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Tyler and Cameron Winklevoss are seeking another patent, this time for a blockchain-based system designed for “securely storing digital assets” like cryptocurrency.

The Winklevoss IP, LLC patent application, titled “Systems and methods for storing digital math-based assets using a secure portal,” was revealed last Tuesday by the U.S. Patent and Trademark Office (USPTO).

According to the patent filing, the Winklevoss system will use “an isolated computer within an electronic isolation chamber.” The system can generate several digital asset accounts, with “one or more private keys and a digital asset account identifier corresponding to each of the digital accounts.”

The patent describes a method that will allow a digital asset account to be divided “into a plurality of private key segments,” paving the way for more secure technology for cryptocurrencies. It stated, “Private keys for a multi-signature account may be distributed to a plurality of users who are required to authorize a transaction together… private keys for a multi-signature account may be stored as backups, e.g., in secure storage, which may be difficult to access, and may be used in the event that more readily obtainable keys are lost.”

In the last couple of months, the Winklevoss brothers have been actively involved in blockchain and cryptocurrencies. In April, Winklevoss IP secured a patent for a blockchain-based system that implements common cryptographic principles to boost the security of digital transactions.

The Winklevoss twins filed a patent in May for an application for crypto-based asset trading that allows for the settlement of exchange-traded products (ETPs) using cryptocurrencies. However, the authorities rejected the application. A day after the decision, the matter was put under review.

Last month, the two launched a working group whose goal is to create industry standards to prevent criminal activities like market manipulation. The group, called Virtual Commodity Association (VCA), has bitFlyer, Bitstamp, and Bittrex.

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The U.S. Financial Industry Regulatory Authority (FINRA) has filed a complaint against Timothy Tilton Ayre, charging him with securities fraud and the illegal distribution of an unregistered cryptocurrency, according to a statement released on FINRA’s website Tuesday, September 11.

In the complaint, FINRA, overseen by the U.S. Securities and Exchange Commission (SEC), states that Massachusetts-based Ayre tried to lure investment to his public company, Rocky Mountain Ayre, Inc. (RMTN), by selling HempCoin, which he misrepresented as “the first minable coin backed by marketable securities.”  The regulator writes that Ayre’s claims are “fraudulent, positive statements about RMTN’s business and finances.”

Furthermore, Ayre stated that HempCoin is a security backed by RMTN common stock, telling investors that each coin was equivalent to 0.10 shares. As a result, more than than 81 million HempCoin securities were mined in late 2017 and sold on crypto exchanges. As Ayre never attempted to register the coin, FINRA has decided to charge the RMTN head with the unlawful distribution of an unregistered security.

In addition to the above, from January 2013 through October 2016, Ayre reportedly made false statements about the nature of RTMN’s business and the creation and “unlawful distribution” of HempCoin, as well as making misleading claims in RMTN’s financial statements.

FINRA, which has started a formal proceeding against RMTN by filing a complaint, reminds the public in the statement that anyone named in a complaint can file a response and request a hearing. If FINRA admits there were violations, the firm or individual might get a fine, censure, suspension, or be barred from the securities industry.

FINRA’s statement comes the same day as its ruling organization SEC has issued two separate cease-and-desist orders along with fines.

As Cointelegraph wrote September 11, the SEC filed a cease-and-desist against Timothy Enneking and his Crypto Asset Management fund, which “misrepresented” itself as the “first regulated crypto asset fund in the United States.” The SEC’s second notice addresses “ICO superstore” TokenLot, which the U.S. watchdog alleges has also breached the law by failing to register in the country.

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Bitcoin (BTC) is a digital currency that is stored in an electronic wallet, which can be accessed by using your private key. However, you don’t have to do this directly. A wallet app automatically uses a private key to sign the outgoing transactions for you and also generates wallet addresses for you using that key.

The device on which your Bitcoin wallet is stores the private key, not the coins themselves. Your coins are stored on the Bitcoin blockchain, and your private key is required to authorize transfers of those coins to another person’s wallet.

There are several different forms of Bitcoin wallets that cater to different requirements and vary in terms of security, convenience, accessibility and more. Full-node wallets cater to decentralization and support the Bitcoin network, and there are mobile wallets that offer built-in cryptocurrency exchanges and convenient QR code scanners, among other kinds of functionality, depending on the wallet you use. 

It’s important to ensure that the wallet you choose is compatible with the currencies you are storing and caters to your specific security and usability needs.

Types of Bitcoin wallets

Mobile

For those actively using Bitcoin on a daily basis, paying for goods in shops or making trades face-to-face, a mobile crypto wallet is an essential tool. It runs as an app on your smartphone, storing the private keys and allowing you to pay for things, trade and store crypto with the phone. 

Moreover, some apps make use of the smartphone’s near-field communication feature, or NFC, which means users can simply tap their phone against the terminal without having to provide any information at all.

Mobile wallets take advantage of simplified payment verification technology, as they only operate with small subsets of the blockchain, relying on trusted nodes in the Bitcoin network to ensure that they have the correct information. 

The disadvantage is that these trusted nodes have control over the coins and transactions, which counters Bitcoin’s trustless philosophy. Nevertheless, these wallets are necessary for mobile phones due to their limited system resources, but this is a potential downside of having easy access to funds.

Furthermore, as another byproduct of being a convenient on-the-go solution for Bitcoin storage, mobile wallets are prone to malware and hacking. Moreover, you can lose control of your wallet if someone simply gains access to your mobile device, especially if there is no two-factor authentication enabled.

Two-factor authentication (2FA) is a second layer of protection where you enter a code in addition to your username and password to log in. A key difference between a 2FA code and a password is that the 2FA code is either sent to your email or phone via SMS to help verify that it is you trying to log in. A more secure 2FA method is to use an authenticator app, such as Google Authenticator, FreeOTP or Authy, because it’s invulnerable to SIM swap attacks or email hacks.

