Mizuho Financial Group announced today that it has tested the use of a digital currency-based, blockchain settlement system.

The project, built in partnership with IBM, is notable given the emphasis financial incumbents have placed on using distributed ledger solutions for settlement in which information, not any finite digital asset, is shared among participants.

For example, the news follows reports that blockchain post-trade provider Cryex is struggling to gain regulatory approval for a similar, cryptocurrency-based settlement service.

However, the company's release did not discuss regulatory challenges with the project, instead focusing on illuminating its design and intent.

Mizuho’s test was created through the use of IBM’s blockchain services platform, announced in February.

IBM's summary of the news reads:

Today Mizuho Financial Group announced it is working with IBM to use blockchain technology for payment settlements using the bank's own virtual currency in a project that will explore how payments can be instantaneously swapped. This is one of several ways the bank is exploring the use of blockchain and creating a platform across the bank using the Linux Foundation Hyperledger code.

By putting blockchain through a number of rigorous tests, the bank is gaining confidence in its use and sharing their learning with the financial community. With the virtual currency pilot, the bank expects to better understand how the settlement process can be simplified in a private, secure and permissioned blockchain network.

Using its own virtual currency that trades 1:1 with the Yen in a secure environment could potentially provide better tracking and control of the exchange of funds, and eliminate some of the expenses associated with the exchange of paper-based currency.

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The price of bitcoin fell $100 during a five-hour span today, dropping 15% to reach a low of $551 on the CoinDesk Bitcoin Price Index (BPI).

The move represents a continuation of the recent price correction that began when bitcoin hit a high of $774 on 18th June, a move market observers suggested was indicative of the idea that the digital currency was “overbought” after reaching two-year highs.

Such a sentiment continued to be voiced by market observers today following the day’s sharp price drop, with blockchain advisor and consultant George Samman indicating the currency's value increased "too fast" this month, and that as a result, price support is now weakening.

Still, sources suggested that the decline is a response to the increasing likelihood that the UK will likely vote to stay in the European Union ('Bremain'), an outcome that could be made official as soon as late Thursday night in US, Friday morning UK time, reports suggest.

The comments echo the widely held belief that bitcoin is a "safe haven" asset that benefits from times of macroeconomic uncertainty in which its strengths as an investment vehicle whose value is derived solely from a global market are best on display.

For example, traders have cited the ‘Brexit’ vote, as well as economic uncertainty in China as factors that propelled the price to its highest level in 28 months this June.

In statements, Tim Enneking, chairman of Crypto Currency Fund; investor and entrepreneur Vinny Lingham; and Arthur Hayes, co-founder and CEO of bitcoin leverage trading platform BitMEX, all cited the coming ‘Brexit’ vote as the defining influence on the decline.

Hayes told CoinDesk:

"The drop below $600 indicates that many traders believe that 'Bremain' will prevail. The vote is still too close to call with various polls indicating 'Brexit' and 'Bremain' in a dead heat."

Hayes predicted the digital currency could rise to $700 should Britain vote to exit the EU, but linger at $550 if the country decides to remain in the economic union.

In turn, Samman voiced his belief that the $560 price level would be one to watch going forward, naming it a key indicator of confidence that could determine future price movements.

Still, Lingham took a more positive stance, asserting optimism will prevail following the ‘Brexit’ vote, and that the price will soon return to the $600 to $700 range.

Charles Bovaird contributed reporting.

'Brexit' image via Shutterstock

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The price of ether, the native digital asset powering the ethereum network, has fluctuated wildly over the last few days as its developers struggled to determine how to resolve the loss of investor funds at one of the platform’s signature projects.

At issue is the loss of roughly 3.6m ETH taken from a distributed autonomous organization (DAO) called The DAO and the ongoing drive to secure both funds lost to attackers and those that remain, for now, under the control of aspects of its development community.

Against this backdrop, ether’s markets have been fluctuating wildly on the uncertainty over both how the situation would be resolved, and how the resolution would be received.

For example, fears persist that solutions in which developers need to rewrite the blockchain’s history, reversing transactions that were valid according to the platform’s rules in a bid to bail out customers, will cause a loss of confidence in the market and result in ether being delisted by major exchanges.

After rising to a high of 0.028 ETH/BTC around 3:30 UTC on 17th June, ether declined roughly 50% to 0.014 ETH/BTC at 6:55 UTC on 20th June, Poloniex figures reveal. By 04:10 UTC on 22nd June, the digital currency had recovered to 0.024 ETH/BTC, approximately 70% higher than its price only two days prior.

But while The DAO hack is laying ethereum’s technical challenges bare, market participants like Max Boonen, founder of market maker B2C2, are asserting that the current decline is best viewed as an opportunity to purchase low-cost ether.

