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The Undiscovered Facts Behind Money Laundering, Cryptocurrency, and Banks

The Undiscovered Facts Behind Money Laundering, Cryptocurrency, and Banks
A week ago, a lot of documents known as the FinCEN documents were delivered, enumerating how the absolute greatest banks on the globe move trillions of dollars in dubious exchanges for suspected psychological militants, kleptocrats, and drug top dogs. Also, the U.S. government has neglected to stop it.
https://preview.redd.it/lme57jyyx1r51.jpg?width=1200&format=pjpg&auto=webp&s=014ead7b7b812b3d6cbaf4a141eeec123589121b
The Financial Crimes Enforcement Network ("FinCEN"), an agency inside the Treasury Department, accused of battling tax evasion, psychological militant financing, and other monetary violations. An assortment of "dubious movement reports" offers a window into budgetary debasement, and how governments can't or reluctant to stop it. Benefits from destructive medication wars, fortunes stole from creating nations, and hard-earned investment funds taken in Ponzi plans, all course through money related establishments, in spite of admonitions from bank workers.
These reports are available to US law enforcement agencies and other nations’ financial intelligence operations. Although FinCEN is aware of the money laundering activities, it lacks the authority to stop it.
Money laundering is more than a financial crime. It is a tool that makes all other crimes possible - from drug trafficking to political crimes. And banks make it all possible. In a detailed expose, BuzzFeedNews named several of the most trusted banks. Current investigations show that even after fines and prosecutions, well-known JPMorgan Chase JPM (+0.9%), HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon BK (+0.8%) are all involved in moving funds for suspected criminals.
The current money related framework generally protects the banks and its heads from the indictment, inasmuch as the bank documents a notification with FinCEN that it might be encouraging crime. The dubious movement alert adequately gives the banks a free pass. Thus, unlawful finances keep on moving through banks into different businesses from oil to amusement to land, further isolating the rich from poor people, while the banks we have developed to trust, make everything conceivable.
As indicated by the United Nations, the assessed measure of cash laundered universally in one year is 2 to 5% of the worldwide GDP, or $800 billion to $2 trillion, with more than thank 90% of illegal tax avoidance going undetected today.
Simultaneously, the cryptocurrency industry has likewise been condemned for being an apparatus for tax evasion, in spite of insights expressing something else. It is assessed that solitary 1.1% of all digital currency exchanges are illegal. During its initial days, Bitcoin was generally connected with the Silk Road, an online dim net commercial center, where clients could buy weapons and unlawful medications namelessly.
Be that as it may, with the developing utilization of the Bitcoin organization, 42 million Bitcoin wallets, and checking, it is getting progressively conceivable to follow exchanges on open blockchains, while private financial exchanges stay covered up on display.
This week, I had a chance to plunk down with Chanpeng Zhao "CZ", the Founder and CEO of Binance, the biggest cryptographic money trade by volume on the planet, to get his interpretation of illegal tax avoidance both in the customary and the computerized fund universes.
Coming up next are a couple of features from our meeting:
Much obliged to you for going along with us today, CZ. As you would see it, for what reason is illegal tax avoidance especially destructive to our economy?
