Crypto Finance: Knowledge Session

File sharing has been around for quite some time now, but some projects -such as the mainnet launch of filecoin, the timely reason for this episode - aim to add token-driven incentive structures into a world that was previously run by altruism and pragmatism. Crypto Finance's Head of Research, Dr. Lewin Boehnke, looks at the cryptoeconomics and token value proposition of distributed file storage. Due to poor audio quality near the end of the recording, we unfortunately had to cut this session a bit short, removing some of the Q&A.

Patrick Heusser, Head of Trading with Crypto Broker AG, shares his vision about what is needed to make DeFi relevant to a broader audience over the next five to ten years and which players - states and corporations - are to likely make this happen. Not everybody in the Crypto Finance group shares that same vision, which made for a very lively discussion.

Blockchains fork from time to time, there are ample examples. Some fork more than others and for different reasons. Crypto Finance’s Head of Research, Dr. Lewin Boehnke, takes the likely BCH chain split, planned for 15 November, 2020, as a sufficient reason to reflect on the ideological differences among blockchain communities and how and why this influences the likelihood of a chain split as a mechanism for resolving disagreements.

Most retail users would agree that it's a good thing that financial institutions that handle their money have some degree of regulatory supervision. Many holders of crypto assets hold in high regards their right to financial privacy and reject any attempts at supervision. What happens if financial institutions handle crypto assets on behalf of clients? They have to be held to high standards and need to fulfil their AML obligations. The announcement of an automated and compliant transfer between Crypto Broker AG and Mt Pelerin (https://www.cryptofinance.ch/en/first-automated-compliant-digital-asset-transaction/), itself a big but straightforward and expected step following the recommendations of the Financial Action Task Force (FATF), raised some privacy concerns in the purer crypto-centric community. We brought in 21 Analytics founder Lucas Betschart to discuss what happened during this transaction, what type of information are and have to be exchanged, and with whom they are shared. We further discuss what impact this has on crypto asset holders who choose to not store their coins with a third party but be their own bank (spoiler: none).

Yes, the title is clickbait. No, we did not actually scam anybody and it is not really possible to do so (although we have a sneaking suspicion that some players are attempting just what is described in this episode). Lightning's distinct topology is not as intuitive as bitcoin's simple 'broadcast every information to everybody' approach. That is the perceptual disadvantage of its better algorithmic scaling. In this hands-on session, Dr Lewin Boehnke, Crypto Finance Head of Research, discusses this topology and the implications for routing, overall fee, and fee-gaming ideas.

When Ethereum Classic had its first noteworthy 51% attack, back in January 2019, Crypto Finance AG's Head of Research, Dr. Lewin Boehnke, felt obliged to record an 'Instant Emergency Education Session' for the team, to classify what happened and combat fear uncertainty doubt about that threatened to spread from this isolated event throughout the whole crypto asset ecosystem. With now three 51% attacks happening on Ethereum Classic within just the last month, the attention is not that high anymore, and the attacks more a reflection of the overall state of ETC than a specific event. Still, it seems like a good time to publish -outside the usual publication cycle every second Friday- this previously internal recording from 19 months ago. It is just as relevant now as on the day of recording.

After introducing into the concepts of DeFi in the previous episode by Bernadette Leuzinger, this time Crypto Broker's Senior Trader Patrick Heusser jumps right in to discuss projects, opportunities and risks.

DeFi, or Decentralized Finance, is a hype. There is hardly any other way to talk about this at this point. Warranted or not, what's behind it when the Plateau of Productivity is reached, that's what we discuss in a wide discussion throughout all areas of Crypto Finance AG, guided and moderated by Bernadette Leuzinger, COO of Crypto Fund AG.

Security is paramount in dealing with crypto assets, and the approaches range from pen-and-paper (and even dice and operations) to stand-alone technology. Our Crypto Finance Head of Research and Crypto Storage CTO, Dr Lewin Boehnke, discusses the spectrum of operations, the technology applied in securing private keys, and emerging trends in these areas. The episode touches on the example of retail hardware wallets to illustrate general considerations, although the scope is not limited to this and is not to be construed as advice for personal security.

In a previous session we discussed Bitcoin's "digital gold" meme. This time, our Head of Research aims to go into the image that some of the other popular crypto assets aim to portrait themselves. The goal they aim to achieve and the target audience they are aiming for. This session explicitly does not go into how and how well the assets achieve the goal, which would easily fill an episode each on their own.

