Iowa University Explores Effectiveness of Blockchain in Detecting Online Fraud.

The University of Iowa, an educational institution with a considerable reputation for its engineering and technology research departments, recently released a paper on detecting fraud for online businesses using blockchain technology. Researchers at the university looked into the effectiveness of blockchain technology in detecting objective fraud and ultimately, its applicability in the online fraud security market.
Blockchain technology, can be used to secure user data, ratings and other valuable information on online platforms and businesses such as marketplaces; its immutable, transparent and robust infrastructure enables data to be stored in an unalterable ecosystem, eliminating the possibility of information and data manipulation.

Blockchain’s Weakness in Rating or Subjective Fraud

The term rating or subjective fraud in the online business or marketplace industry stands for user ratings or consumer feedback which future consumers can rely on to make a purchase from online merchants. Marketplaces like Amazon, eBay and Fiverr have built-in rating systems for customers to rate the service or product they have received.
“User-driven rating systems (i.e., eBay or Amazon) compute their rating scores based on users’ rating. In user-driven rating systems, the rating score can be calculated either as the difference between all positive and negative scores. or as the average of all ratings (e.g., Amazon),” said the research team.
Prior to conducting their study, researchers at the University of Iowa believed that blockchain technology will flawlessly execute most of the operations of an online platform when it comes to data management and storage. However, the team discovered one critical weakness of blockchain technology, which ironically is its most desirable strength; immutability.
Ratings are an important aspect of online platforms as they determine the legitimacy of a merchant or a seller. However, many merchants tend to rate themselves through third-party service providers to make themselves stand out on the platform.
For instance, there are service providers that offer a certain number of ratings and comments on a marketplace for cash or digital payment in return. In private platforms or ledgers, network administrators can overturn these fraudulent votes or ratings. The so-called “rating manipulation” can be avoided with reports sent to the network administrator.
With blockchain technology, it is virtually impossible to overturn these ratings as data and information stored on the blockchain network is irrefutable.
To accurately measure the efficiency of blockchain technology in online fraud detection, the research team looked into the applicability of the blockchain in the following types of attacks:
  1. Constant attack: fraudulent reviewer consistently provides unfair ratings.
  2. Camouflage attack: a strategical fraudulent reviewer injects fair ratings to camouflage himself/herself. This makes fraud detection incredibly difficult.
  3. Whitewashing attack: a fraudulent reviewer injects unfair ratings to a target for a  certain period. The reviewer washes his reputation by creating a new account.
After testing blockchain technology by applying it to the three situational attacks, the team at Iowa University discovered that the blockchain is effective in preventing objective fraud, in which all cases of fraud or mismanagement of data is based on factual information such as numbers.
However, in subjective fraud, which occurs in most online businesses, marketplaces, and platforms, blockchain technology is less efficient as there is no ground for the technology to base on to detect fraud.
“Blockchain systems are effective in preventing bad mouthing and whitewashing attack, but they are limited in detecting ballot-stuffing under Sybil attack, constant attacks and camouflage attack,” said the team.
Based on the findings of the research team, online businesses must acknowledge that the blockchain is not always useful and applicable when it comes to data. Companies need to be cautious when implementing blockchain technology to manage objective and subjective data, as blockchain-based systems could have issues dealing with subjective information.

OpenBazaar Receives $3 Million, Progresses with v.2.0.

