The Economic Affairs Committee of the House of Lords, the upper chamber of the UK Parliament, is holding a meeting today to hear from witnesses on the subject of blockchain and distributed ledger technology.

Today's program starts at 14:05 UTC, beginning with an appearance by Ben Broadbent, deputy governor for monetary policy for the Bank of England, the UK's central bank.

At 14:45 UTC, the committee will hear from Imperial College Centre for Cryptocurrency Research associate director Dr Catherine Mulligan; Gresham College professor of commerce Michael Mainelli; and PwC transformation and assurance director Lord Spens.

Finally, at 15:30 UTC, the committee will hear from Digital Asset Holdings CEO Blythe Masters, and 11:FS co-founder and director of blockchain Simon Taylor.

CoinDesk is liveblogging today's event, so stay tuned for updates as they develop.

House of LordsParliament

A new resolution submitted to the US House of Representatives calls for the development of "a national policy for technology" that would include digital currencies and blockchain technology.

It invokes the idea of bitcoin without calling it by name – referring to "alternative non-fiat currencies" – and blockchain tech, which it says has the potential to "fundamentally change" how trust and security are established in online transactions.

The non-binding resolution is sponsored by Representative Adam Kinzinger, a Republican from Indiana; and Representative Tony Cardenas, a Democrat from California, is co-sponsoring the bill.

The resolution goes on to say that alternative currencies are "leveraging technology" to improve security and increase transparency in ways that could allow them to supplant the "decades-old payment technology" used by financial institutions.

It states:

"The US should develop a national policy to encourage the development of tools for consumers to learn and protect their assets in a way that maximizes the promise customized, connected devices hold to empower consumers, foster future economic growth, create new commerce and new markets.”

The submission further encourages the US government to promote the advancement of alternative technologies that "support transparency, security and authentication". At the same time, it calls for innovators to develop technologies that encourage consumer commerce.

The resolution was referred to the Committee on Energy and Commerce, which saw one of its subcommittees hold a hearing on bitcoin and blockchain tech earlier this year.

The resolution's introduction has won early praise from advocates of the technology who work on Capitol Hill, including Jerry Brito, executive director of the non-profit Coin Center.

"The proposed House Resolution from Rep Kinzinger shows that many in Congress understand that the federal government should adopt policies that encourage blockchain innovations to flourish," he told CoinDesk.

However, the timing of the resolution's introduction indicates that it may be some time before the Energy and Commerce Committee actually moves to address the measure.

The resolution was introduced on 14th July, just before Congress began a weeks-long recess ahead of the 2016 presidential election. Both the House and Senate won't reconvene until the first week of September.

A representative for Rep Cardenas was not immediately available for comment when reached. Rep Kinzinger’s office did not immediately respond to a request for comment.

The full resolution can be found below:

US Congress HR835

Image via Shutterstock

CongressHouse of Representatives

The Bank of England has released new research suggesting that a central bank-issued digital currency could lead to an increase in gross domestic product.

The conclusions were drawn from a working paper published today that examined how a central bank-backed digital currency (referred to as a CBDC in the paper) could yield macroeconomic benefits, while providing banking regulators a clearer picture of the financial system.

The authors wrote:

"First, it leads to an increase in the steady-state level of GDP of almost 3%, due to reductions in real interest rates, in distortionary tax rates and in monetary transaction costs that are analogous to distortionary tax rates. Second, a CBDC regime can contribute to the stabilization of the business cycle, by giving policymakers access to a second policy instrument that controls either the quantity or the price of CBDC in a countercyclical fashion.”

That said, the authors state that there are potential issues inherent in the concept and that "there remains a clear concern" about the risks in transitioning to a "different monetary and financial regime".

These concepts were explored several months ago in a speech by Ben Broadbent, the Bank of England’s deputy governor for monetary policy, who said in March that while such a system could provide greater visibility for regulators, UK banks could see an outflow of deposits.

Broadbent is one of several witnesses set to appear tomorrow before a committee of the House of Lords, the upper chamber of the UK parliament.

The full Bank of England working paper can be found below:

BoE Paper

Image via Shutterstock

Bank of EnglandEuropeUK

Bitmain, the operator of one of the bitcoin network’s largest mining pools, has acquired a bitcoin data and analytics startup for an undisclosed amount.

With the acquisition of Blocktrail, announced today, Bitmain will seek to bolster the services it offers at BTC.com, a block explorer and analytics service it launched last September. The acquisition is the latest in what has proved to be a year of consolidation for the industry, which has seen particular activity in the exchange sector.