It is advised to only deposit as much Bitcoin as you need into the mobile wallet and store larger Bitcoin holdings in a separate hardware or paper wallet.

There’s a large variety of Bitcoin wallet apps for devices running on Android and iOS. They are light wallets that don’t download the entire blockchain to your phone or tablet but may still scan the blockchain to calculate your balance. Be wary of scams and counterfeit wallet apps. There are many out there that will steal your private keys.

Web wallets (exchange wallets) 

Web wallets store your private keys on a server, which are constantly online and controlled by a third party. Different services offer different features, some of which can link to mobile and desktop wallets and replicate your addresses across the devices you own.

Much like mobile wallets, e-wallets enable their users to access their funds on the go from any device connected to the internet. The organizations running the website can gain access to your private keys, thus gaining total control of your funds.

Most e-wallets operate on exchanges, and there have been instances of exchanges shutting down and making off with their users’ funds. Exchange wallets are also frequently targeted by hackers because they are accessible using only your email address and password.

In some cases, exchange wallets offer some degree of protection from the loss of funds — e.g., insurance or backup funds to repay users if the exchange is hacked.

The prevalence of leaked passwords and leaked emails makes this an especially serious security risk because people often use the same email addresses and passwords across many different services. Remember that your email address is half of your login credentials.

Desktop

Desktop wallets are downloaded and installed onto your computer, storing the private keys on your hard drive or SSD. By definition, they are more secure than online and mobile wallets, as they don’t rely on third parties for their data and are harder to steal. 

They are still connected to the internet, which makes them inherently less secure. However, desktop wallets are a great solution for those who trade small amounts of Bitcoin from their computers.

There are a variety of different desktop wallets that cater to different needs. Some focus on security, some on anonymity, convenience, decentralization and other things. Wallets that run as full nodes download the entire blockchain onto your computer. This requires hundreds of gigabytes of disk space and a fast internet connection. However, they offer granular control over your transactions that you won’t find in most wallets. A few benefits of running such a wallet include but are not limited to:

  • Replace-by-fee checkbox: This enables you to increase the transaction fee later if you want to speed up your transaction.
  • Intuitive drop-down box with the transaction fee and speed control.
  • Performance: Transactions are broadcasted directly to the memory pool without going through a third-party node provider.
  • API and CLI: The command-line interface offered by full node wallets provides a vast array of controls not available in light wallet apps. The API provides app developers with the ability to integrate Bitcoin-related functions in their apps. This can also be used to build your own wallet app.

Hardware

A hardware wallet is a rather unique type of Bitcoin wallet that stores private keys in a secure physical device. It is believed to be the most secure way of storing any amount of Bitcoin. Unlike paper-based wallets, which must be imported to software at some point, hardware wallets can be used securely and interactively. Moreover, they are immune to computer viruses; the funds stored cannot be transferred out of the device in plaintext; and in most instances, their software is open source.

Most hardware wallets have screens, which add another layer of security, as they can be used to verify and display important wallet details. For instance, a screen can generate a recovery phrase and confirm the amount and address of the payment you wish to make. So, as long as you invest in an authentic device made by a trustworthy and competent manufacturer, your funds will be safe and secure.

Never purchase a hardware wallet from any used item marketplaces. There are fake hardware wallets in circulation that will steal Bitcoin and other cryptocurrencies. Always purchase hardware wallets from the manufacturer and check that you are on their official website. Check the URL in your browser’s address bar to ensure it’s correct.

Paper wallet 

A paper wallet is essentially a physical document that contains a public address for receiving Bitcoin and a private key, which allows you to spend or transfer Bitcoin stored in that address. Paper wallets are often printed in the form of QR-codes so that you can quickly scan them and add the keys to a software wallet, or a wallet app, to make a transaction. 

A paper wallet can be generated using services that allow users to create a random Bitcoin address with its own private key. The generated keys can then be printed, with some services offering a tamper-resistant design or even an option of ordering holographic labels.

The main advantage of a paper wallet is that the keys are stored offline, which makes it highly resilient against and completely immune to hacking attacks, including malware that logs keystrokes, like keyloggers. However, some precautions when creating a wallet still need to be taken. You must ensure that no one is watching you create your wallet or can see where you’re storing it.

To rule out the risk of any spyware monitoring your activities, it is recommended to use a clean operating system, such as Ubuntu, running from a USB flash drive or DVD. Furthermore, once the paper wallet is set up, the website code should be able to run offline, which allows the user to disconnect from the internet before actually generating the keys. Finally, use a printer that is not connected to a network.

Moreover, it’s important to understand that you are printing valuable, private information on a piece of paper. Certain measures should be taken to protect that piece of paper. For instance, it is recommended to keep it in a sealed plastic bag and to store it in a dry, safe place to avoid water damage and general wear and tear. Some people prefer laminating it and storing it in a safety deposit box.

Physical Bitcoin

Physical Bitcoin coins tend to be preloaded with a fixed amount of BTC with the intention that its value cannot be spent as long as the private key remains hidden. This is usually achieved by using a tamper-evident seal.

The first of its kind, Bitbill was shaped like a credit card, but most alternatives that followed were shaped like a round medal. Mike Cadwell, a cryptocurrency enthusiast nicknamed “Casascius,” created the first of the popular Casascius physical Bitcoin in 2011. Private keys were hidden under a peelable hologram, and when removed, it left a tamper-evident mark. When redeemed, the coin lost its digital worth. Since then, there have been several new coin manufacturers, and some companies offer preloaded cards that contain a specified amount of crypto.

