Ultimate Resource On Crypto-Currency Exchanges And Other Companies Integrate Bitcoin’s Lightning Network In 2022-2023
One of Bitcoin’s most promising new technologies is coming to one of its oldest exchanges. Ultimate Resource On Crypto-Currency Exchanges And Other Companies Integrate Bitcoin’s Lightning Network In 2022-2023
The Kraken exchange announced today it will add support for the Lightning Network in 2021, which adds it to a small (but growing) list of exchanges that support the scaling technology thus far. Kraken is hiring a team to manage the feature, which it anticipates will be open for client use sometime in the first half of 2021.
“The Lightning Network has matured to a level where it can be used by Kraken. It really comes back to what our users are asking for.
They want instant and efficient payment – the ability to deposit and withdraw bitcoin without having to wait for confirmations and without high withdraw fee withdrawals,” Pierre Rochard told CoinDesk, saying Kraken anticipates that it will behoove traders looking for arbitrage opportunities between exchanges.
Regarding what aspects of Lightning have “matured” to make Kraken comfortable with supporting the technology, Rochard said two Lightning tech advancements in 2020, wumbo channels and multi-path payments (MPPs), paved the way for the integration.
Wumbo channels allow users to send larger transactions on the Lighting Network that are larger than a few hundred dollars, while MPPs allow users to break up large payments into smaller amounts to make them easier to send.
Rochard told CoinDesk the rollout will be an “API-first launch” with only withdrawals initially enabled. This launch will only be “the first of many iterative developments with the Lightning Network” for Kraken though, Rochard continued, adding that the exchange may even allow users to set up payment channels (Lightning’s transaction avenues) directly with the exchange.
What Is The Bitcoin Lightning Network?
Bitcoin’s Lightning Network is a technical innovation that allows its users to send bitcoin faster and more cheaply than if they were using Bitcoin’s primary network.
These transactions use bitcoin but take place on a “secondary network” with different rules for accounting payments than Bitcoin’s blockchain (these transactions are eventually settled and recorded on Bitcoin’s blockchain when a user is done using the network).
For an exchange like Kraken, the Lightning Network would lower transaction fees for users when depositing and withdrawing from the trading hub. Since one of the appeals of Lightning is that you can send bitcoin for as little as a cent, this could mean the difference between paying a few dollars or a few pennies to withdraw bitcoin off Kraken at times of high transaction congestion.
Exchanges Integrating Lightning
Bitcoin’s more vocal and passionate community members have griped that Kraken (among other popular exchanges) has neglected to add support for Bitcoin’s cutting edge technology while being quick to add new DeFi coins.
Kraken CEO Jesse Powell has been blunt on social media, stating that the choice to list Ethereum tokens is purely a business one: As the nosebleed price action in DeFi this summer showed us, the real money is in attracting traders to speculate on altcoins.
But now with Lightning on Kraken’s list of priorities, it will be the third crypto exchange to integrate the network, joining early adopter exchanges like Bitcoin-only River Financial and veteran crypto venue Bitfinex.
Scaling technologies like the Lightning Network and sidechains like Liquid and RSK all offer lower fees and faster transactions than Bitcoin’s on-chain network. When asked why Kraken opted for the Lightning Network instead of other scaling solutions like sidechains, Rochard chalked the decision up to network effects.
“Let’s look at it from the perspective of the ecosystem and how many participants there are. The Lightning community has done a great job of growing and building several different implementations. There are multiple different wallet providers, application developers and there’s so much of education and business development.”
“We want the whole industry to adopt this technology, and we want that because we believe it will help everyone. Part of the hope with this announcement is that it gives others the opportunity to join us.”
OKCoin To Integrate Bitcoin’s Lightning Network In Q1
The feature, added to alleviate fee pressure during Bitcoin’s bull market, could be live within a month’s time.
OKCoin is the latest crypto exchange to support Bitcoin’s Lightning Network.
Per details shared with CoinDesk, the exchange is in the final phases of integrating the secondary scaling network. It should be live within three to four weeks, OKCoin’s team told CoinDesk.
“We have been a bitcoin exchange since 2013, and while we are excited about [decentralized finance] and other assets, we know bitcoin is the foundation of the entire industry Bitcoin’s network is often congested and has high transaction fees, particularly during bull markets,” OKCoin CEO Hong Fang told CoinDesk.
OKCoin Adopts Lightning
The Lightning Network is a technology stack built on top of Bitcoin which facilitates faster and cheaper transactions than Bitcoin’s primary network.
This integration means OKCoin can lower deposit minimums for bitcoin on Lightning to 0.000001 BTC ($0.03), while the withdrawal maximum is $750. OKCoin representatives told CoinDesk that Lightning Network deposits will show up under users’ regular bitcoin balances, and that users only have to pay Lightning Network fees (usually pennies) when withdrawing.