CZ: As monetary administration suppliers, it is our obligation to battle unlawful action. Everybody shares this duty. Yet, regularly once the principles are set up, individuals will attempt to get around the guidelines. What's more, there are individuals who simply need more business, and knowing or unconsciously will encourage these exchanges. We live in an intricate world, where one nation may see a go about as criminal and the other may not. Many individuals have a high contrast see, yet the world is really dim. Not all banks are honest and not all crypto organizations are terrible.
The digital currency industry has experienced harsh criticism for encouraging unlawful exchanges. How would you think conventional money and digital currency businesses analyze in such manner?
CZ: If you are utilizing Bitcoin, it is a straightforward record. When you have a couple of exchanges, you can follow the assets right back to where the coins were mined. So along these lines, blockchain really gives a straightforward record to everybody to dissect. In the event that you piece together a couple of information focuses and do a group examination, it isn't that difficult for a calculation to break down the beginning. Security coins are more earnestly to follow, yet their market top isn't unreasonably high, making bigger exchanges more troublesome. So to be completely forthright, it is a lot simpler to make illegal exchanges utilizing fiat than utilizing crypto.
How might you analyze the volume of illegal exchanges in crypto versus fiat?
CZ: It's likely a thousand times less. Essentially, for any important measure of cash you need to move in the crypto, it is exceptionally difficult to move it namelessly. There are outsider checking devices and information bases that can coordinate a considerable lot of the addresses to known people. The digital currency market top is little to the point, that in the event that you are moving a $100 million dollars, you can't do as such without experiencing an incorporated trade, making it considerably simpler to follow.
The cryptographic money space overall was begun by Satoshi Nakomoto as to some degree a campaign against the defilement of banks. Remarkably, the beginning square of Bitcoin contained a commentary tending to the bailouts of banks in 2008 and 2009 ["The Times 3 January 2009 - Chancellor on edge of second bailout for banks."] Is that ethos still alive in the digital currency space today, the drive to bring down the enormous person?
CZ: I have even more a fair view here. Some in the crypto space are against banks, fiat, and so forth., while others think digital forms of money are utilized by drug masters. Those are two extraordinary perspectives. My view is that digital money offers opportunities - a further extent of opportunity in exchanges, ventures, property, reserve funds, and so on. We are simply offering another choice for clients who esteem that opportunity and control. I'm not against any bank or any single individual. I think crypto offers a higher opportunity of cash, and thusly we need to give more individuals admittance to crypto… If I don't care for the banks, I simply don't utilize them.
Where do you feel the equalization lies between the legislature securing its residents as opposed to encouraging advancement?
CZ: I accept governments ought to be public administrations. They ought to give streets and fire departments...Whenever there is government intercession, it is awful for the economy. At whatever point an administration encourages one gathering, it naturally harms another. The administration influences the parity of the economy giving assistance to a gathering that isn't sufficiently serious to remain alive. So at whatever point an administration rescues huge banks, or any business so far as that is concerned, they just appear as though they are making a difference. I have confidence in a free economy, and I buy into that way of thinking unequivocally.
Much obliged to you for your understanding, CZ.
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PrivateX is a private wallet for sending, receiving, and storing your Bitcoin and Ethereum.
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submitted by privatex-wallet to u/privatex-wallet [link] [comments]

