The next Ethereum hard fork is coming soon — here’s how the improvements it brings fit into the big picture of network’s evolution.
Earlier this month, the Ethereum Foundation team lead Péter Szilágyi confirmed the date of the network’s upcoming upgrade, Istanbul. Ethereum’s eighth hard fork overall and the second one this year is slated to take place on Dec. 4.
Istanbul will introduce a number of improvements such as interoperability with Zcash, cheaper zero-knowledge layer two scalability solutions, and adjusted gas price for certain operations, marking another milestone along the road to Ethereum 2.0, a highly anticipated “ultimate” version of the network. How exactly does Istanbul fit into the grand scheme of things?
Forks, releases and phases
No complex open-source system is ever in its final state — software is always in motion, constantly being improved and updated. This is especially true for Ethereum, whose path toward becoming a distributed “world computer” and the platform for decentralized applications has been outlined at its inception as a series of consecutive milestones.
The current goal that the Ethereum developer community is pursuing is an advanced version of the network called Ethereum 2.0, Eth2 or Serenity. The upgrade is expected to see a number of drastic developments, such as transition from proof-of-work to a more energy-efficient proof-of-stake consensus algorithm, realization of a new scalability paradigm called sharding, and the introduction of a more efficient Ethereum Virtual Machine capable of executing high-performance smart contracts. Researcher Danny Ryan has formulated five overarching design goals for Ethereum 2.0: decentralization, resilience, security, simplicity and longevity.
Differences in the language used to describe the stages of network updates can be confusing: There are hard forks named after the world’s great cities, numbered phases, releases denoted by version codes, and poetic labels such as “serenity.” Yet, it ultimately comes down to a rather straightforward structure.
The largest increment of the development process is called a release. A single release can be enacted by the means of one or several hard forks — makeovers of the blockchain protocol that mark a complete departure from its old version.
To date, there have been three releases — the current one called Metropolis — which has been rolled out in two steps: Byzantium and Constantinople hard forks, with Istanbul still to go. Subsequent hard forks, Berlin (tentatively scheduled for June 2020) and London, will mark the advent of the fourth release, Ethereum 2.0, or, Serenity.
Hard forks enact changes to the currently operational Ethereum mainnet. The roadmap to Ethereum 2.0, however, stipulates the creation of separate new chains — such as the eventual existence of two active Ethereum chains with different consensus mechanisms. The rollout of the Ethereum 2.0 chain will come in a sequence of phases specified in the roadmap.
Istanbul: accepted improvements
The main governance vehicle that the Ethereum community relies on to move the network forward is Ethereum Improvement Proposals. They specify suggestions related to changes in the core protocol, client APIs (Application Programming Interfaces) and smart contract standards.
Authors normally seek to time proposals to the forking schedule and target specific hard forks announced in advance. There is currently a push in the community for switching to an “EIP-centric” approach in upgrading the system, where more frequent and smaller forks could allow proposals to develop at their own pace. Berlin, the hard fork slated to follow Istanbul, is expected to be the first in this paradigm.
Istanbul still follows the “fork-centric” approach, where many proposals in various stages of their life cycle were pitched and reviewed during All Core Devs calls. Developers classified EIPs as either desired and ready to go into the fork (accepted), desired but not yet ready (tentatively accepted, assumed go live with the next hard fork), or not desired (permanently rejected). Out of 38 EIPs presented, only six were accepted for inclusion, with another eight approved for the Berlin fork. Here is an outline of the accepted proposals:
EIP-152 brings the ability to verify the Equihash proof-of-work algorithm within an Ethereum contract, enabling interoperability between Zcash and Ethereum blockchains.
EIP-1108 reduces precompile gas costs, making a generation of non-interactive zero-knowledge proof, or zk-SNARKs, cheaper. This is good news for two reasons. One is that the change will enhance development of privacy-focused applications that use this type of cryptography.
More consequentially, using zk-SNARKs is a second-layer solution that can be instrumental in alleviating some of Ethereum’s scalability issues by moving a significant amount of computational work off-chain.
