Bitcoin Cash: 51% Attack and the Bitcoin Cash Fork

Sarson Funds Bitcoin Cash Fork Cryptocurrency Financial Advisor

Sarson Funds Bitcoin Cash Fork Cryptocurrency Financial Advisor

Weekly Analyst Thoughts

Hashing wars are when miners battle with each other to win control of a blockchain. As hashing wars and hard forks take place, the support for Bitcoin’s consensus algorithm is strengthened. While Bitcoin’s Proof of Work (POW) mining algorithm has garnered undeniable support over the years, one flaw still remains: the 51 % attack – a blockchain attack where a group of miners controls more than 50% of the network’s mining hash rate, giving them the ability to halt and even reverse transactions. Satoshi states on the viability of a 51% attack,

“As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure.”

Source: https://bitcoin.org/bitcoin.pdf

When blockchains experience hashing wars, the underlying assumption that cooperating nodes have more CPU power then an attacker is negated, unfolding a multitude of negative repercussions. For example, on BCHA (a recent fork of Bitcoin Cash), there was an attacking miner who had more CPU power than the rest of the cooperating nodes, allowing him to sow absolute chaos on the BCHA network. This attack included the inability to mine users’ transactions (creating empty blocks), only verifying users’ transactions that had special messages attached to them, reorganizing other miners’ blocks so they no longer received the mining reward for solving a block, and demanding that the lead node implement new code rules via a soft fork to pay 100% of the block reward to Bitcoin ABC, therefore starving other miners of their mining reward. In the history of Bitcoin and POW currencies, 51% attacks have occurred mainly to steal coins, but none quite as brutal or unique as this recent attempt to destroy the BCHA blockchain through mining empty blocks, reorganizations, and using soft forks to change node consensus rules.

Jacob Stelter | Blockchain Analyst

Bancor Network: Stake and Protect with Liquidity Mining

Bancor Network Provides Liquidity for Yield Farmers

Bancor Network Provides Liquidity for Yield Farmers

Weekly Analyst Thoughts

This week, Bancor Network launched their liquidity mining program. So far, the addition skyrocketed Bancor’s total value locked and has been a positive catalyst for its token price, which is up 50% this week. The goals for the Bancor liquidity mining program are to increase liquidity to its exchange and encourage LP’s to stick around once the mining period ends through incorporating interesting features like single sided liquidity deposits and a stake and protect feature for liquidity providers.

One of the main reasons why I was originally drawn to Bancor Network was because their stake and protect feature seems to be the perfect hedge against risk of impermanent loss. While Bancor provides inherent risk management opportunities, they originally did not have enough liquidity or volume to make it worthwhile to become a liquidity provider on their platform. Bancor’s liquidity mining program solves the original liquidity and volume issues of Bancor. Below, find images of the total value locked in the protocol and the liquidity mining reward APY’s investors can receive if they became an LP on Bancor.

Source: https://defipulse.com/bancor

Source: https://app.bancor.network/eth/data

In summary, if yield farmers are looking for high returns and mitigation of their impermanent loss risk, then Bancor Network is a great platform to provide liquidity.

Jacob Stelter | Blockchain Analyst

Crypto-Currency: itBit Trading Volume Shows Successful PayPal Crypto Integration

PayPal Crypto Payments Widespread Adoption

PayPal Crypto Payments Widespread Adoption

itBit exchange, the digital asset exchange that provides liquidity for PayPal, has seen a tremendous upswing in trading volume in the three weeks since PayPal announced the integration of digital asset payments on their platform. Owned by Paxos, PayPal’s broker-dealer, itBit has seen close to double its record trading volume since PayPal’s announcement, indicating that the PayPal digital currency platform has a high utility among its users. Below, see itBit’s recent growth in trading volume.

itBit trading volume growth

Source: https://nomics.com/exchanges/itbit#chart

Noting the utility that PayPal is seeing within crypto payments, this trend’s biggest takeaway is that PayPal is finally giving crypto a platform to be used for what it was created to be: a permissionless peer-to-peer transaction network. While Coinbase and other digital asset custodians have enabled users to exchange freely amongst each other, PayPal is mainstreaming crypto’s original purpose as a currency, restoring validation to crypto as a “cryptocurrency.”