OKCoin is one of the members of Blockstream’s Liquid sidechain, another scaling solution, wherein a network maintained by a federation of members like OKCoin processes transactions for a fraction of the cost of Bitcoin’s primary network.
OKCoin’s CEO told CoinDesk the exchange may “explore other networks” in the future but is focused on implementing Lightning live on the platform first.
Once it’s integrated, the Lightning Network will be available on both OKCoin’s mobile and web applications.
Bitcoin Lightning Network Exchanges
OKCoin is not the only exchange riding Lightning into the new year.
At the turn of 2020, Kraken Exchange announced it would launch support for the network sometime in the first half of 2021.
Shortly after the new year, U.K.-based CoinCorner integrated the solution for users of its exchange after having it as a payment option on its merchant plug-in for some months.
Momentum is building for the Lightning Network’s utility as an instant, cheap on- and off-ramp to exchanges. Bitfinex, which services an international clientele but is closed to U.S. users, was one of the first exchanges to offer Lightning Network deposits and withdrawals. U.S.-exclusive River Financial also offers Lightning functionality for its users.
OKEx To Accelerate Bitcoin Transactions With Lightning Network
As Lightning Labs continues to expand the Lightning Network’s capabilities, another major exchange announces its plans to integrate.
Global cryptocurrency exchange OKEx is moving to cheaper and faster Bitcoin (BTC) transactions with its upcoming Lightning Network integration.
According to a Tuesday announcement, OKEx’s Bitcoin Lightning Network will be integrated “in the coming quarter,” making OKEx a participant node in the Lightning Network.
The integration will allow OKEx users to select the Lightning Network option when depositing and withdrawing BTC, intending to decrease transaction fees and times.
The Lightning Network is a second-layer scaling solution and payment protocol based on top of the Bitcoin blockchain. The protocol was suggested by Joseph Poon and Thaddeus Dryja in 2015 in an effort to solve Bitcoin’s scalability problem.
According to data from crypto analytics website BitInfoCharts, the average Bitcoin transaction fee amounted to more than $15 on Monday.
As the Lightning Network is not a blockchain itself but rather a secondary layer, the solution was originally mostly used for small or even micro Bitcoin transactions. To solve this problem, Lightning Labs introduced so-called “Wumbo” channels in August 2020 in order to make it possible for nodes to service larger transactions while reducing on-chain fees.
The word Wumbo, which apparently means “large,” is a reference to an episode of SpongeBob SquarePants. These channels are named as such because they are larger than the 0.1677 BTC ($5,800) limit.
OKEx is not the only crypto exchange to start experimenting with the Bitcoin Lightning Network. In July 2019, European crypto exchange Bitstamp set up its own Lightning Network node to boost the network’s capabilities.
Another global exchange, Bitfinex, reportedly became the first crypto exchange to enable Lightning payments in December 2019. In September 2020, Bitfinex announced support of Lightning Network’s Wumbo channels to enable it customers to deposit and withdraw large amounts of Bitcoin.
Amid Lightning Labs expanding the Lightning Network’s capabilities, more crypto exchanges have moved to integrate the protocol in recent months.
In December 2020, major United States-based crypto exchange Kraken announced that it too will integrate the Bitcoin Lightning Network in 2021. OKCoin also recently announced its plans to integrate the network in the first quarter of 2021.
Lightning Network Node Count Hits Record High, TVL Tops $42M
Will Bitcoin’s premier layer-two solution finally graduate from experiment to everyday utility, following its adoption by major exchanges?
The Lightning Network has grown 75% in size over the past year, hitting a record high 8,900 nodes for the first time on Feb. 8, according to LN monitors at Bitcoin Visuals.
A significant proportion of the increase occurred more recently, suggesting that some Bitcoiners are gravitating toward the layer-two solution, potentially as a means of escaping ever-increasing transaction fees.
The total BTC locked in LN channels has remained in the 1,000 to 1,100 range since Aug. 2020 — however the total dollar value has risen 250% in the intervening months, translating to a record $42.72 million currently locked on the network.
The total number of channels between nodes currently stands at about 38,600, which is the highest since May 2019. This count does not represent channels between private nodes.
I’ve been using the lightning network for 2 years. I already use it for monthly payroll.
I’m still focused on economic inclusion, which requires decentralized unstoppable money, which requires a fee market.
Stoppable money with low fees gets… stopped.
— Andreas M. Antonopoulos (@aantonop) February 5, 2021
Three years after launch, the Lightning Network is still facing an uphill battle to on-board new participants, and is yet to achieve a meaningful level of adoption. Many regular users of Bitcoin are off-put by the technical requirements of funding a Lightning node and maintaining a channel, preferring to stick with on-chain transactions until the experience becomes less daunting.
However big exchanges have begun to adopt the network. In Dec. 2020, Kraken shared its plans to integrate the Lightning Network during the first half of 2021. OKEx made a similar announcement early last week and expects to roll out LN support “in the coming quarter.”
