The Australian government is looking to update its anti-money laundering laws to include bitcoin and other digital currency exchanges.

According to a consultation document published this week by the Australian Attorney-General’s Department, the government wants to begin drafting legislative proposals by the middle of next year. The goal is to begin finalizing that legislation in 2018.

To get there, the government is soliciting public comment on the proposal, which comes amid a broader push to revise the country's money laundering laws, between now and the end of 2017. For now, the proposal is in an early stage, with relatively few details available as to how the legislation might be drafted or what kinds of companies beyond exchange services would be covered.

The agency wrote:

“The AML/CTF Act should be amended to regulate activities relating to convertible digital currency, particularly activities undertaken by digital currency exchange providers.”

The proposed plan was released months after the Australian government released a broad policy statement on fintech, which included proposals to reduce the tax burden on bitcoin activity in the country and explore other legislative options related to the technology. At the time, the Australian Treasury indicated support for “a high-level guiding legislative framework” to govern how the country’s financial industry would integrate blockchain tech.

It also aligns with recommendations from the Australian Senate earlier this year, which called for such a move.

The plan comes as Australia’s private sector explores a range of blockchain applications, from trade finance to digital identity.

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One of the top corporate credit ratings providers believes it's too early for the use of blockchain tech to be a factor in its analysis.

In a report published this week, Standard & Poor's (S&P) reportedly weighed in on the emerging technology, asserting that while it believes the "market-wide adoption" of blockchain technology remains far off, it continues to monitor its evolution due to its anticipated impact.

Notably, S&P said it does not see the use of blockchain technology to be a ratings driver "in the near term or even perhaps in the long term".

S&P continued:

"But we consider that, depending on the technology's eventual application and whether it takes hold in the financial industry, it could have a substantial impact on institutions' business models."

S&P further stated that it would consider changing this view should adoption occur faster than it "currently expects" or if the technology substantially impacts industry business models.

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BankingS&P

A small tweak to bitcoin could have a big impact.

This has been the central point of contention in bitcoin's "block size debate", a long-running dispute over whether to lift a hardcoded limit on the amount of data that can be included in each block of transactions.

One side sees increasing the block size as an easy way to boost the number of transactions processed on the network, potentially expanding bitcoin’s user base. Those opposed to the move worry about the consequences (think centralization and instability) of such a change, or at least question the need to lift the block size in the near-term.

There are other pieces to bitcoin that can be changed or moved around, and any change can make a big difference for the overall health of the network – good or bad.

One data-heavy presentation from the developer conference Scaling Bitcoin earlier this month explored how changing parameters can affect the network, like how a tweak to the frequency at which blocks are created might be one way to easily grow transaction capacity.

Using data pulled from their open source simulator of a proof-of-work blockchain (bitcoin and ethereum are two such blockchains), researchers from ETH Zürich argued that bitcoin could securely reduce its block time from 10 to 1 minute. 

The idea is that the change doesn't impact security negatively, but still boosts the possible number of transactions on the network. So, the argument goes, it's better overall.

Arthur Gervais, a PhD student in the Institute of Information Security at ETH Zürich, told CoinDesk:

”According to my research the one-minute block interval seems like the most plausible. I don’t mean that it provides sufficient security, but that it would provide the same security as bitcoin has today.”

How does this approach grow capacity? The logic is simple: More blocks mean more transactions.

The research effort joins a number of other ideas focused on increasing bitcoin’s transaction capacity, including SegWit, Lightning, and other proposals from Scaling Bitcoin, such as Schnorr signatures and the ambitious plan to reshuffle bitcoin via client-side validation. Alternative bitcoin implementations, including Unlimited and Classic, seek to scale by raising the block size cap.

The 'block time' debate?

Tweaking a parameter to boost capacity – does that remind you of anything?

Bitcoin’s block size, mentioned before, has long been discussed as a way to expand capacity. So, does this mean that we’ll be moving on from the “block size debate” to the “block time debate”?

Not according to Gervais. He sees his project more as a way to compare blockchains with objective measures, and to gauge how changes could affect bitcoin, so that developers can make clearer decisions.

“If people want to scale without sacrificing security, they have several options. I think it’s always good to have the choice. That’s why we’ve been doing this work,” he said.

Gervais continued:

“There has not been a sufficient understanding of the implications of changes to the – not only block size or block time – but security provisions in general. People are creating all these new altcoins and blockchains and I think we first need to take a step back and see what can be done with the current systems.”

Others also had a cautious attitude toward a lower block time interval.

“From my perspective these are propositions that are high risk while having uncertain rewards,” said Alexandre Bergeron, who consults for bitcoin companies. “It is one of those proposition that may sound good on paper yet have considerable impact network wise and come with unintended consequences.”

He argued that the combination of game theory and financial incentives holding bitcoin together is a "balancing act." It’s another lesson in measuring tradeoffs; developers think that the network requires a specific mix of settings and parameters, or security of the overall network might be compromised.

"We still have a long way to go until we can be comfortable with our assumptions about the incentives already in place,” Bergeron added, concluding that these sorts of changes are a "long-term venture.”