The million dollar fees recently paid on Ethereum, independent of the actual reason or outcome of that particular story, serve as a good reason to review and discuss what types of problems can arise if fees are not taken into consideration when setting up security. Heists and blackmail are just the beginning of the potential risks. Crypto Finance's Head of Research, Dr. Lewin Boehnke, discusses the foundational problems and implications, giving basic best practices for the handling and defining fees for various lock-up arrangements.

Our published podcast knowledge sessions usually refrain from discussing valuations. We sometimes hold such discussions internally, but they are typically not of interest after a few weeks and, as such, don't lend themselves to the format of an educational podcast. This discussion is an exception. The topic is the 'intrinsic' value of bitcoin. Despite existing definitions of 'intrinsic' in economics and philosophy, this value appears to be surprisingly ill-defined and prone to individual interpretation when it comes to bitcoin. The question comes up frequently, especially in discussions with a wider audience, and often with the goal of confirming out that bitcoin presumably has no such value. In this session, Crypto Fund's COO, Bernadette Leuzinger, moderates a lively discussion with several members of the Crypto Finance team, exploring the common ground for bitcoin, while looking at a few alternative examples of intrinsic value.

Two events in the last two weeks caused interest in early blocks of the bitcoin blockchain. First, an old block was moved, block number 3654 that was mined in the second month of bitcoin's existence. The second event was the signing of a message from 145 early blocks, just a week later. Both events gave rise to the question of whether those blocks belong to Satoshi. If any message is signed or any coins are moved from an address belonging to Satoshi, it would signal that potentially 1.1 million BTC could be on the move that were previously widely regarded as permanently 'frozen', among other implications of course. After the first of these two events, we discussed the field of blockchain archaeology that you hear in this knowledge session. Old node software and mining practices had quirks that compromised the miners' privacy and now, in hindsight, allow us interesting insights into those early days. The most prominent example is the "Patoshi Pattern", which allowed the quick answer that neither of the two events were likely to be related to Satoshi. This session included showing a chart from https://satoshiblocks.info. We believe that the recording is useful even without this chart, but a quick glance over there does not hurt.

Bitcoin's genesis block encoded the news headline "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." During the recent halving, a miner encoded also a recent headline, "NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue" into the blockchain forever. With fears of inflation growing in the public discourse for some countries and regions, we take advantage of the pertinent personal experience of a member of our team, Crypto Broker AG's Backend Engineer Alessandro Chacón. who gives his personal account of how hyperinflation played out in Venezuela and what role harder currencies, as well as Bitcoin, play in the daily life of ordinary citizens. This discussion intentionally does not address the macroeconomic aspects of the likelihood of inflation, which will greatly differ throughout the world, but it does review a local playbook and the consequences for society.

Flashback to pre-corona times in this episode, which was originally recorded in April 2018 to cover the time-less topic of hashes in general and their use in Bitcoin. In ensuring the integrity of the chain, generating addresses, linking transactions and mining. Hashes are one of only two cryptographic concepts that you need to understand to get the foundations of cryptocurrencies. The other one, signatures, we covered in a separate podcast before. Being recorded pre-corona has two implications. It is much more interactive. Remotely, the discussions don't work that well. The recording quality however is significantly worse. Don't worry, after the first minute it improves, but does not reach the level that we have over a conferencing system where each participant has a dedicated mic.

The halving is coming up, current estimate is for May 11, give or take a few days. What sounds like a simple thing - to just pay 6.25BTC reward per block instead of 12.5 - develops quite some complexity in the ecosystem. Crypto Finance's Head of Research, Dr. Lewin Boehnke looks at previous halvings in bitcoin and altcoins, and ultimately he has come to an intriguing realisation: the current starting point before the halving is sufficiently different from any previous halving that all bets are effectively off.

Decentralisation is, in some cases, a property of blockchains that is critical to the permissionless nature and, in other cases, pursued for its own merit. In many cases, especially when putting applications on top of a blockchain, some aspects of decentralisation are not required although they do not hurt the cause. Crypto Finance's Head of Research, Dr. Lewin Boehnke, tries to walk this fine line and make sense of both successful and failed cases of building centralised applications on a decentralised platform.

With Coronavirus kicking off a COVID-19 health, economic, and financial crisis, Crypto Finance's Head of Research Dr. Lewin Boehnke and Crypto Broker's Senior Trader Patrick Heusser discuss the differences between the current crisis and the 2008 financial crisis, the role that gold plays in these crises, and the role that bitcoin may play this time. Our knowledge pooling sessions are obviously impacted by the fact that many of our employees are working from home currently. The event happened almost exclusively as an audio conference. While it lost interactivity because of this, we hope that the content is still interesting.

