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Crypto token supplies explained: Circulating, maximum and total supply

Circulating, maximum and total supply are all essential metrics for an investor’s price discovery. Find out here what they are and how they can be used.

Total supply vs. maximum and circulating supply

Circulating and maximum supply are equally important in their own use, and understanding their implication vs. the total supply can help assess their impact on the cryptocurrency’s price.

How a price may change in the future is a crucial assessment for an investor who could plan a different strategy depending on how each metric performs against the total supply. Total and circulating supply can change over time, so it’s essential to keep up to date with the latest developments of a project.

A summary of differences between total supply, maximum and circulating supply can be found in the below table:

Cryptocurrency coins or tokens can be easily compared to publicly traded shares in the stock market, as their price reflects supply and demand conditions. The more coins are in existence, the more demand there needs to be for a price to increase.

A low supply means that the token (a share) is scarce and if in high demand, its price will likely rise. On the other hand, if the demand for a cryptocurrency is low but has a large supply, its price may drop.

What is a total supply?

A token’s total supply is calculated by adding the circulating supply to the number of coins that have been mined but not yet distributed in the market.

In the case of coins reserved for staking rewards, for instance, they have already been minted. Still, they are locked up in the project’s protocol and are only distributed when the staker meets a particular condition.

Another instance occurs when a new cryptocurrency project is launched, and the number of tokens issued is not equal to the one being distributed. These types of measures are usually taken to follow demand and not oversupply a cryptocurrency that could, as a result, affect the price negatively.

It could also be the case of tokens created by developers at a blockchain’s launch as premine to use as development funds but have not been circulated yet. Moreover, burned coins or tokens are not calculated in the total supply, as they are tokens sent and permanently locked up in a burned address that nobody will ever be able to access and are therefore eliminated forever.

It is possible to increase the total token supply, depending on the crypto protocol’s rules. With Bitcoin, for instance, unless there is maximum consensus to change the protocol, its total supply of 21 million coins can’t ever be changed. With other tokens, developers could potentially change a protocol’s supply rule by planning in advance a variable in the smart contract.

What is the maximum supply?

A cryptocurrency’s maximum supply is the total number of tokens that will ever be mined, and it is usually defined when the genesis block is created.

Bitcoin’s maximum supply is capped at 21 million, and although anything is possible, its strict protocol and code are built so that no more BTC can ever be mined. Other cryptocurrencies do not have a maximum supply but may have a cap on the number of new coins that can be minted with a specific cadence, like in the case of Ether.

Stablecoins, on the other hand, tend to keep the maximum supply constant at all times to avoid a supply shock that could affect and fluctuate the price too much. Their stability is guaranteed by collateral reserve assets or algorithms created to control supply through the burning process.

Algorithmically-backed coins are designed to maintain a stable price, but they have drawbacks as they are vulnerable to de-pegging risks. Also, non-algorithmic stablecoins like Tether may risk de-pegging, as happened in June 2022, showing that even coins that should provide more certainty may be at risk.

The other two metrics — circulating and total supply — also affect a token’s price, but to a lesser extent than the maximum supply. When a cryptocurrency hits maximum supply, no more new coins can ever be created. When that happens, two main results are produced:

The cryptocurrency becomes more scarce and as a result, its price may increase if demand exceeds supply;Miners have to rely on fees to get rewards for their contributions.

In the case of Bitcoin, the total supply gets cut in half through a process called the halving, so it is calculated that it will reach its maximum supply of 21 million coins in the year 2140. Although Bitcoin’s issuance increases over time through mining and is therefore inflationary, block rewards are cut in half every four years, making it a deflationary cryptocurrency.

What is a circulating supply?

A cryptocurrency circulating supply refers to the number of tokens in circulation in the market at any given time that are available for trade.

The circulation supply metric is used to define the market capitalization of a given cryptocurrency and accounts for the size of its economy. A cryptocurrency’s market cap is obtained by multiplying the price per unit by the number of all the existing coins in a blockchain, even the ones that have been lost or confiscated.

Somewhat emblematic is the example of Bitcoin and its creator, Satoshi Nakamoto, who mined millions of BTC in the early years but never moved them. Whatever the reason behind such a decision, all those Bitcoin are still included in the total circulating supply of the cryptocurrency.