EIP-1344 adds an opcode that returns the current chain’s unique identifier, introducing a way for contracts to track the Ethereum chain they’re on. This will improve the system’s resilience to replay attacks on signed transactions.
EIP-1884 is perhaps the most debated of the accepted proposals, causing controversy since at least August this year. Introduced by Martin Holst Swende, a security lead at Ethereum Foundation, this proposal is aimed at repricing certain opcodes (instructions given to the Ethereum Virtual Machine executing smart contracts) in order to “obtain a good balance between gas expenditure and resource consumption.”
The problem that EIP-1884 is supposed to solve stems from some operations becoming more resource-intensive with the expansion of the Ethereum blockchain. At the moment, blocks with similar gas consumptions take vastly different amounts of time to finish, which is not only an issue in itself, but also can be a vector of a denial-of-service attack.
Friction emerged during the 69 Core Dev call on Aug. 23, where Parity Technologies’ Wei Tang expressed concerns over the possibility that the change of opcode costs would break some contracts that are already deployed. He argued that backward compatibility should be preserved, enabling old contracts to operate according to the original pricing.
Hudson Jameson, Ethereum Foundation’s community liaison, responded that there is a “precedent set that OPCODE prices can and will change so your contracts should not rely on the assumption that they will not change,” adding that the transition would leave people better prepared for the more drastic changes that are imminent.
EIP-1884 will affect a limited number of contracts across a variety of projects. Hubert Ritzdorf from blockchain security firm ChainSecurity has put together perhaps the most comprehensive list of such contracts that stand to be affected.
EIP-2028 reduces the cost of calling data in transactions, potentially leading to larger blocks and thus improved scalability of the network. This will also make layer two scalability solutions (such as zk-SNARKs) more accessible.
EIP-2200 implements net gas metering, changing the way the cost of storage in the EVM is calculated. This will enable new functions of contract storage and reduce some excessive costs.
Still in the works
Another high-profile proposal that the Ethereum community considered in the buildup to the Istanbul hard fork is EIP-1057, which seeks to replace the current Ethash mining algorithm with a new proof-of-work function called ProgPoW, short for Programmatic Proof-of-Work. Core devs have tentatively accepted the initiative, pending audit results, for inclusion in the Berlin hard fork.
The idea behind this algorithm update is to tune it for commodity hardware that uses graphics processing units, making mining more difficult for setups equipped with Application-Specific Integrated Circuit chips.
This measure is designed to restore some degree of decentralization to mining power distribution while leveling the field by making Ethereum mining more attractive to individual users and small enterprises not invested in specialized hardware. ASICs were a major driver behind industrialization of mining over the past few years, leading to massive, centralized mining clusters.
Earlier this year, Ethereum Foundation’s security lead Martin Holst Swende said that the introduction of ProgPoW would mitigate the degree of ASICs and other hardware accelerators’ dominance on the network. He added that another reason for the change is the security flaws inherent to Ethash.
Although there seems to be agreement among the core developers with regard to desirability of ProgPoW, not everyone in the community is happy about the prospect of the mining algorithm changing before the switch to proof-of-stake in Ethereum 2.0.
The most vocal dissenter so far has been Aragon, a project for managing decentralized autonomous organizations, whose community voted on Nov. 2 to oppose any changes to Ethash before the transition to Ethereum 2.0.
Despite some tension, there is no indication that a critical mass of Ethereum users is bitterly opposed to the proposed change, rendering it unlikely that the development will lead to a serious rift.
Should the independent audit attest to the robustness of the new algorithm, it will likely be enforced with the Berlin hard fork, now tentatively scheduled for June 2020, as Ethereum continues its march toward the coveted 2.0 version of the network..
Michael Novogratz’s Galaxy Digital launches two Bitcoin funds aiming to bring wealthy Americans to crypto markets.