How To End The Cryptocurrency Exchange "Wild West" Without Crippling Innovation


In case you haven't noticed the consultation paper, staff notice, and report on Quadriga, regulators are now clamping down on Canadian cryptocurrency exchanges. The OSC and other regulatory bodies are still interested in industry feedback. They have not put forward any official regulation yet. Below are some ideas/insights and a proposed framework.



Many of you have limited time to read the full proposal, so here are the highlights:

Offline Multi-Signature

Effective standards to prevent both internal and external theft. Exchange operators are trained and certified, and have a legal responsibility to users.

Regular Transparent Audits

Provides visibility to Canadians that their funds are fully backed on the exchange, while protecting privacy and sensitive platform information.

Insurance Requirements

Establishment of basic insurance standards/strategy, to expand over time. Removing risk to exchange users of any hot wallet theft.


Background and Justifications


Cold Storage Custody/Management
After reviewing close to 100 cases, all thefts tend to break down into more or less the same set of problems:
• Funds stored online or in a smart contract,
• Access controlled by one person or one system,
• 51% attacks (rare),
• Funds sent to the wrong address (also rare), or
• Some combination of the above.
For the first two cases, practical solutions exist and are widely implemented on exchanges already. Offline multi-signature solutions are already industry standard. No cases studied found an external theft or exit scam involving an offline multi-signature wallet implementation. Security can be further improved through minimum numbers of signatories, background checks, providing autonomy and legal protections to each signatory, establishing best practices, and a training/certification program.
The last two transaction risks occur more rarely, and have never resulted in a loss affecting the actual users of the exchange. In all cases to date where operators made the mistake, they've been fully covered by the exchange platforms.
• 51% attacks generally only occur on blockchains with less security. The most prominent cases have been Bitcoin Gold and Ethereum Classic. The simple solution is to enforce deposit limits and block delays such that a 51% attack is not cost-effective.
• The risk of transactions to incorrect addresses can be eliminated by a simple test transaction policy on large transactions. By sending a small amount of funds prior to any large withdrawals/transfers as a standard practice, the accuracy of the wallet address can be validated.
The proposal covers all loss cases and goes beyond, while avoiding significant additional costs, risks, and limitations which may be associated with other frameworks like SOC II.

On The Subject of Third Party Custodians
Many Canadian platforms are currently experimenting with third party custody. From the standpoint of the exchange operator, they can liberate themselves from some responsibility of custody, passing that off to someone else. For regulators, it puts crypto in similar categorization to oil, gold, and other commodities, with some common standards. Platform users would likely feel greater confidence if the custodian was a brand they recognized. If the custodian was knowledgeable and had a decent team that employed multi-sig, they could keep assets safe from internal theft. With the right protections in place, this could be a great solution for many exchanges, particularly those that lack the relevant experience or human resources for their own custody systems.
However, this system is vulnerable to anyone able to impersonate the exchange operators. You may have a situation where different employees who don't know each other that well are interacting between different companies (both the custodian and all their customers which presumably isn't just one exchange). A case study of what can go wrong in this type of environment might be Bitpay, where the CEO was tricked out of 5000 bitcoins over 3 separate payments by a series of emails sent legitimately from a breached computer of another company CEO. It's also still vulnerable to the platform being compromised, as in the really large $70M Bitfinex hack, where the third party Bitgo held one key in a multi-sig wallet. The hacker simply authorized the withdrawal using the same credentials as Bitfinex (requesting Bitgo to sign multiple withdrawal transactions). This succeeded even with the use of multi-sig and two heavily security-focused companies, due to the lack of human oversight (basically, hot wallet). Of course, you can learn from these cases and improve the security, but so can hackers improve their deception and at the end of the day, both of these would have been stopped by the much simpler solution of a qualified team who knew each other and employed multi-sig with properly protected keys. It's pretty hard to beat a human being who knows the business and the typical customer behaviour (or even knows their customers personally) at spotting fraud, and the proposed multi-sig means any hacker has to get through the scrutiny of 3 (or more) separate people, all of whom would have proper training including historical case studies.
There are strong arguments both for and against using use of third party custodians. The proposal sets mandatory minimum custody standards would apply regardless if the cold wallet signatories are exchange operators, independent custodians, or a mix of both.

