The Search for a Stable Cryptocurrency

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Browser-based cryptocurrency mining activity exploded in hashrate ethereum blog last few months of After many years of deathly silence, the catalyst appears to be the launch of a new browser-based mining service in September by Coinhive. This service wraps everything up nicely in an easy-to-use package for website owners and has injected new life into an idea that was long thought of as dead and buried. Browser-based mining, as its name suggests, is hashrate ethereum blog method of hashrate ethereum blog mining that happens inside a browser and is implemented using scripting language.

This is different compared to the more widely known file-based cryptocurrency mining approach which involves downloading and running a dedicated executable file. Browser-based mining dates back to May hashrate ethereum blog when an innovative service called BitcoinPlus. That service was in many ways remarkably similar to its modern reincarnation, Coinhive. It used JavaScript code for pooled mining and website owners could sign up to the service and embed these scripts into their web pages to make page visitors mine for them.

The big difference is that back in BitcoinPlus. Back inbefore the advent of ASIC mining inBitcoin was still in its infancy, mining difficulty was relatively low, and cryptocurrency prices were even lower.

It was just about possible to do some mining with home-grade hardware. Even though it was possible at that time to mine for Bitcoin via BitcoinPlus. The reward was minuscule compared to the amount of mining power and electricity required.

Due to this fundamental profitability problem with browser-based mining, it soon withered away. The growing problem of profitability was made even worse by the increasing use of ASIC miners. The advent of ASIC miners dragged bitcoin mining out of the realm of home users and into hashrate ethereum blog industrial age dominated by the massive mining farms that we are more familiar with today.

After the demise of Tidbit, the idea of browser-based JavaScript cryptocurrency mining largely died away once again. Despite these setbacks, key lessons were learned. The point of a service hashrate ethereum blog Tidbit was never about single servers or high-end computers doing solo mining.

The true power of this service came from scaling up and pooling the potentially massive combined mining power of masses of users with average hardware visiting a website.

Fast forward to Hashrate ethereum blogthe cryptocurrency landscape compared with had changed drastically. The market for cryptocurrency was extremely limited and illiquid, meaning that even if you got some, it was not easy to turn it back into fiat currency for spending.

Together with the diversity of coins to choose from inthere was also now a diversity of coin reward mechanisms. It's against this backdrop that Coinhive released its browser-mining scripts designed to mine Monero, effectively bringing the idea of browser-based mining back from the dead.

Coinhive is marketed as an alternative to browser ad revenue. The motivation behind this is simple: Users hopefully then get a cleaner, hashrate ethereum blog, and potentially less risky website remember hashrate ethereum blog What could go wrong? Soon after the release of the Coinhive service, the hash hashrate ethereum blog for the service started to climb, and quickly too. Hashing is the process of carrying out cryptographic hash calculations which are used to help process transactions.

Miners who participate in a mining pool hashrate ethereum blog paid a share of income generated by the pool. The Coinhive pool reached just over five percent of that total which is quite an achievement in such a short time. However, the idea was once again revived in December by a group of MIT students in a project called Tidbit—ostensibly touted as an alternative way for website owners to raise revenue.

According to one early adopter, the revenue generated by his particular site was far lower than the revenue generated from ads. In fairness to Coinhive, it recommends being transparent with site visitors and hashrate ethereum blog website owners notify users of the mining that will be taking place hashrate ethereum blog, better still, offer users a way to opt in. The first high-profile site to start using Coinhive mining was The Pirate Bay torrent website.

The Pirate Bay has had a checkered history and, being a highly trafficked site global ranking with million visitors in the last six monthshas been looking for alternative ways to monetize its considerable traffic. Its initial attempts at browser mining were quickly spotted by users and they were not too happy about it. At least in the case of The Pirate Bay, this was a case of the site's owners making a decision to use Coinhive.