While PayPal’s efforts to mainstream the use cases of digital assets is driving incredible trading volume on exchanges, their adoption is just icing on the cake for the crypto ecosystem. As Bitcoin nears its previous all-time high, there is no stopping the increasing pace of innovation and adoption of blockchain technology as a pathway to financial freedom.

Dodo Dex: Stablecoin Liquidity Provides Greater Returns with Lower Risk

Sarson Funds: Dodo Dex Provides Better Returns and Lower Risk- Cryptocurrency Financial Advisor

Sarson Funds: Dodo Dex Provides Better Returns and Lower Risk- Cryptocurrency Financial Advisor

Weekly Analyst Thoughts

Dodo is a new decentralized exchange (dex) and on-chain liquidity provider for yield farmers. Dodo enables farmers to engage in single-side liquidity instead of providing a 50-50 liquidity split between two tokens, the common requirement of decentralized automated market makers like Uniswap.

An interesting feature of Dodo is that it gives the option to pair Defi coins like Aave, YFI, and SNX with USDC, a stablecoin, which is not a function frequently offered by competing decentralized exchanges. Below, find a picture of the Dodo dex pool offerings.

Dodo Decentralized Exchange Sarson Funds

Source: https://app.dodoex.io/mining

The pairing of Dodo’s pools with the USDC stablecoin differentiates the platform from other dexes as it experiences half the normal volatility and provides higher risk-adjusted returns due to the lower risk of impermanent loss.

In summary, if one is looking for a new Defi yield farming opportunity with less volatility, single side liquidity, and greater risk adjusted returns, then Dodo is the place to look.

Jacob Stelter | Blockchain Analyst

Build Your Own Coin: How to Create a Bitcoin Cash SLP Token

Creating Your Own Cryptocurrency - Sarson Funds Cryptocurrency Financial Advisors

Creating Your Own Cryptocurrency - Sarson Funds Cryptocurrency Financial Advisors

Weekly Analyst Thoughts

The mint.bitcoin.com wallet is a premier web wallet for Bitcoin Cash. This wallet is unique because it can create Simple Ledger Protocol Tokens (SLP tokens) for a fraction of a penny without the hassle of dealing with complicated wallet GUIs that are common in cryptocurrency wallets. SLP tokens are tokens built on the Bitcoin Cash blockchain, similar to ERC-20 tokens on Ethereum. Below, see a quick tutorial on how to create an SLP token from the mint.bitcoin.com wallet.

SLP Token Creation Tutorial

  1. Go to mint.bitcoin.com, click “configure,” and then click seed phrase (mnemonic). Write down your seed phrase.

  1. Fund your wallet with a small amount of BCH, so you can create an SLP token (please do not send to this address- use your own mint.bitcoin.com wallet).

  1. Click create and fill out the token information including optional choices on fixed supply, token icon, whitepaper and token website.

  1. Click Create Token.

  1. You are done! You just created an SLP token on the BCH blockchain for a fraction of a penny.

Special Prize: I have sent 2 analyst note tokens to a specific SLP address and paid a BCH dividend of $1.

First person to claim the prize gets the 2 analyst tokens and $1 of BCH since I am attaching the public address and private key below.

Public Address:  qr03tzwdvnh3gyckuuwq0ucunr58em7wz5vctq9emg

Private Key: Ky5ppoE4Xs12pBWAFR4L89ZxTNfKTnv4Dy7A3UeFXmpiEU6PLkNt

Jacob Stelter | Blockchain Analyst

Bitcoin Boom: Financial Advisors Ready Themselves for a Shift to Digital Asset Investing

As Bitcoin Reaches Yearly Highs, Advisors Must Ready Themselves for a Shift in Investing Interests

As the financial services industry shifts towards a more digital and decentralized future, advisors also find themselves approaching one of the greatest wealth transfers of all time. Coined “The Great Wealth Transfer,” millennials are gearing up to inherit $68 trillion from boomers over the next three decades, implying not only a shift in wealth, but also a shift in investing goals and strategies. This wealth transfer will likely spur the universal adoption of digital assets as millennials drive the exponentially increasing capital inflow towards Bitcoin and other cryptocurrencies.

