QuadrigaCX Starts Bankruptcy Proceedings

QuadrigaCX

It’s been a long and winding road with many twists and turns for the beleaguered cryptocurrency exchange QuadrigaCX and its 115,000 former users who are owed roughly $190 million.

On April 8, 2019, the case reached a critical fork in the road as a court, recognizing that attempts to restructure the exchange have failed, appointed business services firm Ernst & Young as the exchange’s Trustee in Bankruptcy to watch over bankruptcy proceedings. It will also assume control of all of QuadrigaCX’s assets.

Ernst & Young Takes Control

With QuadrigaCX moving into bankruptcy, it appears that Ernst & Young now becomes the dominant player in this ongoing drama as previously appointed Chief Restructuring Officer Grant Thornton will no longer be involved.

“EY will continue its investigation, but once it is the trustee, it will have greater powers to do so,” attorney Evan Thomas of Osler, Hoskin & Harcourt told Bitcoin Magazine. “This includes the power to examine people who have relevant information under oath.”

Critically, Ernst & Young will also have the ability to seize the exchange’s assets.

“The trustee can also sell QuadrigaCX’s assets and start lawsuits to recover property or damages,” Thomas said. “The trustee will collect whatever it can recover for eventual distribution to creditors.”

The next step is a meeting of creditors who will elect a Board of Inspectors to oversee the work of Ernst & Young and grant permission to take actions such as selling its remaining assets.

It is likely, noted Thomas, that some of the same users elected to the Users Committee — a group of seven former QuadrigaCX customers who have been representing the 115,000 left stranded by the exchange — will be elected as these inspectors.

Jennifer Robertson’s Assets Are Frozen

Ernst & Young asked the court for and was granted an “asset preservation” order, meaning that all assets held by Jennifer Robertson, the wife of late CEO Gerald Cotten, and the Cotten estate are frozen.

The preservation order prohibits Robertson from selling, removing or transferring any assets. However, it allows her to cover her legal and living expenses by granting her access to two bank accounts overseen by Ernst & Young.

A source close to the case said it appeared that Robertson continues to retain the law firm Stewart McKelvey to represent her and the Cotten estate, despite earlier reports that said the firm was withdrawing its counsel.

What’s Next?

“There will be a claims process for creditors to file claims for consideration by the trustee,” said Thomas. “Eventually, whatever money or other property that is recovered by the trustee will be distributed to creditors with valid claims.”

The Companies’ Creditors Arrangement Case (CCAA) will continue temporarily while QuadrigaCX transitions to bankruptcy. Ernst & Young has said that it will be filing at least one more monitor’s report. The CCAA will eventually terminate and court proceedings will continue under Canadian bankruptcy law.

For a detailed overview of the QuadrigaCX story, read “QuadrigaCX and the Million Dollar Questions: What We Do and Don’t Know.”

This article originally appeared on Bitcoin Magazine.

VeriBlock’s Bitcoin-Backed Security Protocol Goes Live

VeriBlock

After a year on its testnet, the VeriBlock blockchain went live yesterday on the Bitcoin mainnet, allowing exchanges, wallet providers, merchants and other crypto businesses to leverage Bitcoin’s robust blockchain security.

Now that it’s live on the mainnet, VeriBlock’s model extends the Bitcoin blockchain’s security protection from 51-percent attacks to non-Bitcoin blockchains by linking them to the Bitcoin blockchain, offering it as a security backstop.

How Does VeriBlock Work?

VeriBlock allows any blockchain to inherit the full proof-of-work security of Bitcoin using a novel consensus protocol — proof of proof — which records snapshots of any given blockchain and embeds them (in an aggregated form) in Bitcoin transactions, allowing the former to inherit the latter’s security characteristics.

These snapshots can be automatically referenced by the protocol in the event of a 51-percent attack to determine the correct chain. The presence of conflicting snapshots for a particular “altchain” triggers early attack detection (EAD) metrics, which warns users about the potential rewrite before they confirm the transaction and updates them when the transaction is safe to accept.

VeriBlock uses OP_RETURN — a type of bitcoin transaction that is used for embedding data on the blockchain. It can be used for anything from proving the existence of some data at a specific point in time (proof of existence) to issuing new assets, all on top of the Bitcoin blockchain.

“A ‘regular’ Bitcoin transaction and one carrying a VeriBlock publication need not be mutually exclusive,” VeriBlock CTO Max Sanchez said. “It would be a relatively simple engineering matter to add an option in a Bitcoin wallet that said ‘Sending BTC? Secure the crypto-ecosystem with VeriBlock and subsidize your BTC transaction fee.’”

