Bitcoin Weekly 2016 January 27: Kraken and CloudFlare Twitter tiff, BitPay adds full nodes to the Azure BaaS cloud, EU will wait to regulate virtual currency
In this week’s Bitcoin Weekly, a kerfuffle caught the Bitcoin community by surprise when Kraken started to have connectivity problems and then a Twitter exchange with CloudFlare, Inc. arose. Keep reading for the blow-by-blow of information traded — which appears to revolve around an expired credit card and then an unexpectedly changed SSL certificate.
BitPay, Inc. is taking advantage of Microsoft Azure’s Blockchain-as-a-Service (BaaS) cloud platform to allow developers to open up full nodes on the Bitcoin network.
The European Union has been watching virtual currencies such as Bitcoin for a while now (along with the rest of the world), but it appears that the EU intends to stay out of the way for the moment. No regulation is expected to come down right now, but it will cautiously observe the digital money.
This and more in this week’s Bitcoin Weekly.
Kraken connectivity troubles culminate in Twitter sparring with CloudFlare
Last evening San Francisco-based Bitcoin exchange Kraken (Payward, Inc.) began to show signs of connectivity issues that led to speculation as to what had happened to the exchange. Commenting on the problems, Kraken went to Twitter.
We're still working on addressing the connectivity issue. Pay no attention to short selling trolls' claims of a hack. All funds remain safe.
— Kraken Exchange (@krakenfx) January 26, 2016
Kraken uses CloudFlare, Inc.’s business service to protect its website from DDOS attacks — which the exchange has suffered in the past. Tweets about the disruption led Matthew Prince, CEO of CloudFlare, to respond and reveal that the problems actually happened because Kraken had a credit card expiring.
According to Prince, Kraken’s expired credit card brought on three warnings and finally a suspension of service. However, Kraken wasn’t done at this point and shot a reply that put the onus back on CloudFlare.
— Kraken Exchange (@krakenfx) January 27, 2016
In the reply, Kraken acknowledges that an expired credit card had been the first domino, but on January 20 the account had been downgraded and then immediately re-upgraded and that’s when the problems started. According to Kraken’s account, the re-upgrade changed the SSL certificate used by CloudFlare, which required support for SNI (Server Name Indication, an update to TLS used for encrypted web connections). This caused connectivity problems for some clients who did not have SNI loaded; CloudFlare technical support suggested that Kraken inform clients that they should downgrade to TLS 1.1/TLS 1.2 to resolve issues.
Only recently, Kraken bought Wall Street targeting Bitcoin exchange Coinsetter, Inc. and Canada-based Cavirtex. The transfer of accounts belonging to these exchanges is still underway, and clients are waiting for their accounts to become active.
The acquisition of Coinsetter gives Kraken a larger global presence (where the exchange normally only does business in Europe), but it also shows that any exchange can suffer issues. Kraken sees the credit card expiration as only a link in a chain of technical problems — but letting a security service get downgraded does not look good for any exchange. If Kraken intends to consolidate Coinsetter and Cavirtex onto one system, it might lead to increased centralization of the exchange’s efforts, which could make it more vulnerable to similar technical problems.
The back-and-forth on Twitter between Kraken’s CEO and CloudFlare’s CEO may be unnecessary drama played out in the social media, but it does show that the Bitcoin exchange industry may still have a bit of a rocky experience ahead.
BitPay and Microsoft adding full-nodes to the Bitcoin network
Bitcoin financial processor BitPay, Inc. announced its first Blockchain-as-a-Service (BaaS) offering housed on Microsoft’s Azure BaaS cloud known as Bitcore. This developer-centric service allows anyone to launch and maintain a full Bitcoin node on the Azure cloud.
Bitcore claims to have a full set of Node.js libraries to allow people to run full nodes without any other third-party APIs or libraries. In order to run Bitcore, a virtual machine in the cloud needs Node.js, 100GB of disk storage and at least 4GB of RAM.
Any computer that connects to the Bitcoin network is known as a node; a full node is any computer that fully enforces all the rules of Bitcoin and stores the entire blockchain. These nodes are the backbone of the network and provide for the distributed nature of the Bitcoin ledger by saving and archiving the work of Bitcoin miners (who provide proof-of-work to secure Bitcoin transactions).
BitPay’s provision of the Bitcore service on the Microsoft Azure BaaS cloud is designed to help lower the barrier for entry by developers and anyone interested in participating in the security of the Bitcoin network.
The EU has no plans to regulate virtual currencies, yet
The European Union’s financial division has kept an eye on emerging cryptocurrencies over the past few months and is deciding on what to do about them. According to a news article written by NewsBTC, the EU is not looking to regulate digital currencies yet.
“It’s easy to fail when you regulate, you can be too early and too late. From the European Commission’s perspective, we are more on the monitoring side,” said EU senior financial services official Olivier Salles during a hearing on virtual currencies in the European Parliament.
“We want to understand better what is happening,” he added.
The EU has been mulling over the advent of Bitcoin technology and the rise of cryptocurrencies, which have the promise to become hugely disruptive fintech technologies. This has led to attention on virtual currencies and Bitcoin in particular, especially because that while Bitcoins are used widely for legal purposes, like any tool the technology has crossed paths with illegal activity. For example, it was the favored currency of now-shuttered black market the Silk Road and used by notorious DDoS extortion crew DD4BC.
With the market for Bitcoin and other virtual currencies expanding yearly (already venture capital funneled into Bitcoin projects has exceeded $1 billion) and the emergence of New York’s BitLicense means the whole world is watching where countries will align themselves with cryptocurrency. Looking at the bad reaction to BitLicense, this may have led to the EU feeling the need for caution rather than reckless abandon with regulation.
Blockchain Capital raises $13 million for Bitcoin and blockchain projects
Venture firm Blockchain Capital recently closed $13 million for a second Bitcoin and blockchain startup fund, according to coverage on CoinDesk. According to Forbes, the original target for the fundraiser was $10 million, but it did much better than expected.
The first fund raised by Blockchain Capital in June 2015 raised approximately $7 million.
“We are excited to announce the closing of our second fund so that we can continue to support world-class entrepreneurs who are leveraging blockchain technology to disrupt legacy industries and create new products and services around the globe,” Brad Stephens, founder and managing partner for the firm, said.
The firm drew the money over most of 2015 and intends to use the funds to make investments in over 23 startups focused on Bitcoin and blockchain projects.
Featured image credit: Dawson/Bloomberg News
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