Gervais maintains that it's a possible way to help to scale bitcoin, but he isn't necessarily pushing for the change.

“We have no public opinion on what should or shouldn’t be done,” he said.

All possible cases

Besides some vague notion that it will leave funds safe, what does blockchain security mean in cryptocurrency?

If conditions aren’t right, weird behavior that makes the network less secure can become more prevalent. These events include double spending (a user’s ability to spend their bitcoins more than once) or selfish mining (when a miner can cheat to earn more bitcoins at the expense of other miners).

The "stale rate" represents how often miners find blocks that aren’t ultimately added to the blockchain. Too many stale blocks can potentially lead to increased mining centralization and can make the blockchain easier to attack.

So, by looking at the stale block rate, engineers can determine how well it would affect the blockchain’s security. If this number is higher, that’s a point of insecurity.

That's what Gervais and the rest of the Zurich-based research team did to determine that a one minute block interval is the most feasible.

“We simulated all possible cases," Gervais said.

The experimental results show how the team measured block sizes from 0.1MB to 16MB and block intervals going from 0.5 seconds to 25 minutes, looking to see how the stale block rate changed at each and every level.

But still, as with many other blockchain setting changes, the story is complicated.

Bitcoin Core contributor Greg Maxwell was skeptical, advocating for a longer block time on reddit. He argued that the block time question is tricky, because if it's too low, then the network could see a quick drop-off in security.

"Since we can only get it approximately right, we should strongly prefer being slightly too long vs slightly too short," he said. Maxwell also highlighted how, in some cases, it takes longer for blocks to propagate across the network – something a higher block time can help with.

MiningProof-of-WorkScalabilityScalingSecurity

Accenture is among a group of 13 companies partnering with startup CoinSciences in an effort to get more enterprise businesses working with blockchain.

Those involved with the effort are largely existing users of the MultiChain platform, and the program formalizes that relationship. Participants include professional services firm Accenture, financial tech provider D+H and IT firm Mphasis.

According to founder and CEO Gideon Greenspan, the goal is to expand the market for blockchain consulting while at the same time improving the visibility of both its MultiChain private blockchain platform as well as the services of its partners.

He said of the launch:

"The MultiChain Platform Partner Program allows us to formalize our relationship with these companies, offering them both marketing exposure and deep technical assistance.”

The move is a step into the public eye for Multichain, which has emerged as a notable player in the permissioned blockchain space. Those involved with the effort use the startup's platform as a basis for proofs-of-concept and prototype development alongside their respective clients.

First launching as a provider of technology for the bitcoin blockchain, CoinSciences has since shifted gears to projects like a recent cross-border proof-of-concept unveiled by Dutch multinational bank Rabobank.

In statements, partner Accenture was effusive in its praise for CoinSciences and its work, highlighting how it uses the Multichain platform as a basis for early-stage blockchain testing.

"We’ve been working with MultiChain for nearly two years, and have seen the platform evolve rapidly to adapt to clients’ needs, including everything from building proofs-of-concept to supporting pilot projects,” David Treat, managing director of Accenture’s Financial Services blockchain practice, said in a statement.

The news highlights Accenture's growing footprint in the blockchain space. Other startups working with the services firm include Digital Asset Holdings, Blockstream and Monax.

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"Deafening."

That's how market analyst Arthur Hayes describes the enthusiasm ahead of the upcoming launch of a new digital currency called Zcash – and he's not alone.

While blockchain developers have long aimed to provide users of digital currency with privacy, the technology offered by Zcash could offer its users a hereto unforeseen level of anonymity. Now, investors have taken note.

This hype is evidence in the sharp price gains that Zcash futures contracts have enjoyed ahead of the cryptocurrency's 28th October launch.

The contracts, which trade against the price of bitcoin, have surged from a low of $18 (0.027 BTC) on 15th September to a high of $261 (0.379 BTC) as of yesterday, a change that represents an increase of nearly 1,300%.

But that robust price increase has been made possible due to a non-existent supply and high demand. As Zcash does not plan to distribute coins through a public sale of its cryptocurrency to investors, that means miners and those who invested in the startup behind the technology will gain early access.

Hayes explained that enthusiasm for Zcash tokens is so high, he believes the price of 1 ZEC would pass the price of bitcoin by the year's end. The reason? Investors don't want to miss out on a rare opportunity to buy in early.

Hayes told CoinDesk:

"No one wants to miss the next bitcoin or ether. Everyone is trying to get their hands on ZEC."

The comments speak to the outsized gains that traders who have timed past digital currency launches have achieved.

At the time of its initial crowdsale, the price of one ethereum token (1 ETH) was roughly $0.30. Today, it's $11.93, or a nearly 4,000% increase. A similar appreciation has been observed in bitcoin, which rose from $0 to $685, and Augur's reputation toke (REP), which rose from roughly $0.50 to more than $6 today.

Vignesh Sundaresan, who co-founded bitcoin ATM maker BitAccess, also spoke to the supply and demand surrounding Zcash, as well as how expectations of its long-term value have already created a booming market.