Physical Bitcoin is now primarily used as collectors’ items due to the inherent limitations of physical currency. One of Bitcoin’s key value propositions is to provide seamless transfers anywhere in the world — physical coins make that impractical. 

Bank

Many banks stifle Bitcoin-related activities, including but not limited to wire transfers to cryptocurrency exchanges. Banks usually cite money laundering as a reason for opting not to offer this service, although they clearly have an incentive to suppress it to protect their own business model. This is due to the fact that Bitcoin is designed to reduce or eliminate the need for custodians such as banks.

In recent years, conventional financial institutions, such as banks, have started expressing an interest in not only developing their own cryptocurrencies but in providing custody services for existing cryptocurrencies, such as Bitcoin. Regulators are also moving to enable banks to provide cryptocurrency custody services for banks. 

Banking for cryptocurrency could be considered redundant, as Bitcoin stores coins and wallet information securely on its blockchain. Bitcoin also provides the ability to conduct transactions internationally without needing approval from a bank or minimum balance fees. Nonetheless, banks have been trying to stay relevant as cryptocurrency grows.

There are also regulated cryptocurrency banks that can custody Bitcoin. They offer bank-like protections, such as account monitoring, and can step in if suspicious activity is detected. These services also offer the ability to sell your cryptocurrency and withdraw to a conventional bank account. 

These services are useful especially if you’re not holding cryptocurrency long term. However, their similarities to banks don’t end there — they can freeze your account, or your funds can be seized. You would also be subjected to withdrawal limits, Know Your Customer requirements and surveillance even though the overall experience from crypto native banks is more decentralized in comparison to the traditional banking system. Furthermore, there are only a handful of such banks that operate in a fully regulated manner.

Bitcoin wallets and security

Security risks jeopardizing a Bitcoin wallet

  • Key-stealing malware: Malicious software can scan your hard drive and steal your private keys, which means it can steal your Bitcoin in a matter of minutes.
  • A trojan can encrypt all the files on your hard drive. Afterward, it might find all the links to your wallets, then realize how much money you own, and demand that exact amount of Bitcoins to decrypt your hard drive. This is called ransomware.
  • A digital exchange can conduct an “exit scam” and make off with Bitcoin.
  • You can lose your laptop or your phone with your wallets installed on them.

Protecting your Bitcoin from thieves

  • Avoid using any kind of wallet that requires an internet connection; use cold storage options instead.
  • Always be cautious and double-check everything. For instance, you could receive an email that looks like it’s from BlockWallet, but it is actually from BlockWalet. If you authorize it, your Bitcoins could disappear immediately. This widespread type of scam is called “phishing.”
  • If using a desktop or mobile wallet, avoid unknown websites, as they may carry malware.
  • If someone asks you to send them Bitcoin and promises to send you back more: Don’t do it, it’s a scam.
  • If anyone asks you for your Bitcoin private key, don’t send it to them because it enables them to steal all your coins.

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It’s no secret that Bitcoin (BTC) mining is an expensive business, and in more ways than one. Not only has it become less profitable since July 2016’s halving of mining rewards to 12.5 BTC, but competition among miners and an increasing hashrate have resulted in ever-higher energy consumption, with all the damage to the environment that implies.

Yet, as energy-intensive as Bitcoin mining is, a question still remains: Is there a seasonal variation in the cryptocurrency’s energy consumption? Even if consumption is rising on the whole, does something different happen during the summer months?

Well, data hasn’t been collected on Bitcoin’s electricity consumption for long enough to provide a truly authoritative answer to this question, yet what data there is suggests that the summer brings a slight, but noticeable weakening to the rise in BTC’s energy consumption. This is most likely because, globally, energy prices increase during the summer months, putting a strain on the profitability of Bitcoin mining.

Steady growth

When it comes to the question of Bitcoin’s energy consumption, the first thing that needs to be stated is that direct data on consumption hasn’t been made available by the big mining companies. Still, a number of indirect estimations have been produced over the years — based on such metrics as profits, network difficulty and hardware efficiency — and these all show that consumption has been increasing consistently.

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The U.S. Securities and Exchange Commission (SEC) has issued a cease and desist order and a $200,000 fine to Crypto Asset Management (CAM) and its founder Timothy Enneking, according to a document published on the commission’s website Tuesday, September 11. According to CNBC, this is the first SEC disciplinary action against a digital asset management fund.

The SEC order says that CAM “misrepresented” itself as the “first regulated crypto asset fund in the United States,” and raised $3.6 million from 44 investors in late 2017, bringing its net asset value to $37 million.

According to the filing, the fund has “never been registered with the Commission in any capacity.” Тhe commission insists that CAM “wilfully” broke the law by claiming to have the necessary credentials associated with holding and trading securities.

After being contacted by the SEC, the company has agreed to stop its public offering and has offered a buyback to investors. CAM has also agreed to pay the fine, while it has not admitted guilt to the commission’s allegations.

Also today, the SEC issued an order against “ICO superstore” TokenLot. The Commission says that TokenLot breached the law by failing to register. Similar to CAM, the firm has agreed to pay a $471,000, but has not formally admitted to violating the law.

In a further move from regulators, the U.S. Financial Industry Regulatory Authority (FINRA) has filed charges against a Massachusetts man on September 11 for securities fraud and illegal distribution of an unregistered cryptocurrency HempCoin. If FINRA admits there were violations of securities law, Timothy Tilton Ayre or his public company, Rocky Mountain Ayre, Inc. (RMTN), might get a fine, censure, suspension, or be barred from the securities industry.

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The Chief Commercial Officer of global crypto payment processor BitPay said that altcoins “will never come back,” while Bitcoin (BTC) will “rebound” in 2019, in an interview with Bloomberg September 12.