Michael Novogratz’s crypto merchant bank Galaxy Digital is launching two Bitcoin (BTC) funds, targeting people between the ages of 50 and 80. The new funds aim to bring “the wealth of America,” or people who may have largely remained out of crypto investing, to cryptocurrency markets, Novogratz told Bloomberg Nov. 19.
According to Bloomberg, the funds will offer third-party custody from major crypto consortium Bakkt and Fidelity Digital Assets, the digital asset arm of American investment management company Fidelity Investments.
Galaxy Bitcoin Fund and Galaxy Institutional Bitcoin Fund
The two new Bitcoin funds — Galaxy Bitcoin Fund and Galaxy Institutional Bitcoin Fund — have reportedly been established with Galaxy’s own money and some participation from existing investors, according to the report.
The Galaxy Bitcoin Fund will require a $25,000 minimum investment, and investors will be able to withdraw their funds on a quarterly basis. Meanwhile, Galaxy Institutional Bitcoin Fund has weekly liquidity and a higher initial threshold, the report notes.
Both funds will reportedly charge lower fees than major Bitcoin funds such as the Grayscale Bitcoin Trust.
Novogratz’s plans will ostensibly bring a significant amount of investment from older demographics as Bitcoin investment is specifically led by the tech-savvy younger generation in the 18–34 age range. Meanwhile, the share of American Bitcoin investors over 50 years old reportedly accounts for 3%.
Novogratz is ever the bull
Novogratz, a 54-year-old billionaire and known Bitcoin bull, claimed that there are probably 20 billionaires he could name that made their money outside of crypto and are in crypto now. He added that the new Bitcoin funds could attract investors who are now buying gold.
Additionally, Novogratz said he expects that traditional financial services companies will let users invest in Bitcoin in the next 12 months.
Earlier today, major Bitcoin fund Grayscale Bitcoin Trust filed Form 10 with the United States Securities and Exchange Commission to become the first crypto fund to report to the regulator. If the filing is approved. Grayscale could see its investor base widen, as more institutional investors will be able to dabble in Bitcoin.
One of the 21 founding members of the Libra Association, Bison Trails, has raised $25.5 million from Blockchain Capital, Coinbase and ConsenSys.
New York-based blockchain startup Bison Trails has raised $25.5 million in a new funding round led by major venture capital firm Blockchain Capital. One of the 21 founding members of the Libra Association, Bison Trails is providing blockchain infrastructure solutions for more than 20 blockchain protocols to date, the firm said in an announcement on Nov. 19.
The new Series A financing round featured a number of major industry investors including venture capital firm Kleiner Perkins, American crypto exchange and wallet service Coinbase, Ethereum blockchain firm ConsenSys and crypto merchant bank Galaxy Digital.
Other new investors included Collaborative Fund, A Capital, Sound Ventures, while early investors were also represented by Initialized, Accomplice and Notation.
Bison Trails optimizes block production for over 20 protocols like Tezos and Livepeer
As previously announced, Bison Trails is working to optimize block production and validation and is actively securing a number of protocols including Tezos, Livepeer and Decred. By providing an infrastructure for deploying participation node clusters on any protocol, the firm purportedly removes the need for customers to spend resources on developing internal blockchain protocol engineering, the firm said in a recent press release.
Bison Trails joined the Libra Association Council as one of the 21 founding members in mid-October.
Recently, an executive at ConsenSys, one of the Bison Trails’s new investors, launched a new blockchain-oriented investment firm, Aligned Capital. Sam Cassatt, the chief strategy officer at ConsenSys, announced on Nov. 15 that the firm will be seeking to raise $50 million for its first fund.
Fidelity Digital Asset Services, LLC has procured a charter from the New York State Department of Financial Services to operate a virtual currency custody and execution platform.
Fidelity Digital Asset Services, LLC (FDAS) has procured a charter from the New York State Department of Financial Services (NYDFS) to operate a virtual currency custody and execution platform.
Per a Nov. 19 press release, the NYDFS authorized FDAS to operate as a limited liability trust company and run a cryptocurrency custody and execution platform where both institutional investors and individuals can store, buy, sell and transfer Bitcoin (BTC).