Bitfinex, which has offered fee-less conversions of LN funds for over a year, has taken the additional step of also supporting Liquid BTC, which is Blockstream’s competing smart contract-driven L2 solution. Both Lightning and Liquid BTC can readily be exchanged for BTC on-chain at Bitfinex.
As more exchanges onboard second layer based deposit and withdrawal options for BTC, inter-exchange fund transfers are predicted to become much faster and cheaper, with standard transaction fees being replaced with Lightning’s median base fee of 1 satoshi.
The Lightning Network was originally conceived by Joseph Poon and Thaddeus Dryja, who published their white paper on the subject in Jan. 2016. Recognizing the limitations of Bitcoin’s (then) 1MB block size cap, Poon and Dryja set out to create a way in which BTC transactions could be made off-chain.
The result was an independent, smart contract-based network that has the potential to help Bitcoin scale to a much higher throughput of transactions per second.
— Ryan Gentry (@RyanTheGentry) February 5, 2021
Kraken Users Demand Refunds Over Flash-Crash Liquidations
Margin traders on Kraken are outraged after a flash-crash triggered wholesale liquidations while the exchange was inaccessible to users.
Kraken users are demanding compensation after violent flash crashes localized to the exchange resulted in leveraged trades being liquidated amid the sharp retracements recorded across the crypto markets on Feb. 22.
Feb. 22 saw the single largest daily candle in the history of both Bitcoin (BTC) and Ether (ETH) by linear value, with BTC dropping around $9,500 from $57,500, while ETH plummeted by $400 from $1,940 within the span of 24 hours on Coinbase.
However, it appears that a combination of weak buy support and cascading liquidations resulted in particularly heavy losses on Kraken — with BTC falling 22% to less than $45,000 while ETH declined 64% to find support at just $700.
The public reaction on subreddit r/Krakensupport has seen many traders voice their frustrations. Some traders are even threatening to organize legal action against the exchange, with Reddit-user u/dtk6802 claiming to have lost the majority of their life savings amid the flash-crash:
“I lost most of my life savings and haven’t received a response from a human. I’d think they would refund or they would lose all their customers. I’m sick to my stomach but will join the lawsuit with plenty of proof(screenshots) if not refunded.”
However, the fallout appears for some has extended beyond losses and into debt, with Reddit-user u/GoEers304 claiming their balance indicates they now owe Kraken money as a result of the flash-crash.
“Somehow I now owe them 120 dollars. How does an account go into the negative? I had plenty in margin to cover all the other platform drops, but who can cover a 90 percent bogus drop?” they said.
Despite calls for compensation for the flash-crashes from Kraken’s users, social media commentary suggests the exchange will not be refunding traders for their losses.
Heard back from kraken support and they said they have no control over it. And no refund.
— Cannibal Kiwi (@CannibalKiwi21) February 22, 2021
To protect against wholesale liquidations in the event of sudden and localized flash-crashes, many crypto derivatives platforms have long used an index price to determine margin calls.
While other platforms similarly suffered sharp flash crashes, with Ether in particular falling on Nexo, The trading platform has indicated on Twitter they will refund users for losses incurred during the dip:
A service disruption at an exchange partner’s end resulting in trading anomalies has led to some Nexo clients’ ETH balances getting incorrectly liquidated. These liquidations will be reversed. We apologize & will keep you updated.
Your funds are safe.
— Nexo (@NexoFinance) February 22, 2021
Liquidations have not been rare amid the recent crypto price volatility. On Feb. 15, a roughly 11% drop in the price of Ether caused $1.89 billion worth of liquidations across the broader crypto markets.
The majority of liquidations took place on Binance, with $336 million worth of Ether and $55 million worth of BTC being wiped from users’ balances.
Ether’s 50% Selloff Was Genuine, Not An Error, Kraken CEO Says
A plunge of more than 50% in Ether’s price on cryptocurrency exchange Kraken was probably caused by extreme selling, and not by a trading-engine malfunction, the bourse’s CEO said.
Crypto prices tumbled across the board on Monday, with many tokens falling more than 20% during the trading session. Ether, the second-biggest digital coin, sank as low as $700 from about $1,600 on Kraken, according to a report from Coindesk.
“We’re in the process of investigating,” Jesse Powell, chief executive officer of Kraken, said in an interview on Bloomberg Television. “There doesn’t seem to be any evidence of a trading-engine malfunction. It seems like trades processed accurately.”
Powell said the losses could have been exacerbated by the availability of margin trading and stop-loss orders on the exchange.
“It could be that a single whale just decided to dump his life savings.”
Ether extended losses on Tuesday, tumbling as much as 19% to about $1,450 as of 10:54 a.m. in London.
