The Chinese government is investigating crypto miners in the Sichuan province
Sichuan is one of the most important crypto mining regions in the world
Authorities in China are investigating allegedly illegal Bitcoin (BTC) mining farms that have apparently been built without the required permissions in Sichuan province. This is according to the local media agency Sina in a report on May 30.
Illegal Bitcoin Miners Investigated in China
According to a recent report released by Sina, there have been reportedly constructed 30,000 Bitcoin mining machines without approval from the government. The companies behind the constructions of these farms are currently being investigated.
In general, the alleged mining farms have been installed close to the Dadu river, which hosts the world’s biggest embankment dam. Although this dam is under construction, the region has one of the cheapest electricity prices for mining the most popular digital asset.
China and the Sichuan province specifically have been receiving large companies and investors that wanted to mine virtual currencies. Sina claims that 70% of the world’s Bitcoin are mined in China and 70% of the Chinese mining activities are focused in Sichuan province due to the electricity capabilities related to the Dady River.
There were some reports in the last months in which China’s National Development and Reform Commission, a local agency in charge of macro policies, revealed that authorities are considering banning crypto mining activities in the country.
Crypto miners need to have cheap electricity that would allow them to reduce the costs of powering energy-consuming miners and cold temperatures for miners to run more efficiently. Bitcoin mining activities tend to be profitable, but there are periods of time in which some miners have to leave the market due to an adverse market.
Bitcoin’s hash rate is currently close to its all-time high registered in September 2018 when it was over 60 million TH/s. Which is going to be the effect of this investigation on Bitcoin’s hash rate and its network is yet to be seen.
[Author Alert] The author’s opinions above are solely based on their own self-conducted research. Assume any and all authors are using, holding, trading and/or buying cryptoassets mentioned as a portion of his or her financial portfolio. Use information at your own risk, do you own research, never invest more than you are willing to lose.
The crypto market is so mesmerized by rise in the price of Bitcoin (BTC) that some people are not paying attention in some other important factors which can also be very important for the market. For instance, today several large transactions were made using Ripple’s XRP.
These transactions were spotted by the ever attentious Whale Alert profile. According to the Twitter profile, 14 XRP transfers were made from the official Ripple wallet to several unknown wallets, which shows how active Ripple is right now.
Out of the 14 transactions, only two of them were sent out to other Ripple wallets and 12 of them were sent to unknown wallets. The profile also highlighted that some of the addresses were the same that the company sent some funds before.
A total of over 9 billion XRP tokens (almost 4 billion USD) was sent out in these transactions, which clearly shows that the amount of tokens being moved around is currentyl far from negligible. This amount of money includes the fees which were paid. Some of them were over 1,000 XRP tokens, meaning that these were, in fact, very high fees, normal with such large transactions.
Some wallets that received the tokens were reported to be activated just some time before they received the funds from the other wallets, meaning that some of them were actually new wallets which seemed to be created with the specific purpose of receiving these funds.
What Does This Mean For Ripple?
As soon as the movement was spotted, many people started to ask what was going on. These are consderably large numbers, so it picked the interest of many investors using social media during the day of the transactions.
Some people have considered that Ripple may be dumping these funds. This theory is based on the fact that the prices of XRP tokens have not been raised a lot during the month, as they are somewhat stagnated while the price of other assets such as Bitcoin has gone up with time.
Other people have complained that it is “stupid” to say that Ripple is dumping tokens because it is a big organization and it is expected that they will eventually sent out tokens to investors who are interested in them.
The truth is that nobody is sure, so we have to wait for the next moves made by the company in order to actually be able to determine what is going to happen in the future.
The SEC has received multiple applications for Exchange Traded Product (ETF) to be listed on the New York Stock Exchange (NYSE). However, it has been delaying these decisions since at least the middle of last year for many of the companies that have tried to gain the listings.
This is despite the Commissioner of the SEC coming out in support of cryptocurrency and Bitcoin in particular during a recent keynote address at the Consensus Summit 2019. This has lead to many asset managers trying to find new and innovative ways to bring cryptocurrency to retail investors via physical exchanges such as the NYSE.