The Pirate Bay's initial attempts at browser mining were quickly spotted by users and they were not too happy about it. One of the Showtime sites affected was its content streaming site which has high traffic and user sessions are lengthy as visitors stay on the site while content is streaming. Showtime is a premium-based service so it would seem strange that users are made to pay twice for content. The scripts were hashrate ethereum blog removed after they were discovered, suggesting that they were planted there maliciously.

Reports of many other sites using the Coinhive mining scripts soon followed. Over the Thanksgiving holiday in the U. As with Showtime, LiveHelpNow is already a legitimate revenue-generating business and there's no obvious reason as to why it would risk user confidence to earn a few extra bucks from users. So the most likely scenario is that the server was compromised either by an outsider, or even an insider.

There are many reasons why browser-based mining is back with a vengeance. Unlike in previous failed attempts, recent developments in hashrate ethereum blog cryptocurrency and threat landscapes have made this a much more viable activity.

Let's have a look at some of these factors in more detail:. Privacy is important if you want to mine coins maliciously, in order hashrate ethereum blog ensure others cannot easily follow the money trail back to you.

Monero, which came to the market incan offer a high level of transaction privacy. Unlike with most other cryptocurrencies that use public transparent blockchains where transaction addresses can be easily viewed by anyone, Hashrate ethereum blog does things differently. By default, everything is private, including the amount in a transaction, who sent it, and who received it.

There is an option with which wallet owners can selectively reveal some information via what's called a view keybut this is not a feature that cyber criminals are likely to hashrate ethereum blog to use.

As mentioned earlier, Coinhive provides a very neat and easy-to-use package for people to get involved in Monero mining. All you have to do is add a few lines of script to your website code. You don't have to make website visitors download and install executable files. The Pirate Bay was soon followed by another high-profile site—this time Coinhive's miner was found on two of Showtime's websites.

With browser-based mining, the cost of mining is borne mostly by the website visitors through hardware wear and tear as well as energy costs. Scale is achieved by using high-traffic sites with sticky content. Coinhive currently pays 0. The user would have to spend 3, seconds on the site, or roughly 55 minutes, in order to achieve a million hashes. However, if you can get 3, users to spend approximately one second each on the site it would achieve a similar result.

Even under optimal conditions, the amount of hashes produced in each instance will be small, but when it comes to distributed computing power, it's all about scale and every little bit adds up.

As we noted earlier, the value of mining rewards are not great, at least not initially. To get a better hashrate ethereum blog, we need to look at the profitability of this activity over the longer term and take in hashrate ethereum blog macroeconomic picture to get a true sense of the reward.

The value of cryptocurrencies like Monero is going up dramatically. Under these circumstances where the price of Monero can go up substantially in dollar terms over a relatively short time, mining Monero can become an attractive proposition. A small amount of Monero mined today could potentially be worth a great deal more in a matter of months conversely it could also drop significantly depending on the health of the overall cryptocurrency economy.

Mirroring the rising interest and price of cryptocurrency, we have also seen a big jump in hashrate ethereum blog detections of both file- and browser-based cryptocurrency mining activity in recent months. Malicious cryptocurrency mining isn't just confined to desktop computers and hashrate ethereum blog. Always-connected mobile devices are also a growing target. We have even seen growth in coin mining on mobile phones in recent years. Inwe discovered 26 different Android apps that were mining cryptocurrencies.

So far in we have found 35, which is around a 34 percent increase. But cryptocurrency mining is always an energy-intensive activity so the biggest problem facing mobile mining is of course battery drain as battery technology has not progressed as fast as processing power. Mobile mining will inevitably be noticed by the heat generated and the hashrate ethereum blog battery, not to mention any performance impacts that it may also have on the device.

If we consider the cryptocurrency market as whole, we can see that just as the total value of cryptocurrencies increased manifold during the year, interest in malicious mining activity, both browser- and executable-based as indicated by detections of malicious mining activity, increased in tandem with it.

As interest increases, more participants, both as miners and tool makers, join the fray. Coinhive, while being the best known at this time, doesn't have the market to itself. Similar projects like Crypto Loot are cropping up, and other browser mining projects like JSEcoin have been in beta since August and are trying to generate growth in this activity.

