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The Commodity Futures Trading Commission (CFTC) — the United States’ top-ranking derivatives regulator — has published an advisory providing further guidance to both clearinghouses and exchanges seeking to list cryptocurrencies on their platforms. The cryptocurrency space has been riddled with concerns about the vetting process for contracts, like bitcoin futures, and the CFTC is looking to clear the air.

Staff members have issued the following statement:

“Commodity Futures Trading Commission (“CFTC” or “Commission”) staff believes it is important to encourage innovation and growth in these products, but within an appropriate oversight framework that enables exchanges and clearinghouses to operate within the confines of the core principles. To this end, Commission staff continues to monitor developments in these products and discuss the risks and challenges they present with industry and market participants.”

The CFTC says it’s focusing on the latest “best practices” for launching cryptocurrency derivative contracts, saying that exchanges should be able to monitor “underlying cryptocurrency spot markets” and coordinate with federal regulators. They should also be allowed to contact market participants and request comments regarding pending contract launches.

Division of Clearing and Risk Director Brian Bussey mentioned, “CFTC staff is providing this information, in part, to aid market participants in their efforts to design risk management programs that address the new risks imposed by virtual currency products. In addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products.”

While the advisory is not considered a final “compliance checklist,” it does offer insight pertaining to current CFTC expectations and aims to assist both clearinghouses and exchanges in keeping up with changes in the crypto market. The guidance provided in the report includes enhanced market surveillance, large trader reporting, outreach to stakeholders and derivatives clearing organization (DCO) risk management.

Both CME Group and Cboe Global Markets were among the first trading platforms to launch bitcoin futures contracts in December 2017. At the time, both companies had consulted with the CFTC on a strictly limited basis. Bitcoin’s volatile nature and price swings caused many Wall Street players — including the Futures Industry Association — to request that the CFTC further examine virtual currency derivatives before allowing them to be traded.

Thus far, bitcoin futures have behaved as few new contracts have, and their liquidity continues to grow through limited means. However, a study conducted by the Federal Reserve Bank of San Francisco ultimately discovered that the release of bitcoin futures led to the steep drop in cryptocurrency prices last January by allowing “pessimists” to enter the game.

The CFTC has been in control of bitcoin activity since 2015 through the Commodity Exchange Act. The organization has worked extensively to rid the cryptocurrency space of unregistered futures exchanges and protect consumers from fraud, manipulation and illicit practices.

To read the full advisory, click here.

Tari, a new open-source blockchain protocol, aims to redefine the digital asset experience. Backed by institutional investors including Redpoint, Trinity Ventures, Canaan Partners, Pantera and Multicoin Capital, its founders Riccardo “fluffypony” Spagni, lead maintainer of the Monero cryptocurrency; Naveen Jain, a serial entertainment industry entrepreneur; and Dan Teree, co-founder of Ticketfly, hope to simplify the management, trade, programmability and use of all digital assets.

Current State of Digital Assets

“Today, most digital assets such as event tickets, in-game items, loyalty points and virtual currencies are siloed due to restrictions that limit their use and secondary market trade,” Jain said in an interview with Bitcoin Magazine.

Businesses primarily enact these restrictions to control assets after their distribution, verify an asset holder’s identity and prevent fraudulent counterfeiting.

Siloed digital assets aren’t ideal for consumers or businesses. Consumers don’t enjoy “true” ownership of the digital assets they purchase or earn because they must comply with secondary market restrictions and regulations, and businesses miss out on billions of dollars generated from the secondary digital asset resales that occur on outside channels.

For example, consider a frequent Delta flyer who takes one Lufthansa flight a year and is unable to trade his or her Lufthansa miles (that are unlikely to be redeemed) for Delta miles. Or, the millions of dollars in ticket resale revenues that artists like Beyoncé miss out on after issuing tickets for their world tours. Once Beyoncé sells a $100 ticket to the original buyer, she does not participate in the secondary market resale economics when the original buyer resells his or her ticket for $500, and the secondary market scalper turns around and sells the ticket a third time for $1000 the night before the show.