On The Subject Of Insurance
ShakePay has taken the first steps into this new realm (congratulations). There is no question that crypto users could be better protected by the right insurance policies, and it certainly feels better to transact with insured platforms. The steps required to obtain insurance generally place attention in valuable security areas, and in this case included a review from CipherTrace. One of the key solutions in traditional finance comes from insurance from entities such as the CDIC.
However, historically, there wasn't found any actual insurance payout to any cryptocurrency exchange, and there are notable cases where insurance has not paid. With Bitpay, for example, the insurance agent refused because the issue happened to the third party CEO's computer instead of anything to do with Bitpay itself. With the Youbit exchange in South Korea, their insurance claim was denied, and the exchange ultimately ended up instead going bankrupt with all user's funds lost. To quote Matt Johnson in the original Lloyd's article: “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
ShakePay's insurance was only reported to cover their cold storage, and “physical theft of the media where the private keys are held”. Physical theft has never, in the history of cryptocurrency exchange cases reviewed, been reported as the cause of loss. From the limited information of the article, ShakePay made it clear their funds are in the hands of a single US custodian, and at least part of their security strategy is to "decline[] to confirm the custodian’s name on the record". While this prevents scrutiny of the custodian, it's pretty silly to speculate that a reasonably competent hacking group couldn't determine who the custodian is. A far more common infiltration strategy historically would be social engineering, which has succeeded repeatedly. A hacker could trick their way into ShakePay's systems and request a fraudulent withdrawal, impersonate ShakePay and request the custodian to move funds, or socially engineer their way into the custodian to initiate the withdrawal of multiple accounts (a payout much larger than ShakePay) exploiting the standard procedures (for example, fraudulently initiating or override the wallet addresses of a real transfer). In each case, nothing was physically stolen and the loss is therefore not covered by insurance.
In order for any insurance to be effective, clear policies have to be established about what needs to be covered. Anything short of that gives Canadians false confidence that they are protected when they aren't in any meaningful way. At this time, the third party insurance market does not appear to provide adequate options or coverage, and effort is necessary to standardize custody standards, which is a likely first step in ultimately setting up an insurance framework.
A better solution compared to third party insurance providers might be for Canadian exchange operators to create their own collective insurance fund, or a specific federal organization similar to the CDIC. Such an organization would have a greater interest or obligation in paying out actual cases, and that would be it's purpose rather than maximizing it's own profit. This would be similar to the SAFU which Binance has launched, except it would cover multiple exchanges. There is little question whether the SAFU would pay out given a breach of Binance, and a similar argument could be made for a insurance fund managed by a collective of exchange operators or a government organization. While a third party insurance provider has the strong market incentive to provide the absolute minimum coverage and no market incentive to payout, an entity managed by exchange operators would have incentive to protect the reputation of exchange operators/the industry, and the government should have the interest of protecting Canadians.

On The Subject of Fractional Reserve
There is a long history of fractional reserve failures, from the first banks in ancient times, through the great depression (where hundreds of fractional reserve banks failed), right through to the 2008 banking collapse referenced in the first bitcoin block. The fractional reserve system allows banks to multiply the money supply far beyond the actual cash (or other assets) in existence, backed only by a system of debt obligations of others. Safely supporting a fractional reserve system is a topic of far greater complexity than can be addressed by a simple policy, and when it comes to cryptocurrency, there is presently no entity reasonably able to bail anyone out in the event of failure. Therefore, this framework is addressed around entities that aim to maintain 100% backing of funds.
There may be some firms that desire but have failed to maintain 100% backing. In this case, there are multiple solutions, including outside investment, merging with other exchanges, or enforcing a gradual restoration plan. All of these solutions are typically far better than shutting down the exchange, and there are multiple cases where they've been used successfully in the past.

Proof of Reserves/Transparency/Accountability
Canadians need to have visibility into the backing on an ongoing basis.
The best solution for crypto-assets is a Proof of Reserve. Such ideas go back all the way to 2013, before even Mt. Gox. However, no Canadian exchange has yet implemented such a system, and only a few international exchanges (CoinFloor in the UK being an example) have. Many firms like Kraken, BitBuy, and now ShakePay use the Proof of Reserve term to refer to lesser proofs which do not actually cryptographically prove the full backing of all user assets on the blockchain. In order for a Proof of Reserve to be effective, it must actually be a complete proof, and it needs to be understood by the public that is expected to use it. Many firms have expressed reservations about the level of transparency required in a complete Proof of Reserve (for example Kraken here). While a complete Proof of Reserves should be encouraged, and there are some solutions in the works (ie TxQuick), this is unlikely to be suitable universally for all exchange operators and users.
Given the limitations, and that firms also manage fiat assets, a more traditional audit process makes more sense. Some Canadian exchanges (CoinSquare, CoinBerry) have already subjected themselves to annual audits. However, these results are not presently shared publicly, and there is no guarantee over the process including all user assets or the integrity and independence of the auditor. The auditor has been typically not known, and in some cases, the identity of the auditor is protected by a NDA. Only in one case (BitBuy) was an actual report generated and publicly shared. There has been no attempt made to validate that user accounts provided during these audits have been complete or accurate. A fraudulent fractional exchange, or one which had suffered a breach they were unwilling to publicly accept (see CoinBene), could easily maintain a second set of books for auditors or simply exclude key accounts to pass an individual audit.
The proposed solution would see a reporting standard which includes at a minimum - percentage of backing for each asset relative to account balances and the nature of how those assets are stored, with ownership proven by the auditor. The auditor would also publicly provide a "hash list", which they independently generate from the accounts provided by the exchange. Every exchange user can then check their information against this public "hash list". A hash is a one-way form of encryption, which fully protects the private information, yet allows anyone who knows that information already to validate that it was included. Less experienced users can take advantage of public tools to calculate the hash from their information (provided by the exchange), and thus have certainty that the auditor received their full balance information. Easy instructions can be provided.
Auditors should be impartial, their identities and process public, and they should be rotated so that the same auditor is never used twice in a row. Balancing the cost of auditing against the needs for regular updates, a 6 month cycle likely makes the most sense.

