Bitcoin Weekly 2016 September 1: Bitcoin exchange hacks will continue, ZapChain shuts down, Roger Ver joins PIA …

Did you know that between 2009 and 2015 almost one-third of all Bitcoin exchanges suffered a hack and that almost half of all exchanges during the period closed? Not too surprising, given that Bitcoin is still an emerging and developing market, but this statistic from a report out of the University of Tulsa’s Tandy School of Computer Science shines a light on the current security (or insecurity) facing Bitcoin exchanges right now.

Bitcoiner question and answer gurus mourn the loss of ZapChain, an innovative QA forum that used microtransactions to monetize conversations; the website shut down yesterday, August 31, 2016 without much fanfare. Roger Ver, also known as “Bitcoin Jesus” and founder of Bitcoin.com, joined the board of advisors of Private Internet Access (PIA) a VPN provider who offer a bitcoin payment solution for subscriptions.

And lastly, Visa Europe Collab is collaborating with blockchain-technology outfit BTL (Blockchain Technology Ltd.) to run a proof-of-concept test of a intrabank remittance platform to make cross border payments between banks less painful.

CryptoCompare.com charts show the Bitcoin market average slightly lower today, but the range over the past week remains around $570 USD per BTC.

CryptoCompare.com charts show the Bitcoin market average slightly lower today, but the range over the past week remains around $570 USD per BTC. Chart via CryptoCompare.com

As for the Bitcoin market, the BTC market value is currently hovering at $575.47 USD (BitcoinAverage.com) down $8 since last week. The global average for the market has been fluctuating all week but mostly between $570 and $580 without much major fluctuation to speak of; market value was low August 27 (near the $570 floor) and rose between August 29 and 30 near $580 and then trended downwards again to meet the average value listed now.

man hand reach computer keyboard steal hack privacy data breach security

photo credit: ghost in the Machine / deus ex macintosh via photopin (license)

One third of all exchanges operating between 2009 and 2015 have been hacked

For years now, Bitcoin exchanges have been targets of hackers and scams (sometimes suspected as perpetrated by the exchanges themselves). According to Tyler Moore, assistant professor of cyber security at the University of Tulsa’s Tandy School of Computer Science, who shared data with Reuters, reports that from “2009 to March 2015, 33 percent of all bitcoin exchanges operational during that period were hacked.”

Moore says his study was funded by the U.S. Department of Homeland Security and he will soon be publishing the full research on the vulnerability of Bitcoin exchanges.

Also as part of his report, Moore notes that the rate of closure for Bitcoin exchanges has approached 48 percent. Not all closures of exchanges happened due to hacks. It does, however, show that the Bitcoin exchange landscape is still developing even after seven years and that it has a great deal of room to grow.

Amid extremely famous Bitcoin exchange hacks includes the Mt. Gox hack that occurred in 2011 that eventually led (somewhat circuitously) to the eventual collapse and closure of the exchange in 2014. At the time Mt. Gox had been the most massive exchange by volume in the Bitcoin marketplace. This year, Bitfinex Inc., representing 50 percent of trades by volume, also suffered a hack and massive losses of almost $65.6 million USD worth of bitcoins. (This is also not the first time Bitfinex suffered a hack: in 2015 a much smaller one happened with $356,000 in losses.)

In February 2015 alone, four exchanges noted hacks that led to losses—and in some cases closures.

The life of a Bitcoin exchange is a tenuous one and the nature of trading something worth money means that exchanges are targets for thieves.

“The big exchanges that hold customer deposits are a big target for hackers,” ShapeShift AG CEO Erik Voorhees told Reuters, “and unfortunately most bitcoin exchanges store user funds.”

ShapeShift too has been hacked in recent months (with an inside job losing the company $230,000 worth of cryptocurrency in April 2016).

If the past is any indicator, the future for Bitcoin exchanges will include more security treats. Many exchanges have developed various defenses against hacking–such as ShapeShift above, which uses a unique business model—using cold storage, two-factor-authentication, third-party storage and some exchanges even insure customer deposits (although not very many).

Experts questioned in the Reuters article believe that exchanges will likely remain targets (for reasons listed above) and thus vulnerable for the foreseeable future. The Bitcoin exchange market may no longer be the wild, wild west it once was, but it still has a long way to go on the security front.

ZapChain shuts down its Bitcoin social networking site

After a final announcement on August 29, Bitcoin monetized social network ZapChain (https://www.zapchain.com/) has shut itself down as of August 31, 2016. As per the shutdown announcement, while the website’s front page appears to be operational, nothing else is accessible.

