Cryptocurrency exchange Bithumb to block trading in 11 countries

Increased regulatory oversight on cryptocurrency trading is driving exchanges to take extreme measures. After Bitfinex and Poloniex , Bithumb is taking additional measures to ensure anti-money laundering (AML) compliance with its country’s laws.

Bithumb — the world’s fifth largest cryptocurrency exchange by trading volume — is banning the use of its platform across 11 countries, the company announced on Sunday.

The 11 banned countries include Iran, Ethiopia, Iraq, Serbia, Sri Lanka, Trinidad and Tobago, Tunisia, Vanuatu, Yemen, and Syria. All named countries are on the Non-Cooperative Countries or Territories (NCCT) list of Financial Action Task Force (FATF) , an intergovernmental organization that combats money laundering. NCCT is a list of countries that — FATF believes— do not have sufficient laws to prevent money laundering globally.

The South Korean exchange wants to ensure compliance with the AML laws of the country. Local law enforcement bodies raided the cryptocurrency exchange’s office in January this year on charges of tax evasion, however no convictions followed.  It was reported that the authorities were simply investigating the unregulated exchange and checking into their KYC/AML records.

Upbit, the largest cryptocurrency exchange at the time, was also investigated by South Korean authorities earlier this month on charges of fraud — however no formal charges were pressed against it either.

Four executives from two different cryptocurrency exchanges including Coinnest, South Korea’s fifth largest cryptocurrency exchange, were arrested in April for charges of embezzlement and fraud.

Regulatory bodies across the globe are tightening the strings on cryptocurrency trading.

The US Department of Justice is reportedly investigating cryptocurrency market manipulation, while Indian authorities are planning to levy an 18 percent commodity tax on the trading of virtual currencies.

However, there has been an entire shift of focus from outright ban on cryptocurrency to regulating and taxing them — which is good news for cryptocurrency enthusiasts. S c a m s a n d u n e t h i c a l p r a c t i c e s are running rampant in the industry, and rightful regulations can help curb this menace.

How to avoid getting duped by cryptocurrency ‘pump and dump’ schemes (like I did)

Buy low, sell high; do not follow the green candles, let’s pump until 87,000 Satoshis and dump it at ATH (All Time High). These are just a few notable phrases of the chat groups where hundreds and thousands of cryptocurrency traders gather all together to increase the value of an altcoin.

These types of groups, normally referred to as ‘ pump and dump ‘ groups, are bringing market manipulation to a whole new level. Nefarious crypto traders use secure messaging platforms like Telegram to orchestrate coin manipulation to make a quick buck — at the cost of less experienced traders. If you’re getting into cryptocurrencies, or just curious about the field, you’ll need to know how pump and dumps work. Otherwise you might up being taken advantage of, like I was.

When I got duped by a ‘pump and dump’

I started trading in cryptocurrency a while back, being a tech savvy person I was quite enthusiastic about the technology. I was entirely unaware of these scams at that point, but I was definitely part of some Telegram and Whatsapp groups where people were on daily basis selecting low-priced coins to turn it into a gem for others to hop on. Since newbies always follow the green candles, it’s easy for more experienced traders to use them for their own gains.

But I didn’t notice this pattern until a certain coin — which I was quite excited about — was about to be launched on one of the largest cryptocurrency exchanges. The coin looked promising and the exchange even tweeted about it. Everything looked great, but then something happened that I’d never experienced before. Right after the tweet, I started observing how the coin started to inflate in value on other exchanges. But what surprised me the most was that the trading didn’t start on the exchange where it was actually about to be launched.

I waited and waited until trading opened, I was hustling to find the right price to jump in. The price was flickering in front of my eyes from $20 to $18 then from $16 to $19, I unluckily grabbed the coin at $18, hoping it would turn into a gem. But I was sorely mistaken because it suddenly dropped to $9, thankfully I lost my patience at the right time and only lost half of my invested coin. Rest remains history and that coin closed at $2 the same day.

What I figured out later was that I had become a victim of a pump and dump scheme. Unfortunately this is happening far too often in the crypto world and mostly happens with small market cap and circulation coins. It’s really hard to actually stay completely safe and not become a victim of these schemes. The only possible defense is understanding how pump and dumps happen and what kind of people are behind it. That’s why anybody who’s interested in cryptocurrencies needs to know how these schemes work.

The process

The process of the whole cycle is quite simple. The group admins gather as many members as they can in these groups and then it naturally grows bigger when both small and large traders join up as a fear of missing out, the lovely FOMO. Once the group reaches around hundred thousand members it can start to actively manipulate the worth of the coin and signal is passed on to the members. I came across a new pump recently that’s an good example of how the members are activated.

