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Cuba ‘Studying Cryptocurrency’ to Dodge US Sanctions, Says Gov’t

Cuba is the latest country to consider using cryptocurrency to skirt U.S. sanctions, Reuters reported quoting a government source on July 3.

In a public address on local television, the country’s president, Migual Diaz-Canel, said the plan would raise capital for around one quarter of the population, helping to pay for reforms.

It remains unclear whether Cuba is looking at creating its own cryptocurrency token or seeking to use an existing public one, such as bitcoin (BTC).

Bitcoin

It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.[8]

Research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.[18]

Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and by reputable economists stating that 'it should have a zero price'.[19]

This left opportunity for controversy to develop over the future development path of bitcoin, in contrast to the perceived authority of Nakamoto's contributions.[36][35]

During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting 9.9 million in bitcoins, worth about $214 million.[37]:222

In March 2013 the blockchain temporarily split into two independent chains with different rules due to a bug in version 0.8 of the bitcoin software.

Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software, selecting the backward compatible version of the blockchain.

The US Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for 'decentralized virtual currencies' such as bitcoin, classifying American bitcoin miners who sell their generated bitcoins as Money Service Businesses (MSBs), that are subject to registration or other legal obligations.[46][47][48]

On 23 June 2013, the US Drug Enforcement Administration listed ₿11.02 as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881.[53][better source needed]

On 30 November 2013 the price reached $1,163 before starting a long-term crash, declining by 87% to $152 in January 2015.[41]

Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 0.00000001 bitcoins, one hundred millionth of a bitcoin.[2]

A network of communicating nodes running bitcoin software maintains the blockchain.[37]:215–219 Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications.

About every 10 minutes, a new group of accepted transactions, called a block, is created, added to the blockchain, and quickly published to all nodes, without requiring central oversight.

A conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, but the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.[7]:ch.

Miners may choose transactions based on the fee paid relative to their storage size, not the absolute amount of money paid as a fee.

Creating a bitcoin address requires nothing more than picking a random valid private key and computing the corresponding bitcoin address.

For example, in 2013 one user claimed to have lost 7,500 bitcoins, worth $7.5 million at the time, when he accidentally discarded a hard drive containing his private key.[83]

Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.[80]

The PoW requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.[7]:ch.

8 This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash, miners must try many different nonce values (usually the sequence of tested values is the ascending natural numbers: 0, 1, 2, 3, ...[7]:ch.

Every 2,016 blocks (approximately 14 days at roughly 10 min per block), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes.

8 Between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.[92]

The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.[93]

As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.[80]

The successful miner finding the new block is allowed by the rest of the network to reward themselves with newly created bitcoins and transaction fees.[94]

the reward amounted to 12.5 newly created bitcoins per block added to the blockchain, plus any transaction fees from payments processed by the block.

In other words, Nakamoto set a monetary policy based on artificial scarcity at bitcoin's inception that the total number of bitcoins could never exceed 21 million.

Bitcoins stored using a paper wallet are said to be in cold storage.[105]:39 In a 2014 interview, QuadrigaCX founder Gerald Cotten explained that the company stored customer funds on paper wallets in safe deposit boxes: 'So we just send money to them, we don’t need to go back to the bank every time we want to put money into it.

exchange, reported that they had cut their paper wallets into pieces and stored them in envelopes distributed to safe deposit boxes across the United States.[107]

with a private key accessible under a security hologram in a recess struck on the reverse side.[109]:38 The security hologram self-destructs when removed from the token, showing that the private key has been accessed.[110]

Originally, these tokens were struck in brass and other base metals, but later used precious metals as bitcoin grew in value and popularity.[109]:80 Coins with stored face value as high as ₿1000 have been struck in gold.[109]:102–104 The British Museum's coin collection includes four specimens from the earliest series[109]:83 of funded bitcoin tokens;

The hardware wallet acts as a computer peripheral and signs transactions as requested by the user, who must press a button on the wallet to confirm that they intended to make the transaction.

Hardware wallets never expose their private keys, keeping bitcoins in cold storage even when used with computers that may be compromised by malware.[105]:42–45

Although bitcoin can be sent directly from user to user, in practice intermediaries are widely used.[37]:220–222 Bitcoin miners join large mining pools to minimize the variance of their income.[37]:215, 219–222[121]:3[122]

Because transactions on the network are confirmed by miners, decentralization of the network requires that no single miner or mining pool obtains 51% of the hashing power, which would allow them to double-spend coins, prevent certain transactions from being verified and prevent other miners from earning income.[123]

The pool has voluntarily capped their hashing power at 39.99% and requested other pools to act responsibly for the benefit of the whole network.[124]

According to researchers, other parts of the ecosystem are also 'controlled by a small set of entities', notably the maintenance of the client software, online wallets and simplified payment verification (SPV) clients.[123]

In addition, transactions can be linked to individuals and companies through 'idioms of use' (e.g., transactions that spend coins from multiple inputs indicate that the inputs may have a common owner) and corroborating public transaction data with known information on owners of certain addresses.[126]

Researchers have pointed out that the history of each bitcoin is registered and publicly available in the blockchain ledger, and that some users may refuse to accept bitcoins coming from controversial transactions, which would harm bitcoin's fungibility.[129]

Eventually the block size limit of one megabyte created problems for transaction processing, such as increasing transaction fees and delayed processing of transactions.[131]

The Economist describes bitcoin as 'a techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks'.[135]

However, researchers looking to uncover the reasons for interest in bitcoin did not find evidence in Google search data that this was linked to libertarianism.[140]

In 2017 and 2018 bitcoin's acceptance among major online retailers included only three of the top 500 U.S. online merchants, down from five in 2016.[144]

Bloomberg reported that the largest 17 crypto merchant-processing services handled $69 million in June 2018, down from $411 million in September 2017.