Upstart looking to T-Bill hedging as a solution
This is where Whilshire-Phoenix comes in. A small, some would say upstart, asset management firm thinks it has found the secret to getting SEC approval and it revolves around minimizing risk by bundling Bitcoin with various other instruments.
These are notably Treasury Bills and the product uses a proprietary formula to be able to entice larger investors who are looking to dip their toes into the Bitcoin craze. However, these same investors do not want to deal with the inherent instability that permeates the crypto market.
The fund, whose full name is The Wilshire Phoenix United States Bitcoin and Treasury Investment Trust, filed an S-1 with the SEC in January already. An amended proposal as submitted on the 21st of May and it proposed this new ETP model. The new model would group Treasury bills (T-bills) with Bitcoin. Coincidentally, NYSE Arca filed with the SEC to appeal for a rule change that would allow them to list ETPs on their exchange.
IT is a sign of the times that various companies have started looking into releasing Bitcoin-related products such as ETPs and ETFs (Exchange Traded Funds).
VanEck and Bitwise have both applied with little success, as their proposals have been stalled time and time again. The reasons given for the stalling tactics was for the SEC to garner public comment on both the stability and volatility concerns regarding investing into Bitcoin.
Finer details emerge
The ETP would be backed by Coinbase’s Custody program that is insured up to 200 million dollars. It would combine this with short term treasuries and cash equivalents that would be held by the UMB Financial Corporation.
The success or failure of the application hinges on the hedging of Bitcoin (high volatility) versus T-bills (low volatility). The fund’s formulas dictate how much is invested at any given period.
During periods of high volatility, a smaller portion of the fund would be invested into Bitcoin, whereas a much larger portion would be added in periods of low volatility. The beginning of each month would see a reallocation of funds based on the data gathered the previous month – thus allowing for some stability in a market where it has not been seen… ever.
The situation as it stands currently is that the SEC has 45 days to give an answer to Wilshire-Phoenix. An approval from the SEC would see the retail shares traded on the New York Stock Exchange Arca, giving a much wider (and richer) audience to cryptocurrency.
The fine print is interesting as well. The SEC has never approved a 19(b)-4 crypto mutual fund and that is in part due to the lack of control over the NAV (Native Asset Value) of cryptocurrency based funds. However, when looking at combined holdings, particularly when it comes to being grouped with T-bills.
The company believes that the stumbling block in the past has been the ever-present volatility factor and the company likewise believes that it has managed to solve that problem.
Many in the financial and crypto world think that the SEC would be loath to give any cryptocurrency product an approval, no matter how small of a percentage it would be. Wilshire-Phoenix spokespeople couldn’t comment on this as they are not allowed to speculate at this point of the proceedings but they do assure that they are in constant contact with the SEC.
The method they are using, however, isn’t just applicable to crypto. The reorganization of assets on a monthly basis and the formulas used to calculate the reorganization are currently waiting on a patent. This method allows a much greater control over the NAV of the product, as well as shifting the cost of rebalancing value from the customers to the fund itself.
This is done by using the interest gathered by the T-bills to pay for a portion of the rebalancing. If successful with Bitcoin, the fund will be looking to apply this method to other asset classes very soon.
Bart Smith, a crypto analyst and the Head of Digital Assets at financial services firm, Susquehanna, has said that even though there are quite a few factors that contributed to the recent Bitcoin price rally, the asset is still significantly speculative.
Speaking during an interview on CNBC’s Squawk Box, Smith discussed a few issues surrounding the world’s largest cryptocurrency.
On Why Bitcoin Surged
According to Smith, there are a few reasons why Bitcoin was able to shoot as high as it did and these reasons are considerably interconnected.
A factor which has been corroborated quite a few times by some leading industry analysts is the ongoing trade war currently being fought between the United States and China. It is said that people began predicting that the Yuan will be negatively affected and decided to shift base to Bitcoin. This shift, among other things, caused Bitcoin to rise.
Smith also believes that the recently held Consensus conference might also be a factor to be considered with Bitcoin’s surge. According to him, all the publicity, promotion and advertising done in anticipation of the conference did a lot to keep Bitcoin and crypto in general, on the lips of many people. This, unsurprisingly, may also have helped the coin to shoot up as press was quite favourable.
