We are sure you’re already acquainted with our Crypto Week In Review. To make things a little more rounded we decided to write a 2018 Crypto Year In Review to cover the most important news, happenings, controversies and discoverings in 2018 for crypto. Enjoy the read and 2018 crypto year review have a successful new year!
“Fall Of Bitcoin”
Beginning of 2018 was kind of a bloodbath, right? Whoever had knowledge, skill and even some luck, prepared themselves and their portfolio for the red sea that was coming after fruitful December. Unfortunately, a lot of people got into Bitcoin and other altcoins circumstantially. They read it online on some random news portals, friends talked them into it or they heard it on the TV. Bitcoin was riding that green candle train, blazing like there was no tomorrow. We were all wondering when it will stop. The peak was in December 2017. In January its USD value was already halved. A lot of people were disappointed, especially the ones who didn’t do any research and financial education.
Let’s take this roller-coaster journey together with a gif we borrowed from Bloomberg.
Unfortunately, bear market continued through the entire last year and it is not showing signs of stopping anytime now. In 2018, Bitcoin was proclaimed dead over 90 times. Moreso, Bitcoin was proclaimed dead over 340 times since 2010. It’s tragic how little faith people have. We are sure Bitcoin will show the non-believers what’s it all about.
There was a lot of talk about bad regulations, scams, ponzi schemes and other shams that we unfortunately face in crypto space. In 2018 we probably had more frauds and hacks than ever before. Because Bitcoin and other cryptocurrencies are more famous than ever, it is only natural.
Let’s start with the biggest exchange hack in 2018. It was even bigger than the Mt. Gox one and some are even calling it the biggest hack in the history of technology. On January 26, Coincheck president, Wakata Koichi Yoshihiro and CPO, Yusuke Otsuka held a press conference in which they announced the loss at around $530 million. Some reports also suggest 500 million NEM tokens were taken from Coincheck’s wallets. Even though this hack had a greater value in dollars, the impact on the cryptocurrency market was smaller compared to the Mt. Gox one because of the market capitalization increase since then.
Bitgrail hack was in February. It is a small Italian exchange that suffered a big loss. Its trading volume wasn’t impressive at the time, but this exchange was perfect for trading Nano (NANO). For those who don’t know, Nano was around $0.1 in 2017 and it went as high as $34 in January 2018. In the moment of the hack it was trading around $17. It was attractive to traders because of its volatility. The only downside was using a small, non-mainstream exchange. In this attack 17 million Nano was stolen. At the time it was around $170 million.
There were a lot of speculations about this hack. A reddit user even suggested this was an exit scam by the owner of Bitgrail. We are just glad that in the long run this didn’t affect Nano. Since then it has had a rebrand, it was formerly known as RaiBlocks (XRB), now only as NANO. Even though Nano is affected by the bear market like all cryptoassets, its team has continued to actively work on Nano tech and supported users who lost funds in this hack.
Even though Coinrail’s hack wasn’t as big as Coincheck’s, it was still very noticeable and striking. Korean exchange counted the loss at around $40 million in June. This hack of a not-so-known exchange set out a new wave of speculations. According to some, it caused a “Bloody Sunday” in Bitcoin market price. Some claim this hack sent Bitcoin price down by $1,000. However, this was just an unfortunate incident that didn’t impact price of Bitcoin. The price dropped 15 hours after the attack.
The hack of Zaif was in October. This small Japanese exchange suffered a loss at $60 million. Hackers managed to access exchange’s hot wallets which resulted in a loss of a lot of cryptocurrencies, mostly Bitcoin, Bitcoin Cash and MonaCoin. Surprisingly, owner of the exchange, Tech Bureau Corp., promised to cover losses for all customers affected. In the end, they decided to exchange the major Zaif stake for financial support to resolve the issue. They managed to receive around $45 million.