The exchange is unlikely to roll back trades, the CEO said. But he left room for some kind of compensation to clients affected by the dramatic moves. “We may end up doing something for these people. We’re looking into it,” he said.
At a time when cryptocurrency enthusiasm has swept markets and captivated billionaires and small traders alike, the sharp moves raise questions about the stability of crypto exchanges. The industry is lightly regulated and the U.K. financial watchdog has warned that investors risk losing all their money.
The risks haven’t deterred investors who profited from soaring crypto prices over the past few months. Powell said Kraken is seeing five times the number of new clients as a few months ago.
“It’s still a bit of the Wild West. You still have to do your own research and learn how things work, and you’re kind of trading on professional mode on many of these venues,” he said.
Crypto Firm Kraken Seeks Over $10 Billion Valuation
Kraken is in talks to raise new funding in a move that would more than double the cryptocurrency exchange’s valuation to more than $10 billion, according to a person familiar with the matter.
The San Francisco-based company, founded by Chief Executive Officer Jesse Powell in 2011, is in discussions with firms including Fidelity, Tribe Capital and General Atlantic, said people familiar with the matter, who requested anonymity because the talks are private.
Terms, including lead investors, aren’t final, but Kraken’s valuation could surpass $20 billion depending on demand, one of the people said.
Representatives for Kraken, Tribe Capital, General Atlantic and Fidelity declined to comment.
Attention on crypto as an asset class is soaring. Earlier Thursday, Kraken’s larger rival Coinbase Global Inc., which has been valued at nearly $100 billion, filed for a direct listing, citing skyrocketing revenue growth.
Crypto exchanges have gained users as Bitcoin rallied in the past year, and set a record of more than $58,000 this week. Crypto exchanges make their revenue off of transaction fees, and have benefited a surge in trading volume.
Kraken, which is subject to U.S. regulation, offers coins including Bitcoin, Ethereum and Litecoin, its website shows. The company in 2019 leaned on investment platform Bnk to the Future to raise $13 million at a roughly $4 billion valuation.
Kraken facilitates margin trading and is one of the largest U.S. crypto exchanges by spot trading volume, according to CoinMarketCap.com. It’s also a top-10 crypto exchange globally in Bitcoin futures, according to tracker Skew.com.
Bitcoin Could Reach $1 Million or More, Kraken CEO Says
As the leader of crypto exchange Kraken, Jesse Powell is bound to be bullish on Bitcoin. Yet he’s projecting a disruptive future that would stretch the imagination of even the most ardent crypto fans.
In a Bloomberg Television interview, Powell said Bitcoin could reach $1 million in the next decade, adding that supporters say it could eventually replace all of the major fiat currencies.
“We can only speculate, but when you measure it in terms of dollars, you have to think it’s going to infinity,” he said. “The true believers will tell you that it’s going all the way to the moon, to Mars and eventually, will be the world’s currency.”
The CEO also said San Francisco-based Kraken is considering going public, possibly next year.
Extreme predictions are nothing new in the world of Bitcoin, where adherents stand to profit from convincing a wider audience that crypto is a legitimate asset class, rather than a speculative fad. The dollar remains the world’s reserve currency and is the benchmark for global trade, though its value has softened in the past year.
Powell said Bitcoin bulls see it one day exceeding the combined market cap of the dollar, euro and other currencies.
The dollar “is only 50 years old and it’s already showing extreme signs of weakness, and I think people will start measuring the price of things in terms of Bitcoin,” he said.
The digital currency slipped 3% in early U.S. trading on Thursday, hovering around $49,000. Prices have surged almost 600% since the start of 2020 on the back of wider mainstream adoption, with bulls seeing it as both an inflation hedge and speculative asset.
Critics argue that Bitcoin is in a giant, stimulus-fueled bubble destined to burst like the 2017 boom and bust cycle.
Kraken benefits from higher prices as it reaps fees from increased trading. Bloomberg reported last month that the exchange was in talks to raise new funding, which would double the company’s valuation to more than $10 billion.
“Personally, I think $10 billion is a low valuation,” Powell said. “I wouldn’t be interested in selling shares at that price.”
The CEO did acknowledge the potential for wild market swings, saying prices can “move up or down 50% on any given day.” That kind of volatility has long been one of the negatives of Bitcoin, relegating the market to one of speculation, rather than a means of doing business.
“If you are buying into Bitcoin out of speculation, you should be committed to holding for five years,” Powell said. “You have to have strong convictions to hold.”
Kraken Reiterates Tentative Plans For Direct Listing Next Year
A direct listing is a more likely route for the digital currency exchange, CEO Jesse Powell says. His comments echo previous statements delivered to Cointelegraph.
Kraken, one of the world’s largest cryptocurrency exchanges, has tentative plans to go public next year, according to CEO Jesse Powell.
Powell appeared on a segment on CNBC after Kraken published record-breaking fourth-quarter results, including a surge in trading volumes and new client signups.