There is a sub-metric of market cap, denominated realized market cap, which calculates the price of a coin when it was last moved as opposed to the current value. Realized market cap does not include coins that have been lost or are dormant in a blockchain, reducing their impact on the price.

Some cryptocurrencies, like Bitcoin, have a finite supply, and their circulation is only increased through mining. On the other hand, developers of some more centralized tokens can increase their circulation supply through instantaneous minting, a bit like central banks.

Circulation supply can also decrease by a process called burning, which means destroying the coins by sending them to a wallet whose keys are not available to anyone. For this reason, the circulation supply metric should be considered somehow approximate.

What is the crypto token supply?

The crypto token supply establishes how many cryptocurrency coins will exist at any particular time and could be the circulating, maximum or total supply.

The total supply of a cryptocurrency refers to the sum of the circulating supply and the coins that are locked up in escrow, a smart contract where a third party temporarily keeps an asset until a particular and agreed condition is met. The maximum supply is the upper limit on the number of tokens that can be created, while the circulating supply is the number of tokens that exist and are available for trade in the market.

All the cryptocurrency supply metrics are crucial for determining token distribution, demand and market capitalization. They can impact the price of a cryptocurrency and are essential criteria for investors who want to assess a project’s worth.

Unlike fiat currencies, which central banks can print at will, most cryptocurrency tokens have a predetermined supply that cannot be increased or decreased freely. A token’s supply can be released at once, but most cryptocurrencies are mined such as proof-of-work (PoW) coins or minted in the case of proof-of-stake (PoS) coins over time.

Some cryptocurrencies have a limited supply, like Bitcoin (BTC), which will only ever have a finite supply of 21 million coins. Other cryptocurrencies have a maximum supply but not a finite supply. Ether’s (ETH) supply, for example, is not hard-capped like Bitcoin, but the issuance of new coins was fixed at 1,600 ETH per day after the Merge occurred.

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5 reasons 2023 will be a tough year for global markets

From inflation to energy shortages and general instability, markets are set for a turbulent year ahead.

Those who come bearing warnings are rarely popular. Cassandra didn’t do herself any favors when she told her fellow Trojans to beware of the Greeks and their wooden horse. But, with financial markets facing unprecedented turbulence, it’s important to take a hard look at economic realities.

Analysts agree markets face serious headwinds. The International Monetary Fund has forecast that one-third of the world’s economy will be in recession in 2023. Energy is in high demand and short supply, prices are high and rising and emerging economies are coming out of the pandemic in shaky conditions.

There are five fundamental — and interlinked — issues that spell trouble for asset markets in 2023, with the understanding that in uncertain environments, there are no clear choices for investors. Every decision requires trade-offs.

Net energy shortages

Without dramatic changes in the geopolitical and economic landscape, fossil fuel shortages look likely to persist through next winter.

Russian supplies have been slashed by sanctions related to the war in Ukraine, while Europe’s energy architecture suffered irreparable damage when a blast destroyed part of the Nord Stream 1 pipeline. It’s irreparable because new infrastructure takes time and money to build and ESG mandates make it tough for energy companies to justify large-scale fossil fuel projects.

Related: Bitcoin will surge in 2023 — but be careful what you wish for

Meanwhile, already strong demand will only increase once China emerges from its COVID-19 slowdown. Record growth in renewables and electric vehicles has helped. But there are limits. Renewables require hard-to-source elements such as lithium, cobalt, chromium and aluminum. Nuclear would ease the pressure, but new plants take years to bring online and garnering public support can be hard.

Reshoring of manufacturing

Supply chain shocks from the pandemic and Russia’s invasion of Ukraine have triggered an appetite in major economies to reshore production. While this could prove a long-term boon to domestic growth, reshoring takes investment, time and the availability of skilled labor.

In the short to medium-term, the reshoring of jobs from low-cost offshore locations will feed inflation in high-income countries as it pushes up wages for skilled workers and cuts corporate profit margins.

Transition to commodities-driven economies

The same disruptions that triggered the reshoring trend have led countries to seek safer — and greener — raw materials supply chains either within their borders or those of allies.

In recent years, the mining of crucial rare earth has been outsourced to countries with abundant cheap labor and lax tax regulations. As these processes move to high-tax and high-wage jurisdictions, the sourcing of raw materials will need to be reenvisioned. In some countries, this will lead to a rise in exploration investment. In those unable to source commodities at home, it may result in shifting trade alliances.

