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EtherDelta Founder Charged by SEC as an Unregistered Exchange

Zachary Coburn, the founder of EtherDelta, has just been charged by the US Securities and Exchange Commission (SEC) with operating an unregistered securities exchange. The SEC released the news via a press release yesterday.

EtherDelta Charged

According to the report by the SEC, over the course of 18 months, EtherDelta users placed over 3.6 million orders for digital currencies. Among those ordered were coins considered securities by US federal laws.

Under the current law, EtherDelta was supposed to register in the US or apply for an exemption. However, the cryptocurrency exchange failed to do either.

“EtherDelta had both the user interface and underlying functionality of an online national securities exchange and was required to register with the SEC or qualify for an exemption,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

According to the SEC, Coburn neither denied or admitted to the findings, instead, he consented to pay the state $300,000 in unlawful profits. In addition to the $300,000 fine, the EtherDelta founder will pay $13,000 for prejudgment interest and an additional $75,000 penalty.

>> Two Teachers Mine for Ethereum Using School’s Power

EtherDelta isn’t the only crypto exchange the SEC has gone after. In fact, many popular global exchanges have barred US citizens from using their platform due to the country’s strict regulations. Many exchanges don’t want to have to go through the process of registering and the potential for fines.

“We are witnessing a time of significant innovation in the securities markets with the use and application of distributed ledger technology,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division. “But to protect investors, this innovation necessitates the SEC’s thoughtful oversight of digital markets and enforcement of existing laws.”

While many within the crypto community feel the restrictions are too harsh, the SEC feels it has a right to protect its citizens from fraudulent activity. Most fraud has surrounded Initial Coin Offerings (ICOs), and the SEC has cracked down the most on these activities in the crypto space.

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Teachers Mine for Ethereum | Busted for Using School’s Power

Teachers Mine for Ethereum: Mining for cryptocurrency comes with its controversy. Energy consumption is already the most eyebrow-raising aspect. So what about using the local school’s computers to mine for Ethereum… during school time? Oh, and you’re the principal of the school.

This is exactly what happened in Hunan Province, China.

Teachers Mine for Ethereum: What Happened?

According to Hong Kong news outlet HK01, two Puman Middle School principals were caught using the school’s power to mine Ethereum.

The school’s general manager noticed the computers’ fans were louder than normal and this raised questions. This was even during the holiday period. The IT network had slowed greatly, and energy consumption doubled between July and November.

The two principals in question are Lei Hua and vice principal Wang Zhipeng. The pair had installed $7,000 worth of computers (nine computers) and were using the school’s power to mine Ethereum. Hua had initially set up the rigs at his home, but he soon discovered the high cost that mining requires. Shocked at the energy bill, he then installed the computers in a school dormitory.

Teachers Mine for Ethereum, Stealing Power

Installing the computers in the school meant he effectively stole $2,163 worth of power—the amount required to mine.

Since the incident, the principal has lost his position at the school, and the vice principal has been given a strict warning.

>> Square’s Bitcoin (BTC) Profits Jump $500,000 in Q3

Mining Cryptocurrencies

Mining for cryptocurrencies is a notoriously expensive feat and has become a massive business in recent years. If you want to make a serious profit in mining for Bitcoin, for example, you need machines that can run in the thousands.

The more energy that is burned, the faster your computer can compute the complex mathematical equations, meaning you are more likely to ‘win’ Bitcoin.

To put it in perspective, mining for one block on the Bitcoin network reportedly costs the same amount of energy as powering a small house in a year.

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Bitcoin (BTC) Profits Jump $500,000 in Square Q3 Earnings Report

US financial service company Square (NYSE:SQ) just announced that its Q3 Bitcoin (BTC) revenue jumped up from its previous earnings in Q2. Square detailed its full company earnings in a shareholder letter released yesterday.

Bitcoin (BTC) Revenue Q3 2018

Square released a full digest of its total earning and financial activities. The release was far more colorful and interactive than most public companies’ earnings reports. It included various pie charts, graphs, and diagrams, uncommon in the earnings space.

Earlier this year, the newly public company introduced Bitcoin support in its Square Cash payment app. Compared to Q2, cryptocurrency revenue grew $6 million in Q3.

“Total net revenue was $882 million in the third quarter of 2018, up 51% year over year. This includes $43 million of bitcoin revenue,” the report reads.

Square has been on the rise lately, as its market cap just passed Twitter’s this week. Coincidentally, Jack Dorsey is CEO of both companies. While media interest may be down in cryptocurrency this year, this earnings report shows that there is still interest in the crypto space.

>> A Guide to Understanding Cryptocurrency White Papers

Bitcoin profits remain a niche for Square, and the company only brought in profits of around $500,000 after taking into account Bitcoin purchasing costs. This past October, Square expanded its interaction by open sourcing its cold storage set up and expanding its crypto offerings in new jurisdictions.

Square just recently launched Square Terminal, which allows merchants to take debit and credit card payments. There have been rumors circulating about the possible merchants’ integration with BTC, but there have yet to be any official reports on the matter.