There is also the news that Fidelity Investment, a key asset management firm, is also making serious plans to begin Bitcoin trading very soon. Reports have it that when it begins, the firm will allow financial institutions exclusively and will not allow individual clients just yet.
The decision made by Fidelity could be a direct action from a recently concluded survey where the firm found that about half of all institutions view cryptocurrency as a viable financial invention to be used sometime in the future.
On Bitcoin’s Volatility
It has been said times without number, that the fact that Bitcoin is very unstable and volatile would affect its future as a widely accepted form of payment. This opinion has been supported by the Congressional Research Service (CRS) as well Richard Fisher, a contributor for CNBC.
Smith however defended the asset without completely dismissing its volatility, arguing that the market still has a lot of room to develop and possibly grow out of it high volatility. According to him:
“People who are bearish on that would say it’s too volatile. I would argue that it’s kind of in a nascent phase and if a broader adoption occurred, the volatility would damper.”
Smith also believes that the recent Bitcoin surge and its generally impressive trajectory that has been upheld so far this year, will definitely help its chances as the atmosphere is generally a bullish one. Smith explained this by pointing out that
“there is a lot of optimism from people within the Bitcoin community over the things that happened in recent months. And I think that is reflective in the price.”
Bitcoin, according to most analysts and experts is still expected to rise and do better numbers. Many people are looking forward to the Bitcoin halving that is expected to happen in May next year, as a major push for a price surge.
The Nexo team released an update today on the future of their project while also clarifying misconceptions about the rapidly-growing lending platform.
Nexo claims their key business model “is unchanged” but that the company is:
“actively exploring new avenues to maximize token utility and investor value.” The company also claims their ultimate goal is to become “a multi-billion dollar financial institution.”
While few people had heard about Nexo several months ago, the crypto lending platform has become a leader in the space. In fact, the company claims to be “the market leader in the crypto lending space”. Their goal is to solidify that position moving forward while continuing to expand.
Nexo also provided an update on its Nexo Card, which will launch in Europe first before expanding to clients in other countries worldwide. The company claims any delays in launching the Nexo Card will be caused by third parties – not Nexo itself.
Nexo also clarified its deployment of different collateral requirements and a new lower loan minimum of $100. The company claims these programs “have been IT-ready for months” but the deployment of the programs has been on hold while Nexo secures additional funding.
“This has been done to meet the enormous loan demand that will inevitably result from introducing them,” adds Nexo.
The next Nexo update, meanwhile, is scheduled to be released in June for iOS and Android. Also in June, Nexo plans to announce the ex-dividend date for the next Nexo Dividend.
One final bit of news from the blog post is that TRON will be onboarded as a new collateral option as part of the June update.
“Nexo Continues to Be the Undisputed Market Leader in the Crypto Lending Space”
One of the most important points of this latest blog post is that Nexo see itself as the undisputed market leader in the crypto lending industry.
The company plans to grow that reputation moving forward:
“while delivering new features, functionalities and new opportunities to further enhance the Nexo product offering and to maximize value for the NEXO token holders.”
Nexo Clarifies Misconceptions and “FUD” About Project
Another important point of the blog post was to clarify misconceptions about Nexo and the NEXO token.
“For too long have we ignored the malicious spreading of misinformation about Nexo and the NEXO token,” explains the Nexo team in the blog post.
The blog post goes on to describe the NEXO token as
“an income-generating digital asset with significant growth potential.” However, they also caution that FUD has “affected both the token price and the Nexo community.”
Some of the specific points they wish to clarify about Nexo and the NEXO token include:
Key Points of the Nexo Terms Have Not Been Changed, Although Smaller Points Have
Some in the community believe that the NEXO token terms have been quietly adjusted multiple times. Nexo doesn’t deny that the terms have changed, but they maintain that “essential features” like the 30% profit-sharing and the Nexo Dividends program have not bee changed.
However, Nexo didn’t deny adjusting certain terms over the last few months:
“While there are no major deviations from the initially set terms, changes are, of course, sometimes needed in order to adapt to new circumstances and changing business and regulatory realities. An example would be the introduction of the Loyalty Dividend which was not included in the initial Token Terms but was added later on — a move hugely appreciated by the community.”