Such comments, echoed by other market observers, infer that there is confidence in the fundamentals of the ethereum market, despite the fact trading began just last year.

For example, market expert Petar Zivkovski emphasized that ether’s "fundamentals are still strong" and that "the DAO scandal will come to pass".

Of note is that while ether experienced some sharp fluctuations recently, it was not alone among digital currencies.

The price of bitcoin also experienced some volatility over the last few days, a development that has served to further amplify ether’s price swings, Tim Enneking, chairman of Crypto Currency Fund, told CoinDesk.

The digital currency’s price fell from an on opening price of $764.04 on 20th June to a closing price of $631.72 at 19:40 UTC on 21st June, CoinDesk USD Bitcoin Price Index (BPI) figures reveal. The currency then recovered, rising to $678.22 UTC between 12:45 and 12:59 UTC on 22nd June and then falling to as little as $610.32 at 18:00 UTC that same day.

At press time, the price of bitcoin was hovering just above $600.

With this in mind, Zivkovski, director of operations for bitcoin trading platform Whaleclub, stated that he believes the markets are likely to be choppy in the days ahead.

Zivkovski concluded:

“We still think there is some downside before that happens, driven mainly by former bulls looking to cut losses as the ETH dumps took them by surprise.”

Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.

Follow Charles Bovaird on Twitter here.

Yo-yo image via Shutterstock

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Tel Aviv-based blockchain startup Colu has raised $9.6m, a fundraising that comes amid a shift in its business model that finds it focusing on local currency issuance.

The Series A round, backed by Aleph, Spark Capital, Digital Currency Group and former Thomson Reuters CEO Tom Glocer, follows a $2.5m seed round in early 2015 that came at a time when the startup was focused on building out its underlying technology.

While Colu was formerly focused on developing colored coins technology, a top-level protocol on the bitcoin network that allows bitcoins to be augmented to represent other assets, CEO Amos Meiri said the company has now honed in on a specific use case that was the most in-demand among its users.

Meiri told CoinDesk:

"There are a lot of other use cases for colored coins, in music, in the Internet of Things, but what we saw after a while was that more than 60% of the use cases were for local currencies. This is where our market is."

In particular, Meiri cited bitcoin startup Bitt’s use of Colu’s technology to launch a version of the Barbadian dollar on the bitcoin blockchain as a turning point in the project.

As a result of the success of this effort, Colu is now launching two similar projects in neighborhoods in Tel Aviv.

There, Colu has created local currencies on its platform that it contends are gaining traction with users and merchants, and Meiri indicated that Colu is building services for these efforts that will make its technology easier to use.

"We have the wallet and we have a control panel where the manager of the local economy can issue a distributed currency, gain access to data about the economy and manage it from one place," he said.

The company said it will look to launch local currencies in other cities around the world, including Amsterdam and Silicon Valley.

In statements, investors suggested that this strategy would allow Colu to capitalize on trends in the “new digital economy”.

“Their scalable solution has created a way to make blockchain based currencies accessible and immediately available to the market,” Santo Politi, partner at Spark Capital, said in a statement.

Tools and services

Such a positioning may seem surprising given the recent traction shown by the alternative blockchain platform ethereum, which was developed in part to enable digital currencies to be more easily launched.

However, Meiri sought to position this project as one that wouldn’t be able to reach Colu’s target market given that it is providing tools for currency issuance “not just code”.

Meiri pointed to recent issues with the ethereum platform, including the ongoing debate about the ease with which users will be able to use the technology to create advanced smart contracts, as potential indicators that its thesis on the market is correct.

“The only blockchain you can really count on right now is the bitcoin blockchain. This is the only real solution that is working and it’s working for specific use cases,” he said.

Meiri also indicated that a combination of permissioned and public blockchains would be needed to deliver the service, which he said makes Colu a better platform for users who may want to launch local currencies.

Central bank play

The announcement also comes at a time when another set of currency issuers is beginning to demonstrate an interest in blockchain technology, national central banks.

While Meiri didn’t shy away from suggesting the project could one day scale to support even larger use cases, he said the emphasis today would be on developing its tech on a smaller scale.

“We’re not waiting for central banks. It could take three to five years,” he said.

Still, Meiri hinted that Colu has strategic partners that it is working with that could allow it to scale its local currencies from single neighborhoods to whole cities.

More immediately, Meiri said the funding will help expand the Colu team from 23 employees today to more than 30 by the end of the year as it seeks to bring its technology to more users.

Meiri concluded:

"For us, the funding is all about finally bringing the technology to users."

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

Images via Colu.com

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Blockchain-based payments app Circle has raised $60m in new funding from China-based investors, an announcement that coincides with its unveiling of a dedicated domestic subsidiary, Circle China.