Hot Wallet Management
The best solution for hot wallets is not to use them. CoinBerry reportedly uses multi-sig on all withdrawals, and Bitmex is an international example known for their structure devoid of hot wallets.
However, many platforms and customers desire fast withdrawal processes, and human validation has a cost of time and delay in this process.
A model of self-insurance or separate funds for hot wallets may be used in these cases. Under this model, a platform still has 100% of their client balance in cold storage and holds additional funds in hot wallets for quick withdrawal. Thus, the risk of those hot wallets is 100% on exchange operators and not affecting the exchange users. Since most platforms typically only have 1%-5% in hot wallets at any given time, it shouldn't be unreasonable to build/maintain these additional reserves over time using exchange fees or additional investment. Larger withdrawals would still be handled at regular intervals from the cold storage.
Hot wallet risks have historically posed a large risk and there is no established standard to guarantee secure hot wallets. When the government of South Korea dispatched security inspections to multiple exchanges, the results were still that 3 of them got hacked after the inspections. If standards develop such that an organization in the market is willing to insure the hot wallets, this could provide an acceptable alternative. Another option may be for multiple exchange operators to pool funds aside for a hot wallet insurance fund. Comprehensive coverage standards must be established and maintained for all hot wallet balances to make sure Canadians are adequately protected.