The CCO of BitPay Sonny Singh said that cryptocurrency markets are now on the threshold of a new stage of progress, which requires a certain “defining moment,” or a “catalyst.” According to Singh, that “defining moment” will come when big institutional investors, such as Goldman Sachs and BlackRock, “become real” in 2019.

“But next year you’ll see the talk of the big entrants become real, where you’ll see Goldman does launch a trading desk, Fidelity does launch a Bitcoin product, Square offers Bitcoin processing for merchants, BlackRock launches an ETF… So all that will become real, and you’ll see some adoption actually. And then […] the price [will bounce] back up again.”

However, while predicting that Bitcoin “will rebound next year,” Singh was mostly bearish on altcoins. Singh said that altcoins “will never come back” to their previous levels, stating that firms like Fidelity and BlackRock are “not going to launch altcoin products, they’re going to launch Bitcoin products.”

Talking specifically about BitPay, the company’s CCO claimed that the they have “never been more bullish” on Bitcoin, saying the industry is going “full-speed ahead,” with a growing number of partnerships and new hires.

In this regard, BitPay was recently integrated by luxury auto retailer Post Oak Motor Cars to enable the U.S. dealership to accept BTC and Bitcoin Cash (BCH) as payment for Rolls-Royce, Bentley and Bugatti.

Concerning new “big entrants” to the industry, anonymous sources today revealed that U.S. banking giant Morgan Stanley is planning to offer clients Bitcoin trade swaps, which would enable them to trade crypto derivatives without holding any of the cryptocurrency.

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Brazilian retail giant Via Varejo has partnered with blockchain payment service Airfox, according to a September 12 press release.

Via Varejo, which owns home appliance and furniture chain Casa Bahia, is integrating Airfox’s digital banking platform on its e-commerce platforms, as well as in nearly 1,000 of its offline shops.

As the press release notes, customers will be able to purchase goods in Casa Bahia by paying directly via Airfox, or will be able to use microloans provided by the retail group. Customers can also reportedly use the app for personal finance, such as depositing and withdrawing cash, at the chain’s location.

Airfox is a mobile financial service launched in February 2018 that includes fiat and blockchain payments via its AirToken (AIR) coin, an ERC-20 based token.

The press release outlines the importance of the collaboration for mass adoption of blockchain-powered payment services, letting the Airfox “extend its mobile digital wallet to Via Varejo’s national customer base and drive mainstream adoption.”

Via Varejo is one of the largest consumer electronics and home appliance retailers in Brazil, reaching 60 million customers in Brazil via its brands Casas Bahia and Pontofrio. The company owns over 900 stores in 350 Brazilian cities, reportedly making as much as 1 million deliveries per month.

According to the recent press-release, Via Varejo handled approximately $6.3 billion sales in 2017.

Last week, U.S. luxury automobile retailer Post Oak Motor Cars became reportedly the first Rolls-Royce, Bentley and Bugatti dealership in the country to accept Bitcoin (BTC) and Bitcoin Cash (BCH) as payment.

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The Google Cloud team has officially made the Ethereum (ETH) dataset available in BigQuery, the company’s big data warehouse for analytics, according to a post published on Google’s official blog August 29.

The Ethereum blockchain data is posted in the dataset and updated on a daily basis. As the team explains, the tool was created to help make business decisions, prioritize improvements to the Ethereum architecture itself (for example, to prepare updates), and balance sheet adjustments, e.g. how quickly a wallet can be rebalanced.

As Google explains, the Ethereum blockchain contains APIs for random functions such as checking transaction status, looking up wallet-transaction associations, and checking wallet balances. Still, the API endpoints cannot be easily reached. For that reason, BigQuery’s OLAP features help aggregate such types of data and and visualize it.

Ethereum transfers and transactions costs in 2018

Screenshot of Ethereum transfers and transactions costs in 2018. Source: BigQuery

Furthermore, the software based on Google Cloud synchronizes the Ethereum blockchain to computers running Parity — a UK-based provider of infrastructure software for interacting with the Ethereum network, which performs a daily extraction of data from the Ethereum blockchain ledger and stores date-partitioned data to BigQuery for exploration.

Google also shows some examples of the uses of the new tool. One of them relates to CryptoKitties — a game based on the Ethereum blockchain that is the most popular ERC-721 smart contract by transaction count. BigQuery collects data on accounts that own at least 10 CryptoKitties (a color on the graphics indicates owner) and their mascots’ reproductive fitness (size).

CryptoKitties infographic of owners and CryptoKitties’ reproductive fitness

Screenshot of CryptoKitties infographic of owners and CryptoKitties’ reproductive fitness. Source: BigQuery

Google has already expanded into blockchain-based tools and services this year. In February, the company created a similar tool for the Bitcoin (BTC) blockchain to visualize transactions, detect anomalies, and extract necessary data from the blockchain ledger.

As Cointelegraph wrote in July, Google also partnered with two blockchain-focused firms, Digital Asset and BlockApps, to offer new distributed ledger technology (DLT) solutions on Google’s Cloud Platform.

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You may have heard the term ‘blockchain’ and dismissed it as a fad, a buzzword, or even technical jargon. But I believe blockchain is a technological advance that will have wide-reaching implications that will not just transform the financial services but many other businesses and industries.

A blockchain is a distributed database, meaning that the storage devices for the database are not all connected to a common processor.  It maintains a growing list of ordered records, called blocks. Each block has a timestamp and a link to a previous block.

Users can only edit the parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. Cryptography ensures that everyone’s copy of the distributed blockchain is kept in synch.

Blockchains are secure databases by design.  The concept was introduced in 2008 by Satoshi Nakamoto, and then implemented for the first time in 2009 as part of the digital bitcoin currency; the blockchain serves as the public ledger for all bitcoin transactions. By using a blockchain system, bitcoin was the first digital currency to solve the double spending problem (unlike physical coins or tokens, electronic files can be duplicated and spent twice) without the use of an authoritative body or central server.