The company claims that any major changes to the terms and conditions will only move forward with community review.
The Nexo Card Has Been Delayed, But for Reasons Outside of Nexo’s Control
Certain members of the community have also been spreading FUD about the launch of the Nexo Card. The card has been delayed, although Nexo claims the delays are the result of things “that unfortunately Nexo has no control over.”
Nexo claims Visa and MasterCard have “very strict policies” on who can get approved for a card program, and that both companies are very conservative over crypto-related businesses. The companies also have detailed application processes required for each country – there’s no pre-set international card program available.
Nexo claims they “did get approvals” but were also subject to “additional due diligence processes”, and both Visa and MasterCard required the company to amend certain terms.
It’s still unclear when the Nexo Card will launch. Here’s all that Nexo has to say about the launch date:
“The Nexo Card will first become available in Europe with more parts of the world following suit.”
Nexo Continues Dropping Minimum Loan Requirements
When Nexo launched its lending service last year, there was a minimum loan requirement of $5,000. That limit was gradually dropped to $500.
Next, the goal is to drop the minimum loan requirement to just $100. However, Nexo claims there are two main reasons why they have not yet lowered the minimum to $100:
“Nexo does not charge its users any bank transfer fees and we would like to keep it that way”
“Lowering the loan minimum to $100 or aggressively adding more collateral options would further increase the demand side which we might not be yet ready to back with enough financing.”
In other words, Nexo doesn’t want to compromise the user experience by lowering the loan limit to $100. Nexo also claims the reasons above are why they have delayed the launch of their affiliate program.
TRON Will Be Onboarded in June
Earlier this year, Nexo launched a community poll to determine which cryptocurrency should be onboarded to the platform next.
Nexo claims the decision was “unambiguous”, and that TRON would be the cryptocurrency onboarded in June.
What’s Next for Nexo?
June will be a big month for the Nexo team. The company is going to announce the ex-dividend date for the next Nexo Dividend in June. Nexo is also onboarding TRON and updating its mobile apps in June.
It’s unclear when the Nexo Card will launch, although it seems possible the card will launch in Europe before the end of the year.
The Nexo team clearly believes the future is bright not just for itself – but for crypto in general. They claim we’re in the middle of ‘Crypto Spring’ after a prolonged ‘Crypto Winter’:
“With the tokenization of the world, Nexo is in a perfect position with its leading automated lending infrastructure to capitalize on the widespread adoption that established behemoths of the financial world such as JP Morgan, Fidelity, the Yale Endowment fund and Facebook will ensure. The total addressable market for Nexo’s products thus rises to the trillions and we are happy to have you in for the ride!”
Nexo (NEXO) has jumped 46% over the past 24 hours and now sits in the top 100 cryptocurrencies by market cap (currently holding the #100 position).
However, NEXO is still trading significantly lower than its all time high price of $0.39 from May 2018, currently trading at a price of around $0.11.
Ripple’s Insights blog focuses on the regulations of the UAE and other regions.
The FSRA will be creating a balanced approach for the UAE to promote innovation and protect stakeholders.
There has been a lot of volatility experienced in the regulatory atmosphere over the last year around the world. However, Ripple recently gave an update to their customers about the Ripple Regional event, which was based in the Middle East and North Africa (MENA). The individuals on the panel discussed a possible new approach with the Abu Dhabi Global Markets (AGDM), which would provide a little more balance.
Sagar Sarbhai, the Head of Government & Regulatory Affairs for APAC, noted that there is a shift in the attitude of regulators for cryptocurrency. Before now, there was more of a “wait and see” approach to determine how to deal with this asset, which quickly became a more fearful and uncertain way of handling the regulations, which resulted in more aggressive approaches.
By finding balance between these two sides, places like Thailand and other countries have eliminated their bans, choosing more welcoming rules to urge along innovation without losing the protection needed for stakeholders. By taking on this approach, the environment for regulatory measures has beneficial for the growth of the market.
Simon O’Brien from the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA) is one of the team members responsible to creating the regulations for the United Arab Emirates (UAE).