Our Crypto Storage Business Development Manager Alexander Moser looks at gaming and the blockchain, exploring these purely digital valuables that are collectables and, as such, are verifiably scarce and have unmanipulatable handling. The feasibility of games that reside completely on chain and the various models for such a game to interact with assets on chain give rise to different economic possibilities. The take-home message number one: do not underestimate the potential of gaming on the blockchain, especially the potential monetarisation of games through scarce assets. To be clear, we are not talking about ICOs here.

In this episode, Bernadette Leuzinger, COO & CFO at Crypto Fund AG, gives an introduction to the Taproot development and its implications for bitcoin. If implemented, Taproot could be one of the biggest changes bitcoin has experienced since the introduction of SegWit in 2017. Taproot aims to simplify and improve privacy for bitcoin transactions. Taproot is creating a debate among bitcoin developers, as they have been published as Bitcoin Improvement Proposals (BIPs). There are still quite some considerations. If implemented, it would bring about a soft fork in bitcoin. We discuss these considerations, bitcoin's MAST and P2SH, as well as what the cryptographic signature scheme Schnorr would brings to Taproot.

In this episode, Alessandro Chacón, Backend Engineer at Crypto Broker AG, takes up the recurring topic of privacy and gives an introduction to CoinJoin, its implementations and the related privacy aspects for bitcoin. As the bitcoin blockchain is fully transparent and transaction records are publicly accessible to everyone, approaches to protecting transaction privacy are becoming increasingly important for anyone interested in financial privacy. In general, CoinJoin can be viewed as a tool to enhance the privacy and fungibility of bitcoin. It involves a trustless approach, introduced by the bitcoin core developer Gregory Maxwell, to combine multiple bitcoin payments from multiple parties into a single transaction. This makes it more difficult for outside parties, such as blockchain analysis companies, to determine who paid whom. For this internal knowledge session, our team experts – all with various backgrounds - discuss both the technical aspects of CoinJoin, and the concerns arising at the intersection of financial privacy, compliance, and regulation. We hope you enjoy this lively episode.

Fees pay for Bitcoin's security. At least to a small part, the bigger chunk is currently subsidized. There is no fee-table, no guaranteed confirmation times. But still the system is stable and predictable. Head of Research, Dr. Lewin Boehnke discuss fee economics, fee selection algorithms and handling of usual and unusual situations. Websites that are mentioned in the podcast are https://mempool.observer/monitor/ and https://dashboard.bitcoinops.org/

Bitcoin and Ethereum use cryptographic signatures, as does your credit card. Analogies break quickly when trying to explain what they do and how they work. So instead our Head of Research, Dr. Lewin Boehnke explicitly guides through a specific signature scheme. An unusual one, but one that is remarkably intuitive and easy to understand. The IOTA Signature Scheme ISS. We would love to get your feedback. Write us at research@cryptofinance.ch.

Motivated by the positive feedback to the mildly opinionated last episode about Ethereum's forks and difficulty bomb adjustments, our Head of Research, Dr. Lewin Boehnke, jumps right into the field of controversial discussions. This time, Bitcoin's electricity consumption. Taking on frequent talking points and misconceptions and presenting an outlook regarding scaling and the development of sourcing of energy. We always do, but for this one in particular, we would love to get your feedback. Write us at research@cryptofinance.ch.

After the fork is before the fork for Ethereum, with the last fork, Istanbul, very recently on 8th of December and the next fork scheduled for roughly 6th of January. We discuss the history and reasoning of forks in Ethereum, what they have in common with forks in other chains, e.g. Bitcoin and what is distinctly different. The most notable difference for sure is the difficulty bomb. It's a major, but very often misrepresented component of these discussions and our Head of Research, Dr. Lewin Boehnke, aims to clear up misconceptions surrounding it.

In this episode, Alessandro Chacón, Backend Engineer at Crypto Broker AG, dives into one of bitcoin's second layer solutions called "liquid", which is developed by the blockchain technology company Blockstream. Liquid is a sidechain-based settlement network for traders and exchanges, enabling faster, more confidential bitcoin transactions, and the issuance of digital assets. Today, there are already many well-known exchanges involved as "members" of the network. Learn more about Liquid here: https://blockstream.com/liquid/ The episode was recorded in June 2019, so some of the quoted numbers were current at that time.