The impending wealth shift towards decentralized finance and digital assets offers an equally lucrative opportunity for financial advisors to align themselves with the future of their clients’ interests. According to Grayscale’s October 2020 Bitcoin Investor Study, Bitcoin’s largest investor group is between the ages of 25 and 34, while more than half of millennials surveyed indicated that they would invest in digital assets if their financial advisors recommended they do so. Thus, advisors must ready themselves for the upcoming shift in wealth and investor interests by building the resources and knowledge base about the crypto ecosystem to support the future needs of their clients. If advisors fail to act, they will miss out on the next frontier of investing.

Additionally, the shift towards personalized digital investing via platforms such as Robinhood and Coinbase, gives everyday folks the opportunity to invest without the need for a financial advisor. As Coindesk reports, 80% of Robinhood’s investors are millennials, indicating that the once niche practice of investing is less viewed as something only professionals and wealthy individuals can engage in. Rather, personal investing platforms are normalizing investing for smaller-scale investors as they are steered towards cheaper fees and more transparent portfolios.

While most traditional investors in the boomer demographic remain invested in the stock and fixed income markets, the upcoming wealth transfer and alternative interests of millennials will likely make way for a significant reallocation of this capital into digital assets. In recognizing this upcoming shift in wealth and strategy, advisors must prepare to provide the necessary advisory services to digital asset investors before their services are nullified by the emergence of personal investing platforms.

While digital asset investing intersects with the new era of personally managed investments, advisors should not shy away from incorporating digital asset investment opportunities into their offerings. Digital asset custodian platforms give advisors the ability to uphold their traditional fee structures when managing their clients’ investments, allowing for easy integration when advisors are ready. As much as the era of personal investing enables the common person to invest on their own, there will always be a need for strategic financial advisory, especially in the maturing crypto space.

Bitcoin Cash: Upcoming Fork Decides on Means of Developer Funding

Bitcoin Cash Fork Decided On Opinions About Developer Funding

Bitcoin Cash Fork Decided On Opinions About Developer Funding
Bitcoin Cash: Upcoming Fork Decides on Means of Developer Funding

Weekly Analyst Thoughts 

On November 15th, Bitcoin Cash (BCH) will undergo a contentious hard fork where two competing parties will split from each other and go their separate ways. One party, Bitcoin ABC, believes in taking 8% of the coinbase reward—the mining reward for when a miner finds a new block—to fund developers and other blockchain projects. The other party consists of a group of five nodes (Bitcoin Unlimited, BCHN, etc.) who reject the Bitcoin ABC party’s proposal to take hard earned rewards away from miners and distribute them to developers. This party believes that the best way to fund developers is through voluntary funding mechanisms like Flipstarter, which has been extremely successful funding development teams, charity projects, and non-fungible tokens.

The upcoming Bitcoin Cash hard fork will not have replay protection, so users must be vigilant when splitting coins and claiming their fork. The lack of replay protection on cryptocurrency hard forks is problematic because if a transaction occurs on the Bitcoin Cash A chain,  it is possible for the transaction to be replayed, or duplicated, on the Bitcoin Cash B chain due to how similar the blockchains are. Replay risk exposes users to the risk of double-counting transactions.

In summary, the November 15th Bitcoin Cash fork splits the chain into two functions: one to fund developers and other projects with an 8% distribution of the coinbase mining reward, and another where developer funding comes from Bitcoin Cash community members.

Jacob Stelter | Blockchain Analyst

JPMorgan: Launch of “JPM Coin” and Digital Asset Branch “Onyx” Will Force Wall Street to Embrace Blockchain

JPMorgan's Launch of Crypto Shifts Wall Street Sentiment of Digital Assets-Sarson Funds-Cryptocurrency Financial Advisor

JPMorgan's Launch of Crypto Shifts Wall Street Sentiment of Digital Assets-Sarson Funds-Cryptocurrency Financial Advisor

JPMorgan: Launch of “JPM Coin” and Digital Asset Branch “Onyx” Will Force Wall Street to Embrace Blockchain

On Oct. 27th, JPMorgan announced the launch of their long-awaited “JPM Coin,” along with Onyx, their new branch for digital asset operations and custody services.

JPMorgan’s move, while contradicting to CEO Jamie Dimon’s 2017 claim that Bitcoin is a “fraud,” strategically places the bank along the cutting edge of financial technology, giving JP Morgan a strong positioning as the new age of decentralized financial services arises.