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The security is built into a blockchain system through the distributed timestamping server and peer-to-peer network, and the result is a database that is managed autonomously in a decentralized way.  This makes blockchains excellent for recording events — like medical records — transactions, identity management, and proving provenance. It is, essentially, offering the potential of mass disintermediation of trade and transaction processing.

How does blockchain really work?

Some people have called blockchain the “internet of value” which I think is a good metaphor.

On the internet, anyone can publish information and then others can access it anywhere in the world. A blockchain allows anyone to send value anywhere in the world where the blockchain file can be accessed. But you must have a private, cryptographically created key to edit only the blocks you “own.”

Using your private key and someone else’s public key you can transfer the value of whatever is stored in that section of the blockchain.

So, to use the bitcoin example, keys are used to transfer blocks, which contain units of currency that have financial value. This fills the role of recording the transfer, which is traditionally carried out by banks.

It also fills a second role, establishing trust and identity, because no one can edit a blockchain without having the corresponding keys. Edits not verified by those keys are rejected by the network.  Of course, the keys — like a physical currency — could theoretically be stolen, but a few lines of computer code can generally be kept secure at very little expense.  (Unlike, say, the expense of storing a cache of gold in a proverbial Fort Knox.)

This means that the major functions carried out by banks — verifying identities to prevent fraud and then recording legitimate transactions — can be carried out by a blockchain more quickly and accurately.

Why is blockchain important?

We are all now used to sharing information through a decentralized online platform: the internet. But when it comes to transferring value – e.g. money, ownership rights, intellectual property, etc. – we are usually forced to fall back on old-fashioned, centralized institutions or establishments like banks or government agencies. Even online payment methods which have sprung into existence since the birth of the internet – PayPal being the most obvious example – generally require integration with a bank account or credit card to be useful.

Blockchain technology offers the intriguing possibility of eliminating this “middleman”. It does this by filling three important roles – recording transactions, establishing identity and establishing contracts – traditionally carried out by the financial services sector.

This has huge implications because, worldwide, the financial services market is the largest sector of industry by market capitalization. Replacing even a fraction of this with a blockchain system would result in a huge disruption of the financial services industry, but also a massive increase in efficiencies.

The third role, establishing contracts, opens up a treasure trove of opportunities. Apart from a unit of value (like a bitcoin), blockchain can be used to store any kind of digital information, including computer code.

That snippet of code could be programmed to execute whenever certain parties enter their keys, thereby agreeing to a contract.  The same code could read from external data feeds — stock prices, weather reports, news headlines, or anything that can be parsed by a computer, really — to create contracts that are automatically filed when certain conditions are met.

These are known as “smart contracts,” and the possibilities for their use are practically endless.

For example, your smart thermostat might communicate energy usage to a smart grid; when a certain number of wattage hours has been reached, another blockchain automatically transfers value from your account to the electric company, effectively automating the meter reader and the billing process.

Or, smart contracts might be put to use in the regulation of intellectual property, controlling how many times a user can access, share, or copy something. It could be used to create fraud-proof voting systems, censorship-resistant information distribution, and much more.

The point is that the potential uses for this technology are vast, and I predict that more and more industries will find ways to put it to good use in the very near future.

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The United Arab Emirates (UAE) has approved a draft of regulations governing Initial Coin Offerings (ICO), local media outlet WAM reported Sunday, September 9 citing government sources.

The reported move comes in addition to lawmakers in the country adopting plans for a regulatory sandbox aimed at attracting greater fintech activity.

“The sandbox will act as an environment that attracts innovators to test innovative products, services, solutions and business models in a controlled space,” a report from the Securities and Commodities Authority (SCA) published September 4 reads, adding:

“This can be achieved by adopting an approach of relaxing and / or waving regulatory requirements for participants in the sandbox, while at the same time, ensuring that appropriate consumer protection safeguards are in place.”

The regulatory proposals regarding ICOs gained approval from the SCA in July, while WAM now reports the agreement will enter into law upon its imminent publication in the UAE’s Official Gazette, an official periodical containing all the country’s legislation.

“The SCA Board of Directors has approved the SCA plan to regulate the ICOs and recognise them as securities,” WAM stated, noting:

“The Board of Directors, having reviewed a study on the best international practices in this regard, has issued a directive that the procedures for trading digital token are to be regulated. The plan developed by the SCA includes a set of mechanisms as part of an integrated project to regulate digital securities and commodities.”

The UAE has pursued an in-depth policy of fintech integration in recent years, with a particular emphasis on blockchain at both municipal and state level.

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A cryptocurrency (or “crypto”) is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.

The most popular cryptocurrency, Bitcoin, has had volatile price moves this year, reaching nearly $65,000 in April before losing nearly half its value in May. 

Here are seven things to ask about cryptocurrency, and what to watch out for.

1. What is cryptocurrency?

Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.

2. How many cryptocurrencies are there? What are they worth?

More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on May 27, 2021, was more than $1.7 trillion — down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $735 billion — down from April high of $1.2 trillion.

Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:

  • Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable

  • Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation

  • Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems

  • Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money

4. Are cryptocurrencies a good investment?

Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.

That’s what’s called “the greater fool” theory of investment. Contrast that to a well-managed business, which increases its value over time by growing the profitability and cash flow of the operation.

For those who see cryptocurrencies such as bitcoin as the currency of the future, it should be noted that a currency needs stability.

As NerdWallet writers have noted, cryptocurrencies such as Bitcoin may not be that safe, and some notable voices in the investment community have advised would-be investors to steer clear of them. Of particular note, legendary investor Warren Buffett compared Bitcoin to paper checks: “It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a whole lot of money? Just because they can transmit money?”