OpenBazaar, a decentralized network for trading, announced December 13 that they have received funding amounting to $3 million from BlueYard Capital, a Venture Capital fund with a preference to “entrepreneurs looking to upgrade the internet.” Investors Andreessen Horowitz and Union Square Ventures, who have invested $10 million into crypto hedge fund PolyChain Capital, were also involved.
Compared to centralized services that most consumers use such as eBay, Amazon, and Alibaba to name a few, OpenBazaar does away with the high fees required to list and sell goods on their platforms. Personal information is not mandatory as well, ensuring users identities are not stolen nor sold for advertisement purposes.
Brad Burnham, managing partner at Union Square Ventures, said, “The reach and diversity of OpenBazaar usage shows the potential for decentralized applications: within a week of its release buyers and sellers from 129 countries joined the network and began transacting with each other for free.”
“We believe OpenBazaar has an opportunity to fundamentally transform the market structure of commerce, and we’re excited to welcome BlueYard as a new partner and co-investor in OB1.” 
With no intermediary, there are no fees, no requirement to reveal personally identifying information, as well as absolute freedom in buying or selling what you want, at what prices. OpenBazaar is open source as well, allowing anyone to review and audit the source code, as well as contribute improvements to it.
Since its launch in April of 2015, the project has already made leaps and bounds regarding development. The project received $1 million of funding in June, revealed a new UI, and even rebuilt the networking/DHT stack.
With the new funding, OpenBazaar looks to launch 2.0 of the project, and with it IPFS, meaning that OpenBazaar store data no longer needs to be hosted purely locally by one server. Also, new measures will enhance user privacy, such as the implementation of TOR as well as private stores and listings, accessible only by users that have the OpenBazaar address.
Another major feature looking to be introduced in version 2.0 is the ability to request goods and services, instead of only being able to offer them. This allows the market to see better what there is demand for, and respond to that demand.
While there is no timeline on when OpenBazaar 2.0 is to be released, the company have requested feedback from both buyers and sellers, where people can voice their opinion about changes or join their Slack channel to learn more and contribute.

Global War on Cash Intensifies, Demand For Gold, Silver & Bitcoin Surges.

A global war on cash has begun, as many countries have imposed heavy capital controls and have placed restrictions on fiat money. The increasing control of the authorities over traditional forms of money is pressuring investors, traders, households, and businesses to look for alternative safe haven assets like gold and bitcoin.
Over the past few months, an increasing number of leading economies, central banks and governments have imposed strict currency controls and asset regulations to prevent the devaluation of their national currencies, to crackdown on criminal organizations and to eliminate the presence of cash. Despite their efforts, none of the initiatives demonstrated positive outcomes for the general population that is struggling to finance daily operations.
Three countries, India, China and Venezuela, were victims of heavy criticisms this week from financial experts, analysts and investors as their strategies to enhance the economy have backfired and led to even more chaos for businesses, workers, and households.
The Chinese government, for instance, slashed the withdrawal limit of ATMs in Macau by half, meaning China UnionPay network customers can only withdraw $626 daily, effective as of December 10.
The Australian government is also considering taking the A$100 banknotes out of circulation. Kelly O’Dwyer, Revenue and Financial Services Minister, stated that the move was established to recover billions of dollars in taxes, stating, “The whole point of this crackdown on the black economy is to make sure we close down any potential loopholes.” An expert panel will advise the Australian government on what action to take, although O'Dwyer did not rule out imposing a limit for cash transactions, such as mirroring the 1,000 limit in France.
Furthermore, countries like South Korea and Denmark have begun to examine digital networks and blockchain-based systems to replace their current fiat-based monetary systems. The Danish government, and its central bank in particular, have announced their intentions to examine the use of an e-Krone, a digital version of the Danish krone.
The Danish central bank further noted that it will outsource its cash production in 2017, but believes cash is no longer needed and should not be in circulation as only 20 percent of the population uses cash. This also means that 80 percent of the population that holds money in the central bank or other commercial banks will not be able to recoup their money. Essentially, they are holding an IOU in the banks, which soon will be able to produce an unlimited amount of the e-Krone to support the economy.
“Cash and notes are not an alternative to electronic payments. We went beyond that many years ago,” said governor Lars Rohde, implying that the bank has begun to consider having a digital form of money as the national store of value.
The digitalization of money is inevitable and analysts have predicted it to come to fruition by the end of 2020. However, as Shaun Bradley, an author at stated, private blockchains or digitalized financial networks are dangerous as a significant level of trust and dependence exists between the service provider and users.
“The greatest threat to individual freedom is financial dependence, and as long as your wealth is under someone else’s control, it can never be completely secure,” said Bradley.
Thus, while digital forms of money or networks will most likely replace cash in the short term, decentralized and independent networks and protocols like bitcoin should be considered as the global currency, rather than private and permissioned digital systems of banks that will have full control over people’s wealth.
As banks continuously hinted the formation of digital financial networks and elimination of cash, investors, traders, businesses and individuals have been responding by showing increasing interests in safe haven assets like bitcoin and gold.
Physical assets like gold, however, can be seized, taxed and confiscated, as seen in India lately. Because of this precedent for the limitation of physical stores of value, the demand for bitcoin has surged in most countries, pushing its price to a three year high. Another beneficiary has been silver.