Ultimately, the goal of this team is to create the infrastructure that will go past the normal issues, like anti-money laundering standards. As Ripple’s latest Insight article says, much of the attention will be on “practical needs,” like “market abuse, transparency, and reporting.”
The CEO of BitOasis, Ola Doudin, supports this approach, noting that the long-term potential of the crypto market will ultimately be realized by going further than just the price of the assets included.
In order to follow along with this necessity, the CEO added that the company is developing the new rules with the support of ADGM, though she praised the FSRA team for their decision to be forward-thinking in their framework.
Now, BitOasis is trying to establish itself as the first regulated exchange in the region by the time the year ends.
While global cooperation is a priority of ADGM, O’Brien pointed out that this is hardly the only fixation of the organization. It is presently working with several regional entities, including the UAE Central Bank, as the FSRA works to introduce the bank and others to the new framework. Rather than just regulating the various exchanges, O’Brien added that the licensing of the firms plays a role as well, giving them similar validity to a bank.
Overall, taking this refined approach will hopefully improve the credibility of the crypto market, leaving banks, investors, and other stakeholders with more confidence in it. Doudin concludes that everything will come down to “risk and reward,” though the infrastructure will hopefully be designed in a way that both sides feel comfortable with this wager.
Presently, Ripple’s XRP token is trading at $0.449539, rising by 0.5% in the last 24 hours.
Bitcoin is more famous now in 2019 than it ever was before. The recent price spike caused the newest wave of people investing in the asset today. Traditional financial investors, giants from social media and even retail companies such as Starbucks are all talking about cryptos, this is a fact.
However, most of the mainstream media outlets flat out affirm that Bitcoin can be known as a fool’s gold, not digital gold. According to them, the whole thing ranges from a scam to a bubble, something that the investors know that it is not the truth (although eventual bubbles do happen and they end bursting like last year).
Also, while die-hard crypto fans hold their own keys and praise the decentralization of the ecosystem, several crypto users are simply not that much excited about the whole idea. They often do not care about nodes, private keys and cold wallets, they just want a trustworthy company to hold their digital money for them.
This interesting new Reddit post created by u/atc2017 has tried to correlate how the notoriety of crypto and Bitcoin is going up with how prices go up and down. The main reason for creating this was to understand how rise and fall in prices are correlated with exposure and awareness, a theory that is pretty popular in the BTC community.
The graph shows in green the positive mentions of BTC and crypto, the negative ones in red and neutral in gray. Unfortunately, even as the prices increase, most of the news is either neutral or negative and almost none of them are positive.
With the graph, it can be clearly seen that the media continues to be skeptical even as the crypto bulls are making more and more money. Even when the big price increases happen, the token is not really appreciated by the media outlets, as the price bumps may be comparable to more news about it, but not necessarily positive exposure.
When the prices go down, however, negative exposure tends to go up, which clearly shows the negative bias that the traditional media has against BTC.
What could actually be surprising is that most of the time the news is generally deemed to be fairly neutral. This shows that it does not really mean whether prices are going up or down, the media also does not seem to hate BTC that much. Also, this year the negative views have somewhat diminished.
Are these trends ever going to chance? We have to wait and see. Negativity will certainly continue for a long time, at least until the ecosystem is fairly well-regarded around the whole world.
Small Scale Loan provider Bitbond is raising €3.5 million up in a Security Token Offering (STO) to help SMEs in Asia. This denotes the first STO to be endorsed by German administrative body BaFin.
As a private venture involved in loan provision, Bitbond boasts of facilitating business loans worth over €13 million to support SMEs with the use of eCommerce platforms such as Amazon, eBay, and Etsy.
The funds generated from the potential Security Token Offering will be invested in loans to aid the growth and expansion of SMEs and online retailers across Asia.
First Of It’s Kind
Notably, the Bitbond STO happens to be the first STO in Germany to have its outline endorsed by BaFin- the country’s top financial regulatory body- as it looks to encourage crypto adoption.
The platform already bolsters more than 150,000 clients in 80 nations utilizing blockchain innovation to encourage suitable cross-border settlements as well as machine-based learning for effective credit-scoring.
