A number of companies in the UK are stockpiling bitcoins in the event of a ransomware infection, according to a recent survey of 250 information technology specialists in the country.

Data security firm Citrix released the results of a survey it conducted with public relations firm Censuswide, which suggested that ransomware – malware that encrypts up a computer’s files until a ransom is paid (usually in bitcoin) to unlock the data – is a prevailing concern among some companies in the UK.

Thirty-three percent of those surveyed said their companies maintain a stash of bitcoin just in case.

Smaller companies, or those with less than 1,000 employees, appear more like to do so. Thirty-six percent of respondents with 250 and 500 employees, and 57% with between 501 and 1,000 employees, indicated that they had bought bitcoins for possible ransomware events.

Larger companies appear to be less willing to actually stockpile bitcoin for this purpose. Eighteen percent of businesses that employ more than 2,000 people said they had taken a similar approach to the issue, though 35% told Citrix and Censuswide that they’d be willing to pay a data ransom if required.

Despite the small sample size – only 250 specialists within the UK were surveyed – the results suggest that at least some companies are preparing for the worst.

Meanwhile, ransomware events continue to make headlines. Earlier this week, Canadian news outlets reported that the University of Calgary had shelled out C$20,000 to free its email server following a ransomware incident.

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China-based bitcoin mining firm Canaan Creative announced yesterday it had agreed to sell its operations to a publicly listed electronics firm in a deal that would mark the biggest exit for a bitcoin company to date should it be approved by local regulators.

The reported cash and stock stock deal, which has yet to be confirmed by the purchasing party Shandong Luyitong, values Canaan (known commonly by the name of its bitcoin mining chip brand, Avalon) at approximately ¥3.06bn (roughly $466m), according to its representatives. The company further said that Luyitong paid roughly ¥1bn (approximately $152m) in cash, and issued 81 million shares at an average price per share of ¥24.57 ($3.74), representing an additional ¥1.99bn (roughly $303m).

Canaan said that its strong sales projections fueled the valuation, and that it anticipates a net profit of $27m for 2016, with expectations of $39m and $53m in 2017 and 2018, respectively.

Big numbers aside, the deal isn’t yet complete.

Though both sides have signed an acquisition agreement according to Canaan, the Chinese government still has to greenlight the purchase as it involves a domestic firm with a publicly listed stock. Canaan said that while it expects the deal to go through, regulators in the country will have the final say over whether the purchase will pass review.

If approved, Canaan will become a wholly-owned subsidiary of Luyitong, and all current staff members would continue working for the firm, including founder and CEO NG Zhang.

Zhang told CoinDesk:

"This deal is a vote of confidence in the three years of products and services we invented and released. From the first FPGA-based hardware the Icarus and Lancelot, continuing to the Avalon6 blockchain hardware miners, this acquisition and investment provides us the necessary resources and autonomy to make even better products and innovations that our customers expect."

One of several companies worldwide to work on an application-specific integrated circuit (ASIC) for bitcoin mining, Canaan’s Avalon was the first consumer-grade mining product to hit the market. Bitcoin mining is a process by which entities compete to validate transactions and add blocks to the bitcoin blockchain in exchange for a 25 BTC reward.

However, the sale comes amid a time of transition for the bitcoin mining industry ahead of an upcoming decline in the network subsidy paid to miners, which is expected to fall from 25 BTC to 12.5 BTC sometime in July.

In recent weeks, KnCMiner had a less successful end to its operations ahead of this transition, filing for bankruptcy, and many industry observers believe more volatility in this industry sector lies ahead.

CoinDesk will continue to follow this developing story.

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Blockchain app development startup BlockCypher has expanded its platform to include support for Ethereum, a move the company says will see professional services firm Deloitte among its first users.

BlockCypher CEO and co-founder Catheryne Nicholson says the addition of Ethereum was in response to an increased demand from more than half of the startup's client base, which also counts remittance app startup Abra among those using the new toolset.

Speaking with CoinDesk at the Exponential Finance Conference in New York, Nicholson estimated that more than half the company’s developers have asked for an Ethereum integration.

Nicholson said in an interview:

"Our bread and butter is developers. What they ask us for is what we implement. The number one ask was Ethereum, so we had to bring to life our APIs on the Ethereum blockchain."

Launched in 2014 to provide app-building services for blockchain developers, the company last year raised $3m in a seed funding round from Tim Draper and Yahoo co-founder Jerry Yang’s AME Cloud Ventures, among others.