Current Draft Proposal

(1) Proper multi-signature cold wallet storage.
(a) Each private key is the personal and legal responsibility of one person - the “signatory”. Signatories have special rights and responsibilities to protect user assets. Signatories are trained and certified through a course covering (1) past hacking and fraud cases, (2) proper and secure key generation, and (3) proper safekeeping of private keys. All private keys must be generated and stored 100% offline by the signatory. If even one private keys is ever breached or suspected to be breached, the wallet must be regenerated and all funds relocated to a new wallet.
(b) All signatories must be separate background-checked individuals free of past criminal conviction. Canadians should have a right to know who holds their funds. All signing of transactions must take place with all signatories on Canadian soil or on the soil of a country with a solid legal system which agrees to uphold and support these rules (from an established white-list of countries which expands over time).
(c) 3-5 independent signatures are required for any withdrawal. There must be 1-3 spare signatories, and a maximum of 7 total signatories. The following are all valid combinations: 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7.
(d) A security audit should be conducted to validate the cold wallet is set up correctly and provide any additional pertinent information. The primary purpose is to ensure that all signatories are acting independently and using best practices for private key storage. A report summarizing all steps taken and who did the audit will be made public. Canadians must be able to validate the right measures are in place to protect their funds.
(e) There is a simple approval process if signatories wish to visit any country outside Canada, with a potential whitelist of exempt countries. At most 2 signatories can be outside of aligned jurisdiction at any given time. All exchanges would be required to keep a compliant cold wallet for Canadian funds and have a Canadian office if they wish to serve Canadian customers.
(2) Regular and transparent solvency audits.
(a) An audit must be conducted at founding, after 3 months of operation, and at least once every 6 months to compare customer balances against all stored cryptocurrency and fiat balances. The auditor must be known, independent, and never the same twice in a row.
(b) An audit report will be published featuring the steps conducted in a readable format. This should be made available to all Canadians on the exchange website and on a government website. The report must include what percentage of each customer asset is backed on the exchange, and how those funds are stored.
(c) The auditor will independently produce a hash of each customer's identifying information and balance as they perform the audit. This will be made publicly available on the exchange and government website, along with simplified instructions that each customer can use to verify that their balance was included in the audit process.
(d) The audit needs to include a proof of ownership for any cryptocurrency wallets included. A satoshi test (spending a small amount) or partially signed transaction both qualify.
(e) Any platform without 100% reserves should be assessed on a regular basis by a government or industry watchdog. This entity should work to prevent any further drop, support any private investor to come in, or facilitate a merger so that 100% backing can be obtained as soon as possible.
(3) Protections for hot wallets and transactions.
(a) A standardized list of approved coins and procedures will be established to constitute valid cold storage wallets. Where a multi-sig process is not natively available, efforts will be undertaken to establish a suitable and stable smart contract standard. This list will be expanded and improved over time. Coins and procedures not on the list are considered hot wallets.
(b) Hot wallets can be backed by additional funds in cold storage or an acceptable third-party insurance provider with a comprehensive coverage policy.
(c) Exchanges are required to cover the full balance of all user funds as denominated in the same currency, or double the balance as denominated in bitcoin or CAD using an established trading rate. If the balance is ever insufficient due to market movements, the firm must rectify this within 24 hours by moving assets to cold storage or increasing insurance coverage.
(d) Any large transactions (above a set threshold) from cold storage to any new wallet addresses (not previously transacted with) must be tested with a smaller transaction first. Deposits of cryptocurrency must be limited to prevent economic 51% attacks. Any issues are to be covered by the exchange.
(e) Exchange platforms must provide suitable authentication for users, including making available approved forms of two-factor authentication. SMS-based authentication is not to be supported. Withdrawals must be blocked for 48 hours in the event of any account password change. Disputes on the negligence of exchanges should be governed by case law.

Steps Forward

Continued review of existing OSC feedback is still underway. More feedback and opinions on the framework and ideas as presented here are extremely valuable. The above is a draft and not finalized.
The process of further developing and bringing a suitable framework to protect Canadians will require the support of exchange operators, legal experts, and many others in the community. The costs of not doing such are tremendous. A large and convoluted framework, one based on flawed ideas or implementation, or one which fails to properly safeguard Canadians is not just extremely expensive and risky for all Canadians, severely limiting to the credibility and reputation of the industry, but an existential risk to many exchanges.
The responsibility falls to all of us to provide our insight and make our opinions heard on this critical matter. Please take the time to give your thoughts.
submitted by azoundria2 to QuadrigaInitiative [link] [comments]

Atomic Swap with USDT: Swap Online solution in two hundred lines of code

Atomic Swap with USDT: Swap Online solution in two hundred lines of code
https://preview.redd.it/3mx7amtio9g11.png?width=696&format=png&auto=webp&s=f2bd956843196fa2f51048a86f9608b6e714f62e
On the eve of the release on the mainnet, the team of the cross-chain wallet Swap Online is publishing a research study and the code of the atomic swapusing USDT.

USD Tether — the equivalent of the dollar on Omni Layer

The solution described above with the protocol “over” the Bitcoin network gave life to one of the most controversial cryptocurrency projects of the last two years — Tether. Tether (symbol Tether — ₮, ticker — USDT) is a hybrid cryptocurrency with a rate binding to one US dollar. Moreover, according to the assurances of Tether Limited, the issuer of the given tokens, the “binding” is to be understood literally, as each purchased token of USDT corresponds to one US dollar available at the disposal of the company.
If we take the three largest exchanges based on their daily turnover of transactions at the time of writing (Binance, OKEx and HuObi), and then track the five most popular trading pairs for each, we will encounter USDT in 13 out of 15 cases.

USDT — the token with the largest capitalization in the world.

