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Operation Cryptosweep, Blockchain Patents and more!

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The North American Securities Administrators Association released an official announcement of ‘operation cryptosweep’, which is a task force investigating current and future planned ICOs in the US and Canada. Securities regulators will begin an international crackdown on ICOs and cryptocurrency related investment products. The NASAA president stated that so-called cryptocriminals pose a serious threat to main street investors with fraudulent investment scams, and urges investors to use extreme caution when evaluating cryptocurrencies. He also said that the current investigations are just the tip of the iceberg. There is a long list of crypto companies that have been issued cease and desist orders which you can check out by following the link in the description box.

Adding on to that, In late april 13 crypto trading platforms received information demand letters from New York attorney general eric schneiderman; the exchanges include coinbase, bittrex and binance. The information requested includes detailed information about operations, internal controls, and safeguards to protect customer assets. The results of the inquiries will be released to the public to help all consumers understand the operations the associated risks with trading virtual currencies.

Is Google pursuing Buterins skills and knowledge? It would appear so! In a tweet that has now been deleted, Ethereum founder Vitalik posted a screenshot of an email from a Google recruiter, asking him to consider working for Google at some time either now or in the future. He added a poll which received over 2000 votes asking his followers if he should drop ethereum and work for google. Although Google is banning all ads related to cryptocurrencies, it is clear they are interested in developing some kind of blockchain based project, and also notably is invested in Ripple, Veem and LedgerX.

In other news, Walmart just filed for a patent for a ‘distributed delivery record blockchain’, one of multiple patents they have filed describing the use of blockchain technology. This one has to do with recording transactions and tracking the sale and resell of products from person to person. You can read the details of this particular patent yourself, I will include it in the description, it’s pretty interesting. Additionally, Bank of America has received a patent for a blockchain based system for managing security and access to private information. It is essentially an automated way to grant access to authenticated users to secure information contained in a particular block. I think it is good that they are acknowledging the need for improved cybersecurity measures in the face of increasing data hacks that have been affecting so many companies.

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Crypto News Network NewsCast

0x Protocol Explained pt.2 | Deep Dive

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It seems like people liked my first video so thanks for all the great feedback. It was actually very cool because after I posted this video in the 0x subreddit, someone from 0x added it to their internal youtube playlist of explainer videos. So thanks to whoever did that, it was very cool for me to see. That being said, this video is not sponsored by 0x in any way, and like I said before, I’ll try my best to make unbiased educational videos on this channel.
I had also said that I would address version 2 of the protocol as well as the criticisms of the project in general in my second video, but upon researching for it I realized I bit off a little more than I could chew, so that stuff will be a part of my third video.

In this second part of my explainer I’ll be going over the details of 0x at a protocol level, hopefully showing everyone here how 0x works in a very clear way. Additionally, most of my info is sourced from the 0x whitepaper. So that’s a long enough intro, let’s get into it.

The protocol is intended to serve as an open standard and common building block, driving interoperability among decentralized applications or dapps that incorporate exchange functionality. Meaning that any dapp with decentralized exchange capability can be built on top of the protocol. The founders of 0x believed that smart contracts should act as modular, un-opinionated building blocks that can be assembled and reconfigured, opening the door for adoption and use cases across different dapps.

Decentralized exchanges implemented with Ethereum smart contracts have failed to generate significant volume due to inefficiencies in their design that impose high friction costs on market makers. If you’ve ever used etherdelta, you can sympathize with this. Posting, changing or removing an order on the decentralized exchange costs GAS, leading to the user experience being quite difficult.

Another inefficiency of current decentralized exchanges is that some maintain the order book on the blockchain, causes bloat on the blockchain and latency issues while trading.

In order to solve the latency issue of on chain orderbooks and other decentralized exchange issue, 0x uses a model called “off-chain order relay and on-chain settlement”. This model combines the efficiencies of state channels with the quick finality of on-chain order books.

In this approach, cryptographically signed orders are broadcast off of the blockchain; an interested counterparty may inject one or more of these orders into a smart contract to execute trades trustlessly, directly on the blockchain

With this off-chain order relay and on-chain settlement 0x enables two different types of orders: point-to-point orders and broadcast orders. I’ll cover point-to-point first. Point-to-point orders are used for the 0x “OTC” exchange called 0x OTC. For those of you that don’t know, OTC is a term commonly used in the crypto space that describes an “over the counter” sale or trade of cryptocurrencies, done in person or off normal exchanges. Anyone can use the 0x protocol to implement their own point to point exchange.