“ZapChain will be shutting down on, or shortly after. August 31, 2016. Please withdraw your balance,” the announcement read (now inaccessible).

According to EconoTimes, the initial decision on the impending shutdown was posted on the site in June, posted by CTO Adam McKenna:

ZapChain doesn’t really use much in the way of server resources, and keeping the status quo does not take up a ton of our time, so we were planning to keep the site going on the side, but our backend databse provider (Parse) is being shut down by Facebook by January, so within the next six months we would need to completely rewrite the DB backend in order to keep things going.  Unfortunately neither Matt nor I have the time to do this in our off hours, and we both need to work full-time to keep ourselves and our families/kids/SO’s fed, clothed, housed and happy in general.

The startup launched in 2014 and raised $350,000 in a seed funding round in November 2015. Venture capitalist partner Tim Draper, Boost VC founder and CEO Adam Draper and the Boost Bitcoin Fund both participated in that fund.

ZapChain was home to a many discussions surrounding technologies such as virtual reality, augmented reality, drones, blockchain and bitcoin. It acted as a sort of social media forum where questions could be posted with a bitcoin bounty payable to the best answers (as decided by the question poster) in a fashion similar to question-answer forum website Quora but with microtransaction rewards.

Plans appear to have been made for an Open Source Software (OSS) platform version of ZapChain, dubbed Zapchain v2, but details on this project are scant.

Roger Ver via Twitter, https://twitter.com/rogerkver/status/552987414244118528/photo/1

Roger Ver via Twitter, https://twitter.com/rogerkver/status/552987414244118528/photo/1

Entrepreneur and Bitcoin evangelist Roger Ver appointed to VPN company’s advisory board

Private Internet Access (PIA), a virtual private network (VPN) provider that delivers privacy and security for Internet communications, recently announced that Roger Ver, CEO of MemoryDealers and founder of website Bitcoin.com, will be joining the company’s board of advisers. PIA is owned by parent company London Trust Media.

“We are honored and thrilled to officially welcome Roger Ver to Private Internet Access,” London Media CEO Ted Kim said in a press release accompanying the news.

“As a long time user of Private Internet Access,” Ver said about his appointment, “I’m thrilled to be able to directly contribute to a company that shares such similar values to my own.”

As a VPN service, PIA also accepts bitcoin payments for subscriptions. The service can be run on Windows and OSX allowing for a private connection between the computer and one of PIA’s servers, which allows users an encrypted communication channel out of their home, hiding data and traffic from local Internet Service Providers (ISPs) and governments. Although VPNs provide one layer of protection and some extra anonymity, users are still trackable using conventional cookies and logins by web pages visited and browsers used—although their origin IP address is masked.

This marks the second advisory appointment for Ver in the past few months. In June, Ver announced his appointment to the board of John McAfee Global Technologies as a cryptocurrency advisor along with Bitcoin luminary Erik Voorhees and former Bitcoin Foundation director Bruce Fenton.

Visa Europe Collab begins tests of intrabank remittance using blockchain technology

Visa’s innovation lab, Visa Europe Collab, today launched a 100-day test of a blockchain-based intrabank remittance system in collaboration with Vancouver-based blockchain outfit BTL (Blockchain Technology Ltd.)

“We are now inviting a small number of European banks to participate in the project alongside us and BTL. Participating banks will be able to connect to the network and send funds to other banks in the network across multiple currencies,” Visa Europe Collab co-founder Hendrik Kleinsmiede explained to The Financial Times (pay walled article).

This proof-of-concept will use BTL’s interbank settlement platform Interbit. The platform’s design provides blockchain-based settlements that can be used to reduce time needed for cross border transfers between banks. The platform utilizes smart contracts to reduce cost, time and credit risk using blockchain technology as infrastructure. The company also notes that smart contracts can be used to automate regulation and compliance requirements for domestic and international transfers.

“We’re now inviting a small number of European banks to participate in the project alongside us and BTL,” Visa and BTL say on the webpage describing the collaboration. “Participating banks will be able to connect to the network and send funds to other banks in the network across multiple currencies. We’ll work closely together on the development and implementation of the PoC, ensuring that all participants come away with new knowledge and insight into the role that the blockchain could play in interbank settlements in the future.”

Visa Europe Collab has worked with blockchain technology companies in the past such as SatoshiPay Ltd., which collaborated in a proof-of-concept project to make a micropayment network for Internet of Things payment automation in late July this year.

Image credit: Bitcoin Logo, https://www.flickr.com/photos/thelastminute/12350379324.
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Kyt Dotson
Kyt Dotson

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