Lisk Rockets Forward With Roadmap Enhancements.

Lisk, the Berlin-based blockchain application platform that enables its users to build applications in JavaScript, has announced that it’s mainchain has been stabilized and governance model bolstered. This news marks a significant milestone in the company’s quest toward widespread adoption.
With this development, delegates are now able to generate/forge blocks and be rewarded for it, a process similar to bitcoin mining, while ensuring the decentralization of the Lisk network for the first time. Prior to this, the network was tied to a managed system where the nodes of 101 delegates were operated and controlled by the Lisk team. Now, all delegates are under the purview of 101 different community members; a decentralized democracy model that allows Lisk to boost its case for being a world-leading provider of blockchain applications.
The stabilization of the mainchain will result in massive advancements within the Lisk ecosystem. Firstly, the Lisk blockchain is now truly decentralized and trustless, allowing delegates to control their own nodes without supervision or governance by the Lisk team. Secondly, the activation of forging rewards allows LSK holders to either choose to keep their income or reinvest it back to the Lisk network with the aim of financing proposed community projects.
These forging reward incentives flowing into a growing community encourages friendly competition; an environment where users will work harder and faster to secure votes in the hopes of gaining entry into the list of the top 101 delegates.
Says Lisk CEO Max Kordek: “This achievement bolsters Lisk in a big way, and parallels most of the very reasons blockchain technology exists; to allow greater financial freedom, to reward network contributors, to heighten the peer to peer experience and to do away with a central point of authority. We’ve created opportunities for the strongest Lisk supporters to enter the top 101, earn LSK forging rewards, and give back to the system through their own proposals. To be a part of a decentralized community is appealing in its own right but building a decentralized system with active delegates is something entirely different.”
Lisk at its core is a decentralized platform allows for the deployment, distribution, and monetization of sidechains onto the Lisk blockchain. The Lisk network is operated using a highly efficient Delegated-Proof-of-Stake (DPoS) consensus model, which is secured by democratically elected delegates.  The cryptocurrency underpinning the Lisk platform is called LSK.
The company was founded by Kordek and Oliver Beddows in 2016, fueled by a crowdsale that attracted over 14,000 BTC in funding (which is now equivalent to $10 million.) This ICO made history by becoming the third most successful cryptocurrency crowdfund to date, the largest in Germany, and one of the top 25 crowdfunds ever.
Currently valued at over $14 million, LSK, the cryptocurrency underpinning the platform, is situated prominently as one of the world’s most valuable digital currencies.
Lisk, headquartered at the Sony Centre in the iconic German business district, has attracted developers from around the world. Also, prominent advisors like Charles Hoskinson and Steven Nerayoff have contributed to foster a growing ecosystem around blockchain applications and services.
Lisk’s latest development follows an ambitious series of improvements launched last month including a Delegate CampaignProposal Contest and Community Fund. These three events paved the way for the Lisk community to grow their already successful network by empowering Lisk holders to make community-led decisions.
“The Lisk community is essential to our growth and their support will be the only way to achieve our goals in the next few years. By giving them a platform to have a voice, the community can administer and deploy the tools they need for sidechain development by their own initiative. We are thankful that our community showcases demonstrated passion, support and understanding of the blockchain technology and all of its benefits,” Kordek added.
Concludes Kordek:
“We want to be as open and transparent as possible and unveiling our future commitments was a special moment for us. We believe the resulting outcome of our efforts will supercharge the democratic and decentralized nature of our blockchain while providing a foundation for long-term sustainability and success.”