For those who see cryptocurrencies such as Bitcoin as the currency of the future, it should be noted that a currency needs stability so that merchants and consumers can determine what a fair price is for goods. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. For example, while Bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. By December 2020, it was trading at record levels again.

This price volatility creates a conundrum. If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth three times the value next year?

5. How do I buy cryptocurrency?

While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.

To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Here’s more on how to invest in Bitcoin.

Coinbase is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as eToro, Tradestation and Sofi Active Investing. Robinhood offers free cryptocurrency trades (Robinhood Crypto is available in most, but not all, U.S. states).

» Learn more: Bitcoin wallet: How to choose the best for you.

There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country. Also be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to bilk investors. As always, buyer beware.

7. How do I protect myself?

If you’re looking to buy a cryptocurrency in an ICO, read the fine print in the company’s prospectus for this information:

  • Who owns the company? An identifiable and well-known owner is a positive sign.

  • Are there other major investors who are investing in it? It’s a good sign if other well-known investors want a piece of the currency.

  • Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings (you’re an owner), while buying tokens simply means you’re entitled to use them, like chips in a casino.

  • Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.

It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy.

But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those aren’t typical risks for investing in stocks and funds on major U.S. exchanges.

Should you buy cryptocurrency?

Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin.

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Police in California have arrested an alleged hacker who stole Bitcoin (BTC) totalling more than $1 million by hijacking cellphones, investigative cybercrime blog Krebs on Security reported Wednesday, August 22.

Citing a police report, the publication reveals Xzavyer Narvaez, 19, used “SIM swapping,” a technique also known as a “port out scam,” to reportedly steal cryptocurrency from victims’ devices. Over a period of several years, Narvaez and another suspect already under arrest used the funds to buy items such as luxury sports cars.

From March to June 2018 alone, Narvaez’s account on cryptocurrency exchange Bittrex processed 157 BTC (around $1,009,000). The police report also confirms that crypto payment processor BitPay was used in Narvaez’s purchase of a 2018 McLaren from a car dealership in Southern California.

According to the report reproduced by Krebs On Security, Narvaez had used the same device to commit the crimes multiple times, which the publication summarizes “ultimately gave him away,” as “approximately 28 SIM swaps were conducted using the same employee ID number over an approximately two-week time period in November 2017.”

Further investigations by Vice revealed that the SIM swapping underworld regarded the 19-year-old as “one of the best SIM swappers out there.”

Nonetheless, Narvaez was unsubtle about his reportedly illegitimate cryptocurrency gains, posting photographs of cars he purchased on Instagram, Vice reports.

Earlier in August, a U.S. investor filed a $224 million lawsuit against telecoms giant AT&T over alleged negligence, claiming that $24 million in cryptocurrency was stolen via a “digital identity theft” of his cell phone account.

The episodes come as attitudes among U.S. law enforcement have become more nuanced regarding the use of cryptocurrency by malicious parties.

In an interview with Bloomberg earlier this month, Lilia Infante, an agent working on the Cyber Investigative Task Force at the U.S. Drug Enforcement Administration (DEA), said she hoped cryptocurrencies remained in favor in criminal circles, noting:

“The blockchain actually gives us a lot of tools to be able to identify people. I actually want them to keep using [cryptocurrencies].’’

The police report notes that the investigators had used the Bitcoin blockchain in order to “trace the flow of the bitcoins used to purchase the McLaren back to an address attributed to the cryptocurrency exchanger Bittrex,” also noting that “BitPay provided records that identified the Bitcoin transactions in which the vehicles were purchased.”

At the same time, the DEA reported the percentage of crimes involving Bitcoin had dropped dramatically since 2013.

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Last week, at least two crypto-related enterprises, a Silicon Valley stock and cryptocurrency trading platform Robinhood and Singapore-based crypto exchange Huobi, moved closer to going public by holding an initial public offering (IPO).

The ‘old school’ way to collect investments might seem especially attractive in the context of mass adoption trends and a declining ICO market, which now sees its hardest slump in 16 months. But what is an IPO exactly, and which crypto-related companies have chosen to go public?

What’s an IPO?

For those who know what an Initial Coin Offering (ICO) is, the concept of initial public offering (IPO) — a more traditional way for a company to seek investments from broader audience in the public market — should seem familiar. The main difference between the two is that an ICO gives out tokens — whose use case is based on the company’s performance — while an IPO gives investors stock ownership in a company.

An IPO, or stock market launch, is when a company sells its shares to institutional investors and retail (individual) investors. This process is significantly more regulated compared to the ICO market: An IPO has to be supervised by regulators — like the United States Securities and Exchange Commission (SEC) — and be underwritten by one or more investment banks. The so-called ‘underwriters’ manage the process, negotiate with the SEC and help its client get listed on a stock exchange. In the end, they collect commision on the raised funds.

Once the company gets listed on a stock exchange, say the NASDAQ in New York, it goes public — i.e., its shares are traded freely in the open market. Importantly, the company is now bound to comply with the watchdogs and keep its investors in the loop by publishing information regarding internal operations.

Holding a successful IPO includes a number of potential benefits, like attracting capital from a larger amount of investors, diversifying equity base and increasing the overall exposure and prestige of the company. Consequently, there are disadvantages as well, some of which include risks which include not enough capital being raised, legal costs and the requirement to disclose sensitive financial information.

Normally, ICOs allow investors to pay with crypto — usually Ethereum (ETH) — hence remaining somewhat anonymous, while IPO investors are limited to fiat money. However, in August, marijuana culture media group High Times Holding Corp. announced it would accept Bitcoin (BTC) and ETH in its upcoming IPO, making it the “first traditional stock offering ever to accept investments” in digital currencies. Despite the SEC later claiming that High Times will not be supporting cryptocurrencies as payment for shares, the media representative Jon Cappetta has since confirmed that the company is, in fact, technically accepting BTC and ETH as payment options, although now the digital money will be converted into U.S. dollar by a third-party company to meet the SEC’s requirements.