All this generates great community interest in faster, safer and cheaper solutions for exchanging Tether into other currencies. Obviously, such a solution could be atomic swaps, which are instant, decentralized cross-chain exchanges. The Komodo laboratory, the main headliners of this technology, who presented it in the autumn of 2017, reported on the successful exchange of KMD to USDT carried out on the BarterDEX platform, Komodo’s own exchanger.
https://preview.redd.it/z7tx3cv0p9g11.png?width=597&format=png&auto=webp&s=f0944434f691d69ae45c5b80e00fed2736423f7a
At the same time, according to our data, the developers of Komodo made a swap on the ERC20-a version of Tether, which is only available in 3% of cases. Approximately 60 million USDT from global turnover can thus be exchanged using this method, which, obviously, cannot be considered as a solution to the problem. Striking examples of imperfections of existing solutions can be found even on Etherscan.
https://preview.redd.it/39nc2ji6p9g11.png?width=800&format=png&auto=webp&s=992a4adc022175d90d111f030047ba8adeda14f8
This fall, the team of Swap Online is ready to present an atomic swap with Tether. And here’s how we did it.

How Omni conducts transactions

To carry out the Omni transaction, a user needs to create a regular Bitcoin transaction-transfer of 546 satoshi (minimum) with an additional output storing payload using the OP_RETURN op-code. An example of such a transaction. The payload is a mandatory part of any Omni transaction, as it is a sequence of bytes containing all the necessary information about the transaction.

Let us consider what information is stored in the payload itself

transaction marker — 4 bytes, the mandatory part of any Omni payload is always equal to 0x6f6d6e69 — ASCII code omni. If the first 4 bytes of the sequence are not equal to 0x6f6d6e69, then this sequence is not a payload of Omni.
version — 2 bytes, an analog version of the transaction in Bitcoin. For the described algorithm to work, version 0 is used, or that is the same as 0x0000.
transaction type — 2 bytes, transaction type, for an atomic swap it is sufficient to use only “Simple send” transactions, as simple send is the usual sending of omni currency from its address to the address of the recipient. Simple send corresponds to the transaction type code 0, that is, the next 2 bytes 0x0000. Other possible types of transactions exist in Omni.
token identifier — 4 bytes, identifier of the currency used. For example TetherUS has the identifier 31 or 0x0000001f. All tokens created by the Omni protocol at this time can be seen via the following link.
amount — 8 bytes, for a transaction of type Simple send, this is the amount of the sent currency.
As you can see, payload does not store the addresses of senders and recipients of the transactions, these addresses are determined by the Bitcoin transaction in which the payload output was detected. By scanning inputs, the Omni protocol determines who makes the transfer by finding the output of the corresponding address from among the inputs of the transaction p2pkh.
Thus, for a transfer from Alice to Bob of, for example, 50,000,000 TetherUS, we need to create a Bitcoin transaction where one of the inputs will refer to the p2pkh output corresponding to the Alice address. It is also important that this entry be the first in this transaction (the index of this entry in the received transaction would be is minimal or none at all). One of the outputs of this transaction should be the output of p2pkh to Bob’s address, and another output must have been one of the outputs with the following payload:
https://preview.redd.it/0kmuzds8p9g11.png?width=575&format=png&auto=webp&s=af2f496596684af18091fb044f4e20b7e546c32f
Example 1
Example 2

Atomic Swap on Omni Layer

Suppose that Alice and Bob are willing to make an inter-blockchain exchange of cryptocurrencies. Alice wants to exchange the units of any Omni currency, for example TetherUS (the given currency has the currency identifier # 31 in the Mainnet, then in the text we will only talk about this currency of the Omni protocol, since it is the most popular at the moment, but the algorithm below will work for any currency of the Omni protocol as well) for b units of a cryptocurrency working on another blockchain. (Omni works on top of the Bitcoin blockchain, of course, according to the algorithm below it is possible to exchange TetherUS for Bitcoins, but due to their work on one and the same blockchain, this exchange can be done in a different, more efficient way).

