Cryptocurrencies issued in Malaysia must go through central bank

If you thought cryptocurrencies could be kept away from the watchful eyes of banks and governments, think again.

Malaysian Finance Minister, Lim Guan Eng, said that all cryptocurrencies must go through Bank Negara Malaysia, the country’s central bank, before being issued to the public, reports the New Straits Times .

“I advise all parties wishing to introduce Bitcoin (style) cryptocurrency to refer first to Bank Negara Malaysia as it is the authority that will issue the decision on financial mechanism,” said Lim Guan Eng, during parliamentary questioning.

The country is remaining open to cryptocurrencies, but for the most part, it sounds like it just wants to watch out for its netizens – to ensure they won’t fall foul of any scammy coins.

“It is not that we wish to obstruct (cryptocurrency) as we are keeping an open-mind,” Lim Guan Eng continued. “But it is still subject to existing laws.”

While the Finance Minister is making these suggestions, it seems unclear how exactly the country plans on regulating any cryptocurrencies that do approach the Malaysian central bank.

Of course, there is a natural irony that cryptocurrencies will have to seek approval from a central bank before being issued. But as governments look to regulate digital assets it was perhaps an inevitability.

Indeed, the Central Bank of the Bahamas has also published a regulatory framework to help integrate cryptocurrency products into its financial industry.

Secure voting, digital ID’s, and more: How blockchain could reform digital democracy

The immutability and decentralized nature of public blockchain networks, such as bitcoin and Ethereum, could allow governments to process large amounts of sensitive information on an unchangeable and transparent platform.

In an exclusive interview with Binary District, Daniel Gasteiger, the co-founder of Procivis, an electronic ID solutions company built on integrated e-government platform eID+; and Patrick McCorry, a Research Associate at University College London (UCL), discussed the potential of blockchain technology in e-governance and the limitations that may restrict its applicability.

Potential applications of blockchain technology in e-governance

Over the last two years, several governments, including those of Brazil and Georgia, have utilized blockchain technology to manage electoral votes, land registry and digital identities. While many countries have fallen behind Brazil and Georgia in the adoption of blockchain technology, the governments of Japan, South Korea, and the US have vowed to continue exploring the value of the technology in e-governance.

As a data processing technology, blockchain is largely applicable to many of government’s functions and services. Gasteiger explained that blockchain technology could replace existing infrastructures and methods, such as electoral votes and the digitization of ownership.

“The blockchain further allows governments to digitize their registries, for instance, land registry, commercial registry or marriage registry, and it can facilitate the secure allocation and distribution of social benefits. By implementing these applications, governments can foster public trust and increase citizens’ engagement,” said Gasteiger.

The application of blockchain technology in e-voting and the real estate registry would see governments processing millions of transactions on a public blockchain network daily. This could, in turn, increase the potential and facilitate the adoption of blockchain commercially.

Gasteiger further reiterated the importance of the immutability and decentralization. These two characteristics give blockchain a significant edge over existing technologies because it ensures that information is readily accessible and allows both the government and the public to verify that it has been unaltered. Moreover, this is all recorded in a transparent ledger without the fear of hacks or security breaches.

“The blockchain’s characteristics of immutability and decentralization offer two crucial advantages. First, the validity of any official document stored on the blockchain can be reliably verified at any time. Second, the decentralized nature of the blockchain allows governments to digitize their services without the need to create a central storage for sensitive data, sometimes called a honeypot, which would represent an attractive target to hackers,” added Gasteiger.

However, immutability and decentralization come with huge costs and tradeoffs — namely scalability. While public blockchains are extremely secure and virtually impervious to security breaches because they are distributed and don’t have a single point of failure, they struggle to process large amounts of data at fast speeds. In order for data to be sent and received on a blockchain network, every node on the network must synchronize to ensure that each piece of information is verified and confirmed.

By eliminating miners and processing information within the network through stakeholders, the migration from the proof-of-work (PoW) consensus protocol to the proof-of-stake (PoS) consensus protocol algorithm could ease the burden on nodes and users. In a PoW-based system, miners use electricity and computing power to solve blocks and process information. In a PoS-based system, miners are nonexistent and those holding that cryptocurrency can process data without the need for electricity and computing power.

The principle of PoS is based on the idea that stakeholders or holders of the cryptocurrency will not deliberately make negative decisions for the network. On this issue, Gasteiger noted that the migration of public blockchains, like Ethereum, to PoS could improve scalability

“There are still key aspects of the blockchain value proposition that the current technology doesn’t yet deliver on. For instance, the move from proof of work to proof of stake is still outstanding, a step that should increase performance and scalability. In addition, I believe the right equilibrium between a fully-decentralized and a more centralized development paradigm for public blockchains still has to be found.”

Blockchain technology —  impractical for e-governance?

Despite the wide range of applications blockchain technology could power, UCL researcher Patrick McCorry has stated that scalability is still the primary issue for any public blockchain.

Ethereum remains the most flexible and scalable blockchain network in the global cryptocurrency market, settling more than 1.3 million transactions a day according to Etherscan. As such, it has a daily transaction volume larger than that of all cryptocurrencies in existence combined, including bitcoin.

Even with Ethereum’s flexible blockchain network, it doesn’t have the capacity or efficiency to fit hundreds of millions of votes on the blockchain. At this time, public blockchains can only handle around a million transactions a day. For instance, if the Brazilian government was to process its popular petitions on the Ethereum blockchain, which it plans to do in the future, only around 500,000 votes could be processed a day.

Given its obvious inefficiencies, governments have begun exploring methods which could enable blockchains to process large amounts of information outside of the main blockchain network and then simply send a compilation of information to the blockchain.

