Crypto's Biggest ICOs Stay Silent on SEC Subpoenas

Author : Brady Dale

The Silence is Deafening.

After rumors began to fly late last week that the SEC has been sending out subpoenas to initial coin offerings (ICOs), some of the biggest projects to yet utilize the funding mechanism have remained tight-lipped, refraining from public commentary.

CoinDesk has so far reached out to the 14 best-known issuers that have raised $50 million or more through their token sales, asking whether they had received a subpoena or request for information letter. The majority left multiple requests for comment without a reply.

Few attorneys or industry stakeholders are willing to talk on the record about the investigations as well. Although many have said they believe the agency is undertaking a sweep of the industry, one that could be focused on a particular type of token sale.

Only one person has admitted to receiving a subpoena, TechCrunch founder Michael Arrington, who raised $100 million to start crypto hedge fund, Arrington XRP Capital.

That said, over the course of a week, CoinDesk has repeatedly asked each project if they have received subpoenas. Statements, and even the absence of statements, from these issuers can be somewhat illuminating.

Direct Answers

Of the 14 projects CoinDesk reached out to, only one directly answered questions regarding SEC subpoenas: Quoine.

A spokesperson for the issuer, which raised $108 million through the sale of its Qash token, said it had not been subject to a subpoena or a request for information.

While Bancor, which raised $153 million selling its BNT tokens, a spokesperson indicated it had "nothing to report" to CoinDesk, suggesting it had not received a subpoena.

And Overstock.com subsidiary tZero, which is still in the midst of its token raise targeting $250 million, confirmed that it is under investigation by the SEC, but did not receive a subpoena.

Instead, tZero said, it was "willingly working" with the SEC.

Kind of comments

Other than that, several issuers responded to CoinDesk with the infamous "no comment" comment.

TenX, which raised $80 million during its token sale, declined to comment via a spokesperson and so did Kik, which raised $98 million in its Kin token sale.

BITCOIN ON LIGHTNING TOO RISKY? MAYBE ICE CREAM WILL TEMP YOU

Author : Rachel Rose O'Leary

Mar 6, 2018 at 09:00 UTC  |  Updated  Mar 7, 2018 at 01:14 UTC

I scream. You scream. Crypto screams for ice cream?

At least that's what three college students are hoping for in starting an ice-cream delivery service in San Francisco, one that will run solely on bitcoin's in-development Lightning Network at launch.

Dubbed Block and Jerry's, a play on the popular U.S. brand Ben and Jerry's, the service was created to give real consumers a reason to push forward the bleeding-edge payments technology - one that, after years of ideation, is just now beginning to see real testing and use.

"We think that this is a motivating factor to jump into bitcoin and start playing around with the Lightning Network and getting to understand it," Block and Jerry's co-founder Rob Durst told CoinDesk.

With the news, Block and Jerry's also joins a small, but growing number of businesses (both existing and experimental) that have set up shops connected to Lightning's growing network. Now nearly 1,000 nodes strong, this momentum shows a growing interest in the scaling technology, positioned as a way to move transactions off of the blockchain in an effort to allow bitcoin to handle greater adoption.

As such, an interest in getting a whole new host of people involved in cryptocurrency is at the core of the Block & Jerry's project.

"Basically we're just a household of guys who are interested in cryptocurrency and creating web applications for people," developer Jeff Tang explained.

Not only did the team develop the application, but they also devised a step-by-step guide for setting up Lightning and transacting on the network

Durst explained :

"We really are in the process of creating a very straightforward experience. 'I want to buy ice cream, I'm not the most experienced bitcoin user or even computer user, 'How can I jump in?'"

And with ice cream at the forefront, Durst said expects Block & Jerry's to be able to get a spate of new users excited about the technology.

"I think it's cool, I will buy a sticker, but my mum doesn't care about that," he said.

A sweet treat

Still, it's best to think of Block and Jerry's as an experiment, a vision for how merchants might use Lightning to accept bitcoin in the future.

For example, the founder aren't exactly after money - they're not accepting any other cryptocurrencies (or even credit cards) - and in using their website's chat service, they're cagey on delivery times.

Ice cream names such as "Doge Food," "Vitalik Garcia" and "Segwit2x" further show that the website is catering to a niche crowd.

But it's worth noting that the idea behind Block and Jerry's is still somewhat controversial given that sending real bitcoin payments on Lightning remains risky.

Elizabeth Stark, the CEO of Lightning Labs, which is developing a Lighting implementation, is one of the notable members of the technology's movement that is worried users could lose money transaction on the network, and that such issues could hold back development.

She's noted, in particular, that future Lightning releases may not be compatible with the current mainnet, meaning payment channels started today may get shut down with a new release.

In response to the launch of Blockstream's sticker store, one of the first to demo a Lightning-based merchant experience, Stark tweeted, "It's one thing to have people changing code on their own. It's another for a company to be promoting software that is going to lose users money."

As such, Stark and others will be unlikely to give Block & Jerry's the stamp of approval.  

Brain freeze

That said, the co-founders of the project believe transacting over the testnet just doesn't feel "as significant."

And, in part, the effort can be seen as one that's aiming to drive a more immediate consumer experience via Lightning. The Block & Jerry's team believes the more people interact with the early technology, the more they might be inspired to contribute to its development.

So far, Lightning has been mostly the territory of experienced crypto developers, since it lacks a polished user interface and requires users to be somewhat familiar with command line code.

Yet, the team believes it's created a guide that'll make interacting with the network much easier, not just for crypto users but also developers that don't have blockchain specific programming skills.

"We're just doing what we can with the skills that we have," Tang said.

And Durst echoed that, saying, "I think this is a cool demonstration of what is possible for the more average developer."

Yet, what's perhaps most notable is that disguised within the project is an excitement and urgency about getting bitcoin ready for mainstream adoption.