“The first quarter just completely blew away the entirety of last year,” he said. “We beat last year’s numbers by the end of February. The whole market has really just exploded.”
Regarding A Potential Stock Market Debut, Powell Said 2022 Is A Likely Target For A New Listing:
“We’re looking at being able to go public sometime next year. […] It would probably be a direct listing, similar to Coinbase.”
Coinbase plans to stage its public offering on April 14, providing Wall Street with a more conventional way to gain exposure to the crypto boom. Unlike a traditional initial public offering, the company will go public through a direct listing.
That means the current owners of Coinbase shares will convert their holdings to make them available for listing — a move that avoids a lengthy, costly underwriting process.
Like Kraken, Coinbase is coming off a record-breaking first quarter, with revenues hitting $1.8 billion following a 276% surge in trading volume.
Although Kraken is unlikely to achieve the same $100 billion valuation that many analysts are predicting for Coinbase, a public listing would likely still be massive. Last month, Kraken told Cointelegraph that its public listing would simply be “too big” to go through a special purpose acquisition company, or SPAC.
A Company Spokesperson Explained:
“If Kraken would decide to go public, it would do so through a direct listing and not through a SPAC as we are too big to go that route.”
OKEx Goes Live With Bitcoin Lightning Network Deposits, Withdrawals
OKEx is the seventh major exchange to add the scaling solution.
Crypto exchange OKEx’s support for Bitcoin’s Lightning Network is now live.
The Lightning Network is a second layer that works atop Bitcoin to facilitate faster and cheaper transactions than Bitcoin’s primary network.
The exchange announced the integration in February.
“OKEx is pleased to announce that BTC Lightning Network is now live on OKEx website, enabling much faster and cheaper BTC transfers. OKEx users are now able to use the Lightning Network for both BTC deposits and withdrawals,” a press release reads.
Last year and 2021 have been bedrock years for Lightning Network adoption among exchanges, which have added the feature in a bid to lower withdrawal and deposit fees for clients when moving funds through exchanges.
OKEx is the seventh major cryptocurrency exchange to integrate the tech stack. The others include stalwarts OKCoin, Bitfinex and River Financial, while Kraken exchange’s own integration is expected this year.
Multi-billion Dollar Investment Trust Backs Kraken Ahead Of Possible Listing
A London-based trust with ties to the Rothschild banking family, acquired a stake in crypto exchange Kraken last month.
The $5.3 billion dollar investment trust RIT Capital Partners has acquired a stake in leading crypto exchange Kraken.
The London based-trust, formerly named Rothschild Investment Trust, holds ties to the Rothschild banking family of England through Chairman Jacob Rothschild.
In an April 12 note to investors, James Glass described the exchange “one the world’s biggest crypto exchanges having been founded in 2011. It has more than 6M clients and is the 4th largest exchange by trading volumes.”
Glass Suggested The Acquisition Had One Eye On The Potential Direct Listing For The Exchange:
“According to media reports, Kraken is considering going public through a direct listing in 2022, after seeing record trading volumes and new clients amid a surge in the price of Bitcoin.”
While the amount of RIT Capital’s investment was not disclosed, it appears the firm is bullish on Kraken amid the success of its main rival Coinbase, citing its “quarterly revenue of $1.8bn in the Q1 2021” and its public listing on April 14.
The trust notes the potential of its investment in Kraken to also grow in the light of talks over a new fundraising round that could grow the company’s valuation to a reported price range between $10 to $20 billion.
“According to reports, talks have been held in discussions with firms including Fidelity, Tribe Capital, and General Atlantic. Kraken CEO Jesse Powell said this is being delayed in order to evaluate how Coinbase’s IPO performs.”
According to data from crypto aggregator CoinMarketcap, Kraken processed more than $2 billion in volume over the past 24-hours, while Coinbase processed around $3.9 billion within the same period.
RIT Capital Partners was founded in the early 1960s and has a current market cap of more than $5 billion. The trust went public on the London Stock exchange in 1988, and its share price is currently sitting at around $3,300.
This is not their first venture into the crypto world, in December 2020 the U.K.-based trust backed a $142 million investment round for Paypal’s crypto partner and stable coin issuer Paxos.
Court Orders Kraken To Provide Information On User Transactions To The IRS
A court in northern California has ordered Kraken to provide information on users who traded more than $20,000 between 2016 and 2020 to the IRS.
Kraken has been ordered to provide information on its users who conducted the equivalent of $20,000 in crypto transactions in any one year, between 2016 and 2020, to the United States Internal Revenue Service.
A federal court in northern California authorized the IRS to serve a “John Doe summons” on Kraken Wednesday. The exchange is not alleged to have done anything wrong.
The IRS is after the records of an “ascertainable group or class of persons” who may have failed to comply with tax reporting and internal revenue laws.