The group sent out a message signaling that member were to unite and pump. That day the coin’s worth was around 0.00004340 BTC or 4,340 SATs (Satoshis), and the community united to loot the newbies and pumped it up to 9,180 SATs. And then the traders who went in all together went to the moon bang bang! This resulted in huge gains for many (the manipulators), but these gains were a direct result of the loss of others. However, despite this there’s also a bright side to these groups. These groups are quite helpful to many members as not everyone is as good with TA (technical analysis).

Hence few those are good with the analysis of charts, which are quite helpful in predicting the next surge in price or the support the coin may get, may provide helpful insights to the traders. But that might actually make it worse as it can make a certain chat look legit, while it’s actually a way to prepare a pump and dump. These type of groups are not limited to messaging apps like Telegram or Whatsapp, the bigger social media platforms are also used as a medium; especially Facebook, even though Facebook has banned all crypto-currency ads, but the private groups provide a substantial landscape for traders to pump a coin together.

Role of celebrities in pump and dumps

In the era of cryptocurrencies, celebrities hold a powerful position with millions of fans and followers on Twitter, Facebook, and other social channels. One notable example of a crypto celebrity is John McAfee , a British-American computer programmer and the owner of the famous company, McAfee Associates.

His recent activities have earned him the title of ‘John McAfee Pump.’ With 782k Twitter followers, John decided to talk about a coin via his tweet every single day. This resulted in the value of the coin going ATH (All time high), with alleged organizers dumped with the spike.

It somehow went too hot, and he changed it from “Coin of the day” to “Coin of the week.”. This made the entire market unstable with organizers making millions out of thin air.

McAfee is just one bad influencer, while there are some good ones that actually do their research and due diligence — but unfortunately they might be a minority. People trading in cryptocurrencies, the average Joes, are also greatly affected by influencers on YouTube, Twitter and other platforms. But since there’s different type of influencers out there, how can one decide which ones are the quality influencers and which ones are just coin shillers?

Well, t here are number of things one should look out for before following anyone’s advice in this volatile market:

Look out for the value a vlogger is providing. Is it something that is hands-on that you could apply regularly or was it just a lot of noise or babbling, obviously your time is valuable.

Look out for the time a influencer takes to get on to the point. Does he take too long to get to the point or if the information is wrapped up in too much noise? Or does he provide right on spot information, right away to be applied. Is it an hour long of noise or couple of minutes of powerpack.

Look out for the transparency, which means the influencer prioritize pre-hikes. This is so that you are not tricked or waved into something that you don’t know what exactly is going on. This for me gives the highest level of trust and makes me comfortable.

And never just follow a single influencer, to stay safe make sure you’re checking out a bunch of quality information providers. You can use the above points but also make sure to do your own research to find legitimate influencers, because their advice is really valuable.

The current state of the pumps and dumps

With such growth, volatility, and manipulation in these currencies, government organizations around the world are waking up and starting to give the burgeoning market the attention that it needs to develop. Recently, CFTC issued an official document giving a heads up to all the users and to lessen the severity of scams and manipulation.

At a Senate hearing this month, CFTC Chairman Christopher Giancarlo was mindful that the regulator was focused on cracking down on manipulation of cryptocurrency markets. The pump and dump has been deduced as illegal and is considered to be securities fraud — which is great news.

Pump and dump groups are definitely not the right way to grow the cryptocurrency ecosystem. With so much volatility, FUD, and FOMO, the technology which has yet to change the dynamics of this century, will strive to achieve acceptance, and we can’t have pump and dumpers ruin that.

Ethereum researcher explains why sharding is the only true blockchain scaling solution

Binary District spoke exclusively with Vlad Zamfir, a researcher at the Ethereum Foundation; and Sergey Gorkov, chairman of the government-owned Russian development bank Vnesheconombank.  Both discussed some of the most pertinent topics in Ethereum – scalability, lack of incentives for core blockchain developers, the potential of blockchain technology in the financial sector, and responded to criticisms of Ethereum.

Bitcoin is primarily used as a safe haven asset and a store of value. The Ethereum blockchain network, on the other hand, is being adopted as an infrastructure for decentralized applications and autonomous smart contracts-based platforms by an increasing number of multi-billion dollar conglomerates and financial institutions.

Scalability and lack of incentives

Two years since its launch, Ethereum has evolved into a $23 billion blockchain network. Several decentralized applications and blockchain projects, now worth hundreds of millions of dollars, have launched on top of the Ethereum protocol. Ethereum continues to solidify its position as the leading smart contract-enabled blockchain network for decentralized applications and platforms.

Many Fortune 500 conglomerates, including Microsoft, JPMorgan, ING, Intel and Spanish banking giant BBVA, have adopted Ethereum to automate certain operations and create decentralized applications on top of the Ethereum protocol. The success of Ethereum in traditional industries is the result of an increased effort to bring Ethereum to the mainstream – specifically through the formation of the Enterprise Ethereum Alliance.