There were numerous other hacks, even to crypto famous people like Ian Balina who lost around $2 million in a certain attack. In almost every Week In Review we write about either exchange hacks, either Twitter scams to get some crypto out of people. Important part is: learn from other people mistakes. Don’t keep your coins on exchanges, it’s the easiest way to lose them. There are so many software tools that can help you upgrade your security. But don’t stop at software, get a hardware wallet, it’s the safest option out there at the moment.
After such a depressing portion of our yearly review, we had to continue with something more cheerful. CryptoKitties! Also known as digital cats to brighten up your virtual world.
What Are CryptoKitties?
According to the official website:
CryptoKitties is a game centered around breedable, collectible, and oh-so-adorable creatures we call CryptoKitties! Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.
This is one of the first games built on blockchain technology. You can breed, collect, buy, sell or trade CryptoKitties like collectibles. For anyone curious about how to do it all, there is a short (and cute) tutorial on their website.
When you mention CryptoKitties now, it’s not such a big deal, people have heard of them and mostly forgotten about them. In the beginning of 2018, CryptoKitties were very popular. It was sort of a mania. Then it all quieted down until September when someone spiked the trading volume and regular prices. To put it in numbers, someone bought a CryptoKitty called Dragon (#896775) for 600 ETH, which was around $170,000 at the time. We are still unsure why is the price of this certain CryptoKitty so high. At the first glance Dragon doesn’t look so special. It is a ninth generation, usually the earlier generations are more valuable, she has average looks and average attributes (catributes!). Whatever the reason, thanks to Dragon, CryptoKitties got a nice bump in September after a long, quiet period.
Salutations. I’m Dragon. I bit Rebecca Black when I was younger, but those days are gone. Believe it or not, spying on the neighbours is seriously exhilarating. You should try it some time. Let’s connect on ICQ.
We are a bit unsure how to grade one other news that was very noticeable in 2018. It is somewhat positive, because we always appreciate when crypto is promoted to larger masses. However, this certain coin was followed by a lot of controversy, corruption talk and manipulating prices while situation in Venezuelan economy and finances are in crumbles.
What Is Petro?
Petro is Venezuelan national cryptocurrency tied to the value of a barrel of oil. It is supposed to support the struggling economy and keep it from failing. Also, it should serve as a tool to attract foreign investors. Petro was announced by Venezuelan president Nicolás Maduro and at first his initiative was welcomed warmly. He was called the leader of 21 century. About Petro he said:
Advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.
There were a lot of news, speculations and changes about Petro throughout the year. Even though Maduro presents it as a solution for financial crisis, Venezuelan Parliament called it a fraud:
We find ourselves before a new kind of fraud, disguised as a solution the (financial) crisis. This incompetent government wants to compensate for lack of oil production with these virtual barrels.
as well as:
This is not a cryptocurrency, this is a forward sale of Venezuelan oil. It is tailor-made for corruption.
This didn’t stop Maduro. Government then released a free cryptocurrency training course for Venezuelan citizens. Donald Trump also had a response on Petro – he banned US citizens from engaging in transaction involving Petro. This put a damper on the whole attracting foreign investors with the cryptocurrency. Crypto exchange Bitfinex also joined in in this ban.
Maduro had a lot of announcements and promises regarding Petro throughout the year: Petro-fueled crypto bank, listing on all the biggest exchanges and funding housing for homeless people with Petro. Another interesting fact is that it looks like Petro whitepaper is just a copy of Dash’s whitepaper. Even though Petro was originally only supposed to be backed by oil, whitepaper states it’s backed by oil, gold, diamonds and iron.
On October 29, Petro went on sale. The only proof of owning Petro is a certificate of purchase which is issued by the state after passing KYC procedure. This certificate is also a wallet since Google Play Store suspended the app on October 15. Wallet is “suspended” so its functionality can be checked before reactivating it. Such are the claims by Venezuelans v.p. of economy.
A new law was approved by the National Constituent Assembly in November. This allows usage of Petro in commercial transactions inside of Venezuela. This includes purchase of goods and services. Head of commission for cryptocurrency regulation, Andrés Eloy Méndez said this law is essential to overcome financial blockade USA imposed. He also mentioned this will establish new business relationship with the rest of the world with bypassing the global banking system.