Does VeriBlock Create Problems for Bitcoin?

There have been estimates of the percentage of the Bitcoin blockspace used by VeriBlock that range from 20 percent of the network to as high as 45 percent. This may raise some concerns about how VeriBlock will affect the network.

“This was widely reported right before the VeriBlock testnet was phased out,” Sanchez said. “However, the effects of proof of proof on the Bitcoin network are actually very small … As demand for bitcoin transactions increases and users are willing to bid higher fees, the amount of space VeriBlock consumes in Bitcoin will shrink — the two economic forces result in an equilibrium.”

Sanchez also noted that VeriBlock’s solution offers security regardless of Bitcoin’s transaction frequency at a given time.

“The natural ebb-and-flow of VeriBlock transaction volume on Bitcoin does not affect the security characteristics of VeriBlock or VeriBlock-secured altchains, nor does it adversely affect Bitcoin,” he said.

Jameson Lopp, CTO of Casa, has been observing VeriBlock’s activity on Bitcoin’s testnet for over a year.

During an episode of the HSHR8 podcast on March 20, 2019, Lopp said that he doesn’t see the VeriBlock venture as an attack on the Bitcoin network, as some might, but he wondered about the economics of spending millions in fees to provide security.

“If you’re paying the fees to put it in the blockchain and you convince some miners to put it in, then there might be some economic rationality for this,” he said. Lopp also noted that he can see “the value of having a data anchor” for Bitcoin.

“We believe that VeriBlock elegantly expands Bitcoin’s usefulness and does so in a way that doesn’t result in a burden on the network,” VeriBlock CEO Justin Fisher told Bitcoin Magazine. “It drives demand for Bitcoin and also, in its own way, helps make Bitcoin more secure while maximizing the utility derived from Bitcoin’s energy consumption.”

In an announcement on March 25, 2019, Matt Roszak, Bloq co-founder; Anthony di Iorio, founder and CEO of Decentral; and Bill Shihara, co-founder and CEO of Bittrex, all commended VeriBlock on its innovative new protocol, expecting it to add a new level of security to the blockchain ecosystem.

“Bloq is proud to have been part of the journey with VeriBlock over the past two years — and especially with a technology that helps any blockchain project thrive and benefit from the security that Bitcoin provides,” Roszak wrote on his company blog. “As the multi-chain, multi-network, multi-token world emerges, we are confident that VeriBlock will continue to play a vital role as a security root for this new frontier.”

The vice president of crypto exchange BitBuy, Jordan Anderson, also praised the solution in an interview with Bitcoin Magazine.

“VeriBlock is an excellent example of a proof-of-proof initiative to ensure altcoins are not susceptible to a 51-percent attack,” he said. “VeriBlock will promote security and stability within the altcoin ecosystem, and provide greater confidence to consumers looking to participate.”

Meanwhile, long-time bitcoin core developer Peter Todd was more apprehensive, explaining that he needed time to look at the actual implementation of the VeriBlock project.

“The general idea of piggybacking on an existing consensus system is a good one,” he said. “But VeriBlock is an unusually complex variant of that idea, so I’m not confident given what I’ve seen in the white paper that it is secure.”

This article originally appeared on Bitcoin Magazine.

Tippin.me Takes Off at Lightning Speed With More Than 14,000 New Users

Tippin.jpg

As the new Lightning network (LN) protocol continues to take the Crypto-Twitterverse by storm, it’s taking at least one new app with it, as the tipping and micropayment app Tippin.me catches on like wildfire. Founder Sergio Abril told Bitcoin Magazine he is “overwhelmed” by the interest and support he is receiving from around the world.

Struck by the potential success of the new Lightning network protocol, Abril created Tippin.me three months ago as a way to enable Lightning micropayments without a user having to set up an LN node.

Abril told us he is getting more than 200 new users a day, 14,100 new users as of March 6, 2019.

The goal of Tippin.me is to make the Lightning network easier to use, by giving users a simple, custodial web wallet to receive and manage small amounts of bitcoin for tips and micropayments.

To use it on Twitter, users need only download an application extension to Chrome or Firefox, register, and sign in with their Twitter account. From there, they can share a QR code with fellow tippin.me users to receive tips through the Lightning network.

“I realized that micro payments could be huge with Lightning Network, but there were still some obstacles that made tipping hard. You needed to be online to get a tip, you needed to generate an invoice every time. It needed to be easier, it needed to be way simpler, and certainly something more appealing. And that’s how Tippin started,” Abril told Bitcoin Magazine.