Alternatives to IPOs: Shortcuts to the public

Beside the traditional IPOs described in the section above, there are some alternative ways for a company to go public — namely the reverse IPO and Dutch IPO.

A reverse IPO, or a reverse takeover, is a way to bypass at least some of bureaucratic scrutiny involved in the process and go public with less hassle. To conduct a reverse IPO, a private company should buy enough shares to control a publicly traded company (also referred to as the shell). After that, the shareholders of the private company merge the shell company with their enterprise and exchange their shares for a majority of the shares of the public company.

At that point, they have gone public without having to go through the aforementioned process of a traditional IPO. In countries like the U.S., such a company will still have to disclose the information regarding the deal to the SEC, however “there are no registration requirements under the Securities Act of 1933 as there would be for an IPO,” as the regulator mentions on its website. Moreover, if the reverse-merger company’s securities are listed and traded on an exchange, the listed company must still meet the exchange’s initial listing standards to qualify for listing — however, the overall process is still much cheaper and faster in the end.

Dutch IPOs, in turn, are more similar to ICOs — they represent a way to raise money directly from the public instead of holding a conventional IPO, where investment banks would take their cut in the process.

During a Dutch IPO, as per Investopedia, potential investors submit their bids for the number of shares they want to buy and the price they are willing to pay for them. Once the bids are entered, “the allotted placement is assigned to the bidders from the highest bids down, until all of the allotted shares are assigned.” The price is based on the last successful bid. Perhaps the largest company at least remotely related to crypto that has gone public through a Dutch IPO is Patrick Byrne’s Overstock.com.

Australia and the U.K.: First crypto IPOs

Although the majority of crypto firms still rely on ICOs — as Block.one’s June offering showed — investors are still ready to pump record-breaking amounts of money into an unreleased product, and some of the players have already gone public through IPOs.

An apparent first was almost secured by an Australian-based Bitcoin mining firm Bitcoin Group Ltd., who was set to become the world’s first crypto firm to be traded on a stock exchange. It submitted its first prospectus to the Australian Stock Exchange (ASX) back in 2015, and after a series of delays caused by the Australian Securities and Investment Commission (ASIC) interference, raised a modest 5.9 million Australian dollars during its IPO, severely missing its AU$20 million goal. The ASX then raised concerns regarding Bitcoin Group’s capital, and the company chose to withdraw from the stock market.

Since then, the ASX has seen at least two more successful crypto-related applications: A fintech startup Kyckr, which uses blockchain for its corporate identity management platform, was listed on the stock exchange in 2016 after raising $5.2 million; and Identitii, a blockchain-based software outfit that helps financial institutions exchange payment information, which was listed on the ASX after its $11 million IPO in August 2018. While it is yet unclear how Identitii will perform, Kyckr shares are now being traded at 12 cents, despite being initially sold for 20 cents.

Another country that has hosted crypto-related IPOs is the United Kingdom. Back in December 2015, Coinsilium, a firm which provides advisory services to blockchain projects, was listed on the ISDX Growth Market in London, becoming the world’s first blockchain company to float, according to Financial Times. Coinsilium issued 10,000,000 ordinary shares at approximately 13 cents per share and raised one million pounds ($1,3 mln) in gross proceeds, becoming “the world’s first IPO of a blockchain technology company,” as Cameron Parry, Coinsilium’s executive chairman, commented on the news. The company’s shares trade at approximately 9 cents as of press time.

Moreover, in August 2018, mining firm Argo Blockchain PLC, which offers customers the ability to mine four cryptocurrencies — Bitcoin Gold (BTG), Ethereum (ETH), Ethereum Classic (ETC) and Zcash — became the first crypto company to join the London Stock Exchange (LSE), raising around $32 million for a total valuation of about $61 million. It sold a total of 156,250,000 ordinary shares that represented 53.2 percent of the firm’s issued share capital at around 21 cents per share. Argo’s stock shares are being sold for approximately 23 cents, as of press time.

Hong Kong: Main frontier for China’s biggest mining players

The biggest player to join the IPO race might be Bitmain, an extremely successful Chinese mining company with around $3.5 billion in profit generated in 2017 — arguably one of the most influential businesses in the industry. Specifically, Bitmain develops high-grade Bitcoin mining hardware and has huge mining capabilities.

In June, media started to report that Jihan Wu, the co-CEO of Bitmain, was planning to conduct an overseas IPO in a market with U.S. dollar denominated shares — like Hong Kong — as it would allow early backers to cash in funds.

Later in July, a research unit for crypto exchange BitMEX analyzed leaked data on Bitmain’s potential IPO and stated that the mining giant had conducted a pre-IPO round that allegedly raised around $14 billion, leading them to believe that it could raise no less than $20 billion at the IPO stage.

Nevertheless, as Cointelegraph reported earlier, there had been a lot of rumors and uncertainty around Bitmain’s upcoming IPO. For instance, though DST Global and Japan’s SoftBank were initially listed among possible investors, they have since denied their involvement. Nevertheless, if Bitmain IPO ever does happen, it’s likely to affect the crypto industry simply due to the scale of the operation.

Still, Bitmain might be outraced by some of its compatriots: Both Canaan Creative, China’s second-largest BTC mining hardware manufacturer, and its competitor Ebang Communication have announced their plans to conduct IPOs on the Hong Kong Stock Exchange (HKEx), which is yet to list crypto-related stocks. Interestingly, both Canaan’s and Ebang’s estimated goal is $1 billion, which is still modest compared to Bitmain’s whooping $20 billion.