Revamped Digital Assets

By leveraging blockchain technology, the Tari protocol enables consumers and business to break down walled gardens between businesses, sell and trade scarce digital assets with programmed rules, and record immutable transfer and verification of ownership.

The Tari protocol hopes to unlock additional utility for digital asset users and enable “true” digital asset ownership and control. By utilizing the Tari protocol, the aforementioned Delta flyer can perhaps trade his or her Lufthansa miles for Delta miles. And artists like Beyoncé can issue their world tour tickets with programmed rules that allow them to capture and control secondary market value. Beyoncé could hard-code rules such as: tickets can only be resold three times, Beyoncé is entitled to 10 percent of any ticket resale, and tickets are not re-sellable 24 hours before the show.

John Pleasants, former CEO of Ticketmaster and COO of Electronic Arts, thinks that the Tari protocol will open up free trade between a variety of industries.“[Tari] can help the entire live entertainment industry recover billions in lost revenue by better controlling how tickets are sold and resold. From a gaming perspective, the ability to buy and sell virtual goods on a distributed system across different platforms can greatly improve both monetization for publishers and the overall consumer experience.”

Tari Protocol: Under the Hood

According to Spagni, the Tari protocol will be built on top of Monero. Specifically, Tari will be a merged-mined sidechain of Monero. Merged-mining allows for two cryptocurrencies to be mined simultaneously based on the same algorithm. In this case, it is Monero’s proof of work algorithm that miners must solve.

The Tari token powers the Tari protocol, serves as an incentive for miners to mine Monero and for valiators to accurately validate the network’s rules.

“To give miners an incentive to merged-mine your chain, there needs to be a reward. We can’t pay them in Monero, so we need to have a native token that merged-miners receive. Tari tokens will also be used as an incentive for rule validation. Users have the opportunity to put Tari tokens in an escrow account and passively run a program that validates [protocol] rules on their computer. If they behave and validate the rules correctly, they will earn tokens and keep their escrow,” explained Spagni.

Merged-Mining with Monero

Because Tari is merged-mining, the team doesn’t have to recruit new miners. Instead, Monero mining pools can “flip a switch” (tweak their settings) and mine both Monero and Tari simultaneously. Spagni also pointed out that merged-mining with Monero’s proof of work system doesn’t incur additional electricity costs or environmental damage risks traditionally associated with proof of work, since miners aren’t burning more cycles.

Spagni also noted that, “All the proof of work chains burn less electricity than Visa. We are getting to a point where a solid proof of work chain can provide the same, if not greater, capabilities of Visa.”

Tari Community

The Tari team noted that there is no “core team” for Monero. Jain noted, “We don’t want single points of failure. We are co-founders and contributors. But, not the only contributors. There are lots of smart people within and outside the organization. We want far more external contributors than internal contributors. In fact, we want hundreds if not thousands of contributors over time.”

For reference, the Monero protocol had around 150 contributors within the last 12 months.

Potential Issues

Although Tari aims to revamp the way consumers and businesses interact with digital assets, the team has various obstacles to overcome.

Adoption

Is it favorable for businesses to allow their assets to trade on a secondary market? And will businesses amend their terms and user agreements to allow secondary market liquidity for their digital assets? For example, airline loyalty points are currently an illiquid market. Wall Street analysts have pointed out that the sale of these loyalty points can equal up to half of an airline’s yearly earnings before interest and taxes, but airlines might want loyalty points to expire unredeemed. That way, airlines can increase revenue, without having to discount travel for customers who don’t take advantage of their loyalty points.

Scalability

Because the Tari protocol intends to become the underlying protocol for the transfer of digital assets, they will need to handle “many tens of thousands of transactions per second,” according to Jain. The team plans to use lightning as the primary throughput mechanic for Tari.