Glossary

A — blockchain of Bitcoin.
B — the blockchain of the cryptocurrency for which TetherUS is being exchanged.
a — the sum of TetherUS, which Alice wants to exchange.
b — the sum of the cryptocurrency of the adjoining blockchain B, to which Alice wants to exchange her a TetherUS.

Creating a Transaction

1) Bob generates a random value secret.
2) Bob calculates the secretHash by performing the following operation: secretHash = RIPEMD160 (secret)
3) Bob creates and sends an htlc transaction sealed by secretHash
4) Bob sends Alice a secretHash value, and a hash of the hrlc transaction he created in the previous paragraph in order for Alice to make sure that the correct htlc transaction is actually present in the B blockchain.
5) Alice received from Bob the secretHash and hash of the htlc-transaction Bob created, and is convinced that such a transaction is really present in the B blockchain, and that this is indeed a htlc-transaction sealed by the secretHash value.
6) using the received secretHash, Alice creates the following transaction and translates it into the Bitcoin blockchain:
https://preview.redd.it/oxri5a7gp9g11.png?width=735&format=png&auto=webp&s=14e88db4fc4d1743406939343d42e33352b05782
Let us call such a transaction financing_tx. In fact, it is almost an ordinary Bitcoin htlc transaction that is used in atomic swap with the only difference that in the amount field, 546 satoshi is the minimum number of Bitcoins that can be at the output of the transaction, below this value, Bitcoin counts the transaction as dust and does not conduct it.
7) Alice creates a transaction according to the following scheme:
https://preview.redd.it/awz9uzuhp9g11.png?width=1000&format=png&auto=webp&s=9ca79e77ca6aff631a39ae95dfaa70aa06d695ec
Let us call this transaction redeem_tx. Alice creates such a transaction with two inputs: the first is the input referencing the output of funding_tx, which contains the htlc script. Alice does not sign this script, that is, the SigScript field remains completely empty. The second input is the input referring to any unspent exits of Alice, the main condition is that at this output stage there are enough Bitcoins to pay the transaction fee, and this entry is signed by Alice with her private key with the signature type SIGHASH_ALL (that is, she signs the entire transaction except for SigScript fields on the inputs transaction, which makes this transaction immutable. The outputs of the same transaction are the elementary Simple Send and a TetherUS from Alice to Bob (details of what Simple Send, payload is and how it works can be found in another section).
8) Alice sends Bob the redeem_tx created in the previous paragraph and the one she signed herself.
9) Bob got the redeem_tx sent by Alice, checks it, just looks through the inputs and outputs, making sure that this is really a transaction that Alice should have created using the real algorithm. After that, Bob signs the transaction with his private key and provides the secret value in the SigScript of the corresponding redeem_tx entry.
10) Bob sends the signed redeem_tx transaction to the blockchain, thereby transferring the TetherUS currency from Alice to himself. Note — before carrying out this step, we still need to check that Alice’s address has the necessary amount of TetherUS.
11) Alice looks through blockchain A and gets the value secret and uses it in the B blockchain to transfer the funds using the htlc transaction Bob created in point 3. The exchange ends here.
Stating the obvious: naturally the timelock value used by Bob when creating the htlc-transaction must be significantly longer than the timelock that Alice uses, since her htlc transaction should be spent earlier than the htlc created by Bob. This is necessary so that Bob cannot manage to spend both htlc.

Conclusion

Thus, connecting Omni Layer to Swap Online allows users to cover transactions.

Full research you may find in our Github

C++ source code for creating TX
C++ source code for redeem TX

Swap.Online Essential Links

Website: https://testnet.swap.online GitHub: https://github.com/swaponline Email: [email protected] Telegram: https://t.me/swaponline Facebook: https://www.facebook.com/Swaponline Twitter: https://twitter.com/SwapOnlineTeam Wiki: https://wiki.swap.online/ Bitcointalk: https://bitcointalk.org/index.php?topic=4636633
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