Bitcoin is 'not actually usable' for retail transactions because of high costs and the inability to process chargebacks, according to Nicholas Weaver, a researcher quoted by Bloomberg.

Per researchers, 'there is little sign of bitcoin use' in international remittances despite high fees charged by banks and Western Union who compete in this market.[37]

Venture capitalists, such as Peter Thiel's Founders Fund, which invested US$3 million in BitPay, do not purchase bitcoins themselves, but instead fund bitcoin infrastructure that provides payment systems to merchants, exchanges, wallet services, etc.[160]

In 2012, an incubator for bitcoin-focused start-ups was founded by Adam Draper, with financing help from his father, venture capitalist Tim Draper, one of the largest bitcoin holders after winning an auction of 30,000 bitcoins,[161]

The company's goal is to fund 100 bitcoin businesses within 2–3 years with $10,000 to $20,000 for a 6% stake.[161]

Williams, as of 2014[update], bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the US dollar.[172]

A May 2014 'Investor Alert' warned that investments involving bitcoin might have high rates of fraud, and that investors might be solicited on social media sites.[178]

The European Banking Authority issued a warning in 2013 focusing on the lack of regulation of bitcoin, the chance that exchanges would be hacked, the volatility of bitcoin's price, and general fraud.[180]

Following the first delivery date in January 2018, the CME requested extensive detailed trading information but several of the exchanges refused to provide it and later provided only limited data.

Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of the Tether cryptocurrency and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017.[192][193]

The criticisms include the lack of stability in bitcoin's price, the high energy consumption, high and variable transactions costs, the poor security and fraud at cryptocurrency exchanges, vulnerability to debasement (from forking), and the influence of miners.[195][196][197]

The Economist wrote in 2015 that these criticisms are unfair, predominantly because the shady image may compel users to overlook the capabilities of the blockchain technology, but also due to the fact that the volatility of bitcoin is changing in time.[198]

As of 2015[update], The Economist estimated that even if all miners used modern facilities, the combined electricity consumption would be 166.7 megawatts (1.46 terawatt-hours per year).[142] At

Politico noted that the even high-end estimates of bitcoin's total consumption levels amount to only about 6% of the total power consumed by the global banking sector, and even if bitcoin's consumption levels increased 100 fold from today's levels, bitcoin's consumption would still only amount to about 2% of global power consumption.[210]

A July 2014 report by the World Bank concluded that bitcoin was not a deliberate Ponzi scheme.[221]:7 In June 2014, the Swiss Federal Council[222]:21 examined the concerns that bitcoin might be a pyramid scheme;

Nobel-prize winning economist Joseph Stiglitz says that bitcoin's anonymity encourages money laundering and other crimes, 'If you open up a hole like bitcoin, then all the nefarious activity will go through that hole, and no government can allow that.'

In 2014, researchers at the University of Kentucky found 'robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives'.[140]

In Charles Stross' 2013 science fiction novel, Neptune's Brood, the universal interstellar payment system is known as 'bitcoin' and operates using cryptography.[233]

Bitcoin was obscure back then, and I figured had just enough name recognition to be a useful term for an interstellar currency: it'd clue people in that it was a networked digital currency.'[234]

In September 2015, the establishment of the peer-reviewed academic journal Ledger (.mw-parser-output cite.citation{font-style:inherit}.mw-parser-output .citation q{quotes:'\'''\''''''''}.mw-parser-output .citation .cs1-lock-free a{background:url('//upload.wikimedia.org/wikipedia/commons/thumb/6/65/Lock-green.svg/9px-Lock-green.svg.png')no-repeat;background-position:right .1em center}.mw-parser-output .citation .cs1-lock-limited a,.mw-parser-output .citation .cs1-lock-registration a{background:url('//upload.wikimedia.org/wikipedia/commons/thumb/d/d6/Lock-gray-alt-2.svg/9px-Lock-gray-alt-2.svg.png')no-repeat;background-position:right .1em center}.mw-parser-output .citation .cs1-lock-subscription a{background:url('//upload.wikimedia.org/wikipedia/commons/thumb/a/aa/Lock-red-alt-2.svg/9px-Lock-red-alt-2.svg.png')no-repeat;background-position:right .1em center}.mw-parser-output .cs1-subscription,.mw-parser-output .cs1-registration{color:#555}.mw-parser-output .cs1-subscription span,.mw-parser-output .cs1-registration span{border-bottom:1px dotted;cursor:help}.mw-parser-output .cs1-ws-icon a{background:url('//upload.wikimedia.org/wikipedia/commons/thumb/4/4c/Wikisource-logo.svg/12px-Wikisource-logo.svg.png')no-repeat;background-position:right .1em center}.mw-parser-output code.cs1-code{color:inherit;background:inherit;border:inherit;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;font-size:100%}.mw-parser-output .cs1-visible-error{font-size:100%}.mw-parser-output .cs1-maint{display:none;color:#33aa33;margin-left:0.3em}.mw-parser-output .cs1-subscription,.mw-parser-output .cs1-registration,.mw-parser-output .cs1-format{font-size:95%}.mw-parser-output .cs1-kern-left,.mw-parser-output .cs1-kern-wl-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right,.mw-parser-output .cs1-kern-wl-right{padding-right:0.2em}ISSN 2379-5980) was announced.

World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available on Bloomberg Terminal

Two European companies have launched what they describe as the world’s first genuine bitcoin (BTC) bond, they confirmed in a joint press release on July 3.

“This is an excellent product for people who currently hold bitcoin and aren’t planning to sell over the next few years…,”

“Now, for the first time, they have an institutional grade way of making their wallets grow without exposing their bitcoin to the swings of the traditional ‘fiat’

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