Spagni explained, “We’re building a standards compliant lightning router, that will be compatible with Bitcoin, Monero and Tari. We will also achieve additional throughput by building a MimbleWimble chain. This way, transactions won’t be stored on the blockchain in their entirety, just kernels.”

The Tari protocol has yet to deploy a test network boasting any transaction capabilities, not to mention Visa-level performance.

Disclosure: The author has an investment in Tari.

Cryptocurrency Verge has suffered what executives are claiming is a DDoS attack. The platform is experiencing a serious delay in its blockchain, which has led to security concerns amongst users and worries about the currency’s stability.

At press time, Verge is trading for roughly $0.052, and its market cap value sits at $785 million. A decrease in the currency’s price has occurred over the last hour, docking Verge down by 0.36 percent, while the coin has fallen by nearly 7 percent over the last 24 hours. Currently, Verge is the world’s 31st largest cryptocurrency per CoinMarketCap.com.

Verge first mentioned the attack in a Twitter post, explaining:

“It appears some mining pools are under DDoS attack, and we are experiencing a delay in our blocks. We are working to resolve this.”

The problem may be more serious than the company is implying, however. The attack lasted more than a few hours and has resulted in over 35 million XVGs (worth approximately $1.7 million) being stolen.

The theft occurred when hackers exploited a specific glitch in Verge’s technology by mining multiple blocks virtually one second apart using the same algorithm. This was the same tactic used in a hack just last month that saw over 250,000 XVGs disappear into thin air, forcing Verge to prepare a subsequent hard fork.

Reddit user ocminer was the first to notice both attacks. The user commented that Verge’s system had not been properly repaired since April, and that “since nothing really was done about the previous attacks (only a band-aid), the attackers now simply use two [algorithms] to fork the chain for their own use and are gaining millions.”

At the time of writing, it is unclear if the hack is still underway or if the threat has been neutralized. Citing frustration over Verge’s apparent lack of security, one Twitter user known as VergeArmy exclaimed, “Doing some research, maybe we should ask all the mining pools to implement Response Rate Limiting (RRL) walls in their code.”

Some investors, however, are looking at the hack as an opportunity to make a little money and add to their portfolios. Twitter users like Daniel Eberhardt, for example, have said, “This is going to cause a temporary decrease in price. The few that see this as an opportunity instead of a threat are the ones that will reap the rewards in the future.”

Another — going by the name of toefur — comments, “Full faith in the Verge Devs!! #vergefam. Meanwhile, I’ll keep buying the dip.”

Described as a privacy-oriented cryptocurrency, Verge has experienced many security issues over the last few months. The company’s Twitter account was previously hacked in March, while additional reports have emerged that suggest Verge has been inadvertently exposing users’ IP addresses. These reports have not yet been confirmed.

CoinGate, a payment gateway for cryptocurrencies, is planning to launch Bitcoin Lightning Network payments on its platform. As explained in an update published by the company on Reddit, the company is currently testing the technology, and users are invited to join in the tests.

The Lithuanian company serves over 4,000 merchants globally by allowing them to accept bitcoin and altcoin payments which can then be converted into BTC, EUR or USD as payouts.

Utilizing the Lightning Network, merchants could accept payments instantaneously at reduced transaction fees.

CoinGate has been preparing for the integration of Lightning for a while. In 2017, it was an early implementer of Segwit addresses, which fixed the scriptSig malleability problem, thereby making the Lightning Network less complicated to implement.

The company has been experimenting with Lightning payment processing in its sandbox as further tests are being carried out to ensure the stability of the system. Lightning is currently available on its testnet, but there are plans to run live pilot integrations on the mainnet three months from now with a select group of merchants that wish to test the service. The testnet version released to the community is merely for collecting feedback and testing for bugs within the network and in its implementation on CoinGate.