Superintendent of Financial Services Linda A. Lacewell noted that “this approval is further evidence that innovation and consumer protection can coexist in New York’s evolving and expanding financial services industry.” Commenting on the development, Michael O’Reilly, COO for Fidelity Digital Assets, said:
“The custody and trade execution services that we provide are essential building blocks for institutional investors’ continued adoption of digital assets. The designation as a New York Trust Company under the supervision and examination of the DFS builds on the credibility and trust we’re establishing amongst institutions and other market participants. We will continue to play a leading role in supporting the maturation of the entire ecosystem as we expand our business and the clients we serve.”
Fidelity’s developments in crypto custody service
Earlier in November, Fidelity Investments, which stands behind FDAS, hired Michael Zinaman as its product specialist to further oversee the company’s strategy on cryptocurrencies, custody and execution services. Zinaman oversees the company’s strategy for its cryptocurrency custody service that launched in mid-October.
At the time, the company’s CEO Abigail Johnson said that the company had fully launched its crypto custody business following a year of preparation and accumulating clients.
Recently, institutional Bitcoin trading platform Bakkt received regulatory approval from NYDFS to offer custody services to any institution. Previously, the option was only available for those trading its Bitcoin futures.
The Gemini crypto exchange made its first-ever acquisition by purchasing the Nifty Gateway platform, which enables users to buy and manage non-fungible tokens.
The Winklevoss twins’ Gemini exchange has made its first-ever acquisition by purchasing the Nifty Gateway platform, which enables users to buy and manage non-fungible tokens (NFTs).
Tyler Winklevoss revealed the acquisition in a Nov. 19 blog post, detailing that so-called “nifties” are a unique asset or good on a blockchain that differ from other cryptocurrencies as they are one-of-a-kind and thus not interchangeable. Nifties’ features make them ideal as a base for crypto-collectibles and crypto-art, according to Winklevoss.
Because all collectibles will migrate onto blockchain
Currently, the Nifty Gateway platform allows users to buy nifties with a credit or debit card. Speaking about the motivation behind the acquisition, Winklevoss cited their belief that all collectibles — both real-world and digital — will eventually transition onto a blockchain in the form of nifties.
By a curious coincidence, Nifty Gateway was developed by identical twins Duncan and Griffin Cock Foster. In a separate announcement, Duncan Cock Foster said:
“There is a lot of infrastructure that we need in order to build something on the scale that we are imagining. It would be time consuming and tedious to build on our own. But by teaming up with Gemini, we get instant access to a lot of critically important technologies that we would not have otherwise.”
The financial details of the acquisition were not disclosed.
Crypto-collectibles gain in popularity
Crypto-collectibles are gradually making their way into the mainstream, with the launch of projects such as CryptoKitties and sports teams and organizations embracing the new technology. Speaking on stage at BlockShow Asia 2019 in Singapore earlier in November, True Global Ventures 3d founder Dusan Stojanovic said the time to invest in crypto collectibles is “right now.” Stojanovic stated:
“I am really bullish about gaming and non-fungible tokens [...] CryptoKitties was the start. I think the timing is right now, way before five years [from now].”
Publicly traded Bitcoin fund Grayscale Bitcoin Trust filed a form with the United States SEC to become the first crypto fund to report to the regulator.
Publicly traded Bitcoin (BTC) fund Grayscale Bitcoin Trust (GBTC) filed Form 10 with the United States Securities and Exchange Commission (SEC) to become the first crypto fund to report to regulator.
Grayscale announced in a blog post published on Nov. 19 that, if the filing will be deemed effective by the SEC, several aspects of the fund’s operations could change.
In the event of approval
The firm notes that, if the regulator deems the filing effective, the structure of the trust will remain the same and it will not be added to a national securities exchange. However, there will be some changes to Grayscale’s scope and operations.
