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This Brazilian Bank Is Using Ethereum to Issue a Stablecoin

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A state-owned bank in Brazil is about to issue a crypto token designed to maintain parity with the national currency.

Revealed exclusively to CoinDesk, the Brazilian National Social Development Bank will launch a pilot in January 2019 for the BNDES token, which runs on the ethereum blockchain and is backed 1-for-1 by Brazilian real. The bank has been experimenting with the stablecoin throughout 2018 and will now use it for tax-deductible contributions to cultural institutions.

ConsenSys, the ethereum design studio, will be among the companies consulting the bank during this process. Although the Brooklyn, N..Y.-based conglomerate of startups wouldn’t comment on this Brazilian project beyond confirming its involvement, it falls squarely in line with priorities listed in an internal statement issued by its founder Joe Lubin earlier this month, stating the company will renew its focus on being a blockchain advisory specializing in architecture and token design.

For the pilot, the bank will issue several hundred dollars worth of BNDES to the National Film Agency, a film distribution company called Ancine for short, to create and promote scripts and movie productions in Brazil.

Since the bank has a history of corruption scandals involving misallocated funds and alleged bribes, the pilot creators hope public BNDES blockchain data will help bolster trust in state-owned banks.

The trial will use the National Registry of Taxpayers’ (Cadastro Nacional da Pessoa Jurídica, or CNPJ) electronic identification certificates, which are already widely used by Brazilian companies as official registration documents

“We can enforce rules using smart contracts. The company that receives the money can only spend it with companies that are working within the [film] sector,” Vanessa Almeida, a BNDES systems development manager, told CoinDesk.

Regarding the CPNJ identifiers, she added:

“We have a kind of ID in Brazil that has a certificate to send a token to the company, the company has to sign with this certificate…we will know in advance to which address you can send the tokens.”

This project was developed, with help from Ethereum Foundation developer Alex Van De Sande, to allow filmmakers associated the nonprofit Ancine to collect and share their financial records in real-time. Recipients will only be able to redeem the stablecoin through the bank for local currency.

All that transaction data may be leveraged to develop and inform future use cases as well. “This information can help guide public policies,” said Almeida. “They will have a better map of this sector of the economy.”

Beyond trading

Stepping back, cryptocurrency traders have been the leading stablecoins users so far, storing value in their exchange accounts that can be instantly swapped for other cryptocurrencies without dealing with banks.

Exchange companies like Paxos, Gemini, and Coinbase, all added fiat-pegged cryptocurrencies in 2018. In contrast, this Brazilian pilot shows a use case for fiat-pegged crypto beyond speculative markets.

Rosine Kadamani, founder of the the educational Blockchain Academy in Brazil, told CoinDesk this pilot could have ripple effects across the country.

That’s because the government-run development bank manages funding for projects ranging from educational initiatives to building infrastructure like roads and dams.

“Because unfortunately, Brazil is very well-known for corruption, there’s a lot of questioning about the use of public funds,” Kadamani said. “They start with a stablecoin that is basically an accounting control, because everything goes back to the bank. But in the future, if it works well, there are other implications.”

Indeed, Gladstone Moises Arantes, Jr., technical lead of the BNDES blockchain initiative, told CoinDesk the bank will reevaluate the results of this pilot and consider expanding it to other organizations that receive public funding.

He told CoinDesk:

“The concept we have could be used for other institutions in Brazil or the government as a whole.”

BNDES token initiative team image courtesy of the Brazilian National Social Development Bank

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Researchers Discover How To Automate Accountability On The Blockchain

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“The (virtual) gold rush is on, and as in the Wild West of yore, the outlaws are ever present,” wrote blockchain developers and academics in a recent paper, Polygraph: Accountable Byzantine Agreement. Luckily, these researchers have have discovered a way to detect and punish dishonest blockchain users.

The authors — Vincent Gramoli and Pierre Civit of the University of Sydney, and Seth Gilbert of the National University of Singapore — developed the Polygraph protocol, which automates accountability in blockchains to hold participants accountable for double spending, a notoriously knotty issue in cryptography.

Though the double spend problem was supposedly solved by Satoshi’s white paper, published in 2008, the researchers discovered that disagreements caused by blockchain forks can lead to double spending if the resulting branches have conflicting transactions.

They cite a zombie case:

“Byzantine nodes can override the General Polygraph Protocol by proposing directly two conflicting views to two different clients to then perform a double-spending attack. The coalition does not participate to the consensus in order to violate the liveness property…. Note that safety is also violated: When a client invokes the read() primitive, the coalition can answer arbitrary values, despite the non-termination of the legitimate consensus. The client is supposed to trust the coalition, like all the other clients who can forever receive a different output for the read() primitive. Hence, for t ≥ n − t0, the eventual prefix property is violated. This makes the blockchain vulnerable to a double-spending attack.”

Yes, the paper is scholarly, but it also provides pragmatic solutions to real problems in current consensus mechanisms.

The group considers the growing threat of centralization on blockchains, caused by the collectivizing of hashing power. Under traditional Byzantine protocol agreements, if one party amasses more than one-third of total mining output they gain decision making authority. As an aside, the authors note that the largest Bitcoin mining pool today controls approximately 19 percent of total hashing power.

“We need a new sheriff in town to bring the guilty parties to justice. What if, instead of preventing bad behavior by a party that controls too much of the network power, we guarantee accountability,” write the authors.