The launch of the JPM Coin along with Onyx is more than just JPMorgan jumping on the blockchain bandwagon. Rather, the launch of these services is indicative of the bank’s belief in the ever-expanding potential and use cases of blockchain technology to be a profitable and cost efficient approach to the future of financial services.

Takis Georgakopoulos, JPMorgan’s global head of wholesale payments, stated in an interview last week about blockchain’s profitability, “We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business.”

Similarly, the bank plans on utilizing the permissionless efficiency of blockchain technology as it looks to build out cost effective solutions to risky interbank transfers and cross-border payments. Blockchain technology, as we all know, is no stranger to near immediate global value transfers with just the tap of a finger. To assist in their effort to rebuild the traditional flow of money, JPMorgan has launched Liink, a P2P network built on the Onyx blockchain platform to automatically validate payments and assist in quick, secure transactions that remove the risk of third party interference and lag time.

As the crypto ecosystem enters into the era of widespread adoption, banks must future-proof themselves by recognizing trends in financial technology and embracing fintech momentum. In this day and age, it is imperative that banks alter their outdated approach to financial services and adapt a new, more efficient approach to banking: harnessing the power of blockchain technology. As JPMorgan pioneers Wall Street’s blockchain presence, financial services companies will soon be forced to follow suit in order to stay afloat in an increasingly decentralized world.

Harvest Finance Hacked: Flash Loans and How to Mitigate Risk of Loss

Harvest Hacked and how to protect against losses

Weekly Analyst Thoughts

Harvest Finance Hacked: Flash Loans and How to Mitigate Risk of Loss

This past weekend, Harvest Finance, a Defi yield farming protocol, was hacked using a Defi transaction mechanism called a flash loan. A flash loan is a specific type of transaction where the borrower must repay the loan in the same blockchain transaction. If the borrower does not repay the full loan (principal + interest), the transaction reverts, so as to seem like the flash loan never happened. Like Harvest, Aave also supports flash loan transactions and credits much of its meteoric 2020 price rise to this feature.

The Harvest Finance attack was executed through the Curve Finance Y pool with a flash loan. As seen below, Harvest’s near $3 billion in volume and over 170% APY raised concerns that there was irregular activity in the Curve Finance pool.

Source: Curve.fi

The takeaway from this clever arbitrage on Harvest Finance is that even if a yield farming protocol has multiple layers of audits (as Harvest did), it can still be vulnerable to attacks. So, don’t let the fact that a protocol is audited give a false sense of security when investing in Defi yield farming protocols. Instead, it is safer to diversify risk by investing with several reputable yield farming platforms (Ex: Uniswap, Balancer) to mitigate the risk of lost funds through sophisticated flash loan attacks.

Brian Brooks of the OCC Claims Defi Will Soon Replace Traditional Banking

OCC Says Decentralized Finance Will Soon Replace Traditional Financial Services

Brian Brooks of the OCC Claims Defi Will Soon Replace Traditional Banking

Current Comptroller of the Currency and former Coinbase Chief Legal Officer Brian Brooks claims that decentralized finance (Defi) will soon replace the need for traditional banking services.

At DC Fintech Week on Oct 19th, Brooks stated that a financial future governed by permissionless, autonomous financial technology is not far away. At the rate that Defi is moving, Brooks claimed, “decentralization is very likely an unstoppable force out t here. Decentralized networks, by definition, are cheaper, faster, and more resilient than any kind of centralized structure.”

Brooks compared Defi’s momentum next to traditional banking with email’s disruption of the postal service, adding “with email, we don’t need aggregation anymore – we can do it directly with each other.” Just as email removed the need for third party mediation of communication, Defi allows individuals to perform financial services directly with each other through the algorithms within decentralized networks. Brooks stated, “It is possible for you to just go online and say, ‘Hey, listen, I’ve got $10,000 here and I’d like to earn five percent’… and the algorithm will find someone who does and all of a sudden there’s no longer a value in the bank aggregating all of that money together.”

As opinion-leading individuals like Brian Brooks of the OCC spread the word on what the future of finance will look like, this should not be Armageddon for banks. Rather, to stay afloat in an ever-changing world, Banks must adapt and adopt the momentum of fintech innovation, especially as it pertains to the promising future of blockchain technology and cryptocurrencies. If banks want to survive, they must take part in pioneering the future of blockchain technology.