The beta release launched today includes APIs for hosting Ethereum accounts, tracking balances and facilitating transactions.

Nicholson says the platform's Turing-complete programming language has driven interest among the startup's customer base.

"It’s a much more robust scripting language," she said. "It’s easier. It’s in standard programming language user interfaces, it’s not a machine language."

According to Deloitte principal Eric Piscini, his team of 12 US-based blockchain specialists have been working with the startup to develop two prototypes built on the bitcoin blockchain.

What attracted Piscini to the Ethereum integration, he said, is that the blockchain team won’t have to learn any new skills to start building with the new offerings. Deloitte announced that it was first working with BlockCypher earlier this year.

Piscini told CoinDesk:

"If you need smart contracts you will mostly go to Ethereum if you need a basic exchange of value you use the bitcoin blockchain."

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Following the publication of a report by the US Office of the Comptroller of the Currency (OCC) on FinTech innovation in March, six blockchain businesses and advocacy groups have submitted public comments that shed light on how they’re hoping to inform and influence the regulator’s future activity in the sector.

While positive about the OCC’s action to better understand the industry, the majority of the respondents used the forum to advocate for the regulator to create a national licensing regime that would ease barriers to entry for startups. Industry representatives argued that what is needed is an approach that allows startups to bypass the state-by-state licensing process that they say is discouraging domestic innovation.

Such an argument was put forth in various forms by industry participants as diverse as bitcoin exchange Coinbase, bitcoin payments app Circle, industry advocacy group Coin Center and distributed ledger startup Ripple in comments that have now been made public.

Ryan Zagone, director of regulatory relations at Ripple, wrote:

"Our regulatory regime lacks an efficient national licensing option designed for companies with national or global reach. This gap limits the ability for these companies to grow in the US. In many cases, they relocate or focus their growth in countries with more efficient licensing regimes."

Jerry Brito, executive director at Coin Center, and John Beccia, CCO of bitcoin startup Circle, built on this idea in his remarks, wherein they advocated that the OCC create a new “federal alternative” to state money transmission regulation.

"We believe a new charter at the federal level could lead to a race to the top and innovation among regulators at the federal and state level," Beccia wrote.

Elsewhere, respondents suggested the OCC set up a task force or innovation office to work more directly with the FinTech industry, so it can better understand the nuances of the specific technologies and business models that are being employed by startups.

Respondents also spoke directly to the nuances of blockchain technology and what they perceive as the difficulty the industry has had fitting into current regulatory regimes designed for more traditional payment systems.

The negative repercussions of this were perhaps most strongly voiced by Chamber of Digital Commerce president Perianne Boring, who wrote:

"The digital currency and digital asset companies involved in MSB activities are similarly being denied access to banking services without appropriate initial due diligence aimed at understanding the actual business model."

International influence

In what has become a common industry refrain, many representatives encouraged the OCC to look to the UK, Singapore and Australia as examples of jurisdictions that are more accommodating to innovative startups.

Brito, for example, asserted that the OCC should model its actions after the UK Financial Conduct Authority, which he said has had a positive impact on its domestic FinTech ecosystem by creating an inclusive tone.

"Profound criminal penalties await an innovator who ignores the states, or who wishes to hazard a liberal interpretation of when an activity is not money transmission, or who – succinctly – chooses to seek forgiveness rather than permission," Brito wrote.

Brito’s statements sought to connect such difficulties as delaying the larger benefits of new financial technologies, which he argued should be apparent in the wake of a recent incident at centralized payment network SWIFT.

The comments were echoed in a filing by Beccia, whose firm recently secured an e-money license in the UK, and who lauded the UK as an example the OCC should follow.

"In addition to encouraging innovation within its borders, the UK regulators have focused on international coordination efforts to further foster innovation and assist UK FinTech companies," Beccia wrote.

Beccia went on to position further action from the OCC as a way for the US to restore its competitiveness and "change the dynamic" for FinTech.

Firsthand exposure

Among these submissions, banking consortium R3CEV arguably emerged as an outlier as its comments were more directed at the OCC’s relationship with its clients in the incumbent financial industry.

Still, R3 managing director Charley Cooper argued the OCC should seek to work more closely with the industry, including startup firms.

He said:

"The OCC should consider various ways to actively engage with the private sector – both financial services companies and technology companies alike – to better understand and support the new technologies coming to market."