Although initial coin offerings (ICOs) and independent blockchain projects have created many millionaire Ethereum developers, Zamfir explained that most Ethereum core developers earn salaries that are much lower than the market standard.

“I agree with the general statement that core developers are not sufficiently incentivized”, he noted. “ Some Ethereum developers are paid by the Ethereum foundation, but at what are now below-market salaries.”

“I think core developers provide a huge amount of value as a public good”, added Zamfir. “Public goods are inherently difficult to fund because the non-excludable nature of their benefits means that even those who don’t pay get to enjoy the benefits.”

As Coinbase co-founder Fred Ehrsam previously explained in his analytical blog post , most core developers in both Ethereum and bitcoin rely on salaries that are much lower than market standards; their main incentives are the value of the native tokens such as Ether.

In order for Ethereum and other blockchain networks to grow proportionally, scale and improve security measures, the work of core developers is essential. However, in comparison to developers for independent companies or successful ICOs , core developers are poorly incentivized.

For instance, the main role of the Ethereum Foundation in the open source development community is to administer the /ethereum Github. Zamfir explained that the Ethereum Foundation also hires around 40 developers to fund the development of Geth, Pyethereum, Solidity, Whisper, Swarm, and the Mist Browser. It is also in charge of developing scaling solutions to provide a better and more flexible ecosystem for businesses and users.

Most of the technological development on Ethereum is carried out by the Ethereum Foundation. Most recently, Ethereum co-founder VItalik Buterin and Bitcoin’s Lightning Network co-author Joseph Poon released Plasma, a solution which scales the Ethereum network by eliminating unnecessary data from transactions and optimizing smart contracts.

“As only merkleized commitments are broadcast periodically to the root blockchain (i Ethereum) during non-faulty states, this can allow for incredibly scalable, low-cost transactions and computation. Plasma enables persistently operating decentralized applications at high scale”, the paper of Buterin and Poon reads .

Many experts, including Ehrsam, have previously explained that such scaling solutions will be key in improving Ethereum’s capacity to support large-scale decentralized applications. But, contrary to the analysis of Ehrsam, Zamfir explained that off-chain and second-layer scaling solutions are not as usable as other researchers and developers think.

“I think they are not very usable because they span different trust models and require non-miner/validator nodes to be available to make settlement transactions”, said Zamfir. “Settlement transactions can be censored by the miners/validators, leading to the reversion of all of the state changes that were processed off chain.”

“This actually makes the underlying blockchain less secure, because it makes censorship much more profitable”, he explained further. “I like to spend my time working on blockchain sharding, which I regard as the only true blockchain scaling solution, and which I think will provide for all of the scalability requirements of the blockchain without sacrificing on security or the trust model.”

Importance of hard forks in Ethereum

More importantly, Zamfir noted that most updates to the protocol or the blockchain network can be more safely and efficiently deployed as hard fork solutions, rather than as soft forks. He and the Ethereum development community generally advocate for hard forks over soft forks.

Zamfir emphasized that hard forks are more ethical than soft forks because they require user consent.

He suggested that the Bitcoin development community and the Bitcoin Core development team are opposed to hard forks because of their desire to maintain 1MB bitcoin blocks and a proof of work blockchain.

“They [bitcoin development community] don’t want to make any significant, foundational changes to the protocol because they believe that a single proof-of-work blockchain with 1mb blocks and ASIC miners is the best architecture that is possible”, added Zamfir. “If they believed in proof-of-stake, blockchain sharding, or bigger blocks, then they would also prefer hard forks to soft forks.”

The potential of Ethereum blockchain in the finance sector

In an exclusive interview with Binary District, Sergey Gorkov discussed the partnership between  Vnesheconombank and the Ethereum Foundation, specifically the establishment of the VEB Blockchain Competence Center. He noted that the demand for Ethereum, and blockchain technology in general, is growing rapidly in Russia, primarily due to the strong presence of Ethereum in the country’s blockchain sector.

For years, banks, financial institutions, and major technology conglomerates have received tens of billions of dollars in funding to integrate blockchain technology. However, many industries are yet to produce a finished product or commercially successful blockchain project.

“We are now piloting three projects, which should be finished by the end of the year. These projects started before the creation of the center, so the center should add a bit of energy to them. By next year, I’m sure we will be able to “shoot” with the first technologies that will already be ready for use by government institutions, public administration, and private companies,” Gorkov revealed.

Gorkov explained that blockchain technology has struggled to maximize its potential in major industries because the companies and developers of technologies, like Ethereum, have never encountered technical and scalability issues of this sort.  He emphasized that the decentralized nature of blockchain technology qualitatively changes the relationship between the state and the people. As the industry evolves, Gorkov noted that more commercially successful blockchain projects will develop.

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: