It was only a matter of time.
That a pastor … got nabbed for his alleged involvement in a bitcoin banking hacking scheme?
But more on that later.
First, we’ll start with bitcoin’s nightmare of the week.
The contentious debate about bitcoin’s block size that has dominated the bitcoin news cycle for months has finally hit a breaking point: Bitcoin’s core network, and its ability to properly process transactions, has hit its max.
Perhaps, it’s time to get Satoshi Nakamoto out of hiding.
Where this debate started was with the fear that bitcoin’s network needed to be overhauled and its core software needed work to expand its block size to 2MB in order to ensure the network could continue growing. Well, as you’ve probably noticed if you’ve been paying attention to the debate at all, no one could agree on what to do.
And so, the Bitcoin Core vs. Bitcoin Classic debate raged on.
But what has reportedly happened as a result is that the network has reached its capacity, which has inevitably delayed transactions from occurring — or, in some instances, simply failing. As a result, it’s delayed some transaction times from 10–43 minutes, according to a report by The Verge. And from other reports, this has led to shops that once accepted bitcoin to stop doing so. And users are just left in the dark at the moment.
Wait, wasn’t the blockchain our answer to faster payments?
But we digress.
The whole block size dilemma is why many in the bitcoin community pushed to increase the block size limit, but that never happened. At the moment, bitcoin’s blocks take about 10 minutes to mine and are 1MB in size. But the problem is that, with the current volumes running through the network, it simply can’t keep up.
Increasing the size would enable bitcoin to continue growing, gain more users and essentially get more attention from the masses.
Of course, as with anything related to bitcoin, it’s not as simple as it sounds. And that’s where the legality debate over what’s referred to as the bitcoin “hard fork” has originated. At least, according to one pro-bitcoin attorney, that hard fork of bitcoin could be illegal and could open up a whole new can of worms for bitcoin developers over liability issues.
On the legal side, it’s been argued that having a new fork in bitcoin’s code would open up an entirely new batch of legal issues for the new creators. That complicates things for investors, users and the entire bitcoin community, some have argued. It could also open up bitcoin exchanges to more legal issues and complicate the entire process of enabling bitcoin transactions as an exchange.
Surely, no one can be that surprised that the bitcoin community can’t come to a consensus on this issue. The debate has even pushed out a prominent developer who left after he said the network was controlled by too few voices and that the divide in the community was just too much to overcome.
There are skeptics who suggest that growing bitcoin’s capacity would destroy the virtual currency. And there’s another side of the debate that’s saying this divide in the bitcoin community is preventing any innovation from occurring.
And guess what else? Surprise, surprise. The most recent debate has reportedly caused some mudslinging and reportedly sketchy tactics by some to argue their side of the case. The Core side says the network is being overloaded with spam transactions by the Classic side that is overwhelming miners. The Classic people have claimed block miners have been hit with DDoS attacks during this process.
In the end, it’s up to the bitcoin miners to sort out what computing power bitcoin should be running at, regardless of what the community actually votes for. As The Verge article points out, it’s similar to the delegates selecting a candidate to run in the presidential election.
Or, more appropriately, between a fork and a hard place.
Pastor Indicted In Bitcoin-Linked JPMorgan Hacking Case
A pastor, bitcoin and a bank hacking case. Now, there’s three things you don’t often see in one headline.
Just yesterday (March 3), a New Jersey pastor was indicted for his alleged connection to a bribery scheme that involved — yes, you guessed it — a bitcoin exchange. But, even juicier, that bitcoin exchange has been linked to cyberattacks on JPMorgan Chase and other major companies.
This case involves the pastor, Trevon Gross, who was the former chairman of the Helping Other People Excel Federal Credit Union. He has been charged with taking payments that enable an illegal bitcoin exchange to operate and eventually gain control of the credit union.
Allegedly, Gross accepted $150,000 in bribes from a group who operated an unlicensed bitcoin exchange. Well, that exchange eventually was connected to a scheme that was intended to hold that credit union and other banks captive — leading to a massive hacking scheme.
How massive? Reports show that the banking hack involved over a dozen companies’ networks, which resulted in the personal information of 100 million people stolen. JPMorgan was one of the companies, with records of more than 83 million customers being potentially compromised.
And here’s where bitcoin comes into the mix. Prosecutors claim that the bitcoin exchange, Coin.mx, then exchanged millions of dollars worth of bitcoin for other customers, including the pastor’s credit union. Federal regulators liquidated that credit union last November, according to Reuters.
Gross eventually gave himself to the FBI and is scheduled to be arraigned today.
Bitcoin’s Tech Gets The Big Bank Test
All was not lost for bitcoin this week — at least on its technology side. That side, of course, is the side of bitcoin everyone wants to talk about (the blockchain).
And, from the sounds of it, the technology that powers bitcoin is making inroads with Wall Street’s banks. This news follows the FinTech company R3 CEV, which brought together 42 banks to test how a set of standards could be established for financial service companies looking to implement blockchain’s tech.
This week, R3 announced that the initial trial has concluded, which involved 40 banks within the consortium participating by testing five blockchains on how they could be used to issue, trade and redeem a fixed-income product.
And that’s a big step for blockchain in the financial services arena, as it’s believed to be the biggest test of its kind that has to do with a real-life scenario that impacts the financial markets ecosystem. And during a time when bitcoin and blockchain are undergoing their own sort of identity crisis, this just might be the bright spot that’s needed for the digital currency and its technology.
Some of the major banks that participated in the trial included Bank of America, Barclays , BBVA, Bank of New York Mellon, Citi, Deutsche Bank, JPMorgan, Goldman Sachs, HSBC, Morgan Stanley, State Street and Wells Fargo.
Not a shabby list.
“This development further supports R3′s belief that close collaboration among global financial institutions and technology providers will create significant momentum behind the adoption of distributed ledger solutions across the industry,” David Rutter, R3’s chief executive, said in a statement.
“These technologies represent a new frontier of innovation and will dramatically improve the way the financial services industry operates, in much the same way as the advent of electronic trading decades ago delivered huge advancements in efficiency, transparency, scalability and security.”