A No-Confidence Challenge Facing President Who Tried to Make Crypto a Second Form of Legal Tender in Her Country

On Monday (5 November 2018), eight senators introduced a vote of no confidence in Hilda Heine, the President of the Republic of the Marshall Islands, which is an island nation (comprised of more than 1,100 islands and islets) near the equator in the Pacific Ocean. The vote has been scheduled to take place on November 12th (since the Marshallese constitution requires a vote to be held five to ten days after a no confidence motion has been lodged).

It all started back in February 2018, the same month that the government of Venezuela launched its own (oil-backed) cryptocurrency (called the Petro) as a means of escaping U.S. sanctions. As reported by Bloomberg, in late February, members of the Marshallese parliament (Nitijela) voted to proceed with a plan to create a national cryptocurrency called the Sovereign (SOV) that would serve as a second official form of legal tender (along the U.S. dollar). David Paul, minister-in-assistance to the president, told Bloomberg in a phone interview that the government would "arrange an initial coin offering and exchanges will be allowed to apply to trade the currency,"

On 26 February 2018, the country passed the "Declaration and Issuance of the Sovereign Currency Act 2018", the purpose of which was "to declare and issue a digital decentralized currency based on blockchain technology as legal tender". The bill stated that this new cryptocurrency, called the Sovereign (SOV), would be issued by the Ministry of Finance and introduced via an initial coin offering (ICO).

Then, on 10 September 2018, the International Monetary Fund (IMF) released a 58-page report in which it warned the Republic of Marshall Islands (RMI), a small sovereign island nation in the Pacific Ocean, not to go ahead with the plan to launch of SOV, saying that using crypto as a second form of legal tender would be risky:

"The issuance of a decentralized digital currency as a second legal tender would increase macroeconomic and financial integrity risks, and elevate the risk of losing the last U.S. dollar correspondent banking relationship."

The IMF report went on to say that the potential costs of this plan far outweighed the potential benefits:

"The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender."

According to Radio New Zealand, at yesterday's session of parliament, Senator Casten Nemra, a former president of the Marshall Islands, had several criticisms of the Heine administration, the most notable being that "the plan to establish a digital currency as legal tender had tainted the country's reputation and generated criticism from major financial organizations, including the International Monetary Fund and the US Treasury Department."

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The Monero Hard Fork – Did it Help GPU Miners?

Monero, the open-source altcoin created to provide fungibility, privacy and decentralization, successfully underwent a hard fork on 9th March, 2019, resulting in a hash rate plummet of over 80% and a purge of ASIC miners from the network. This is the latest development in Monero’s ongoing war against ASICs, which is designed to prevent too much centralisation of mining hash power. But what exactly does it mean for GPU miners?

The War with ASICs

Monero performed its first anti-ASIC hard fork in April 2018 to counter ASIC machines such as the Antminer X3. The Monero Core Team vocalized specific concerns over government manipulation or imposed regulation of the network and has consequently committed further to increasing ASIC resistance, building its strategy on making scheduled hard forks to prohibiting ASICs from engaging with the network.

In deliberately excluding ASIC mining, Monero is committed to CPU and GPU miners, and resisting centralisation. Preventing potential 51% attacks is doubly important for a privacy coin like Monero, and as mining farms grow in size and the number of hash-power-for-hire marketplaces increases, it’s important to remain committed to this path. The recent Ethereum Classic attack in January shows that it is possible to carry out a 51% attack, even on an altcoin with a fairly high market capitalization.   

The one danger is that over time, Monero’s commitment to its six-monthly hard forks may be unsustainable. This is because community consensus becomes increasingly harder to achieve – the last fork spawned four Monero spin-off projects.

 The Implication for GPU Miners

Monero’s introduction of the anti-ASIC Proof of Work protocol saw hash rates plummet by 83%, boosting profitability for GPU miners who typically mine other more profitable coins. However, the hash rate is already beginning to climb, recovering to 313.75 Mh/s from 95 Mh/s.

The drop in hash rate made Monero one of the most profitable coins to mine for a time, but through the laws of supply and demand, the hash rate is already equalizing. The market didn’t rally in response to the hard fork as one might have expected, the sluggish response may be because most mining farms and GPU mining rigs require too much manual effort to change mining algorithms – although software is becoming more sophisticated.

Monero Network Hashrate

Monero’s upgrade has also introduced further security-oriented changes to the dynamic block algorithm to help mitigate potential ‘big bang’ attacks. Sticking to its privacy coin roots, the upgrade further introduced a dummy encrypted payment ID, improving the homogeneity of each transaction.

The latest hard fork is therefore a significant improvement on Monero’s founding principles of privacy, security and decentralisation which should be welcomed. Plus, it’s a boon to GPU miners, and demonstrates that if you’re agile, there’s still money to be made through GPU mining.

Matt Hawkins, CEO at Cudo Ventures

Matt Hawkins is a distributed computing expert and entrepreneur. He founded and sold a data centre business and is now applying his knowledge, network and his enthusiasm for crypto market and technology developments in Cudo Miner. Matt believes decentralised computing is better for the environment, and Cudo’s vision is to help make computing more ethical and sustainable – whether its reducing waste or creating innovative ways to support good causes.