A CoinGate representative told Bitcoin Magazine that the company believes “the Lighting Network is the scaling layer Bitcoin needs.” As a payment processor, CoinGate expects to see an increase in the number of transactions as cheaper transaction fees mean more people will be able to transact and use bitcoin and altcoins accepted on the platform. The ability to receive payments instantaneously will also have “an enormous effect on the convenience of bitcoin payments in both online and retail locations.”

Thaddeus Dryja and Joseph Poon first proposed the Lightning Network in a 2015 white paper as a solution built on Bitcoin. The goal of the network is to make bitcoin more of a day-to-day currency that can be useful for daily trade and micropayments.

Find out more about the Lightning Network here.

CoinGate, a payment gateway for cryptocurrencies, is planning to launch Bitcoin Lightning Network payments on its platform. As explained in an update published by the company on Reddit, the company is currently testing the technology, and users are invited to join in the tests.

The Lithuanian company serves over 4,000 merchants globally by allowing them to accept bitcoin and altcoin payments which can then be converted into BTC, EUR or USD as payouts.

Utilizing the Lightning Network, merchants could accept payments instantaneously at reduced transaction fees.

CoinGate has been preparing for the integration of Lightning for a while. In 2017, it was an early implementer of Segwit addresses, which fixed the scriptSig malleability problem, thereby making the Lightning Network less complicated to implement.

The company has been experimenting with Lightning payment processing in its sandbox as further tests are being carried out to ensure the stability of the system. Lightning is currently available on its testnet, but there are plans to run live pilot integrations on the mainnet three months from now with a select group of merchants that wish to test the service. The testnet version released to the community is merely for collecting feedback and testing for bugs within the network and in its implementation on CoinGate.

A CoinGate representative told Bitcoin Magazine that the company believes “the Lighting Network is the scaling layer Bitcoin needs.” As a payment processor, CoinGate expects to see an increase in the number of transactions as cheaper transaction fees mean more people will be able to transact and use bitcoin and altcoins accepted on the platform. The ability to receive payments instantaneously will also have “an enormous effect on the convenience of bitcoin payments in both online and retail locations.”

Thaddeus Dryja and Joseph Poon first proposed the Lightning Network in a 2015 white paper as a solution built on Bitcoin. The goal of the network is to make bitcoin more of a day-to-day currency that can be useful for daily trade and micropayments.

Find out more about the Lightning Network here.

Working to “make journalism truly free,” Inkrypt wants to provide a censorship-free, back-end solution for content hosting and delivery. With a focus on transparency, data distribution and immutability, the protocol would give journalists and publishers the means to circulate content without the risk of a central point of failure or the threat of government intervention.

Inkrypt was born from the experience of state-propagated censorship that each of its founders confronted before relocating to the United States. “[Inkrypt] is very much a product of the personal backgrounds of the founders and their mutual fascination for the implications of distributed ledger technologies,” co-founder Farhan Javed told Bitcoin Magazine. “They share a common experience of having lived under regimes of governmental censorship and are committed to changing such realities.”

Standing testament to this, Javed alluded to co-founder Dr. Muhammad Ali Chaudhary’s childhood in Pakistan, quoting an experience that would lay the foundation for Inkrypt’s creation.

"Growing up in a country like Pakistan meant that we were given a very curated version of the world, and it was only after I moved to the U.S. that I realized the value of freedom of information. For example, for the entirety of my high school, YouTube was blocked in Pakistan and I didn't think much of it at the time," said Dr. Chaudhary in a statement for Bitcoin Magazine.

Any media published with Inkrypt is fragmented and distributed across a global network of nodes. As with most distributed file storage protocols, the data is encrypted, replicated and held within the spare hard drive space of the network’s node operators. Stored on the blockchain, the data is immutable and, given its distribution model, it is protected from any central point of failure. What’s more, third parties such as governments or corporations can’t identify nodes simply by observing a transaction on the network.