Overstock Successfully Issues Shares Over the Blockchain.

Overstock has always had a forward stance when it came to Bitcoin, being one of the first major retailers to accept the cryptocurrency. Now they have taken it a step further, making history by issuing shares by leveraging the Bitcoin Blockchain.
This was accomplished through Overstock's subsidiary Medici, which owns 81 percent of , or 'T Zero.' T Zero is touted as the world’s first blockchain-based trading platform. The modular and adaptable platform creates an “authenticated, immutable ledger,” and Patrick Byrne hopes to license it to not only other businesses, but use T Zero’s platform to revolutionize stock exchanges, banks, and other financial institutions.
“This offering is historic in that we have successfully issued public securities that exist only on a blockchain,” said Overstock CEO Patrick Byrne.“In doing so, we have demonstrated to the world that there is indeed a path toward applying blockchain technology to capital markets in a way that complies with regulatory requirements and is accessible and practical for both issuers and investors. In the process, we raised a meaningful amount of capital, which Overstock can use to continue fueling our growth.” 
Byrne calls the issuing of shares on the blockchain a “Sputnik Moment.” Not only is it a historical first, but “it demonstrates that we are live.” After having the operation approved by the SEC last December with as much as $6 million spent in legal fees just to make sure it was fully compliant with both the SEC and FINRA, investors are now able to trade the 126,565 shares that were issued over tØ’s blockchain.
With that being said, stock prices for Overstock have been relatively undisturbed, with Overstock shares closing at $17.95 at the time of writing. The news has had a definite positive impact on share prices, especially from the $13.00 low Overstock witnessed in November.
Bryne claims Overstock and its subsidiary are in talks with foreign governments discussing the possibility of launching exchanges using the technology as well. This comes at a time where financial heavyweights such as Goldman Sachs and Banco Santander are withdrawing from R3. Over time, more firms are expected to join the T Zero platform, creating a small but growing ecosystem of stocks that provide transparency for regulators.

Kraken Awards $10,000 to Winners of BTC-ETH Portfolio Challenge.

In a challenge hosted by Kraken, the Investment Case Study Competition, Tulane University’s Freeman School of Business has won the top prize of $10,000. They provide evidence that a 67:33 Bitcoin to Ether ratio for a hypothetical portfolio would provide a diversified investment while still seeing outstanding returns.
The crypto-related challenge posed by Kraken and The Economist to 13 teams at business schools located globally was as follows:
“Bitcoin vs Ethereum: You have $1M to invest across these two blockchain technologies by buying bitcoins and ethers – the digital assets or “cryptocurrencies” that power these decentralized computer networks. You cannot touch your investment for the next 5 years. How much of that $1M do you invest in each? Why?”
The Freeman School of Business from Tulane University suggested using the 67:33 ratio in a minimum variance portfolio (MVP), where assets are less risky when invested together based on the expected rate of return.
This method was examined with the utilization of multiple regression models, to forecast prices of Bitcoin and Ether, and these models showed that the MVP had the second highest return following the full Bitcoin portfolio. Also, back-testing showed that the team’s chosen MVP had the lowest variance and comparable returns to a full Ether portfolio. The 52-week Monte Carlo simulation also displayed similar results, shown below.
While the team’s evidence points to strong support for their choice, they also stated that:
“the [portfolio’s] combination strikes an intuitive balance between the upside potential of Ether and the relative staying power of Bitcoin.”
Second place was awarded to the team at Ryerson University’s Ted Rogers School of Management. With their 69:31 ratio, Ryerson adopts a slightly more “conservative” portfolio by favoring Bitcoin a little more than Freeman. The team analyzed the historical performance of both currencies and by extrapolating these values, formed a five-year projection.
Coupled with conversations of industry leaders and adjusting the estimations for the variance, the team weighted their findings and came to the conclusion that while Bitcoin offered a higher expected value, a significant percentage should be allocated towards Ether for the sake of diversification.
Third place is, even more, Bitcoin dominant than the first two, with a 78:22 ratio. BYU Marriott School of Management differs from the other two in that instead of relying heavily on historical data to come to weighted investments; the team assessed the question “through an extensive evaluation of seven fundamental attributes that are indicative of the potential longevity of each currency.”
As the data size for both of these digital assets is quite small, as well as being extremely volatile and could be completely irrelevant in five years, BYU takes a more theoretical approach with the same concision in the end; Bitcoin should be the majority of an investor's cryptocurrency portfolio.
Kraken may have created this case study for their use, and may indeed have a significant amount of funds they would like to hold without touching for several years with an expectation of returns associated with cryptocurrency. Regardless, investors could also use the data publicized in their own portfolio’s, balancing allocation to around 67 percent Bitcoin and 33 percent Ethereum for the best balance between risk and reward.

