchants to independently accept transactions on the Lightning Network.

Jack Mallers, the founder of Zap, described some of the properties of this new app on a recent Twitter thread. Mallers also spoke with Bitcoin Magazine to elaborate on some of the inner workings of the project.

Zap’s new PoS protocol was recently put to the test at a Chicago cocktail lounge, uploading the menu onto the app and allowing customers to use a QR code for tipping. Mallers built a device to allow the establishment to run the app, a “Rock64 board (4GB ram) with a Samsung SSD (1TB).” Mallers said that the current hardware rig “is very similar to a Nodl (nodl.it) device” and that “the founder of Nodl (ketominer) was very helpful with advising the build out of the box.”

Self-sovereignty was a huge design concern for rolling out this app, so for the final product “total costs for the device hardware were under $200, and that was non-manufactured and ordered from Amazon. This allows the merchant to be fully validating, always online, and not reliant on any third party. The most powerful position any merchant can be in.”

Looking forward, Mallers said, “I'd like to help Bitcoin enter a more consumer-facing era, and build this new relationship with end users via the Lightning Network. However Zap can best help Bitcoin achieve adoption and success, is where Zap will go.”

With the first test launch successful, he went on to state that he’s seen a lot of demand from people in specific industries, “like marijuana for example, that struggle with banking relationships and are very interested in Zap PoS. We plan to continue working on the app(s) to get them to a point where they are helping real people. You can definitely expect more to come.”

The Lightning Network has already been heralded as a technology with the potential to completely transform the industry, with a way to circumvent the scaling problem associated with Bitcoin. Many companies have been taking notice of the network’s advantages and have made their own attempts to capitalize on it. BitFury, for example, has recently rolled out Lightning Peach, its own set of tools for the Lightning Network, including a PoS system.

For Mallers, spreading the use of the Lightning Network was the principal driver behind building the Zap PoS application and holding the Chicago event. “We want to humanize the Lightning protocol [and] present it in a way that is digestible, understandable, easy to communicate with, etc.”

The road to large-scale adoption won’t be easy, of course.

“Getting all of this right doesn't take genius insight, rather learning from repeated efforts,” said Mallers. “It simply requires time and persistent ambitious effort towards a common goal.”

Nevertheless, Mallers seemed confident in the overall feasibility of this technology. “The benefits are clear. There is no more powerful position to be in than a self-sovereign merchant. Nobody can deny you payment, no paybacks, no down time, no banking issues, no border restrictions, attracts new customers, etc. There is literally only upside in this.”

This article originally appeared on Bitcoin Magazine.