This year has so far seen the bitcoin mining chip manufacturer behind the Avalon chip series sold in the industry’s largest public acquisition, while CoinDesk was acquired by bitcoin investment firm Digital Currency Group.

With the news, three full-time Blocktrail employees will join the Bitmain team, including Blocktrail co-founder Boaz Bechar, who voiced his optimism that BTC.com would help his team reach more users.

Bechar told CoinDesk:

"We’ve seen a lot of consolidation going on in the past year, and for us, it was really a perfect match of finding a big player that has a use for all the technology we built."

Bechar said Blocktrail, co-founded by VKontakte co-founder Lev Leviev, would now be increasing its European team "significantly".

"I think BTC.com is going to be strong. We’re going to have a bigger team and bigger resources," Bechar said.

Marbles image via Shutterstock

BlockTrailChinaMining

A new report from JPMorgan Chase and consultancy firm Oliver Wyman argues that blockchain technology presents an opportunity for asset managers.

The report, released on 13th July, seeks to position the emerging technology as a means for asset managers to offer more sophisticated services to clients. It offers a broad overview, ultimately arguing the industry sector needs to "get off the sidelines" and begin investigating how they can adopt the technology.

The report states:

"Revenue opportunities will grow out of the improved data sources, greater liquidity and lower frictional costs fostered by blockchain. Asset managers will be able to serve clients in new ways, for example, with real-time reporting or alternate trading strategies."

The report is the latest to shed light on JPMorgan's examination of the technology, after the firm publicly disclosed its testing of blockchain applications earlier this year.

Further, the publication comes amid a notable silence on the technology from members of the asset management community.

To date, major market-leading firms including BlackRock, Charles Schwab, Fidelity and Vanguard have been quiet on industry developments, with only Fidelity publicly exploring the technology through its in-house innovation department.

The report envisions adoption for asset managers taking place in three development waves, the first of which will take shape between now and 2019. The last wave, during which the report sees the development of "critical infrastructure" around the technology, is forecast to play out between 2020 and 2030.

According to JPMorgan and Oliver Wyman, the current wave of adoption will see the development of "simple applications" focused on data communication between network parties, while the second will give rise to systems used to store "core transaction data".

However, the report says this is incumbent on the success of early trials and the winding down of services that today provide the same functions.

From there, the report says the third wave will see "major pieces of capital markets infrastructure" being augmented or outright replaced by blockchain applications.

"Once assets are held as tokens on the blockchain, the clearing and settlement of trades across multiple asset classes can move to distributed ledger-based infrastructure, as opposed to the hybrid or dual systems that we project through the first two waves," the report reads, adding:

"This will drastically cut processing cycles and unlock liquidity."

The last wave, which the report leaves relatively ambiguous, could see the broad adoption of the technology, though whether this will be driven by incumbents or new startups remains to be seen.

Image Credit: Roman Tiraspolsky / Shutterstock.com

asset managementJPMorganOliver Wyman

Last month, an unknown attacker drained tens of millions of dollars worth of the digital currency ether from The DAO, an ethereum-based smart contract aimed at functioning as a funding vehicle for projects in the ecosystem. The incident sparked an effort to effectively roll back the clock and undo much of the damage, a process that comes to a head this week as network-wide changes are set to be rolled out.

For weeks, the impact has been largely confined to the pages of social media and, for developers, within the workspaces and private chats of those most closely involved with the so-called ‘hard fork’ effort. Now, however, with code for the changes completed and merged with major wallet implementations, that’s about to change.

Major exchanges that offer trading services for ether have announced their plans to support the fork in the past few days. Generally speaking, the plan is to support the strongest blockchain, which will be determined by how much hashing power it draws from ethereum’s distributed network of miners.

So far, digital currency exchanges Poloniex and Kraken (which comprise more than 50% of ether trading volumes) have both said they plan to briefly suspend deposits and withdrawals prior to the fork activation.

Miners, signs indicate, have largely moved to adopt the hard fork measures, with major pool operators looking to their members to assess support for the plan, even if reluctantly.

The stakes on the outcome of the vote are high. If the hard fork fails to be implemented, many early adopters of ethereum who purchased DAO tokens meant to give them voting rights in the new organization will be out $60m worth of the cryptocurrency, increasing concerns about potential regulatory involvement.

On the other hand, if the hard fork is implemented, the ethereum blockchain, which is supposed to be an unchangeable record of all transactions, will no longer be seen as immutable. In sense, code may no longer be law.