A month after the official release of Petro, Maduro has another move – changing Petro rate. Even though there is a raging hyperinflation in the country, value of Petro is now 9,000 bolivars instead of original 3,600 bolivars.
Who knows how will the story of Petro finish. It is full of controversy, secrecy and smoke bombs. However, we still hope it will end up somewhat positive for cryptocurrencies – they don’t need another group of haters.
We all know that meme of a dude screaming BitConnect?
To be completely honest, this is still hilarious. Even though we feel sorry for all the victims of this Ponzi scheme. But let’s go back to the beginning.
Story Of BitConnect
BitConnect started as a Bitcoin investment lending platform. In 2016 they had an ICO and it finished 2017 as one of the best performing cryptocurrencies on CMC. Despite this huge growth and user base that just bloomed, this investment platform had a very suspicious business model and a lot of people time and again labeled it a Ponzi scheme. Why? BitConnect guaranteed gains with up to 40% total returns per month. In short – the more cash you invest, the bigger the profits are. Investors were promised ROI on a daily basis. To put this in numbers. If you put $1,000 in your BitConnect investment account, you could earn more than $50 million within three years. This was assuming that the scheme does live up to its promise. It is only natural people deemed this model a fraud. One of the first people to voice his concern was Vitalik Buterin.
Despite many warnings, BitConnect didn’t stop for a long time. Even though there was an ongoing investigation about BitConnect, there was no taking them down. They signed a partnership with Blockchain Expo where they had their own stand. BitConnect also attended ICO EVENT conference in Amsterdam as a sponsor. It went as far that they even hosted BitConnect galas.
Crackdown On BitConnect In 2018
Even though investigation in November 2017 showed BitConnect as a Ponzi scheme, BitConnect team just dispelled this as fake news. And they continued to shill their product. Until January 2018. when Texas Securities Board handed them an emergency cease and desist order. The Board ordered them to close down their operations until they were granted the necessary permissions to continue its business. This was followed by another similar order from North Carolina Securities Division. All the bad press, orders and the truth coming out slowly but finally led to the crash of BitConnect. So, they announced:
We are closing the lending operation immediately with the release of all outstanding loans. With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD. In short, we are closing lending service and exchange service while BitConnect.co website will operate for wallet service, news and educational purposes.
As a result, BitConnect crashed almost instantly with a 96% of decrease in value. Here is a screenshot of the fall from CMC:
Bitcoin Cash Fork
Bitcoin Cash (BCH) surfaced in August 2017 as a hard fork from Bitcoin’s original blockchain. The hard fork from Bitcoin happened as an attempt to fix Bitcoin’s scalability problem. Part of the community, with Roger Ver as their “leader”, wanted to increase Bitcoin’s block size. They didn’t want Bitcoin to be seen as an investment asset but they wanted it to be a strong currency for transactions. Of course, the rest of the community didn’t approve of this turn of events, so only one thing was an option – a hard fork.
Since then, twice a year BCH preforms hard forks as a part of their protocol upgrades. The latest one, which was scheduled for November 15 didn’t go as smooth. There was a motion not consistent with the initial roadmap. So BCH community actually split in three parties: Bitcoin ABC, Bitcoin SV and Bitcoin Unlimited.
Bitcoin ABC is also known as a “conservative” wing, which is represented by Roger Ver. They are supported by various crypto names: Bitmain, Binance, Bitcoin.com and Coinbase. They are called the conservative wing since they believe structure of BCH is solid with no need to change anything. However, they do believe further development is always necessary and warmly welcomed. Upgrades they suggest are:
- Oracle services;
- Scaling improvements;
- Smart contract abilities.
All of these points have one aim: to reduce transaction costs at its core.