Should the SEC accept Grayscale’s filing, it would designate the fund as an SEC reporting company and obligate it to register its shares under the Exchange Act. Furthermore, as many institutions block investors from considering trusts based on SEC-approval, Grayscale’s eligible investor audience could widen. The SEC’s auditing standards would also be applied to Grayscale.
The firm also noted that accredited investors will benefit if the filing is approved:
“Accredited investors who have previously purchased shares in the Trust’s private placement would have an earlier liquidity opportunity, as the statutory holding period of their private placement shares would be reduced from 12 to 6 months.”
Grayscale is not the only fund seeking to give investors easy exposure to Bitcoin. As Cointelegraph reported in September, investment management firm VanEck also launched its own Bitcoin trust, and issued just four Bitcoins during the first week of operation.
Grayscale sees record inflow
Grayscale’s regulatory foray follows a record year for the trust, which saw inflows of $254 million in total investment into its products in the third quarter of 2019. Q3 2019 marked the highest demand for the company’s offerings since its establishment, making a threefold quarter-on-quarter increase from $84.8 million in Q2 2019.
The Royal Bank of Canada will not launch its own digital currency trading platform, contrary to previously published news.
The Royal Bank of Canada (RBC) — the largest bank in Canada with $499 billion in assets under management — will not launch its own digital currency trading platform, contrary to previously published news.
Last week, rumors that the RBC was exploring the possibility of launching its own cryptocurrency exchange began circulating the internet on a range of finance and economics-focused publications.
At the time, it was reported that the trading platform would “facilitate buying and selling of individual digital coins, including Bitcoin (BTC) and Ether (ETH), as well as the transfer of funds combining different types of cryptocurrencies.”
No near-term plans to launch a crypto exchange
However, the RBC eventually denied the rumors about it launching a digital currency trading platform. The RBC told Cointelegraph that “recent media articles have commented on certain patent applications made by RBC in relation to blockchain technology, and speculated on the applications of these patents.”
The bank confirmed that the aforementioned patent files do not relate to the development of a cryptocurrency exchange for clients, stating that it does not have near-term plans to launch a digital currency exchange for its customers. The RBC said:
“As part of the innovation and discovery process, RBC, like many other organizations, files patent applications to ensure proprietary ideas and concepts are protected.”
Banks’ approach to fintech products internationally
Earlier in November, news broke that the Central Bank of Tunisia (BCT) announced the start of digitization of the Tunisian dinar. The BCT subsequently denied the reports, clarifying that it was exploring various methods of digital payment alternatives, including a possible central bank digital currency, but it had not moved forward with its implementation.
In China, the People’s Bank of China announced that it will use a new system to certify 11 types of fintech hardware and software products relating to digital payments. The PBoC stated that, in order to obtain a corresponding certificate from the central bank, applicants will have to pass a prototype examination as well as on-site inspections.
Launched in May 2019, Salesforce’s Hyperledger-based blockchain platform will now be used to authenticate Lamborghini heritage cars.
Italian luxury sports car brand Lamborghini is using Salesforce Blockchain to authenticate heritage Lamborghini cars. Salesforce, a major global customer relationship management firm, announced on Nov. 19 that Lamborghini can now trace, certify and authenticate heritage cars faster and more securely using its blockchain platform.
Launched in May 2019, Salesforce’s Hyperledger-based blockchain platform will now be implemented to create a trusted network between multiple participants for certification checks during a Lamborghini’s resale.
Each Lamborghini vehicle will now come with an immutable record of service
Typically, when a Lamborgini is resold, the vehicle goes through 800 or 1,000 certification inspections that take place at the Lamborghini headquarters in Italian Sant'Agata Bolognese, the press release notes.
The process requires Lamborghini to work with a huge network of resources such as photographers, auction houses, dealerships, repair shops and media sources — to register the full history and verify all of the parts and service history of each vehicle.
Specifically, the firms claim that each Lamborghini vehicle will now come with an immutable record of service, including major details such as prior ownership and restoration. The new system is also designed to protect Lamborghini cars against potential counterfeiting as all authentication checks are managed by Lamborghini and its partner network, the press release notes.