The Series D funding was led by Beijing-based investment firm IDG Capital, with Breyer Capital, General Catalyst Partners, SilverLake co-founder Glenn Hutchins and former IBM CEO Sam Palmisano contributing funding. Circle also added new strategic partners in the region including Baidu, CICC Alpha, China EverBright Investments, Fenbushi Capital and CreditEase.

In interview, Circle co-founders Sean Neville and Jeremy Allaire indicated that the Series D round will be used to fund its global operations, and that Circle China had been capitalized six months ago with a separate seed round.

However, Neville and Allaire used the announcement to emphasize how they believe Circle is now taking steps to build a truly global payments experience, one that will soon be able to allow users in the US, Europe and China to exchange value with the ease of a text message.

Allaire told CoinDesk:

“We don’t think of ourselves as focused on remittance or money transfer, we don’t think those categories will exist. For us, this capital is all going in the global company and that’s investment in consumer marketing, that’s the focus.”

Allaire sought to describe Circle as “not another closed network” like peer-to-peer payment platforms like Venmo or Transferwise, companies to which the startup’s business model market observers allege is now perhaps most similar.

In this way, Neville and Allaire assert that their core advantage is not that Circle will excel in providing money transfer services to consumers, but rather a more mature version of the company’s app will transcend boundaries, and thus, be more user friendly.

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

Image via Shutterstock

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The Cornell computer scientist who helped identify vulnerabilities in The DAO revealed 10 new exploits in its code at an event in New York.

The statements from Emin Gün Sirer, a longstanding critic of the project, come amid broad concern over developments at The DAO, a smart contract-based funding vehicle built with ethereum that has effectively collapsed following an exploit of a vulnerability within its smart contract code.

Sirer warned that, while the vulnerability that led to the removal of tens of millions of dollars worth of the cryptocurrency ether is now well-understood, much remains to be fixed before another DAO (decentralized autonomous organization) can be launched.

The statements were the first to lay a clear path forward for how to build an organization run largely with code, and thus fulfill the original vision of The DAO.

Sirer, who is the co-director of the Initiative for Cryptocurrencies and Contracts (IC3), an academic research project focused on the technology, used the forum to lay out a detailed account of possible exploits for such projects that go all the way down to the Ethereum coding language itself.

Sirer went on to argue that the issues highlighted are relevant when looking at the question of creating similar projects in the future.

He told the crowd:

"The DAO 2.0 requires much, much more effort. It’s a much deeper field than people might think."

Vulnerabilities detailed

In the days leading up to the initial bug detection, Sirer and his colleagues published an overview of what they called a “recursive call” vulnerability that allowed the exploiter to move funds into a so-called “child DAO” that breaks off from the original DAO.

Addressing a crowd of about 70 bitcoin coders, ethereum developers, computer scientists and financial professionals at last night's event, Sirer went into detail about other possible threats.

For example, the “stalking” bug – which is currently being used to mount a counter-attack against a white-hat hack designed to move funds into a safe account – is an example of one of the vulnerabilities Sirer identified at last night’s event.

The 10 vulnerabilities Sirer discussed in detail include a "concurrent proposal trap" whereby an attacker makes an arbitrary proposal such as 'Do you believe in God?' designed to entice a high degree of response, and include long voting period during which the token used to vote becomes trapped. Then, a competing proposal could be made by the attacker after the funds have been locked up.

Another exploit, called a "majority takeover" attack, disguises a majority vote by a single party that might benefit from a successful proposal by splitting the voting power into smaller votes cast separately, for which he said there is no known defense.

Some of the exploits discussed last night were published in detail in the earlier paper. A full list, along with an account of how The DAO functions, can be found here.

"The whole point of smart contracts is to create exciting, weird financial instruments," Sirer told attendees, adding:

"This is not exciting, it’s just weird."

Tough love

In the hours leading up to yesterday’s event, Sirer engaged in an Twitter debate in which he argued that the Ethereum community should ostracize founding members of Slock.it, a Germany-based startup that wrote The DAO code and spearheaded its deployment.

At the event in New York, Sirer doubled-down on his call, naming founders Stephan Tual and Christoph Jentzsch, in particular.

But while Sirer had some harsh words for Slock.it, he said the problems extend to ethereum itself. He called The DAO a "ginormous $220m bug bounty", a criticism that extended not only to DAOs, but to ethereum’s smart contracts coding language Solidity, which he said is a work in progress.

Sirer told attendees:

"We should redesign Solidity, we should rethink what it means to write secure state machines, how we should specify them and how we should make sure that they do not mess up."

Image by Michael del Castillo for CoinDesk

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