“Beyond just the permanence of the data, the communication between nodes during content delivery to the end viewer is also anonymized through redundant pathways, using a combination of I2P, Tor and MeshNet, which provides front-end censorship resistance seeing as external actors such as governments are unable to identify the nodes,” said Javed.

Building on Po.et

The decentralized publishing protocol Po.et is in the midst of a development initiative to grow its platform. It’s offering itself as a toolkit for the developer community to pick up and put to use. Coming out of Harvard Innovation Labs, Inkrypt is the first project to take Po.et’s toolkit and build with it.

According to Javed, the team chose to implement its project with Po.et because “there is a complete alignment in vision.”

“Both entities want to empower content creators and usher in a new media ecosystem dedicated to data integrity, transparency and ownership. The best way to realize that common vision is to partner up, share resources, leverage scaling effects and form the foundation of the next generation of comprehensive media and information solutions for the upcoming age of the Web 3.0.”

To compensate node operators, Inkrypt will distribute its own token, though Javed suggested that “the relationship and interaction between the Inkrypt protocol's native tokens and [Po.et’s native token, POE] is actively being explored by both teams.”

Besides serving as a form of payment, the token will also contribute to the protocol’s governance system to maintain the network and police illegal content like child pornography. This system will outfit journalists and other media personnel with a self-governing model “without being dictated by the regulatory framework of any particular nation-state government,” according to Javed.

The new era of media that Javed describes is an end that Po.et envisions its platform delivering. According to Jarrod Dicker, Po.et’s CEO, with the help of applications like Inkrypt, Po.et hopes to position itself as “the marketplace for all creators to leverage tools on the blockchain,” an Ethereum-like protocol for the digital media realm.

“The protocol is structured to unlock the true value of the web as it pertains to content, reputation and ownership. Po.et is a horizontal layer that others will build vertically upon leveraging its information and substance to create critical applications for media web 3.0,” said Dicker in an interview with Bitcoin Magazine.

“We're looking to accelerate development on the platform by announcing an official development initiative that will enable us to invest in and provide a platform for media companies and creators everywhere to build on the blockchain.”

Both Dicker and Javed see Inkrypt as an invaluable tool to correct the authoritarian censorship that plagues journalists and media outlets in the world’s more restricted countries. But in the future, Javed believes that “this phenomenon has the potential to rattle the global journalism industry at large, primarily by dramatically increasing the potential for content syndication.” Once organizations see what Inkrypt can deliver to those in censorship-prone countries, media arms in countries with free speech will join the movement as well.

In the immediate future, to prove its worth, the project is working on a minimum viable product as a proof of concept. Once completed, the team plans to introduce it to journalists in the Middle East’s more censorship-heavy countries, such as Pakistan, Iraq, Syria and Turkey.

Disclaimer: The parent company of Bitcoin Magazine, BTC Media, LLC, is an affiliate of Po.et.

Æternity, a “blockchain 3.0” platform for scalable smart contracts interfacing with real world data, founded by “Godfather of Ethereum” Yanislav Malahov, is announcing the launch of æternity Starfleet, a series of incubator and accelerator programs to support the global blockchain ecosystem by building a network of innovators, investors and industry enthusiasts.

“Today’s launch is the culmination of months of extensive research and preparation and underlines our commitment to be the enablers of innovation, strengthening the already thriving blockchain community worldwide,” said Malahov in a statement. “We are confident that these incubator programs will accelerate the adoption of blockchain technology globally and support projects that share our vision for a future built on powerful, user-friendly decentralized applications.”

Malahov founded æternity in 2016. The æternity technology platform is an open-source, blockchain-based distributed computing platform, based on decentralized cryptographic P2P technology and designed for productivity, transparent governance and global scalability.

While the æternity platform, described in its white paper, is under development, there are proof-of-concept implementations, written in Erlang.