According to CEO and founder of Bitbond Radoslav Albrecht;
“We are still in the process of uncovering the potential of emerging technologies like blockchain and machine learning, so it’s exciting to be at the forefront of this developing space.”
What The First Regulated STO In Germany Could Mean
It is impressive and applaudable that the German supervisory body is ready for advanced securities contributions. Undoubtedly, blockchain innovation could serve as a credible source of capital for independent businesses and small ventures across the globe. Albrecht also clarified on the conventional monetary framework as he was quoted saying:
“The traditional financial system is acting as an obstacle for countless entrepreneurs across the world. With this STO, we will continue to offer accessible loans to the small business that need them, so that they can grow and invest in their own communities in turn.”
Numerous organizations are already profiting the Bitbond platform. One of such is the case of Dr. Joemar Taganna, a bioengineer, who got a business loan from Bitbond to aid the launch of his software product development business; SciBiz. He enthused:
“It’s much easier to secure a Bitbond loan than more traditional routes to seed finance. There’s a lot less hassle, which makes it quicker to launch a business and achieve sustainable growth.”
This STO will keep running until the 8th of July and is available to financial specialists around the globe with the exception of the United States.
Could This Be A False Start?
Although many industry specialists already predicted the approval and endorsement of a Regulation A+ STO, the Bitbond STO– being the first government-authorized STO in Germany- just about shows the level of advancement being made in the country and Europe at large, although the U.S. appears to keep hauling its heels.
A Regulation A+ will be an extraordinary achievement for the cryptocurrency and blockchain space, however, the need for an ‘Exchange Agent’ seems to be a noteworthy hindrance that restricts crypto firms in the U.S making such significant moves.
Facebook currently owns the largest social media platform in the world. This is pretty much enough in order to have a successful launch for the long-awaited Facebook Coin, right? Well, not so much, according to a new piece of research made by Diar.
The new currency created by Facebook is set to disrupt the global banking networks and to earn a lot of money for Facebook while doing so. By removing all the financial barriers and making some of the products advertised on the company cheaper, the idea is to take over the world, basically.
However, the new report from Diar poses an interesting question which should be taken into account in order to discover if Facebook has big chances or not. The fact is that the users of Facebook are continuously older as time passes. New generations are not as prone as the old ones to keep using the social media network.
This demographic could prove to be the largest challenge for Facebook so far, especially as the company is struggling to widen its reach. The main problem happens because older people are not so prone to know about cryptocurrencies and to be willing to use them as young ones.
According to the report, the most probable strategy that Facebook will use in its expansion is to target countries which do not have a very strong financial structure. This way, they will offer their token to people as an alternative in order to make payments online.
It is important to notice, too, that the so-called Facebook Coin (also known as Project Libra), will possibly be used on WhatsApp and Instagram, too, which changes the whole scenario, especially when you consider that the userbase of Instagram is considerably younger than Facebook’s.
Facebook Is Already Starting Partnerships To Launch New Token
Another important fact that should be taken into account is that Facebook is already moving major partnerships forward. The company is said to be currently dealing with the Western Union, which will possibly help Facebook in the future. Other rumors, however, affirm that the company is only consulting as part of its research to provide services for the unbanked around the world.
Facebook also met with representants of both Visa and Mastercard, the two largest payment processors in the world right now. Even the venture capitalist investor Tim Draper was consulted by the company. He is known as a major Bitcoin bull and a crypto enthusiast.
Last week, it was also reported that the giant of social media was talking with members from both Coinbase and Gemini, two prominent crypto exchanges in the U. S. market. According to anonymous sources cited by the Financial Times, Facebook has negotiated with the companies in order to ensure that its stablecoin has a peg to the value of the USD.
The purpose of this article is to take a look at Bitcoin’s topology and metrics and relay that information.
In this piece, various facets of the Bitcoin network will be analyzed to assess its overall ‘health’ and status.
Any and all metrics that can be conveniently viewed via various explorers/data analysis sites will be aggregated and cited appropriately in the compilation of this report. Information compiled May 20th, 2019
Understanding the Picture Above
Upon viewing the picture above, you may have noticed that there are two scales on the y-axis. On the left side, we can see percentages and on the right, we can see data sizes.