One of the ongoing topics is the use of smart contracts for real life applications. How does a smart contract work together with out-of-chain events? What is relevant to handle on the blockchain, what adds and does not add to the quality of the project by handling it there? In this episode, our Head of Research, Dr Lewin Boehnke, guides the discussion through the complete code of a contract that is both extremely minimalistic and highly consequential in its use of the blockchain. Here is a bit of background on the carbon vote that determined the future path of Ethereum after The DAO hack: The smart contract is comprised of merely 15 lines of code, 6 of them empty or comments. Essentially only one line is relevant. See the code here: http://v1.carbonvote.com/ We discuss how this was sufficient as a full voting contract. During the original session, we had the contract code in front of us. For reference, here is the full contract code: ---- /** *Submitted for verification at Etherscan.io on 2016-07-06 */ contract Vote { event LogVote(address indexed addr); function() { LogVote(msg.sender); if (msg.value > 0) { msg.sender.send(msg.value); } } } ---- Source: https://etherscan.io/address/0x58dd96aa829353032a21c95733ce484b949b2849#code

Mining is a component of blockchain economics that is often misunderstood. In this episode we look at the economic and technological roles that mining plays for a cryptocurrency and the implications of these roles. Our Head of Research, Dr Lewin Boehnke, guides this discussion about the economics of asics, asic resistance, and a few real and potential developments, including the impact of botnets in the blockchain era, and how zero knowledge proofs could evolve.

Like many young fields, crypto assets don't have an established nomenclature yet. Deliberately or not, words get reused in very different meanings. This often makes project descriptions hard to understand. We sat down for a session to talk about what 'tokenisation' actually is: what it is, what it is not, where blockchain comes in, and what it changes. For a bit of context for this particular session, we had an internal task through all teams to evaluate what tokenisation means for Crypto Finance AG and vice versa. This session happened right at the start of it, to set the scope and develop substance instead of getting lost in buzz. The audio quality for this session is far from good. Towards the end, the recording had significant jitters, which lead us to cut this episode a bit short - hence the slightly abrupt ending in this episode.

Bitcoin's deflationary nature is rarely questioned. Instead, it is often considered as part of its origin story. We're referring to bitcoin’s limitation to 21 million BTC – a message that is easy to convey and was tempting from the outset. With regard to the economic considerations, however, the asymptotic crawling to a fixed number might not be the wisest choice. In cryptocurrencies, the expenditure of electricity towards the security of the network by the miners has to be reimbursed by some economic participant. There are two extremes. The cost is borne by the users of the currencies in each transaction through fees, or by the hodlers of the currency through inflation. Crypto Finance's Head of Research, Dr Lewin Boehnke, discusses the economic rationale and consequences of that decision for bitcoin, and he presents original arguments and considerations around this decision from a technological rather than an economic standpoint. This knowledge session, recorded just over a year ago, remains relevant today, as bitcoin price moves can be considered in light of this aspect.

What are the moving parts of a blockchain and how do they play a part together? This podcast looks at communication, protocol, consensus, systems, and applications relevant in the technology stack of a blockchain. It also explores how these elements can change and what the consequences are for a project when they do change. This episode, hosted by Dr. Lewin Boehnke, Head of Research at Crypto Finance AG, started as a general overview, and the Q&A with the team developed into a discussion of forks in particular and resilience in general.

Handling cryptocurrency addresses seems seamless when using standard tooling like electrum wallet or mobile wallets. You want to pay somebody? Scan their QR code. You want somebody to pay you? Your app will provide you with one that they can scan. New ones every time. You usually don't need to know what is happening under the hood, until of course you deviate from the typical usage patterns by introducing repeating transfers between fixed counterparties, corporate structures, or you just have the urge to get a better grasp of the details. In this session, recorded this May, our Head of Research, Dr. Lewin Boehnke, gives us a look under the hood and guides us through key derivation and its usual and not so usual uses.

Last summer, while Fomo3D was in full bloom, Alexander Moser, Business Developer at Crypto Storage AG, hosted a session about game theory. It was not the typical session you would expect, where he would explain why proof of work is secure. Instead, he looked at fringe scenarios that can come up, intentionally or accidentally, in smart contracting platforms and contracts build on those. This ended up in a wild brainstorming exchange about topics ranging from the possible impact of in-contract incentives to economic considerations for the platform itself. As this happened during a hot summer evening, the windows were open and the audio quality suffered as a result. We hope that it is still an enjoyable episode.