Æternity Starfleet will work in partnership with Software University (SoftUni), an organization based in Sofia, Bulgaria, focused on software development education and networking. “I expect this program will contribute greatly to the blockchain startup ecosystem,” said Hristo Tenchev, founder of SoftUni. “With a significant concentration of technical talent and entrepreneurs, a blockchain-focused incubator program is exactly what the current ecosystem needs.”

Æternity Ventures, based in Sofia, Bulgaria, will be in charge of the business side of æternity’s global incubator and accelerator programs.

"The primary force behind any new technology is the people who believe in its potential; therefore, it is paramount that blockchain’s major players create a collaborative space for projects to grow and prosper while supporting the development of innovative projects through robust accelerator and incubator programs,” Nikola Stojanow, æternity’s CBDO and CEO of æternity Ventures, said in conversation with Bitcoin Magazine.

“Blockchain education is still in its infancy, much like the overall blockchain space,” continued Stojanow. “A mainstream blockchain revolution hinges on a constantly expanding global community of developers and blockchain enthusiasts. In order to allow the blockchain space to evolve and grow, it must be presented as more than just a buzzword, with real-life use cases being showcased that people can relate to, we believe the incubator and accelerator programs will enable the next-generation of blockchain projects to reach mainstream adoption."

Æternity Starfleet will support global projects from their seed stage and provide them with up to $250,000 in funding and access to Starfleet coworking spaces.

The first Starfleet program, which will start on June 11, 2018, with four weeks of intensive training and mentoring in Sofia, Bulgaria, is now accepting applications. At the end of every program, each team will be given the opportunity to present their project to an audience of investors, thought leaders and blockchain experts. Future programs will be also offered in coworking spaces in Vaduz, Liechtenstein; Berlin, Germany; and Zagreb, Croatia, with online options as well.

The North American Securities Administrators Association (NASAA) just announced “Operation Cryptosweep,” one of the largest coordinated enforcement actions by U.S. and Canadian regulators to crackdown on fraudulent Initial Coin Offerings (ICOs).

The task force was convened in April 2018 and includes members from more than 40 jurisdictions throughout North America and has resulted in nearly 70 inquiries and investigations and 35 pending or completed enforcement actions related to ICOs or cryptocurrencies since the beginning of May.

Joseph P. Borg, NASAA president and director of the Alabama Securities Commission, said “The actions announced today are just the tip of the iceberg,” Borg also noted that the task force had found approximately 30,000 crypto-related domain name registrations, most of which appeared in 2017 and 2018.”

An important part of the Cryptosweep program is to raise public awareness of the potential risks associated with ICOs and cryptocurrency, while also encouraging the public to come forward and alert the agency to potential scams.

Borg commented, “Not every ICO or cryptocurrency-related investment is fraudulent, but we urge investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution.”

“Operation Cryptosweep contributes to our ongoing efforts to raise awareness about potentially fraudulent activity involving cryptocurrency products,” said Leslie Byberg, executive director and CAO of the Ontario Securities Commission. “To avoid investment fraud, investors should always check that they are dealing with a registered individual or firm, and should carefully consider the risks associated with investing in this novel space.”

Robin Jacobs, who is with the Wisconsin Division of Financial Institutions (DFI), also part of the task force, said these types of schemes haven’t reached the state on a large scale but are rampant across the rest of the U.S. and Canada.

"There are very few legitimate ways to make 10, 15, 20 percent off your investment," she said. "And if they’re offering you guaranteed high returns, do not give them your money.” Jacobs continued, "Regulators are on top of this and we’re going to go after them for misrepresenting these investments to the public and essentially stealing people’s investment money."

CryptoSecure, a company that recently announced John McAfee was joining as a senior strategic advisor, is one of the companies just served with a Cease and Desist letter by NASAA as part of the sweep. Other companies who received similar letters include Digital Ticks, Leverage, Power Mining Pool, ThinkCoin, Ubcoin and many more.