In addition, the IRS will check if Kraken has been compliant with its record-keeping obligations, such as Know Your Customer rules.
“This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share, ” said IRS Commissioner Charles Rettig in the court’s press release.
Acting Assistant Attorney General David Hubbert of the Justice Department’s Tax Division said:
“Those who transact with cryptocurrency must meet their tax obligations like any other taxpayer.”
A John Doe summons is used by the IRS to get the names and information about all taxpayers from a specified description, such as the “$20,000 and over” class stated in the latest summons.
According to the supporting declaration, the IRS is after information on five different classes of U.S taxpayers. Some of the activities the IRS is looking into include: reporting limited income despite trading crypto between a range of $5 million–$56 million, operating multiple accounts while exchanging fiat currency to digital assets and back to fiat for no apparent economic benefit.
The IRS is also keeping an eye on people who submitted delinquent tax returns in 2017 and 2018 with income more than $2 million each year, with activity consisting of more than $23 million in deposits, and withdrawals at various crypto exchanges.
The road to this latest fishing expedition was reportedly paved by the first John Doe summons on Coinbase in 2016, in which the IRS obtained the information of 13,000 Coinbase customers.
Coinbase has been under scrutiny ever since, and in November 2020, tax lawyers of Coinbase warned customers that it had been tracking an increase in IRS enforcement against users who fail to comply with tax and reporting requirements.
Cointelegraph reported on April 18 that a Massachusetts federal court had entered an order authorizing the IRS to serve a “John Doe summons” on Circle Internet Financial Inc.
One Crypto Exchange Is Going To Extreme Lengths On Cybersecurity
Kraken pushes its employees to act in ways associated more with intelligence agents than tech workers.
There’s an organization where children of employees have to sign nondisclosure agreements before attending company parties—the only exception is for kids who haven’t yet learned to write—and where a parent had to explain to his 8-year-old that she couldn’t exchange Pokémon with friends because the boss forbids her from connecting her Nintendo Switch to the internet.
When he goes to work, that same father has to leave his made-to-order suit, luxury French watch, and classy leather shoes in the closet, donning a $9 Uniqlo T-shirt and jeans to blend in with the crowd near the office.
This organization isn’t an underground criminal group or an intelligence agency—it’s Payward Inc., the San Francisco-based company established in 2011 to operate the cryptocurrency exchange Kraken, which investors now value at $10 billion.
Nick Percoco, the company’s lushly bearded chief security officer, says ransomware attacks often start with cybercriminals digging up personal information about employees online and using it to tailor phishing emails containing malicious software.
So he’s set out to install a company culture of vigilance—some would say paranoia—about guarding personal information.
“Security has become part of our culture in a way that I don’t even have to say it much anymore,” says Percoco, a 25-year cybersecurity veteran. “I feel it.”
Payward’s guiding principle is that a lax security mindset in one’s private life bleeds over to work. New Payward employees spend two days in security classes, then three days setting up office PCs and passwords.
Then there’s a week to go over a 70-item checklist of recommended personal security measures, including setting up hardware token login authentication for personal devices, installing alarms and surveillance cameras at home, and closing social networking accounts.
After the initiation, employees are prohibited from using public USB charging ports, identifying themselves as Kraken workers, or sharing the location of their offices with family members.
The devices of any employee who downloads unusually large chunks of data, gains access to suspicious websites, or uses a phone in unusual ways are immediately locked down, followed by a call seeking explanation.
So far, Percoco says, Payward’s cybersecurity defenses haven’t been breached, even though crypto trading platforms are an attractive target for hackers and the company is regularly hit with hacking and phishing attacks.
Masanori Kusunoki, a director of the Japan Virtual and Crypto Assets Exchange Association, sees Payward’s measures as extreme but sensible.
“It is surprising that a company is successfully implementing such strong measures to all the employees because people don’t like to spend that much of energy to cybersecurity,” he says.
Takeshi Chino, Payward’s Japan chief—and the one who has to commute in costume—can’t tell his wife the physical location of the office.
He is one of the few executives the company has authorized to acknowledge publicly that he works at Payward, a privilege gained only after the security team audited all the information that could be gleaned about him by searching the public internet, dark web, and government records.
Chino, 37, also supervised his 6-year old son as the boy signed his first NDA before attending a company event two years ago at an Italian restaurant.
“I heard from people that Kraken is crazy about security before I joined, and yes, it is really intense about it from Day 1,” Chino says in a video chat, where his background is completely black except for the company logo. “But that’s what it takes.”
Jack Dorsey Says He Will Integrate Lightning Network Into Twitter Or Bluesky
Earlier this month, Dorsey revealed that Square intends to develop an open-source non-custodial Bitcoin hardware wallet.
Jack Dorsey, co-founder and CEO of social media network Twitter and founder and CEO of financial services company Square, has confirmed he is planning to integrate Bitcoin’s Lightning Network sidechain with at least one of his businesses.