Bitcoin SV is more of a liberal stream and they are the main opposition to Bitcoin ABC. They are led by Craig Wright with a goal to restore the original Satoshi protocol. Craig Wright even declared himself Satoshi Nakamoto but these are claims he never managed to back up with some concrete proof. Supporting parties of Bitcoin SV are: CoinGeek and CalvinAyre. Bitcoin SV wants to radically change the current BCH. The split was created to overwrite Bitcoin ABC’s scripts and boost the block size of BCH to 128MB (from 32MB). All this is supposed to help grow network size and scale. They are also promoting miners. They want to win miners’ to side with them by restoring original Bitcoin protocol and promising profit in the long run.
Bitcoin Unlimited is also known as the neutral wing. Their lead man is Andrew Clifford. Both Bitcoin ABC and Bitcoin SV are conflicting. Before the hard fork which splits BCH in two blockchains happened they suggested a solution and called it Bitcoin Unlimited’s strategy for the November 2018 hard fork. This would give the miners possibility of choice – they would vote for points they want to see applied in the hard fork.
Hard Fork & Hash War
As we all know, the hard fork happened on November 15. In the end BCH blockchain was split in two. One for Bitcoin ABC and one for Bitcoin SV. This led to a hash war and ultimately a lot of market negativity. Why was there a hash war? Well if a specific community manages to overpower the competitor in hash power that would mean certain chain gets the biggest support. This would mean the most supported chain could become the next BCH.
The graph from CoinDance shows how the hash is looking since the split. Bitcoin ABC is mostly winning. But it has only been a month. Who knows what is yet to happen in this BCH story.
Lightning Network Breakthrough
The biggest problem for our oldest “dad” cryptocurrency is the same one that has been troubling it since the beginning. Scalability. Bitcoin can only process 7 transactions per second. To compare it with competition, Visa can process 24,000 transactions per second. To improve Bitcoin’s way of functioning the community came up with several options.One of the proposals actually got picked as a possible option and testings are being developed for it. It’s called Lightning Network.
How Lightning Network Works?
Lightning Network works as a layer on Bitcoin’s blockchain that enables two parties to create a payment channel on that layer. They would then use this channel for instant payments with almost no fees. To create such payment channel, they would need a multisignature wallet. It’s a wallet which both parties can access and have their private keys. After this is set up, all parties can make unlimited transactions in this shared wallet.
This is Lightning Network in simple short explanation. And when this technology gets accepted and developed even further you won’t even have to set up payment channel as we explained. You will be able to send payment directly using channels with people you are already connected with. Another point we’re really delighted about is that with Lightning Network you will be able to contradict your friends who say you can’t even buy a beer with Bitcoin.
Development & Security
Joseph Poon and Thaddeus Dryja first came up with Lightning Network in 2015. It is being developed by three teams: Blockstream, Lightning Labs and ACINQ, all of which are working on different implementations. Testings showed all these three implementations work great with one another. One other amazing feature that is worked on is using Lightning Network for swaps between currencies without using exchanges.
Security is a bit tricky. Since the system will work on top of a BTC blockchain, it won’t actually have blockchain security behind it. You can think about it as Paypal built on top of Bitcoin. This suggest that until another system is developed or they come up with something else, Lightning Network will be used mostly for small transactions. Large transactions will still be done the old fashioned way on the original Bitcoin blockchain.
Lightning Network In 2018
The reason we are even writing about Lightning Network in this 2018 crypto year review is because it has had major breakthroughs in 2018. Even though this project has been worked on since 2015, despite the bear market, 2018 is a highlight for Lighting Network. As of December 23, channels that support scaling of Lightning Network were able to aid almost 500 BTC. In that moment USD equivalent number was around 2 million. Many believe Lightning Network is the future of Bitcoin. We’re very excited to see how this project will develop even further.
A very exciting year is behind us. We’ve had some ups and downs, though, to be completely honest, in prices we had mostly downs. Bitcoin was pronounced dead so many times by mainstream media who is clueless about what Bitcoin even is. Thankfully for us true believers, we see a lot of progress. Lightning Network is working better than ever, crypto is spreading through all layers of work, society, entertainment and especially politics. We’re looking forward to 2019 and which innovations will it bring in our beloved cryptocurrency world.
Thanks for reading and stay tuned for more.
Ana & Petar