In the recent testing of its Ethereum-based electoral system, the Brazilian government utilized a system called hashing to combine all daily votes into a single transaction and broadcast it to the Ethereum blockchain network. Systems like hashing allow blockchains to process large amounts of information in chunks, compile it into one transaction and, ultimately, process it much more efficiently and at a lower cost.

McCorry, however, maintains that the system employed by the Brazilian government only solves the specific issue of time-stamping. He emphasized that it does not solve the problem of scalability as a whole.

“This is mostly to do with time-stamping and committing to a set of votes in such a way that the Brazilian government cannot remove or add votes in the future. I think it is honorable that they have attempted to add further integrity to their electoral system using the Ethereum blockchain, but it only solves this one issue. It does not help solve ballot stuffing or authenticating voters. That depends on the voting protocol being used by Brazil,” said McCorry.

He asserted that he is not convinced of the applicability of blockchain technology in e-governance or why it is better than traditional database replication techniques in the management of votes, land registry and digital identifications.

“It can provide some benefits in terms of proving to the general public that data has not changed over time (i by time-stamping and committing to data). However, I’d be wary of the government collecting information about the general public and storing it in the blockchain. I’ve not really been convinced why this type of data needs to be stored on a blockchain or why it is suitable for this purpose compared to traditional database replication techniques.”

Henrique Costa, a law professor at Universidade de Brasília, who is currently an advisor to the Brazilian government on the testing of Ethereum blockchain network in processing electoral votes, gave a contrasting opinion. In regions like Brazil where corruption remains a serious issue, Costa said that the blockchain could bring legitimacy to the country’s electoral system by processing information transparently.

Costa added that, in Brazil, there is no secure method of gathering votes and signatures from the people when processing popular petitions. In this system, a regulatory proposal can be heard in Congress if the signatures of 1 percent of Brazil’s population are obtained. The blockchain could be used to manage these popular petitions along with other important aspects of the country’s electoral system.

While McCorry believes that e-governance is a compelling use case for blockchain technology, he still holds that, for now, blockchain has “very little” advantage over existing technologies.

“It really depends on the application and sometimes it takes great imagination, intuition or experience within the sector to find a compelling use case,” explained McCorry. “A smart contract (and blockchain) works best when there are two or more mutually distrustful parties that wish to perform some shared computation. It works great for financial applications such as trading assets or currencies. So far, for e-voting and e-governance, it seems only useful for proving that data hasn’t been changed (i time-stamping) or providing a consistent view to all voters.”

Ultimately, there are no compelling use cases for blockchain technology that are better or more efficient than existing technologies. Nevertheless, as scalability improves, second-layer scaling solutions are implemented and blockchain is adopted by the e-governance sector, more convincing use cases of blockchain technology will likely emerge.

This post was written by Joseph Young for Binary District, an international сollaborative technology community which creates unique competency-based workshops and events on new technologies. Follow them down here:

Legendary cypherpunk declares cryptocurrency is failing its creators

As cryptocurrency falls further into the hands of the mainstream, it falls further away from its creators, the cypherpunks.

Earlier today, CoinDesk published an in-depth interview with Timothy May, one of the founding members of the cypherpunk movement.

In the interview, May highlights how the ideology that spurred the creation of Bitcoin is slowly being eroded.

After asking May a few questions, CoinDesk received “a sprawling 30-page evisceration of a technology industry [May] feels is untethered from reality.”

Blockchain is an ideology before a technology

In an article dating back to 1985, David Chaum, the creator of DigiCash, outlined the concept of the “dossier society.” This society, he thought, would come as an inevitable result of our increasing reliance on technology.

In his interview May reaffirmed with all its regulation, blockchain is slowly becoming another tool that enables a “surveillance state, a dossier society.”

But we must remember, blockchain was created to support a system, and perhaps more importantly, an ideology that sought to challenge the “dossier society.” Only now, this isn’t what is panning out, as more centralized bodies are getting their hand into blockchain.

When CoinDesk asked May if he thought Bitcoin has stuck to its cypherpunk roots, he replied it is far, far away.

May went on to say, “I think the greed and hype and nattering about “to the Moon!” and “HODL” is the biggest hype wagon I’ve ever seen.”

All aboard the blockchain hype-train

May told CoinDesk how the hype and intense interest in cryptocurrency and blockchain has swept through industries like a tsunami leaving behind “confusion and carnage.”

Some might call this disruption, May likens it more to Schumpeter’s “ creative desctructionism .” Some even might claim this is necessary for societal development. May doesn’t seem to think so.

“What I see is losses of hundred of millions in some programming screw-ups, thefts, frauds, initial coin offerings (ICOs) based on flaky ideas, flaky programming, and too few talented people to pull off ambitious plans,” May told CoinDesk. “Sorry if this ruins the narrative, but I think the narrative is fucked.”

May highlights how sheer interest and hype surrounding blockchain has got every man/woman and his/her dog developing some kind of use for the supposedly decentralized tech. But when this happens, the tech becomes inherently more centralized.

“People and companies are trying to stake-out claims.” May continued, “Some are even filing for dozens or hundreds of patents in fairly-obvious variants of the basic ideas, even for topics that were extensively-discussed in the 1990s”

Using blockchain to posture for competitive advantage couldn’t be any further from what it originally set out to achieve. As May put it, “Satoshi would barf.”

May might have a point here. A recent study showed China’s control of Bitcoin’s hashrate . Another study found only 16 percent of cryptocurrencies are truly decentralized. Then there are the seemingly weekly announcements of yet another bank using blockchain.

All of which create a centralized and controlled reality, contrary to the original visions for Bitcoin.

“Remember, the excitement about [Bitcoin] was mostly about bypassing controls, to enable exotic new uses like Silk Road. It was some cool and edgy stuff, not just another PayPal,” May said.

The lengthy interview is worth a leisurely read; find it over on CoinDesk .