Bitcoin (BTC) Movement

At press time, Bitcoin is currently trading at $6,515.40 a coin, down -0.11%. This week, the original digital currency went on a bit of a bull run and jumped above the $6,500 mark, but now it seems to have slightly corrected.

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Winklevoss Lawsuit | Lawyer States Shrem Committed ‘No Misconduct’

Earlier this month, the NY Times reported that the crypto-famous Winklevoss twins have accused Bitcoin Foundation founder Charlie Shrem of Bitcoin fraud. The Winklevoss lawsuit has now turned into a heated battle between both parties.

Winklevoss Lawsuit

According to the report by the NT Times, Shrem made several lavish purchases in 2018, that caught the attention of the Olympian twins. The pair filed a civil lawsuit against Shrem accusing him of stealing thousands of Bitcoin from them in 2012.

“Either Shrem has been incredibly lucky and successful since leaving prison, or—more likely—he ‘acquired’ his six properties, two Maseratis, two powerboats and other holdings with the appreciated value of the 5,000 Bitcoin he stole from” the Winklevoss twins in 2012, the lawsuit states.

The lawsuit claims the Winklevoss twins worked with Shrem on a previous project before he served one year in jail for purchasing drugs with Bitcoin. The filing claims that Shrem stole 5000 Bitcoins from the twins in 2012, that were worth $13 at the time. Now, the coins are valued at around $32 million.

>> Startups Urgently Need to Adapt to a Changing Market as Token Sales Drop 90 Percent

Lawyer Defends Shrem

“Shrem can show by verifiable evidence that he did not take the 5,000 bitcoins [the Winklevosses] accuse him of taking,” the filing reads.

The lawsuit against Shrem spans over six years, and the result was a falling out over a deal to help the Winklevosses accrue digital currency. This September, the same judge that charged Shrem with his previous proceedings agreed to partially freeze his assets amid accusations by the Winklevosses. Shrem then failed to pay $1 million in restitution to the state as part of the plea deal.

Klein, Shrem’s lawyer, states this is incorrect and claims:

“The true facts are that Shrem paid a portion of the money owed before he knew of the [Winklevosses’] complaint, and is in the process of paying the rest.”

Klein also denies the idea that Shrem has used the 5,000 Bitcoins in question to purchase all of his new assets.

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Public vs Private Blockchain | Ernst & Young’s New Blockchain Prototype

On October 30th, Ernst & Young (EY) announced a world-first for distributed ledgers. Called the Ernst & Young Ops Chain Public Edition, the company created a new blockchain prototype that combines the security of the public ledger model with the privacy of the private ledger model—thus a private blockchain.

It does this by using zero-knowledge proof (ZKP) technology on the public Ethereum blockchain. The result, it claims, is a network that will suit the needs of institutions, especially in the financial sector.

But why the need to combine the pro’s of both networks, what’s missing?

The Benefits and Problems of a Public Blockchain, Compared to Private

Anyone is able to join a public blockchain and read or write transactions. As a result, public blockchains are made up of hundreds of thousands of independent computers known as ‘nodes.’ This massive ecosystem means resilience and security—a huge positive of this blockchain model. Bitcoin and Ethereum are well-known examples of this type of blockchain.

However, every transaction on this type of ledger must be verified by each node. And with hundreds of thousands of nodes making up the network, this has become an issue.

It’s an issue because to reach consensus or verification, nodes perform a proof-of-work (PoW). A PoW is a complex cryptographic equation that is solved by the computer. Therefore, transaction times can be slow and costly and this becomes especially evident during times of high activity and volume.

This is given the term scalability, and it refers to a network’s ability to handle and process large numbers of transactions at any given time. Until scalability improves on public blockchains, many enterprises are reluctant to use them.

Another issue facing public blockchains is privacy. Each transaction provides details such as the amount, date, sender address and receiver address. This is visible to anyone on the network. Though many users love this type of transparency for safety reasons, institutions or anyone dealing in larger sums, lack business privacy.

>> Winklevoss Lawsuit Continues; Lawyer States Defendant Committed ‘No Misconduct’

The Benefits and Problems of a Private Blockchain, Compared to Public

A user must be invited to a private blockchain. As such, the network is considered closed or exclusive and can be referred to as permissioned blockchains. Naturally enough, this network model has fewer members than a public blockchain and so can be more vulnerable to hacking.

If a blockchain is fully private, then the network rules are usually controlled by one organization or by several pre-selected nodes. A consensus is reached not by every member on the network but by the selected group of nodes.

Because private blockchains are just that, private, they are well-suited to business and enterprise adoptions. Transactions are only visible to the limited numbers of invited participants.

Hyperledger is a good example of this type of blockchain. R3 is another, being a global banking and financial institution blockchain consortium based on their distributed ledger technology product, Corda.

However, as stated, what private blockchains gain in privacy, they lack in security. With far fewer nodes on the network, manipulation and/or hacking is far more plausible.

Conclusion

There are the two basic blockchain models in a nutshell. Can Ernst & Young’s new prototype truly solve the scalability issue of a large distributed ledger whilst also providing maximum security and privacy to its users? Sounds almost too good to be true, right?

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