Cooper went so far as to state that the OCC should consider taking steps to work "first hand" with startups in the industry by developing an in-house understanding of the technology, while emphasizing the collaboration is needed for all market participants to alleviate concerns about new innovations.

Each respondents comments can be found in full here.

Image credit: Mark Van Scyoc / Shutterstock.com

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As stakeholders in the world's largest decentralized autonomous organization (DAO) descend into forums to debate its future, concerns are emerging about what the success or failure of The DAO could mean for Ethereum, the blockchain platform that enabled its creation.

Front and center for those invested is the idea that the fate of one of the technology's most visible projects could create a lasting impression among potential users and the public, and the fears are not without precedent.

While bitcoin continues to face difficulty with regulators and banks, Ethereum has so far been able to build public bridges with the mainstream financial world. Tests were run by 11 banks on a private version of the network in January, and invitations for its creator to help inform the work ongoing at Hyperledger and R3CEV have so far followed suit.

In contrast, bitcoin's network has secured billions of dollars in funds for years, but its reputation was shaped early on by events like the shutdown of online black market Silk Road, the rapid price fluctuations of its token and the collapse of its once-largest exchange, Mt Gox.

Against this backdrop, those close to the project are beginning to see The DAO as Ethereum’s "flagship application", one that they believe could hold the key to ensuring a lasting, favorable impression for Ethereum's technology, or scar its reputation.

Stephan Tual founder of Ethereum startup Slock.it which created the code on which The DAO is built told CoinDesk:

"You don’t want a bad story about Ethereum. If [The DAO] were to crash, people would compare it to Mt Gox."

Reality check

But why is so much riding on The DAO?

A decentralized autonomous organization that lets its members vote on how to fund projects and direct operations, The DAO has so far amassed $160m in consumer funds in exchange for voting rights in the way it spends money, prompting mainstream media attention.

Currently, those funds amount to about 14.4% of all the ether in circulation and with a mandate to invest in Ethereum startups The DAO has the potential to exercise considerable influence on the ecosystem.

But shortly after the organization successfully raised the funds its design was challenged with the publication of a critical report authored by three computer scientists who specialize in blockchain. The report advocated for further development of The DAO to be halted until certain issues they claimed to have found in the governance model were fixed.

One possible mechanism to help solve those issues is built into the The DAO's voting mechanism. While the organization’s mission is to fund other Ethereum projects the method of selecting those projects can also be used to vote on internal changes, including to its own code.

At the moment, each of the top three proposals for funding from the DAO would redefine how it operates. The moratorium proposal is the most popular to date, followed by a proposal to change the deposit required to make a proposal and a method for returning DAO tokens accidentally sent to the project. Several others are specifically aimed at the governance model.

But, it's not just entrepreneurs who are concerned either. Six of the top 10 most discussed threads on The DAO forum pertain to changing The DAO itself, ranging from giving it a new name, to changing the requirements for submitting a proposal, and concerns about the way decisions are made.

Learning from the Mt Gox implosion

At its peak, Mt Gox accounted for an estimated 80% of all bitcoin trading volume in the world.

When the exchange collapsed in February 2014 losing an estimated $350m worth of bitcoin, many heralded it as one of the many so-called deaths of bitcoin. With a current market cap of over $9bn and a 20% price increase last month, bitcoin clearly hasn’t gone anywhere, but its reputation has visibly suffered.

At the time of the Mt Gox collapse, Tony Sakich was just getting started in the industry at his first job with a bitcoin company, BitPay. Now an Ethereum consultant with blockchain services firm Venbex Group, Sakitch told CoinDesk the reason bitcoin is thriving in spite of the collapse of its largest exchange is that so much activity existed in other areas of the bitcoin economy, a point he says the Ethereum community could learn from.

To help lead the development of the Ethereum ecosystem, investment firms which have traditionally focused on bitcoin startups — such as Blockchain Capital and Digital Currency Group — have recently begun evaluating Ethereum startups as potential portfolio members.

In April some of that research culminated in a $775,000 investment in Ethereum co-founder Gavin Wood’s operation Ethcore, led by Blockchain Capital and Fenbushi Capital. Other firms such as Trust Stamp have also begun to receive VC investment.

While The DAO is naturally attractive to Ethereum entrepreneurs looking for funding, Sakich said investments from outside the organization also need to increase.