 

Point-to-Point Message Format

Point-to-Point Message Format

In this table, 0x describes the message format of point-to-point orders. You can see from the table that the first row describes the address of a smart contract that enables point-to-point orders. Going further down we see that maker is the address originating the order, taker is the address permitted to fill the order. Token A and Token B are the tokens exchanged with this OTC deal. And value A and value B are the units of each token to be exchanged. If you’re wondering what uint256 means, it’s just a placeholder that means unsigned integer of the max length of 256 bits, so in the simplest of terms, it’s just a number.

Variables: v,r,s comprised something called an ECDSA signature which stands for Elliptic Curve Digital Signature Algorithm signature. The signature gets verified in the 0x Exchange contract so that a malicious actor can’t generate a falsified order. Without the signature in place, one could generate order parameters that say “Maker is selling 100 of tokens for 100oftokensfor1, and then take it” sort of like forging a check if that makes sense.

So if we were to put this all together, the packet of data that makes up the order
Is a small message that may be sent through email, or even a Facebook message. The cool part is that the order can only be filled by the specified taker address, rendering the order useless for eavesdroppers or outside parties.

And here is a diagram that illustrates what I’ve just described.

Point-to-Point Order Example

Point-to-Point Order Example

The second thing enabled by the 0x protocol is the broadcast orders which I think is a more applicable portion of the protocol. In this system consists of 3 different actors: there are the makers, takers, and relayers.
A maker creates an order
A taker is someone who acts on that order
A relayer is an entity that hosts and maintains an order book. You can sort of compare them to an exchange except instead of having to operate proprietary software, manage user funds, and execute trades a relayer facilitates signaling between market participants by hosting and propagating an order book. Relayers don’t need to execute trades because Takers execute their own trades, which is pretty interesting because a user of the protocol doesn’t need to trust a relayer in order for a trade to be executed. If you go on the 0x website you can see the current list of 0x relayers such as dEX, dharma, or paradex.

The message format for broadcast orders is slightly different from the point-to-point structure that I talked about. In this case a broadcast order can be filled by anyone that wants to fill it, not just a specified address, secondly, there is a transaction fee structure meant to incentivize the relayers and reward them for hosting an orderbook. Let’s take a look at the message format.

Broadcast Orders Message Format

Broadcast Orders Message Format

The only differences between this one and the previous table is having to do with the Relayer. So we can see that there is now a feeRecipient, feeA, and feeB
FeeRecipient is the address of the relayer, where fees are allocated after a completed transaction
feeA is the fees provided by the maker
And feeB is the fees provided by the taker.

In this diagram, I’ll explain how the broadcast orders structure works.

Broadcast Orders Example

Broadcast Orders Example

1. Relayer cites a fee schedule and the address they use to collect transaction fees.
2. Maker creates an order, setting feeA and feeB to values that satisfy Relayer’s fee schedule, setting feeRecipient to the Relayer’s desired receiving address and signs the order with their private key.
3. Maker transmits the signed order to Relayer.
4. Relayer receives the order, checks that the order is valid and that it provides the required fees. If the order is invalid or does not meet Relayer’s requirements, the order is rejected. If the order is satisfactory, Relayer posts the order to their order book.
5. Takers receive an updated version of the order book that includes Maker’s order.
6. Taker fills Maker’s order by submitting it to the exchange contract on the Ethereum blockchain.

One thing that might have caught your ear was me saying the Maker sets both feeA and feeB. Now, this might not make sense because I said that fee B is provided by the taker. It’s important to note that Relayers ultimately have control over which orders get posted. Therefore, if the Maker wants their order to be posted to a specific order book, they must set feeA, feeB, and feeRecipient to values that satisfy the Relayer associated with that order book. Fees are negotiated off-chain, and Relayers can change a fee schedule dynamically and at their own discretion. Once the Relayer has accepted an order onto their order book, the order’s fee values cannot be changed. The taker has the option to act or not on the order. If they do act on it, they are responsible for paying feeB.

