CFTC Wants to Learn More About Ether (ETH) and Its Use on the Ethereum Network

On Tuesday (11 December 2018), the U.S. Commodity Futures Trading Commission (CFTC) issued a "Request for Input" (RFI) on "Crypto-asset Mechanics and Markets". More specifically, the CFTC is "seeking public comment and feedback in order to better inform the Commission’s understanding of the technology, mechanics, and markets for virtual currencies beyond Bitcoin, namely Ether and its use on the Ethereum Network."

According to its press release, the CFTC is expecting that these comments, all of which must be received by 60 days from the date of publication of the RFI in the Federal Register, "will benefit LabCFTC, the CFTC’s FinTech initiative, and help to inform the Commission’s understanding of these emerging technologies." The Commission says that it wants this public feedback for advancement of oversight of the commodity futures markets and for regulatory policy development. It also says that the feedback will "advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets." Comments may be submitted via the CFTC website, regular mail, or hand/courier delivery.

In addition to general feedback, the CFTC is hoping for answers to 25 questions across the following categories:

  • "Purpose and Functionality"
  • "Technology"
  • "Governance"
  • "Markets, Oversight and Regulation"
  • "Cyber Security and Custody"

Here are a few of the more interesting questions:

"Are there any existing or developing commercial enterprises that are using Ether to power economic transactions? If so, how is Ether recorded for accounting purposes in a comprehensive set of financial statements?"

"Does the Ethereum Network face scalability challenges? If so, please describe such challenges and any potential solutions. What analyses or data sources could be used to assess concerns regarding the scalability of the underlying Ethereum Network, and in particular, concerns about the network’s ability to support the growth and adoption of additional smart contracts?"

"Relative to a proof of work consensus mechanism does proof of stake have particular vulnerabilities, challenges, or features that make it prone to manipulation? In responding consider, for example, that under a proof of stake consensus mechanism, the chance of validating a block may be proportional to staked wealth."

"How would the introduction of derivative contracts on Ether potentially change or modify the incentive structures that underlie a proof of stake consensus model?"

The following question is especially interesting (see if you can spot anything wrong with the question):

"In light of Ether’s origins as an outgrowth from the Ethereum Classic blockchain, are there potential issues that could make Ether’s underlying blockchain vulnerable to future hard forks or splintering?"

 

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Peter Schiff Admits to Entering PIN Instead of Password for His Blockchain Wallet

Siamak Masnavi

On Wednesday (January 22), famous gold bug Peter Schiff finally admitted that he lost access to the bitcoin held in his Blockchain Wallet because he had misunderstood how this wallet works. However, not all the blame for this incident should be pointed to Schiff.

Schiff is the CEO of Euro Pacific Capital, a full-service, registered broker/dealer specializing in foreign markets and securities, and founder and Chairman of SchiffGold, a full-service, discount precious metals dealer. He is also a man who is extremely bullish on gold, bearish on the U.S. dollar, and highly skeptical about Bitcoin.

On 4 July 2019, Schiff revealed that he owned some Bitcoin (BTC), Ether (ETH), and Bitcoin Cash (BCH), and said that he was going to HODL his bitcoin no matter what happens to the Bitcoin price.

Then, last Sunday (January 19), Schiff took to Twitter to express his anger with Bitcoin after allegedly losing access to the crypto wallet that holds his bitcoin:

Although Schiff said at the time that the wallet app he was using -- which we know know was the iOS version of Blockchain Wallet (made by Blockchain.com) -- had "somehow" become "corrupted" and that is why his password -- which he was sure of remembering correctly -- was being rejected, most people in CryptoTwitter seemed to believe that this was just a case of a "boomer" who has simply forgotten his wallet's password:

Eric Voorhees, Founder and CEO of ShapeShift, whom Schiff claims was the person who set up Schiff's wallet in the first place, says that it is Schiff who is to blame (and not Bitcoin) for forgetting his password and not making a note of his wallet's recovery phrase:

However, last night (January 22), three days after first reporting the loss of access to his entire Bitcoin holdings (which had mostly been gifted to him by members of the crypto community on Twitter), Schiff admitted that this situation was not due to a corrupt wallet but the fact that he had been confused about the concepts of PIN and password for his Blockchain Wallet; what made things worse was that he did not know/have neither the password nor the 12-word backup/recovery phrase: 

Having spent some time playing with the Blockchain Wallet, here is one possible explanation for what really happened. 

When you create a new Blockchain Wallet, you are asked to specify an email address (which acts as your username), a password (which is needed in case you ever logout or are logged out of your wallet), and a 4-digit PIN (which the wallet apps asks for -- if you have not setup biometric authentication -- whenever it is restarted, in order to "decrypt" your wallet). 

It is essential to note that the Blockchain Wallet does not force the user to record a 12-word or 24-word recovery/seed phrase at the time that the wallet is being created, i.e. this step is optional. After the wallet has been created, you need to go to the app's menu and choose "Backup Funds", at which point you are asked to write down each of the 12 words of the "backup phrase" the app assigns to your wallet.

So, if Schiff is telling the truth about never knowing the password of the backup phrase, then it looks like the person who created the wallet for him (i.e. Vooerhees) may have not told Schiff the wallet's password and not told him to make a note of the backup phrase.

Therefore, we can certainly blame Schiff for not bothering to understand how his wallet works, but it is also true that developers of crypto wallets need to do more to improve wallet usability in order to prepare for the mainstream adoption of crypto.