Symantec has observed a significant jump in all cryptocurrency mining activity in recent months as evidenced in our increasing detection rate See Figures 4 and 5.

Despite the genuine aspirations of most browser mining projects to offer a real and potentially better alternative to traditional web revenue generation methods, the sad reality hashrate ethereum blog, it can and is being misused. Increasing user awareness and detection by security hashrate ethereum blog will trigger a new arms race between cyber criminals and defenders.

We can expect to see adoption of a wide range of traditional malware propagation and evasion techniques to help spread and prolong mining activity in order to maximize profit. For as long as the current enabling factors are in place making hashrate ethereum blog favorable for mining, we can expect to see interest in browser mining to be sustained or even increase in the short to medium term.

Symantec is keeping a watchful eye on the growing trend of browser mining. We are making adjustments as necessary to prevent unwanted cryptocurrency miners from stealing your computing resources to enrich others. Website owners should watch for injection of the browser-mining scripts into their website source code. Our network solutions can help you spot this in hashrate ethereum blog network traffic as your server communicates with visitors.

In addition, file system scans can also show up any files where the browser-based miner code has been injected, enabling you to hashrate ethereum blog and clean up the content. Symantec helps prevent others from stealing your computing resources hashrate ethereum blog protecting various stages of the attack chain:.

All mining software, whether it is file- or browser-based, must be able to connect to either the cryptocurrency network or a mining pool to exchange data, in other words its proof-of-work.

Without this connection, it cannot get the data it needs to generate hashes, rendering it useless. We can also block the mining scripts from being downloaded in the first instance. Our network protection operates on our endpoint solutions as well as our gateway and cloud touch points; all these solutions help build a solid defense against unwanted mining activity. Hashrate ethereum blog are some of the network protection signatures geared towards detection of browser-based mining:.

Our endpoint solutions, including those for mobile devices, can detect and block all types of mining activity whether they are file-based or in-browser.

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Announcing World Trade Francs: The Official Ethereum Stablecoin 01st April, Ethereum scalability research and development subsidy programs 02nd January, Special thanks to Robert Sams for the development of Seignorage Shares and insights regarding how to correctly value volatile coins in multi-currency systems. Results of this research will likely go into either subcurrencies or independent blockchains.

One of the main problems with Bitcoin for ordinary users is that, while the network may be a great way of sending payments, with lower transaction costs, much more expansive global reach, and a very high level of censorship resistance, Bitcoin the currency is a very volatile means of storing value.

Seeing this concern, there is a growing interest in a simple question: Can we have the full decentralization that a cryptographic payment network offers, but at the same time have a higher level of price stability, without such extreme upward and downward swings?

However, the problem of making a price-stable cryptocurrency, as the researchers realized, is much different from that of simply setting up an inflation target for a central bank. The underlying question is more difficult: To resolve the issue properly, it is best to break it down into two mostly separate sub-problems:. For the decentralized measurement problem, there are two known major classes of solutions: As far as exogenous solutions go, so far the only reliable known class of mechanisms for possibly cryptoeconomically securely determining the value of an exogenous variable are the different variants of Schellingcoin — essentially, have everyone vote on what the result is using some set chosen randomly based on mining power or stake in some currency to prevent sybil attacks , and reward everyone that provides a result that is close to the majority consensus.

If you assume that everyone else will provide accurate information, then it is in your interest to provide accurate information in order to be closer to the consensus — a self-reinforcing mechanism much like cryptocurrency consensus itself. Particularly, what if some medium-sized actor pre-announces some alternative value to the truth that would be beneficial for most actors to adopt, and the actors manage to coordinate on switching over? If there was a large incentive, and if the pool of users was relatively centralized, it might not be too difficult to coordinate on switching over.