The reason why ‘Bitcoinvisuals’ is a preferred source for analyzing a hefty number of Bitcoin metrics is because they run their own node using default settings. So when their findings are analyzed, we can get a better sense for the ‘load’ that certain Bitcoin conditions impose upon individuals running full node setups on the network.
Specifically, ‘Bitcoinvisuals’ states:
“Our node’s memory usage for unserialized mempool data. We run default Bitcoin Core settings.”
Notably, ‘BitcoinVisuals’ is running a ‘bitcoind’ setup, which is optimized for RPC (remote procedure call) usage.
What is ‘Bitcoind’?
When ‘BitcoinVisuals’ refers to ‘bitcoind’, they are referring to a version of the node software that allows for querying the chain using JSON.
Bitcoin, in its initial iteration, could not be queried for information (i.e., wallet balances, addresses, transactions, etc.) without implementations such as ‘bitcoind’ being created to facilitate such calls.
Examples of API Calls That Can Be Made
The list above is not exhaustive, by any means — but it does shed greater light on how several of the most popular blockchain explorers are able to extract information and deliver it to users in a ‘readable’ format.
Explain the Y-Axis Percentages
The percentages on the left side of the y-axis, represent the nodes set capacity for pulling transactions from the mempool.
Setting a limit on the number of transactions that are pulled from the mempool is critical to ensure the security of the protocol. Otherwise, without a limit, nodes would endlessly pull in transactions into their mempool.
This, of course, would create a significant vulnerability on the network because spam attacks would eventually force nodes (with insufficient memory) to crash.
Fortunately, as stated above, there are measures in place on the protocol that are designed to prevent this from happening. The specific code in question can be found below:
In the picture above, we can see that the default max MB that nodes will pull running this implementation is 300 MB.
Accordingly, the percentages on the left side of the y-axis for ‘BitcoinVisuals’ shows how ‘full’ the node’s mempool allowance is at a given time.
Why This is Important
It is ultimately up to nodes to relay information to the network and it is up to nodes to accept certain information as well. While 300 MB is the default capacity for nodes, there is no guarantee that nodes will be able to continuously function at this capacity in the long-term without running into some issues.
In such an instance where the mempool is filled (under the default settings), full nodes running bitcoind can exercise their option to elevate the ‘minrelaytxfee’ which simply stipulates that:
“Fees (in BTC/kB) smaller than this are considered zero fee for relaying, mining and transaction creation (default: 0.00001).”
If this is confusing, take a look at the stackexchange answer a user gave below, which eloquently explains the ‘minrelaytxfee’ setting in greater detail:
If, for whatever reason, a full node does have its mempool filled, then new transactions will replace older transactions as long as the newer ones have a higher TX than that of the pre-existing transactions with the lowestfee.
Recent Spike in Transactions
For those that have been paying attention to current events in the Bitcoin space as of late, they may have noticed that Bitcoin’s mempool has seen a noticeable spike.
However, this spike has not coincided with the increase in price (i.e., greater usage from increased interest), but rather as a result of a ‘spam attack’ on the network.
It Appears This Recent Spike May Be Related to the Bitcoin Cash Spike in Transactions
Recently, the Bitcoin Cash network was attacked during its hard fork upgrade. This was covered in full by the author in a series of tweets posted below:
1/ A quick look at the topology for the Bitcoin Cash $BCH network. >50% nodes upgraded currently.
No ‘issues’ reported in the Git, so doesn’t seem like there’s a software issue. Just seems like some nodes haven’t upgraded to the new software yet. pic.twitter.com/IaR2nQcEOM
In what may have been retaliation, it appears the Bitcoin mempool also started getting spammed that same day (May 15th, 2019):
At one point, there was approximately 150 MB worth of transactions in the mempool at one time.
Since then, however, it appears that the mempool has sorted itself out — dropping from a high of 70k+ unconfirmed transactions to just 500 at its lowest.
How Do Spam Attacks Work?
In order to understand this, we need to go back to why Bitcoin Core has a ‘fee market’ set in place.