Since its launch, Tippin.me has sent out 16,500 tips and generated 195,000 invoices. Abril told us that when Twitter CEO Jack Dorsey tweeted about Tippin.me recently, 35,000 people visited his site in one day.

🤭 The Chrome extension that places a https://t.co/NVpjMUDdfJ button in every Tweet is here.https://t.co/Ra3de5dr50#LightningNetwork #LNTrustChain pic.twitter.com/FIx5zBbZfb

— Tippin⚡️ (@tippin_me) February 14, 2019

How Does It Work?

To set up Tippin.me, you can use the extensions on Google Chrome or Firefox. Some users have installed the Chrome version in Brave and that seems to work as well.

You will also need to install a mobile Lightning wallet, such as an eclair wallet for androids or the bluewallet for IOS and androids from the App or Play stores.

When you sign up at Tippin.me, a small web custodial wallet is created there, linked to your Twitter username.

With the browser extension installed, a Lightning icon will show up in your tweets along the bottom, appearing after the reply, retweet, like and message symbols.

When the Lightning icon is clicked, a QR-code will appear and you can scan it with your new bitcoin wallet. (The process of retrieving a proper QR code for that user is handled automatically by the extension itself.)

Cashing out tips is done from the Tippin.me dashboard.

Security Is “Top of Mind “

As the Bitcoin space weathers another storm, security is again top of mind. we asked Amber D. Scott, CEO of Outlier Canada, whether she would feel comfortable with a Tippin.me wallet.

“The risk, as I see it, isn’t because the Tippin.me wallets require certain information to be revealed publicly. It’s in part due to the custodial nature of the tool, and in part due to its novelty. Tippin.me is still in Beta mode, so there are some risks to users as the system has not yet been battle-tested and there is a greater chance of bugs.”

Abril told Bitcoin Magazine that the amounts involved are small so this takes some pressure off, but he is still very mindful of security concerns.

Abril said:

“I decided to show a disclaimer at the sign up screen on Tippin since day one, to make sure that nobody was holding a big amount. I know that this sign could hold people back, but Tippin was just a side project, a fun experiment, and I didn’t want people to risk too much.”

“The truth is that anything could happen, but as long as you don’t keep your bitcoins in there, and do cashouts regularly, you will be OK. Also, let’s not forget that we are talking about small tips, usually just cents.”

Promoting Lightning and Bitcoin

Asked if the recent bear market had shaken his faith in Bitcoin, Abril said:

“Despite the current market situation, I think that nothing has changed. Bitcoin is the natural evolution of money, and it will happen sooner or later. It’ll keep on growing no matter what.

“But we need to make it easier to use if we want to speed up the process. We need to simplify everything to push adoption. A lot. And that’s why I decided to build Tippin.me.”

“It’s a fun way to play with lightning,” said Coin Center Communications Director Neeraj Agrawal. “Small applications like these are good for onboarding. It got me to finally install a mobile lightning wallet.”

Asked about the timeline for taking Tippin.me out of beta, Abril noted:

“I hope to have a viable gold product within weeks … The truth is that the Lightning Network is still in Beta as well, and that’s one of the reasons I decided to hold on and stay in this phase (If Lightning Network can fail, so [can] Tippin, which is built on top of Lightning Network… So I didn’t want to risk). Luckily, LN (Lightning Network) is maturing very fast, and the system I’m building is really solid already, so things could change soon!”

Want to experiment with Lightning payments on Tippin.me? Join in on Tuesdays for Bitcoin Magazine’s #LightningTrivia events to win some sats and tickets to the Bitcoin 2019 Conference in San Francisco. Follow @bitcoinmagazine.

This article originally appeared on Bitcoin Magazine.

21 Lectures Offers Bitcoin Developer Courses by Schnelli, Decker and Chiang

21 lectures.jpg

Switzerland is an international bitcoin and blockchain mecca, known for its crypto culture and concentration of crypto businesses. Now, it is the new home to 21 Lectures, a school for bitcoin developers founded by Lucas Betschart. The school is registered in Zug but courses are taught in the capital, Zurich.

21 Lectures (named for the bitcoin cap of 21 million) is the only course for bitcoin core developers in Switzerland, and Betschart is hoping that the high-profile nature of the teachers — including James Chiang, Christian Decker and Jonas Schnelli — will attract students from around the world.

For Betschart, starting a program like this is an expression of confidence in the future of Bitcoin.

“Bitcoin itself didn’t change,” he told Bitcoin Magazine. “It’s still the censorship resistant, internet-native alternative to central bank money and, therefore, still very appealing to me from a technological as well as ideological point.”