Now, if there are two kinds of mining, one of which is used to select Schellingcoin participants and the other to receive a variable reward, then this objection no longer applies, and multi-currency systems can also get around the problem. However, we should not simply count on this incentive to outweigh 1. The second block time would mean that there is almost no time for coordination. The creator of the block can be strongly incentivized or even, if the Schellingcoin is an independent blockchain, required to include all participations, to discourage or prevent the block maker from picking and choosing answers.

A fourth class of options involves some secret sharing or secure multiparty computation mechanism, using a collection of nodes, themselves selected by stake perhaps even the participants themselves , as a sort of decentralized substitute for a centralized server solution, with all the privacy that such an approach entails.

The incentive to vote correctly is that only tests that remain in the main chain after some number of blocks are rewarded, and future voters will note attach their vote to a vote that is incorrect fearing that if they do voters after them will reject their vote.

If Schellingcoin proves unworkable, then we will have to make do with the other kinds of strategies: Examples of such services include:. A slightly different, but related, strategy, is to measure some statistic that correllates indirectly with price, usually a metric of the level of usage; one example of this is transaction volume. The problem with all of these services is, however, that none of them are very robust against rapid changes due to technological innovation. Hence, trying to peg a currency to any of those variables will likely lead to a system which is hyperinflationary, and so we need some more advanced strategies for using these variables to determine a more stable metric of the price.

First, let us set up the problem. Formally, we define an estimator to be a function which receives a data feed of some input variable eg. Unfortunately, the problem with this approach is obvious from the graph and was already mentioned above: Note that there are an infinite number of versions of this estimator, one for each depreciation rate, and all of the other estimators that we show here will also have parameters.

The optimal value for the compensated estimator is a drop of 0. The next estimator that we will explore is the bounded estimator. The way the bounded estimator works is somewhat more complicated.

Any growth outside these bounds it assumes is coming from price rises or drops. The theory is that cryptocurrency price growth to a large extent happens in rapid bubbles, and thus the bounded estimator should be able to capture the bulk of the price growth during such events.

There are more advanced strategies as well; the best strategies should take into account the fact that ASIC farms take time to set up, and also follow a hysteresis effect: A simple approach is looking at the rate of increase of the difficulty, and not just the difficulty itself, or even using a linear regression analysis to project difficulty 90 days into the future.

Here is a chart containing the above estimators, plus a few others, compared to the actual price:. Note that the chart also includes three estimators that use statistics other than Bitcoin mining: We can also split up the mining-based estimators from the other estimators:. Of course, this is only the beginning of endogenous price estimator theory; a more thorough analysis involving dozens of cryptocurrencies will likely go much further.

The best estimators may well end up using a combination of different measures; seeing how the difficulty-based estimators overshot the price in and the transaction-based estimators undershot the price, the two combined could end up being substantially more accurate. Something like Bitcoin, if it becomes mainstream, will likely be somewhat more unstable than gold , but not that much more unstable — the only difference between BTC and gold is that the supply of gold can actually increase as the price goes higher since more can be mined if miners are willing to pay higher costs, so there is an implicit dampening effect, but the supply elasticity of gold is surprisingly not that high ; production barely increased at all during the run-ups in price during the s and s.

The price of gold stayed within a range of 4. The other issue that all of these estimators have to contend with is exploitability: Mining difficulty, however, is much more difficult to exploit simply because the market is so large. If a platform does not want to accept the inefficiencies of wasteful proof of work, an alternative is to build in a market for other resources, such as storage, instead; Filecoin and Permacoin are two efforts that attempt to use a decentralized file storage market as a consensus mechanism, and the same market could easily be dual-purposed to serve as an estimator.

The simplest approach is to simply issue them as a mining reward, as proposed by the Japanese researchers. However, this has two problems:. If not handled very carefully, the second problem has the potential to create some rather dangerous feedback loops in either direction; however, if we use a different market as an estimator and as an issuance model then this will not be a problem. The first problem seems serious; in fact, one can interpret it as saying that any currency using this model will always be strictly worse than Bitcoin, because Bitcoin will eventually have an issuance rate of zero and a currency using this mechanism will have an issuance rate always above zero.