There is some insight provided for this in Bitcoin’s whitepaper. Specifically under the ‘Incentive’ heading, it states:
This is elaborated upon further in the Bitcointalk forums when a user questions how Bitcoin intends to prevent itself from being rendered vulnerable to a DoS attack on the protocol: https://bitcointalk.org/index.php?topic=287.msg8810#msg8810
In this thread, Satoshi Nakamoto explains that the fee structure was not only established in Bitcoin to provide an incentive for miners to mine, but also to protect the protocol from spam costs.
The logic behind Satoshi’s reasoning was simple. If a mandatory minimum is attached to TXs of a certain size, then this would disincentivize bad actors from spamming the transaction with constant 1 satoshi sends.
This theory worked well for the time being (circa 2010), but in latter days, we have come to see that Bitcoin has continued to be plagued by spam attacks due to bad actors seeking to harm the protocol’s efficacy.
This results in an elevation of the mean fee that must be paid in order to get a transaction into a block because Bitcoin transactions are accepted on a priority basis (remember the economic incentive we discussed above).
Due to the basic nature of humans, Satoshi was able to accurately use this to Bitcoin’s advantage by allowing miners to choose transactions with the highest fees. Thus, those seeking to get their transactions confirmed “immediately” must simply pay a fee that is higher than the bulk of users.
This break down by user, ‘AndrewBuck’ in the thread, explains the system perfectly:
As more transactions are spammed onto the network, the fee rate increases. This is also true with usage of Bitcoin.
Notably, this led to a situation in 2017 where, when the mempool was at its largest size (consistently, day over day), the necessary median fee to ensure that a transaction was confirmed in a reasonable amount of time was approximately $28.
In some cases, the fees for sending Bitcoin in a convenient time frame (within 1 or so transactions) was even greater than the amount that some individuals were looking to transact or the fee would take a greater portion of the ‘send’ than the remainder of the transaction after the fee had been extracted.
Thus, since we have already seen what many claim to be increased activity on the blockchain, we’re going to go ahead and take a look at Bitcoin’s median and mean fees over times.
Bitcoin Median Fee
As expected, the median transaction fee (fee/tx) increased substantially during the time that the market had been spammed.
As can be seen in the chart above, on May 12th, 2019, the average fee/tx was $0.39 (USD value derived from averaged market price of Bitcoin at the time). Soon after, however, the average fee/tx rose to $4.79:
The good news is that the average fee/tx here is lower than what it was previously when mempools were filled up to a comparable height before SegWit implementation became more widespread (2017).
However, it is still worth noting that the average transaction fee did spike to $4.79. Those in the upper 90th percentile were paying as much as $6.37 to have their transactions confirmed.
Even now, at the time of writing, the transaction average fee/tx stands at $2.56:
Comparing the Fees to Other Protocols
Bitcoin Cash Fee
At the time of writing (May 20th/21st, 2019), the median Bitcoin Cash fee/tx (USD) was $0.0011.
At the time of writing, Litecoin’s median fee/tx is $0.015 (USD). In order to put these metrics into perspective, however, mining profitability must be taken into account:
The fact that Bitcoin is a more expensive protocol (in terms of sending fees) is not an issue. However, when this issue is juxtaposed with the fact that Bitcoin Cash is slightly more profitable to mine on currently, these statistics become a bit worrisome for any Bitcoin maximalist.
While Bitcoin does still possess the advantage of the network effect, large disparities between Bitcoin Cash’s financial metrics and Bitcoin could pose a problem in the short-term.
Evaluating Bitcoin’s Fees / (Conclusion)
As mentioned above, one of Bitcoin’s primary issues in 2017 was the exorbitant fees that users had to pay in order to have their transactions confirmed in a reasonable time frame.
As noted earlier in this report, transaction fees had climbed to well over $20 at one point in time.
Part of this was due to the activity on the network, but this was also partially attributable to ‘mempool spamming’, which is yet another phenomenon that was covered earlier in this report.
Specifically, however, in the next installment of this research, we’re going to go ahead and look at the current fee rate (in Satoshis and USD) and analyze whether Segregated Witness has been helpful in lowering the overall fee rate for Bitcoin.