"Right now people have money, and they want Zcash, and there is no Zcash," he told CoinDesk.

Behind the hype

Yet, in a market filled with digital currencies, analysts say Zcash holds a unique promise due to the potential power of its underlying technology.

Unlike most digital currencies (which are clones of bitcoin or assets on the ethereum protocol) Zcash uses a wholly new protocol called Zerocash, which offers both anonymous digital coins called zerocoins and non-anonymous coins referred to as basecoins.

Zerocash permits anonymous transactions by harnessing a kind of zero-knowledge proof called a zk-SNARK, which allows two parties to provide each other with verified information without revealing their identities in the process.

This technology permits the creation of a secure blockchain that hides the sender, recipient and value of all transactions. Further, the information surrounding these transactions is only available to those holding a view key.

Now, users have the ability to share their view key with others if they desire. As a result, they may soon have the ability to create selective transparency on the Zcash blockchain.

By allowing Zcash users to retain their confidentiality, its developers say they have created the digital currency in a way that solves for fungibility, or the ability for one zerocoin to be truly indistinguishable from any other.

Fungibility has become an issue in the public blockchain sector, as evidenced by how it dominated conversation at bitcoin's most recent annual developer event.

The cause for concern is that if companies know the past history of a blockchain token, they may refuse the monies provided by that source. This sort of situation has already taken place with bitcoin, as some exchanges have refused to accept specific coins after notable thefts.

Potential limitations

But while the sharp gains in Zcash futures have helped to support claims about its potential, some market observers say the currency could face hurdles ahead.

Bitcoin developer and trader BTCDrak described Zcash as "novel and highly interesting," but noted that the digital currency’s use of zero knowledge proofs may present challenges.

"It's bleeding edge cryptography," he said, before adding that the proofs are "very large" and that they "take a lot of CPU to sign transactions". Both criticisms have led to concerns about its blockchain's eventual scalability.

Kevin Zhou, trader at digital currency exchange Kraken, also noted that investors may have reason to caution their excitement.

For example, he too called its technology "bleeding edge" cryptography, while noting that it remains "untested".

“It's the things we don't know we don't know (unknown unknowns) that could go wrong," emphasized Zhou, adding:

"With every super new technology, there are always going to be risks."

Bright horizons

In spite of the risk, digital currency hedge fund manager Jacob Eliosoff (like other traders surveyed) believes Zcash presents a unique opportunity for buyers.

But Eliosoff was cautious as well. While he said the benefit of fungibility today is "significant," he argued zerocoins could become obsolete if popular digital currencies like bitcoin or ethereum solved for the problem.

Either way, all eyes will likely be on Zcash tomorrow with its official launch.

Already, miners have begun to prepare to support its blockchain, offering the ability for interested parties to purchase interests in Zcash miners.

Mining firm operator Jonathan Toomim went so far as to say he is excited for Zcash because he believes it holds the potential to undermine bitcoin's value.

"Bitcoin had four main value propositions – anonymous electronic cash; cheap and scalable transfer of wealth; programmable money; [and] absolute scarcity as a store of wealth," he explained.

"If we look at bitcoin's tech, we see that Zcash does [anonymous electric cash] and probably [cheap and scalable transfer of wealth] better than bitcoin," he said.

Others were less academic in their estimations of the market.

Zhou praised the digital currency, stating that he likes it far more than its competitors, telling CoinDesk:

"Personally, I really like Zcash."

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Zcash.

Golden coins image via Shutterstock

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US telecom giant AT&T is seeking a patent for a kind of home subscriber server that utilizes a blockchain.

The application, filed on 6th April and published on 6th October, outlines a “decentralized and distributed secure home subscriber server device”. It was filed by Roger Piqueras Jover and Joshua Lackey, both of whom worked as researchers at AT&T before being hired as security architects for Bloomberg LP.

A home subscriber server performs authentication and media delivery functions for those who, for example, have a television subscription. According to the application, AT&T wants to boost the security of these multimedia delivery networks by distributing the nodes that store and transmit the information – that’s where the blockchain comes in.

AT&T is seeking to patent both the proposed device itself as well as the method of using it. Perhaps both notably, the application outlines how it would be preferable to leverage the bitcoin blockchain as opposed to an internal, private network, though this approach is outlined in the application as well.

The authors explain:

“.... in cases where the decentralized and distributed secure home subscriber server system utilizes the bitcoin blockchain, advantage can be taken of the plethora of nodes contributing and maintaining the security of bitcoin transactions.”

The application goes on to cite how a high number of nodes within the proposed network would allow it to continue operating under attack conditions.

“...in the event of a node (e.g. base station device) being down or overwhelmed by an overloading attack, the disclosed distributed secure home subscriber server system operation would be unaltered and only mobile devices under the coverage of a victim base station device would be affected,” the authors explain.

The patent represents the first known application of the technology by the US telecom. Last month, social media observers spotted a job listing for a "senior blockchain developer", though that listing was not available online at press time.

AT&T declined to comment when reached.

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