He added, “People who understand the value of Bitcoin (not just the price) don’t care too much about these short-term market swings.”

Schnelli, Bitcoin Core maintainer and Shift cryptosecurity expert, says, “In Switzerland, the Bitcoin ecosystem is becoming more and more established and has a growing international appeal. I am pleased to be involved in a modern and future-oriented further education with 21 Lectures.”

Developing a Sustainable Business Model

Betschart says that the program’s primary goal is to get more software developers to contribute to Bitcoin’s open source projects: He and his team are “not interested in making a profit.”

A statement on the program’s website lays out its philosophy:

“We believe in the power of open source software, creative commons and that all people should be able to access information freely. This is why we publish all our teaching materials freely available to use, share, copy, distribute and modify.”

Betschart told Bitcoin Magazine, “The plan is to have a sustainable business model to cover the costs of the teachers, rooms and expenses.”

The three main sponsors — Xapo, Shift and BitConsult — are all contributing to this project.

Xapo, the Hong Kong-based bitcoin wallet and storage company, contributed startup funding. This contribution, paired with Betschart’s own bitcoin earnings, was able to create a self-sustaining school with courses costing $1,500 or the equivalent in bitcoin.

Shift, the Bitcoin software company that introduced the first U.S. bitcoin debit card, is lending four of its developers as lecturers including Marko Bencun, Jonas Schnelli, Kaspar Etter and Henrik Jonsson.

BitConsult provides free hardware wallets and other tools to students in the program.

Only Bitcoin Taught Here

The courses only cover Bitcoin — general knowledge, protocol, cryptography and Lightning — and use libbitcoin and the command line tool libbitcoin-explorer for exercises.

There are two course levels: a two-day basic course for people with a technical background and some training as developers and a four-day advanced course for graduates of the basic course.

Applicants will be required to attend in person and the requirement to qualify is “technical knowledge and familiarity with the command line.”

“The current advanced course of 21 Lectures gives an extensive insight into Bitcoin, but it’s only a starting point: The developers will have to learn and practice more by themselves, although our teachers, as well as the open-source community in general, are always very helpful to get new contributors up to speed,” Betschart said.

“We hope to collaborate more with other courses in the future, exchange ideas, content and attendees. A good next step from the 21 Lectures course is probably the ChainCode Labs program.”

The next course begins March 4, 2019.

Course materials can be found here: https://github.com/21Lectures

This article originally appeared on Bitcoin Magazine.

Court Grants QuadrigaCX Bankruptcy Protection

quadriga court.jpg

Today, February 5, 2019, a court in Nova Scotia, Canada, granted bankruptcy protection under the Companies’ Creditors Arrangement Act (CCAA) to the embattled Vancouver-based cryptocurrency exchange QuadrigaCX. The court appointed Ernst & Young as monitors to help the exchange locate any funds it could use to reimburse users and ordered a 30-day stay of proceedings.

The exchange initially made the news on January 14, 2019, when the company announced its CEO Gerald Cotten had died in India on December 9, 2018, from complications from Crohn’s disease. News website CoinDesk obtained what appears to be a copy from the Indian government of Gerald Cotten’s death certificate, although his name is misspelled.

On January 31, 2019, the exchange went offline posting a statement that they had filed for creditor protection.

More than a month after Cotten’s death, the exchange announced that he had the only access to the exchange’s cold storage, effectively locking up the exchange’s funds in offline wallets that, allegedly, no one else at the company has access to. Cotten’s widow, Jennifer Robertson, has reportedly hired a security expert to hack into the computer.

In its petition to the Nova Scotia court, QuadrigaCX claimed they didn’t have access to wallets containing $137 million USD in cryptocurrency owned by an estimated 115,000 users. The affidavit claims that QuadrigaCX has 363,000 registered users and owes approximately $190 million USD. Court documents show that one user alone had a balance of approximately $70 million CDN ($53 million USD).

Professional services firm Ernst & Young said they would focus on finding out whether there are any reserves in cold storage and, if there are, how to access them.

In court today, the lawyers for QuadrigaCX said they are considering selling the exchange to pay off funds that are owed. Maurice Chiasson, a lawyer representing QuadrigaCX, has said that, currently, there are several payment processors that hold funds from the exchange.

A number of affected users have retained lawyers and formed class actions to seek restitution. Attorneys for the applicants now have five days to serve the 115,000 customers owed funds with notice of the order.

This article originally appeared on Bitcoin Magazine.