We can expect such alliances to mirror the geopolitical shift from a unipolar world order to a multipolar one (more on that below). Many countries in the Asia Pacific region, for instance, will become more likely to prioritize China’s agenda over that of the United States, with implications for U.S. access to commodities now sourced from Asia.

Persistent inflation

Given these pressures, inflation is unlikely to slow anytime soon. This poses a huge challenge for central banks and their favored tool for controlling prices: interest rates. Higher borrowing costs will have limited power now we have entered an era of secular inflation, with supply/demand imbalances resulting from the unraveling of globalization.

12-month percentage change in the Consumer Price Index (CPI), 2002-2022. Source: Bureau of Labor Statistics

Past inflationary cycles have ended when prices rose to a point of unaffordability, triggering a collapse in demand (demand destruction). This process is straightforward when it comes to discretionary purchases but problematic when necessities such as energy and food are involved. Since consumers and businesses have no alternative but to pay the higher costs, there is limited scope to ease upward pressure, particularly with many governments subsidizing consumer purchases of these staples.

Accelerating decentralization of key institutions and systems

This fundamental shift is being driven by two factors. First, a realignment in the geopolitical world order was touched off by broken supply chains, tight monetary policy, and conflict. Second, a global erosion of trust in institutions caused by a chaotic response to COVID-19, economic woes and rampant misinformation.

The first point is key: Countries that once looked to the United States as an opinion leader and enforcer of the order are questioning this alignment and filling the gap with regional relationships.

Meanwhile, mistrust in institutions is surging. A Pew Research Center survey found that Americans are increasingly suspicious of banks, Congress, big business and healthcare systems — even against one another. Escalating protests in the Netherlands, France, Germany and Canada, among others, make clear this is a global phenomenon.

Related: Get ready for a swarm of incompetent IRS agents in 2023

Such disaffection has also prompted the rise in far-right populist candidates, most recently in Italy with the election of Georgia Meloni.

It has likewise provoked growing interest in alternative ways to access services. Homeschooling spiked during the pandemic. Then there’s Web3, forged to provide an alternative to traditional systems. Take the work in the Bitcoin (BTC) community on the Beef Initiative, which seeks to connect consumers to local ranchers.

Historically, periods of extreme centralization are followed by waves of decentralization. Think of the disintegration of the Roman Empire into local fiefdoms, the back-to-back revolutions in the 18th and early 19th century and the rise of antitrust laws across the West in the 20th. All saw the fragmentation of monolithic structures into component parts. Then the slow process of centralization began anew.

Today’s transition is being accelerated by revolutionary technologies. And while the process isn’t new, it is disruptive — for markets as well as society. Markets, after all, thrive on the ability to calculate outcomes. When the very foundation of consumer behavior is undergoing a phase shift, this is increasingly hard to do.

Taken together, all these trends point to a period where only the careful and opportunistic investor will come out ahead. So fasten your seatbelts and get ready for the ride.

Joseph Bradley is the head of business development at Heirloom, a software-as-a-service startup. He started in the cryptocurrency industry in 2014 as an independent researcher before going to work at Gem (which was later acquired by Blockdaemon) and subsequently moving to the hedge fund industry. He received his master’s degree from the University of Southern California with a focus in portfolio construction/alternative asset management.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Sam Bankman-Fried denies rumors that he fled to Argentina

SBF stepped down as CEO of FTX on Nov. 11 after initiating Chapter 11 bankruptcy proceedings in the District of Delaware.

FTX founder Sam Bankman-Fried has denied speculation that he’s fled to Argentina as the saga surrounding his collapsed cryptocurrency exchange continued to unfold in near-real time on Twitter. 

In a text message to Reuters on Nov. 12, Bankman-Fried, who also goes by SBF, said he was still in the Bahamas. When Reuters asked him specifically whether he had flown to Argentina, as the rumors suggest, he responded: “Nope.”

Users took to Twitter over the weekend to speculate whether SBF was on the run after filing for Chapter 11 bankruptcy for FTX Group, which includes a slew of companies such as FTX Trading, FTX US and Alameda Research. The rumors started after users tracked the coordinates of his private jet using the flight tracking website ADS-B Exchange. The tracker suggested that SBF’s Gulfstream G450 had landed in Buenos Aires on a direct flight from Nassau, Bahamas in the early hours of Nov. 12.