On Friday, Dorsey responded to a question from Twitter user Deyonté, who had requested that Dorsey integrate the Lightning Network into Twitter or BlueSky — the decentralized social network Twitter has devoted manpower to developing since 2019.
In response, Dorsey responded, “Only a matter of time.”
Only a matter of time
— jack (@jack) June 11, 2021
Dorsey’s comment appears intentionally vague, with the remark appearing open to be interpreted as confirming that either BlueSky or Twitter, or even both companies, could be eying a Lightning integration.
Twitter user Mklad also suggested Dorsey’s pro-Lightning remarks could relate to Square’s recent acquisition of Jay-Z’s failed music streaming platform, Tidal.
Dorsey’s tweet comes amid recent moves from Square to expand its digital asset operations.
Earlier this month, Dorsey revealed that Square intends to develop an open-source non-custodial Bitcoin hardware wallet. The following day, Cointelegraph reported that Square had revealed a partnership with blockchain infrastructure firm Blockstream, with Square planning to invest $5 million into a solar-powered Bitcoin mining facility.
Dorsey has long argued that Bitcoin (BTC) mining incentivizes adoption and innovation in renewable energy, with Square committing $10 million toward its Bitcoin Clean Energy Investment Initiative in December.
P2P Exchange Paxful Integrates Lightning Network
Lightning Network is the leading Bitcoin scalability solution, providing layer-two transaction capabilities separate from BTC’s main blockchain.
Peer-to-peer cryptocurrency exchange Paxful has integrated Lightning Network into its platform, giving its 7 million users access to near-instant Bitcoin (BTC) transfers.
The new feature gives users the ability to send and receive BTC from their Paxful Wallet in a matter of seconds and with much lower fees than existing blockchain transactions, the company announced Tuesday.
Paxful co-founder and CEO Ray Youssef described Bitcoin as “the best financial option” but acknowledged that scalability issues could be hindering adoption. He said Lightning Network is Bitcoin’s greatest chance of achieving the scalability needed to make microtransactions a reality.
The global online microtransaction market was valued at roughly $34.6 billion in 2021 and is expected to grow at a compound annual growth rate of 10% over the next four years, according to industry research.
The video game industry and the virtual goods and services that it propagates are becoming a major catalyst for the growth of microtransactions.
Lightning Network is being developed to facilitate Bitcoin payments and allow users to quickly and reliably engage in off-chain transactions through a second layer. Lightning currently boasts over 26,500 nodes for a network capacity of 2,468.93 BTC at the time of writing.
In the absence of a viable transaction layer, Bitcoin has carved out a strong niche as an investable asset.
However, creating an electronic cash system was a key component of Satoshi Nakamoto’s 2008 Bitcoin white paper.
(Interestingly, and as Cointelegraph recently explained, the Bitcoin founder’s forum posts and correspondences used “cash” and “gold” synonymously.)
There’s strong reason to believe that Lightning Network will achieve wider utility on the Paxful trading platform.
As of April 2021, the P2P exchange had processed over $5 billion in volume, with Africa — a region that is quickly adopting Bitcoin as a medium of exchange — emerging as one of its biggest markets.
Jack Dorsey’s Cash App Integrates Bitcoin’s Lightning Network
- Cash App Has Integrated The Lightning Network.
- All Users Can Now Instantly Send Bitcoin Across The World.
- Spiral’s Lightning Development Kit Is empowering Cash App’s integration.
Users of Block’s mobile payments platform Cash App can now make instant and free bitcoin payments through the Lightning Network, the company tweeted on Monday.
The integration of Bitcoin’s second-layer protocol for faster and cheaper transactions was made possible by the Lightning Development Kit, an open-source project developed by another company owned by Block, Spiral.
Spiral operates completely independently of its parent company and Jack Dorsey, the CEO of Block and ex-CEO of Twitter, also has little direct control over it. Instead, the self-directed group of developers, designers, and project managers work together to advance the adoption of bitcoin.
Lightning Labs Releases Tools Letting AI Transact And Hold Bitcoin
AI models such as ChatGPT could soon be able to buy, sell and use Bitcoin on the Lightning Network.
Bitcoin Lightning Network development firm Lightning Labs unveiled a new set of tools for artificial intelligence (AI) to send and receive Bitcoin on the network’s layer-2 solution.
On July 6, Lightning Labs announced the toolkit which helps enable AI applications such as OpenAI’s ChatGPT to interact with the Bitcoin network to send, receive and hold the cryptocurrency.
The move is to help make payments faster, cheaper and easier for AI developers who will be able to distance themselves from traditional and often prohibitive payment rails while also enabling pay-per-use AI models on lightning.
Large language models (LLMs) are software applications modeled on large data sets enabling them to generate human-like responses to user prompts and conduct other tasks.