Significantly, to accommodate the rising amount of fintech-based IPOs, the HKEx announced in August a new blockchain-powered private market. Called the HKEx Private Market, it focuses on helping smaller startups get their financing through pre-IPOs before entering the bigger market and facing the regulators’ supervision. It is set to be launched by the end of the year, according to the stock exchange’s chief executive Charles Li:

“We plan to launch a completely new venture called the HKEX Private Market in 2018 to provide early stage companies and their investors with a share registration and transfer platform based on blockchain technology so they can conduct pre-IPO financing and other activities on an off-exchange venue not under the regulatory remit of the Securities and Futures Ordinance. The Private Market will serve as a ‘nursery’ for early stage companies before they are ready to enter public markets.”

The reverse IPO: Simpler, but not necessarily a successful way for crypto companies

On Aug. 29, the Hong Kong Stock Exchange (HKEx) announced that Huobi had acquired controlling stock interest in Hong Kong-based electronic products manufacturing firm Pantronics Holdings Ltd.

Huobi reportedly seized an overall stake of 71.67 percent in Pantronics, alongside blockchain services provider platform Fission Capital — at a breakdown of 66.26 percent and 5.41 percent respectively.

Huobi’s purchase had the apparent signs of being a reverse IPO. However, Sandy Peng, a partner at Fission Capital, told Cointelegraph that “for the time being, this is a straight forward acquisition […] As stated in the announcement, Huobi intends to start new blockchain-related businesses using this entity.”

Indeed, the reverse IPO way, despite being cheaper and faster, has not proven to be fruitful for crypto companies: On Aug. 1, when crypto evangelist Mike Novogratz’s crypto-focused merchant bank Galaxy Digital made its trading debut on Toronto’s TSX Venture Exchange, the largest stock exchange in Canada, it shares plunged 20 percent.

Lacking the two years’ of audited financials required for a U.S. IPO, Novogratz instead acquired a Canadian crypto start-up Coin Capital, which he then merged with an already TSX-listed Canadian shell company Bradmer Pharmaceuticals.

Before approving the listing, Canadian regulators subjected the firm to close scrutiny and pushed back its trading debut from April to August, during which a protracted downtrend in the crypto markets saw BTC below $6,000.

The U.S. SEC advises investors to be extra cautious when investing in the stocks of reverse merger companies.

From Coinsquare to Coinbase: More potential IPOs on the horizon

In September, Techcrunch reported that Robinhood, a stock and cryptocurrency trading platform with five million customers, was looking for a chief financial officer (CFO) to navigate the company through the path to an IPO. The Silicon Valley startup is already undergoing a series of audits from the SEC and the Financial Industry Regulatory Authority (FINRA) to ensure regulatory compliance.

Coinsquare, one of Canada’s largest cryptocurrency exchanges, is aiming to hold an $120 million IPO in September to facilitate overseas growth, according to the Bloomberg report. Interestingly, Coinsquare plans to sell its shares on the main Toronto Stock Exchange, “in contrast to several crypto companies which have used a shortcut to list on Canada’s junior TSX Venture Exchange in recent months via reverse takeovers,” as the media points out.

Interestingly, Coinsquare chief executive officer Cole Diamond insisted that Coinsquare was not taking the reverse IPO route, saying:

“Hell no. We believe that there are a tremendous amount of low-quality deals going public.”

Another major America-based crypto exchange, Coinbase, which has a reputation for being fully compliant with regulators, has also been flirting with the idea of holding an IPO since December 2017, but is yet to disclose any concrete details on going public. Meanwhile, all eyes are on Bitmain and its competitors, who are racing to enter the blockchain-friendly Hong Kong market.

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Global crypto wallet Abra has enabled the direct purchase and sale of cryptocurrencies for European bank accounts, according to a press-release published by PR Newswire Tuesday, September 4.

Abra, which offers 28 cryptocurrencies for consumers worldwide, will now support Single Euro Payments Area (SEPA) bank accounts. As the company’s official Twitter states, the launch of in-app European bank purchases of digital currency has already started.

Customers can now transfer euros or several other national currencies directly to their wallet which can, in turn, can be converted into the 28 cryptocurrencies offered by Abra including Ethereum (ETH), Litecoin (LTC), and Ripple (XRP).

Bill Barhydt, founder and CEO of Abra, further explained the innovation:

“With users from over 70 countries globally, and a greater demand for the ability to invest in cryptocurrencies from any bank account, it is really important to give investors the opportunity to fund their Abra wallet directly from any bank account.”

Along with backing SEPA bank accounts, Abra has announced three new coins recently added to the wallet: Cardano (ADA), Basic Attention Token (BAT), and Tron (TRX).

Until today’s announcement, the Abra wallet could only be funded by U.S. bank and wire transfers in the United States, along with American Express, Visa, and MasterCard debit and credit cards around the world.

The Single Euro Payments Area (SEPA) is a payment system that simplifies bank transfers in the EU. Currently, it includes 28 EU members, together with the four member states of the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland), and Andorra, Monaco, and San Marino.

 

As Cointelegraph reported back in March 2018, major U.S. crypto wallet and exchange Coinbase received an e-money license from the UK Financial Conduct Authority (FCA) to conduct its fiat activities in Great Britain, as well as in the 23 countries within the European Union. It was not immediately clear if Coinbase could keep the EU license in the future due to Brexit.

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Although the blockchain and crypto communities remain united around the ideology of blockchain and its world-changing potential, there is still one issue which proves to be as divisive as a hard fork — consensus protocols. Although proof-of-work (PoW) is still the protocol of choice for Bitcoin and many others, the debate rages over proof-of-stake (PoS), along with other emerging consensus protocols.

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