Much in the way we prevent crime in the real world, we can prevent bad blockchain behavior via “defense-in-depth” — the basic Byzantine agreement protocol that prevents usurpation if the attacker has less than one-third of network control or if the network infrastructure is working to pass messages in time.

“Byzantine agreement protocols act as the locks on the bank doors, preventing the gangs from making off with the loot,” they wrote.

However, when these guarantees fail — and the authors suggest they can and do — the Polygraph protocol will intercept malicious behavior.

The Polygraph’s basic algorithm is based on the Byzantine agreement protocol, but goes further in that proceeds through asynchronous rounds, or a vote that receives democratic imput.

“First, a reliable broadcaster is used to distribute the proposal values. Then, a second phase of communication is used to determine whether enough processes have converged on a single value. Finally the processes decide, if they can; and if not, they update their estimate in an attempt to converge on a single value.”

This Town Isn’t Big Enough

If the process determines that someone is pursuing illegal actions, the consensus can vote them off the network.

“Accountability has been overlooked in blockchains but it is actually key to security,” said Gramoli, who also serves as Red Belly Blockchain CEO. “The industry cannot accept blockchain to be a simple distributed system where valuable assets vanish as soon as a third of the participants form a coalition.”

Red Belly Blockchain has been funded by the Australian Research Council and developed by researchers of the Concurrent Systems Research Group at the University of Sydney and Data61-CSIRO.

Photo by Xiang Gao on Unsplash

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A New Bitcoin Exchange Point On the Colombian-Venezuelan Border Will Help Refugees

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A new cryptocurrency exchange service is available on the border between Colombia and Venezuela and its aim is to help refugees traveling across the Simon Bolivar International Bridge.

Visitors are now able to use the point-of-sale service with cryptocurrencies to buy goods. The POS is located in Santander, Colombia, just across the border from Venezuela. Panda Group created the payment alternative with refugees in mind. The group, a Columbian-Venezuela joint venture, announced the implementation of the new service through their Twitter account.

According to the data published by Coinatmradar.com, the service lets users exchange using bitcoin (BTC), bitcoin cash (BCH) and dai (DAI), and converts them into to Colombian Pesos (COP).

At the physical location – a small phone service provider in a mall called La Parada – customers can buy bitcoin with prices based on the Localbitcoins rate in pesos. The service will charge 10 percent above the market price and those who sell their bitcoins will do so for 5 percent more than the established market value.

This is not the first cryptocurrency service in the country. The Panda Group has already installed another five cryptocurrency exchanges in Colombia, most of them in the Colombian capital, Bogotá.

According to Panda CEO, Arley Lozano Jaramillo, their solutions are focused on helping the Venezuelan users and they announced the addition of a new service called Xpay.Cash to encourage adoption.

“This service is for all our brothers to pay directly in Cucuta with their cryptoassets and mitigate the loss of exchanging from BTC to COP, which represents a loss of at least 20%,” Jaramillo said.

Colombia has the highest rate of cryptocurrency investors in South America, next to Brazil. There are reportedly over 20 businesses accepting bitcoin payments in the country. The establishments are mainly focused in tourism, food and digital services.

Bitcoin At The Border

The ATM installed in Villa del Rosario City is connected to the Venezuelan border by the state of Tachira. The states are only separated by the Simon Bolivar International Bridge, one of the most heavily traveled borders used by Venezuelan refugees.

The refugee situation has also sparked a focus on the cryptocurrency, mainly for humanitarian aid purposes.

On the other hand, the last point of sale with cryptocurrency was implemented in Cúcuta, another border location with an growing Venezuelan population. The state also has a Bitcoin ATM, one of forty-two in the country.

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Fidelity-Backed Crypto Analytics Firm to Integrate Twitter-Based Crypto Sentiment Feed

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Crypto analytics firm Coin Metrics partnered with Social Market Analytics (SMA) to collaborate on a feed of real-time sentiment towards cryptocurrency based on social media data, according to a press release on June 17.

The new partnership intends to collect and analyze data posted by crypto community on social media in order to provide a new tool to help crypto traders to track social media sentiment data to build their portfolio strategies.

The new product will initially target sentiment data solely on social media giant Twitter, Coin Metrics CEO Tim Rice confirmed to Cointelegraph, adding that the firms are currently not considering integration of the service into Facebook.

Specifically,Coin Metrics will incorporate the product into market data platform, called the SMA cryptocurrency Sentiment Feed, providing calculated metrics of data on Twitter, according to a report by crypto media outlet The Block. In the report, Rice said that the calculation algorithms would include relevant tweets and calculate “19 different aggregate sentiment metrics down to snapshots of one minute.”

Social Market Analytics is providing social media-powered predictive data analytics to traditional capital markets participants in various markets, including stocks, forex, Exchange-Traded Funds (ETFs), futures, among others. Since its establishment in 2012, SMA has been a Twitter Finance partner, the firm’s CEO Joe Gits stated in an email to Cointelegraph.

Meanwhile, Coin Metrics is backed by major American investment management company Fidelity in February 2019, which participated in a $1.9 million funding round in February 2019.

Earlier today, social media giant Facebook released the white paper for its long-anticipated cryptocurrency and blockchain-powered financial project known as Libra stablecoin.





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