Durst concluded:

"If you're not making much money, and each dollar counts, I think end of the day you need a platform that offers cheaper, faster confirmations. And I think the Lightning Network can do this."

Source : Coindesk.

HARD FORK REFUND? DEVELOPER TO APPEAL ETHEREUM FOR HACKED MILLIONS

CoinDesk Daily is sponsored by February 28, 2018

On November 24, 2015, James Levy received 40,000 ether from the Ethereum Foundation.

Worth roughly $35,000 at the time (and nearly $35 million today), the grant was an award for Levy's efforts to create an early smart contracting tool, and one of many meant to encourage work on what was then another nascent cryptocurrency in a sea of alternatives.

But three weeks later, the grant was gone, drained from his wallet in what might be the largest hack of a single wallet in the history of the ethereum platform.

The result of a weak passphrase, Levy has been silent on the matter ever since. But now, in order to fund a new venture called TapTrust, Levy is appealing to the hacker to return the funds, and failing that, he's turning to the community to implement what would entail a system-wide software upgrade, or hard fork, to do so.

Such an upgrade would rely on EIP 867, a proposal to standardize the process of recovering funds on the platform, one that has been a point of conflict for ethereum developers.

At times heated, the discussion around the proposal is tilting toward blocking all attempts for the EIP to proceed. Former EIP editor Yoichi Hirai even stepped down from his post as a result, citing legal concerns that could ensue from allowing the proposal to develop. And with the developer community in an uproar, the proposal has been frozen in place as the process for accepting code changes gets considered more intently.

As a co-author of EIP 867, Levy has found himself in the eye of the storm as developers expose concerns about the proposal - everything from lamenting ethereum's governance structure as it relates to system-wide catastrophes to predicting that stakeholders could collude with such proposals ratified.

Levy's move is indeed controversial, but he feels that going public with his story might sway the current debate.

"Particularly in light of something like a hack, it's a very important issue for the community, and it's one that, I think, the network and the platform of ethereum and the community, we need to figure out," Levy told CoinDesk in an exclusive interview.

As adoption continues to rise, and ethereum is increasingly adapted for use in enterprise organizations, Levy continued :

"Ultimately, I think it comes down to, are we an economic system that lives outside the rest of society and the legal system? Are we totally separate from that? Or, are we somehow going to interface with these things?"

The theft

To step back, the hack happened because of a weak passphrase, which could lead some to put the blame of Levy himself. Yet Levy defends his security efforts, saying that he suspected his private key would still be needed to access the wallet.

But the wallet generation tool Levy used, developed by ethereum creator Vitalik Buterin, had a critical flaw in that others could access the wallet just with the passphrase.

"I assumed that the passphrase was going to be used in addition to some other criteria," Levy explained.

Later, when the wallet was drained, Levy found his private keys were still secure, and initially, he didn't believe he had been the victim of a hack.

"At first I thought was due to an upgrade or something," he said.

Shortly before the wallet had been emptied, new softwares, such as Brainflare (for brute-forcing passwords) were released, and so Levy tested the software on his own wallet, cracked the passphrase and learned the bitter truth about his grant money - it was gone.

Yet, he traced the funds to another wallet, and in watching the wallet ever since, hasn't noticed any movement.

They've stayed at the same address, without "a single outgoing transaction in the entire history of the blockchain," Levy said.

And while Levy first accepted the funds as permanently lost, it was the eerie silence of the hacker's address (typically you would think a hacker would try and cash out or use the funds) that made him think a fund recovery might be possible.

Initially, Levy will just try some friendly communication.

"One of the things I am eager to do is to try to get in touch to whoever may have access to that new wallet, and to try to come up with something that we can agree to in terms of how to remedy the situation," Levy explained.

But should that not work, Levy will submit another fund recovery proposal that builds on his former efforts with EIP 867.

Undoing finality

According to Levy, the new proposal requires "a very, very limited and well-defined and well-structured support for undoing finality," such as the format offered by EIP 876.

With that, Levy could recover his funds and use a significant portion to build something that would benefit the blockchain's community, including his new venture TapTrust, a Wikipedia-style forum for displaying objective information about tokens launched on ethereum.

"We're trying to improve the quality of information available and improve the ability for average people to participate in this new crypto economy without compromising their safety," Levy said.

It's perhaps an especially notable statement since much of the controversy surrounding the fund recovery proposal was stoked because of poor communication, Buterin said during a recent developer meeting.

Levy knows his appeals might not do any good, but still believes they will start a broader conversation about a pain point the community needs to tease out.

While the latest discussion around fund recovery stemmed from a code vulnerability that allowed a newbie coder to freeze, at the time, $160 million worth of ether in Parity Technologies ethereum client, Levy said hacks should be looked at categorically differently.

"I think that if we want to encourage organizations and businesses and financial institutions to adopt ethereum, that this is, I think for a lot of them, going to be a requirement, that in the event of a catastrophic situation, there is at least something that they can try to do," he said.

And it's a question that touches on a deeper, more philosophical rift in the ethereum community - the concept of blockchain finality.

The concept was first excited in the community after The DAO hack, when the ethereum community voted in favor of hard forking the code to return funds to its original holders. Valuing immutability under the adage "code is law," a dissenting group forked off the main ethereum chain, creating ethereum classic.

Such tensions are still active in the community today, as witnessed through the more recent funds recovery debates, that Levy wouldn't be surprised if there was another split down the line.

Levy told CoinDesk:

"I wouldn't be surprised if the network splits a some point over, not necessarily the issue of ETH recovery, but more generally, the issue of are we going to have a network that is technically pure, or are we going to have a network that we're making some accommodations so that we can integrate with society."

Author : Rachel Rose O'Leary
Source : Coindesk.