Hence, the currency will always be more inflationary, and thus less attractive to hold. However, this argument is not quite true; the reason is that when a user purchases units of the stabilized currency then they have more confidence that at the time of purchase the units are not already overvalued and therefore will soon decline.

Alternatively, one can note that extremely large swings in price are justified by changing estimations of the probability the currency will become thousands of times more expensive; clipping off this possibility will reduce the upward and downward extent of these swings.

For users who care about stability, this risk reduction may well outweigh the increased general long-term supply inflation. This approach can be described as follows:. Because stable-coins are a zero-total-supply currency ie. However, the mechanism has some rather serious fragility properties. At the end, the stable-coin could easily end up being worth nothing at all. Note that BitShares has now moved to a somewhat different model involving price feeds provided by the delegates participants in the consensus algorithm of the system; hence the fragility risks are likely substantially lower now.

An approach vaguely similar to BitAssets that arguably works much better is the SchellingDollar called that way because it was originally intended to work with the SchellingCoin price detection mechanism, but it can also be used with endogenous estimators , defined as follows:. Note that there are still fragility risks here. Second, if the vol-coin market is too thin, then it will be easily manipulable, allowing attackers to trigger margin call cascades.

Another concern is, why would vol-coins be valuable? Scarcity alone will not provide much value, since vol-coins are inferior to stable-coins for transactional purposes. Now, consider a strategy where a user tries to hold on to a constant percentage of all vol-coins. Seignorage shares is a rather elegant scheme that, in my own simplified take on the scheme, works as follows:.

However, the simplicity comes at the cost of some degree of fragility. To see why, let us make a similar valuation analysis for vol-coins. The profit and loss scenarios are simple:. The same valuation strategy applies as in the other case, so we can see that the value of the vol-coins is proportional to the expected total future increase in the supply of stable-coins, adjusted by some discounting factor.

Thus, here lies the problem: In exchange for this fragility risk, however, vol-coins can achieve a much higher valuation, so the scheme is much more attractive to cryptoplatform developers looking to earn revenue via a token sale. Note that both the SchellingDollar and seignorage shares, if they are on an independent network, also need to take into account transaction fees and consensus costs. Fortunately, with proof of stake, it should be possible to make consensus cheaper than transaction fees, in which case the difference can be added to profits.

Ultimately, however, some degree of fragility is inevitable: Even sidechains, as a scheme for preserving one currency across multiple networks, are susceptible to this problem. The question is simply 1 how do we minimize the risks, and 2 given that risks exist, how do we present the system to users so that they do not become overly dependent on something that could break? Are stable-value assets necessary? There would then be multiple separate classes of cryptoassets: If that were to happen, and particularly if the stronger version of price stability based on Schellingcoin strategies could take off, the cryptocurrency landscape may end up in an interesting situation: The true cryptoeconomy of the future may have not even begun to take shape.

On a related note: It came from the thought experiment: How do we value them? Having thousands of paired currencies with low volumes are unfeasible. Something that sets cryptocurrencies apart from fiat, is that one can prove how long money has been held dormant. This is based on the assumption that the more valuable and useful a blockchain is, the more it gets used which might not be an entirely right assumption.

If a cryptocurrency is used often, you will see that kinetic days as a percentage of all time in the blockchain would be lower than less successful blockchains.

However, this is not reasonable. But theoretically, a ratio can exist which compares a blockchain to this ideal. It would then result in something like saying: The hopefully emergent factor from measuring their value in terms of time, is that creates a new unit of account: As you can see. Nice overiew of existing methods.

But they may have very less to do with the actual trading price on an exchange. Is it still true, that the value of something is the amount of money someone is willing to pay for it. If a Dapp developer desperatly needs Ethers for his Dapp, and the miners wont let go of their Ether, speculating that Ether will gain in value, the price will increase regardless of above mentioned techniques.