"I’m hoping that developers don’t hear all this about The DAO and stop there and think that’s their only way to get an Ethereum project done," Sakich said, adding:

"To have a strong ecosystem in Ethereum you need projects outside of The DAO and there needs to be as many projects as possible."

Dangers of parallelism

While the Ethereum ecosystem appears to be growing into a resilient group of companies, there’s still danger of what blockchain consultant Taylor Gerring calls "parallelism" in the industry.

Gerring, who works closely with the non-profit Ethereum Foundation that helps support the network, told CoinDesk that the risks of another blockchain being tainted by a massive collapse early in its development remains a concern for the wider industry.

If The DAO were to collapse, he believes, the side-effects could go far beyond just having a negative impact on Ethereum, but might spill over into blockchain technology generally speaking.

Gerring told CoinDesk:

"We should try to draw the comparison and try to ensure we’re not making the same mistakes from the past. If we make the same mistakes we could end up in a situation where there’s negative implications to all blockchains."

That said, Tual noted that he sees differences in the architecture of The DAO and Mt Gox that could lead to different results, even in the case of a project failure.

Should The DAO invest solely in firms that go bankrupt, Tual argued the project will have made a positive impact on the blockchain ecosystem.

Unlike Mt Gox, which resulted in the loss of customer funds and years-long legal disputes, a total collapse of The DAO, he argued, would leave for its legacy the jobs it created and this industry-wide dialogue.

Breaking the Mt Gox precedent

Yet, to keep The DAO from capsizing, Tual said he thinks members need to accomplish three objectives – rounding out its list of curators, amending its governance model to see after the concerns of voting members and investing in sound business ideas.

"Obviously, choosing a winner is never easy. [But The DAO is] not a crowd of people, it’s a crowd of experts," said Tual. "These are smart guys, they aren’t sheep."

To help see to the governance issues Tual said the team at Slock.it has begun work on a proposal framework that would act as a "stopgap solution" to prevent an entirely new version of The DAO code from forming so early in its development.

Under the terms of the new proposal, voters would have a right to remove themselves from The DAO after a project is passed, but before it is formally implemented. In that situation members would hold onto dividends to be paid out from previous measures in which they were involved.

With the person or people who formally launched The DAO using Slock.it’s open-source software still unknown, Tual and his fellow co-founders have become the public faces standing in for who members of the forum call DAOtoshi Nakamoto.

For his part, Tual said critics of The DAO need to also recognize that with this much money on the line projects will move slowly. But he adds that the critics themselves are very welcome.

"If you look at the criticism it stems out of concern because they want it to work," said Tual, adding:

"We all want Ethereum to be a success and we all know a failed DAO would be bad."

Image via YouTube

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The China-based company behind the first bitcoin mining ASIC has been acquired, though the exact details of the sale vary.

Canaan Creative, the company that produces the Avalon chip series, confirmed its acquisition by Shandong Luyitong Intelligent Electric PLC today in an email to CoinDesk. Shandong Luyitong is an electronics firm founded in 2003, and that is publicly listed on the Shenzhen Stock Exchange.

As for the exact amount paid in the acquisition, initial statements from parties involved or close to the deal indicate it could be the largest-ever exit for bitcoin startup.

According to news source Ifeng.com, Shandong Luyitong paid ¥3.06bn (roughly $466m) in stock purchases and cash to acquire 100% ownership of the firm. Further, it said Shandong Luyitong is planning a private share offering in conjunction with the sale, looking to sell as many as 6.79 billion shares at a price of ¥24.57 per share.

In a separate Twitter post, Jihan Wu, CEO of China-based bitcoin mining firm Bitmain, reported that the firm was to be publicly listed through its relationship with Shandong Luyitong, and that it is seeking to raise ¥0.67bn at a valuation of ¥3.1bn.

Representatives of Canaan did not immediately provide more details, stating they were unable to disclose more than what is public at this time.

The Avalon chip was the first application-specific integrated circuit (ASIC) designed for bitcoin mining to hit the market, or the process by which new transaction blocks are created on the bitcoin network. Canaan Creative was founded in 2012, releasing its first Avalon chip the following year.

The company has made no official announcement about the deal through its social media channels. Shandong Luyitong did not immediately respond to requests for comment.

Image Credit: Canaan Creative

Update: This article has been amended to reflect that the Avalon was the first ASIC to hit the market, while several other companies were also developing chips.

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