“We’re extremely excited about the new wave of innovation brought about with the latest wave of LLM models,” Lightning Labs said.
Announcing a new set of tools to build Lightning⚡and #bitcoin-powered AI products for a global audience.
— Lightning Labs⚡️ (@lightning) July 6, 2023
Lightning Labs explained the tools are built on the “L402 protocol” — a lightning native authentication mechanism. It also employs “Langchain,” a library used for simplifying operations with AI applications.
“With the tools we’re releasing today, developers will be able to build more accessible AI infrastructure for both humans and agents alike.”
The Lightning Labs team also acknowledged the problem with current LLMs, which lack native web-based payment mechanisms. AI application developers are forced to rely on dated payment methods such as credit cards with the additional expenses passed on to users, it claimed.
“A new fast-growing class of ‘organisms’ (intelligent LLM or AI Agents) are unable to easily gain access to fiat systems of payment as they aren’t registered ‘entities’ with any nation,” it noted.
Speaking on the Stack Sats podcast on July 6, Kody Low, developer at the community payments platform Fedi, commented on the interoperability between AI and BTC for payments:
“AI is one of those things where there is absolutely no better solution anywhere in the world than Bitcoin, and AI companies have not yet solved their monetization problems.”
According to data from Lightning Network analytics platform 1ML, its current capacity is 5,432 BTC or roughly $163.5 million. Bitcoin Visuals has reported a dip in the number of lightning channels over the past year, from around 80,000 in July 2022 to about 70,000 currently.
Google Cloud Furthers Bitcoin Lightning Ambitions With Voltage Partnership
Lightning strikes Google Cloud as Apple closes the door on Bitcoin tipping — why a recent collaboration could bolster Bitcoin Lightning Network activity.
Google Cloud is the latest company to show interest in Bitcoin Lightning. The $225-billion cloud and data service recently partnered with Voltage, an infrastructure provider specializing in the Bitcoin Lightning Network.
The partnership will allow one of the world’s largest cloud computing providers to roll out Bitcoin-based services worldwide while assisting the expansion of Voltage’s operations. Graham Krizek, CEO of Voltage, told Cointelegraph:
“Voltage is leveraging Google Cloud to go to service our customers more globally. So, we have larger customers that need nodes deployed in specific geographic regions like the U.K. or Asia.”
Conversely, Google can use “Voltage as sort of their outsourced Bitcoin and lightning team.” He said, “We service that business for them of actually, you know, helping companies that are interested in adding Bitcoin or Lightning into their services.”
The announcement received significant traction on social media and reflects Google’s growing understanding and acceptance of Bitcoin and Lightning. But crucially, the implications of the partnership run deeper.
Christopher Calicott, managing director of venture capital firm Tramell Venture Partners, told Cointelegraph, “We had some people that were former Googlers in backchannels […] saying this is the kind of unexpected
Moreover, Google’s open-minded approach to Lightning diametrically opposes that of its competitor, Apple. Apple delisted Damus, the Lightning-friendly decentralized social media protocol, from the App Store recently, demonstrating an aversion to Lightning. Calicott explained that the tech world could be warming up to Lightning:
“There is a growing and broad-based corporate tinkering with Lightning in particular right now. If they’re adjacent to payments, they would ignore Lightning at their peril.”
Google Cloud operates under the umbrella of its parent company, Alphabet. The payments platform Google Pay boasts hundreds of millions of users in more than 15 countries.
Since 2020, the investment arm of Google, Google Ventures (GV), has shown a robust interest in blockchain and Web3 companies, as well as Bitcoin.
GV participated in a $6-million seed round for Voltage in 2021. For Calicott, the interest of such a big player in the crypto space could be a sign of growing momentum:
“I hate to over-index on any one particular corporation here, but just for me, like anything in life, when people put their money where their mouth is, it sends a very strong signal of where they’re focusing.”
Krizek agreed, “I think that this really is a big signal into enabling more Bitcoin-focused strategies amongst Google specifically, but also just larger organizations.”
Despite Apple striking off the Lightning-friendly app Damus — much to the chagrin of the former Twitter CEO Jack Dorsey — Lightning continues to gain traction among billion-dollar businesses worldwide.
One of Mexico’s largest companies has begun experimenting with Lightning, while two major crypto exchanges, Binance and Coinbase, recently promised Lightning integrations.
Nonetheless, it’s still early, and “we’ve got to observe this as it grows,” Calicott noted. Krizek, who’s seen his fair share of Bitcoin ups and downs, having participated in the Bitcoin space since 2012, underscored why the partnership is important:
“As we start to expose these organizations more so into Bitcoin and what is possible with it via Lightning, I think we’ve caught their attention already with the amount of interest and demand that we’ve had from this.”
He added that more services should be rolled out in the near future, complemented by efforts in Bitcoin education.
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Monty H. & Carolyn A.