How we got here

For those who may be unfamiliar with The DAO, here’s a quick recap of the story so far.

Launched in April, The DAO was designed as a series of contracts that would raise funds for ethereum-based projects and disperse them based on the votes of members. An initial token offering was conducted, exchanging ethers for "DAO tokens" that would allow stakeholders to vote on proposals, including ones to grant funding to a particular project.

That token offering raised more than $150m worth of ether at then-current prices, distributing over 1bn DAO tokens.

Just over a month ago, however, news broke that a flaw in The DAO’s smart contract had been exploited, allowing the removal of more than 3m ethers.

Subsequent exploitations allowed for more funds to be removed, which ultimately triggered a ‘white hat’ effort by token-holders to secure the remaining funds. That, in turn, triggered reprisals from others seeking to exploit the same flaw.

An effort to blacklist certain addresses tied to The DAO attackers was also stymied mid-rollout after researchers identified a security vulnerability, thus forcing the hard fork option.

How the fork works

Much has been said about the ethereum hardfork and the idea that it constitutes a "rollback" of the network. While not necessarily false, the specifics of the hard fork proposal on the table are a bit more complicated – here’s how.

The proposal doesn’t exactly unwind the network’s transaction history. Rather, it relocates the funds tied to The DAO to a new smart contract with the single purpose of letting the original owners withdrawal them.

According to a recent blog post explaining the move, DAO token holders will be able to withdraw ETH at a rate of 1 ETH to 100 DAO.

The extra balance and any ether that remains as a result of the re-entrancy exploit and the splitting mechanism will be withdrawn and distributed by the DAO curators, or individuals selected prior to the collapse of The DAO to provide "failsafe protection" for the organization.

As part of an effort to help ensure the hard fork doesn't also include new vulnerabilities, ethereum co-founder Jeff Wilcke also announced a bounty program for those who test the hard fork code. Coders earned rewards based on vulnerabilities they discovered in the code.

Miners make their pitch

By Friday, major mining pools in the ethereum network had begun to open up voluntary voting to gauge their contributors' interests on how to handle the hard fork. Pools measured sentiment by way of hashrate, rather than individual miner accounts.

Though support by the miners does seem to swing toward the hard fork, low turnout has opened the door to criticism that the vote wasn’t representative of the entire network. At least one large mining pool said it would only begrudgingly honor the fork.

Pools like Dwarfpool, which possesses about a quarter of the network’s total hashing power, held a vote in which a majority of participants indicated their support. However, less than 7% of Dwarfpool’s hashrate was accounted for in the vote.

Fourteen percent of Ethermine’s hashrate voted in a similar poll, with a clear majority of those taking part voicing support. 23% of Ethpool’s mining power voted, with a slim majority moving against the hard fork.

Other miners, including F2Pool, which operates a major bitcoin mining pool, suggested a degree of apprehension about the hard fork plan but indicated that it would likely support it.

The pool said in a statement:

"We are as a matter of principle against unduly rushed or controversial hard forks irrespective of the team proposing and we will not run such code on production systems nor mine any block from that hard-fork. I believe this is universal and it could be applied to ethereum, too. I fail to see why we must take such a controversial and risky hard fork. We are not willing to deploy this hard fork unless we have to."

Exchanges make their own plans

The fork is scheduled to kick in at block 1,920,000, estimated to take place sometime around 21st July, which will limit the amount of time ether exchanges like Poloniex, Bitfinex and Kraken have to implement their plans.

In a blog post, Poloniex said it will temporarily disable deposits and withdrawals for an unspecified length of time leading up to the migration process.

"Once the network is stable and the migration is complete, we will enable deposits and withdrawals," the post said.

In an email Friday, Kraken said it intends to disable withdrawals on 19th July, approximately one hour before the hard fork activates. Trading will function as normal during the fork and all ether on Kraken after the fork will be tokens of the chain with the most number of miners working on it.

Earlier reports that withdrawals will also be closed for one hour after the hard fork are untrue, according to a representative of Kraken speaking to CoinDesk.

From the email:

"ETH deposits and withdrawals will be enabled again once the winning chain has become clearly evident. We expect the hard fork process to be smooth and quick, but there is no certainty of this."

In its statement, Bitfinex largely echoed Poloniex and Kraken, declaring its intention to support the strongest change.

The exchange said in a blog post:

"We will re-enable deposits and withdrawals when we are confident that the longest valid chain has been clearly decided. During this time exchange trading, margin trading, and margin funding will all continue to operate as usual."

Pencil, eraser image via Shutterstock

Ethereumhard forkTechnology