Lamborghini’s use of Salesforce Blockchain follows a recent pilot project involving its first vehicle certified using Salesforce’s blockchain. In August 2019, a one-of-a-kind Lamborghini Aventador S was certified on Salesforce Blockchain for a show at the 2019 Monterey Car Week in California to protect the car as a work of art.
The U.S. Federal Emergency Management Agency is investigating a blockchain-based property registry to streamline disaster insurance payouts.
The United States Federal Emergency Management Agency (FEMA) is exploring the idea of a blockchain-based property registry to streamline disaster insurance payouts.
In its latest National Advisory Draft Report to the FEMA Administrator, the agency indicated its interest in deploying blockchain technology in order to streamline disaster insurance payouts and improve the speed of disaster responses.
To achieve this, FEMA recommended the establishment of a blockchain-based property and land registry, containing all critical information needed to file an insurance or disaster assistance claim.
Cutting the rate of self-insurance for public infrastructure
FEMA suggested that such a registry would not only promote liquidation of an insurance policy such as a “disaster dividend” or a “harm’s way” claim but also reduce the rate of self-insurance for public infrastructure. According to FEMA, self-insurance most often means no insurance at all, which makes the government bear the expenses on unfunded disasters.
In the report, FEMA noted blockchain and other emerging technologies’ ability to improve resilience and recovery efforts in a disaster, as critical data can be stored off-site in a “highly-trusted, secure platform.”
Adoption of blockchain in the insurance industry
There are a number of examples of the successful implementation of blockchain technology in the insurance industry globally. Recently, the United Kingdom-based charity organization Oxfam International announced the success of its blockchain-based delivery system of microinsurance to paddy field farmers in Sri Lanka.
The company claimed that blockchain could transform and simplify the insurance claims process, which would result in reduced administration costs and a higher percentage of premiums being used for fully trusted pay-outs.
In April, the British Virgin Islands partnered with blockchain firm Lifelabs.io to launch an alternative crypto-enabled payment infrastructure for residents across the chain of islands. The partnership had a particular focus on using crypto infrastructure to support the reliable and swift transfer of aid and access to funds in emergency scenarios.
Deutsche Boerse and Swiss state-run telecom Swisscom have settled securities transactions using different blockchain protocols.
German securities marketplace Deutsche Boerse and Swiss state-run telecom Swisscom have settled securities transactions using different blockchain protocols. In a joint proof-of-concept (PoC) involving a number of banks, the participants exchanged money in the form of cash tokens against tokenized shares, Deutsche Börse officially announced on Nov. 19.
Based on blockchain technology, the joint PoC intends to show the potential of new technologies in the financial services sector and maintain Germany and Switzerland’s expertise in the digital asset ecosystem.
Three major Swiss banks participated in the PoC
The PoC involved major Swiss banks, including the fourth-largest Swiss bank Zuercher Kantonalbank, investment bank Vontobel and Falcon Private Bank. These banks were acting as counterparties and exchanged securities tokens against cash tokens, the press release notes.
The central bank of Switzerland, the Swiss National Bank, also indirectly participated in the PoC as the cash tokens were deposited as collateral in Eurex Clearing’s account in the bank. The cash tokens in Swiss francs were provided by Deutsche Boerse.
Corda and Hyperledger were used for cross-chain secure settlement
In order to process cash and security tokens, the participants were deploying two different distributed ledger technology (DLT) protocols — R3's Corda and IBM’s Hyperledger Fabric — to complete cross-chain secure settlement.
Other participants of the PoC included Swiss blockchain firm daura and Custodigit, a joint custodial venture by Swisscom and Sygnum. The firms provided core elements of the digital share registry for the PoC, Deutsche Börse noted.
The new initiative by Deutsche Borse and Swisscom is another milestone in the existing blockchain-related collaboration of the companies. Earlier this year, Deutsche Borse Group and Swisscom partnered with Singapore-based fintech firm Sygnum to develop compliant financial market infrastructure for digital assets.