How the Blockchain Could Have Saved 34,000 Client Data Files.

Quest Diagnostics, a public clinical laboratory service provider with a revenue of $7.5 billion in 2015, lost 34,000 sets of valuable client information in a major hacking attack, announcing an investigation into the attack on December 12. During the data security incident, Quest Diagnostics admitted that the name, date of birth, lab results and telephone numbers of its clients were stolen.
According to the Quest Diagnostics IT and development teams, an undisclosed group of hackers gained access to the company’s internal system called MyQuest by Care360 and stole Protected Health Information (PHI) from its central database. More details of the hacking attack have not been disclosed and the company’s contracted cybersecurity firm has yet to unravel methods used to infiltrate the company's database.
“When Quest Diagnostics discovered the intrusion, it immediately addressed the vulnerability. Quest is taking steps to prevent similar incidents from happening in the future, and is working with a leading cybersecurity firm to assist in investigating and further evaluating the company's systems,” said the Quest Diagnostic team.
One of the most concerning aspects of this hack and data theft is that the Care360 online application is currently being used by many hospitals and healthcare corporations across the US. Since its launch in 2010, it has attracted the likes of doctors and medicare institutions for its flexibility and functionality.
"One factor that influenced our doctors to choose Care360 EHR is that Quest Diagnostics was behind it," said Dr. Paulo Andre in 2010. "It's available online from anywhere. I use it in three different hospitals when I'm on call. Each time I need to get a piece of information regarding one of my patients, I just enter the name of the patient to get the information I need. I can check prior lab results, MRIs, my notes, or my colleagues' notes, and make a clinical decision very fast. It's a very easy interface."
However, since 2010, the company has not carried out any updates or overhaul of its internal systems and databases. Its structure remains despite the fact that leading doctors, surgeons, physicians and hospitals around the US rely on this platform to embed sensitive patient data, the online platform is not encrypted.
While Quest Diagnostic claims that it will address the vulnerability, the vulnerability or weakness in the platform hasn’t even been disclosed by the company and the cybersecurity firm it is collaborating with.
To avoid the disastrous theft of data within the healthcare industries, various multi-billion dollar firms, including Capital One, are partnering with blockchain startups to secure healthcare records and important patient data on the immutable and unalterable ledger of a blockchain network.
“We’re seeing an unprecedented transformation in the payments space as rapid advances in digital technology are reimagining the client experience. We see the new network models and data analytics capabilities as an opportunity to reinvent treasury management to better meet the needs of clients, not only increasing payment efficiency but also generating actionable information about their business,” said Capital One executive vice president Patrick Moore.
Moreover, major research and professional services firms including Deloitte have released various papers and research on the blockchain technology’s potential in the healthcare industry. RJ Krawiec, Deloitte Consulting LLP principal and the leader of Federal Innovation and Translational Medicine at the company, stated that current technologies are incapable of staying on par with the roadmap presented by the Office of the National Coordinator for Health Information Technology as they cannot offer secure network infrastructure and transparency of data.
The MIT has been working on such a project, known as MedRec, ensuring the privacy of individuals while using aggregate data to conduct medical research. Also, like the joint project between Capital One and blockchain startup Gem OS utilizing blockchain to secure health records, major laboratory service providers and healthcare software developers like Quest Diagnostics must look into emerging technologies to ensure client data is secured in a safe ecosystem.