Getting into the order book aspect of 0x here, compared with traditional exchanges what is normally used is a matching engine to fill market orders on behalf of the users, users trusting that the prices shown aren’t manipulated by the exchange. But because the 0x protocol is a decentralized protocol, relayers can’t execute trades on behalf of makers or takers. Relayers can only recommend a best available price to Takers who must then independently decide to sign and send the transaction to the blockchain.

If you’re wondering about fill and partial fill order the exchange smart contract stores a reference to each previously filled order to prevent a single order from being filled multiple times. A partial fill can be executed by the taker by specifying an argument value fill when calling the exchange smart contracts function. Here you can see that this argument is an unsigned integer that must be less than or equal to the total units of tokenA.

Partial Fill Smart Contract Argument

Partial Fill Smart Contract Argument

The expiration time is set by the maker and references times stamps provided by the Ethereum virtual machine. As a maker, you can cancel an order, but it costs Gas. The cancel function maps an order’s hash to the order’s maximum value, preventing subsequent fills.

So that was a bunch of info but that is about all I can fit into this. I hope you enjoyed it. It’ll take me a few days for part 3 to get posted where I go over the governance model of 0x and some other aspects. If you liked how I explained things go ahead and toss a like and subscribe that would be great. If you like 0x or dapps in general please share this video!

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Blockchain News

Chinese Government Ranks Cryptocurrencies, Market Survey Results and more

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China Ministry of Industry and Information Technology’s public blockchain ratings that were released today. They unveiled national standards and a ranking of the top blockchain projects focused on evaluating technical aspects. The standards include requirements for interoperability, safety, and reliability. The list includes 28 projects, that were given scores in three categories: technology, application, and innovation. And this list will be updated monthly!
The top 5 are:
ETH
STEEM
LSK
NEO
KMD
Notably, Bitcoin ranked highest of all on innovation but low on the technology rating, placing 13 out of the 28, Ethereum is #1 overall with high scores on the technology and application aspects, and ok on innovation. They are controversial, as any ranking is going to be somewhat subjective based on the creators’ own opinions, I like the idea of creating a standard index.

Now, let’s get into Vechain/PwC survey results and what they say about general enterprise opinions on blockchain’s usage.
A survey was administered by VeChain and PwC to their clients, of which 130 enterprises responded. The participants all have annual revenue over $100 mill and the survey also included two focus group discussions including 40 respondents. If you don’t know, PwC is an international services provider, one of what is known as the “Big Four”, and they announced a partnership in which PwC will utilize Vechain’s blockchain platform. with Vechain in May of 2018. The participants in the survey represent a broad group: including enterprises in industries ranging from IT, service, Manufacturing, media, and retail as well as departments within those enterprises from IT, to marketing, founders, science researchers etc. I will highlight some key interesting findings from in the 30 page report(which I recommend checking out yourself, and I will have linked down below)

One of the questions asked participants to rank what they see as the core features of Blockchain tech. The top 4 responses were:
1. Tamper resistance
2. Distributed system
3. Smart contracts*
4. Integration

Another interesting finding In the survey results is that the more people understand about blockchain, the more optimistic they are about it. Granted, the majority of these enterprises do have some connection or development to blockchain going on in their organization.

Top 3 fields respondents see blockchain application in are: Logistics, Government, Medical field
Top 3 actual applications: security traceability, distributed data storage, identity management.
I would like to see more surveys like this from around the world, to see more worldwide opinions!

Lastly, Jack Ma, founder of Alibaba says that while he does “believe strongly in Blockchain’s potential to address issues of data privacy and security for society at all levels,” he says that bitcoin is a bubble. Due to the number of speculators who view investing in bitcoin and other cryptocurrencies as a way to get rich quick, it gives blockchain as a whole a negative reputation to some people, who don’t see the value in the underlying innovative technology. Like I mentioned last video, facebook, google, twitter, and bing have all banned cryptocurrency related ads, due to the existence of ICO scams and cryptos unregulated nature, but the bans discredit the potential of decentralized systems build with blockchain that can eliminate issues of data privacy and security for governments, corporations and individuals – in an “era of big data” especially. Mr. Wu also says that people should think beyond just making profits, but about the potential of the technology.

Investment in distributed ledger technology and development of blockchain technology in China is an attempt to grasp a hold of global technological competition, but it is unknown if they will ease their stance on crypto trading.

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