History lesson in the knowledge session. In a session back in January 2019, we took the then recent coinmetrics blog about inconsistencies in the Bitcoin Private monetary supply (https://coinmetrics.io/bitcoin-private/) as an opportunity to review that and two more prior hacks. The origin story of Monero (https://soundcloud.com/the-bitcoin-game/the-bitcoin-game-42-riccardo-fluffypony-spagni) and the hack of Cryptsy (since the original source is now down, here's the internet wayback machine archived version: https://web.archive.org/web/20160115053621/http://blog.cryptsy.com/). What all three incidents had in common is that actions of individual developers got by far not the scrutiny that they should have prior to being entrusted with projects and having their code deployed in production systems. It's a lesson in recent history and a call to caution.

New crypto assets come up every now and then, and some of them bring something new to the table. It is very rare for a new project to get the attention of the established Bitcoin community. By combining scalability with anonymity and opt-in auditability, Mimblewimble raised many eyebrows. The anonymous drop of the Mimblewimble whitepaper was such a moment. Bernadette Leuzinger, COO of Crypto Fund AG, hosted the session about this topic in January 2019, right around the time of the mainnet start of two implementations. We discuss the protocol, the implementations, and practical implications.

Atomic swaps are a very simple tool but hard to grasp concept. This is partly due to the technology and game theory, but what adds to the complexity is the emergent economic and regulatory implications that we also touch on in this episode of our internal knowledge session by Crypto Finance's Head of Research, Dr. Lewin Boehnke. The recording is rather old, several months at this point. But as often, we are not chasing the news in our knowledge sessions but rather aim for the more fundamental topics.

This podcast is a guide to the Crypto Broker Weekly Rotation Report given by our Senior Trade Patrick Heusser, with an explanation of the type of indicators, the rationale for their choice, and an overview of the report structure. He references the report from June 13, 2019: the PDF of this report in the podcast can be found here for you to follow while listening: https://www.cryptofinance.ch/en/crypto-broker-weekly-rotation-report-cw-24-2/ The report provides information on bitcoin and altcoins and extensive insights into the crypto asset market, including quantitative data analysis, macro market comments, technical chart analysis, and rotation (sector) analysis. You can find the most recent reports here: https://www.cryptofinance.ch/en/insights/?_search=rotation%20report Should you wish to receive the weekly Crypto Broker Rotation Report by email, you may subscribe to the report in the form at the bottom of this web page: https://www.cryptofinance.ch/en/brokerage/ Disclaimer This publication, provided by Crypto Finance AG, is published for information purposes only. No information provided in this publication shall constitute investment advice. This publication does not constitute an offer, solicitation, or recommendation to acquire or dispose of any investment or to engage in any other transaction. This publication is not intended for solicitation purposes, but only for use as general information. All descriptions, examples, and calculations contained in this publication are for illustrative purposes only. While reasonable care has been taken in the preparation of this publication to provide details that are accurate and not misleading at the time of publication, Crypto Finance AG (a) does not make any representations or warranties regarding the information contained herein, whether express or implied, including, without limitation, any implied warranty of merchantability or fitness for a particular purpose or any warranty with respect to the accuracy, correctness, quality, completeness, or timeliness of such information, and (b) shall not be responsible or liable for any third party’s use of any information contained herein under any circumstances, including, without limitation, in connection with actual trading or otherwise or for any errors or omissions contained in this publication. Crypto Finance AG is a corporate entity registered under Swiss law in Switzerland and not subject to prudential supervision. All intellectual property, proprietary, and other rights and interests in this publication, and the subject matter hereof, including, without limitation, all registered design, copyright, trademark, and service mark rights, are owned by Crypto Finance AG, its affiliates, or third parties. Investments in virtual currencies are high-risk investments with the risk of total loss of the investment. You should not invest in virtual currencies unless you understand and can bear the risks involved with such investments. Crypto Finance AG excludes its liability for any losses arising from the use of, or reliance on, information provided in this publication.

Talking about 'public' or 'permissioned'/'private' blockchains does not do the flexibility of the ecosystem justice. Even considering the in-betweens does not do the trick. In this first-ever-published recording of our twice-weekly internal knowledge sessions, our Head of Research, Dr. Lewin Boehnke, looks at the landscape and argues that there are at least three characteristics that have to each individually be considered on a private-public scale that determine the use cases of that cube.