The rumour is SBF on his way to Argentina.. pic.twitter.com/Jnxm3bprm9

— CoinMamba (@coinmamba) November 12, 2022

Bankman-Fried lives in a luxury penthouse in Nassau that’s reportedly shared by several roommates, including Caroline Ellison, the CEO of Alameda Research.

Just landed Sam Bankman-Fried @SBF_FTX Private Jet touches down in Buenos Aires Argentina LVKEB on the run #FTX pic.twitter.com/DD4Gy9nguk

— 0xMeTaNeeR (@0xMetaNeeR) November 12, 2022

Once considered to be the poster child for crypto’s exponential growth, SBF is now at the center of the industry’s biggest scandal. In less than a week, FTX went from one of the world’s largest cryptocurrency exchanges with a valuation of roughly $32 billion to a bankrupt firm with an $8 billion hole in its balance sheet. According to Bloomberg, SBF’s net worth plunged from $16 billion to zero after FTX’s collapse.

Related: Binance CEO CZ on FTX crash: “We’ve been set back a few years”

FTX raised billions in venture capital over the past few years, touting backers such as Lightspeed Venture Partners, Ontario Teachers’ Pension Plan, Circle Internet Financial, Coinbase Ventures, Multicoin Capital, Paul Tudor Jones and Sequoia Capital. 

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FTX reportedly hacked as officials flag abnormal wallet activity

Wallets tied to FTX and FTX US have seen $659 million in cumulative outflows over the past 24 hours, according to Nansen.

Collapsed cryptocurrency exchange FTX reportedly faced a series of unauthorized transactions over the weekend, prompting several warnings from users and analysts against interacting with its mobile app or website. 

Wallets associated with FTX saw roughly $266.3 million worth of outflows on Nov. 11, according to analytics firm Nansen. FTX US, a separate entity operating in the United States, was reportedly drained of $73.4 million.

$266M has been withdrawn from FTX in the last 24 hours

$73M from FTX US pic.twitter.com/qoiroPSegq

— Nansen (@nansen_ai) November 12, 2022

The magnitude of the alleged attack appears to have intensified overnight, with net outflows from FTX and FTX US totaling $659 million, according to Nansen data journalist Martin Lee. That represents roughly one-third of the wallets’ net outflows over the past seven days.

We’ve seen over $2B in net outflows from FTX Intl and FTX US over the past 7 days

Of which $659M (33%) happened in the last 24 Hours

Somehow no congestion or long wait times when the wallet was getting mass drained pic.twitter.com/NJJcMJppSZ

— Martin Lee | Nansen (@themlpx) November 12, 2022

FTX US general counsel Ryne Miller confirmed on Nov. 12 that the transactions were unauthorized and that FTX US had moved all remaining crypto into cold storage as a precaution.

Following the Chapter 11 bankruptcy filings – FTX US and FTX [dot] com initiated precautionary steps to move all digital assets to cold storage. Process was expedited this evening – to mitigate damage upon observing unauthorized transactions.

— Ryne Miller (@_Ryne_Miller) November 12, 2022

Investigating abnormalities with wallet movements related to consolidation of ftx balances across exchanges – unclear facts as other movements not clear. Will share more info as soon as we have it. @FTX_Official

— Ryne Miller (@_Ryne_Miller) November 12, 2022

An administrator for FTX’s Telegram group confirmed that the exchange was hacked and urged users not to use the FTX website due to potential security vulnerabilities. “Don’t go on ftx site as it might download Trojans,” wrote community administrator Rey. 

An administrator for FTX’s official Telegram group confirmed that the exchange was hacked. Source: Telegram.

FTX’s meltdown and apparent security breach were documented in near real-time on Twitter, with some users claiming that FTX customers were receiving SMS messages and emails urging them to log into the app and website, which have since been infected with a Trojan.

Reports of SMS messages & emails being sent by FTX to customers to log into the app & website, which are infected with a trojan as part of the hack

FTX has millions of users. Things are about to get a LOT worse.

Please warn as many ppl as you can before it’s too late!

— Mario Nawfal (@MarioNawfal) November 12, 2022

Related: Sam Bankman-Fried apologizes for FTX liquidity crisis: ‘I fucked up twice’

At the beginning of the week, FTX held the reigns as a top-three cryptocurrency exchange. Its monumental collapse began on Nov. 7 when Binance CEO Changpeng Zhao tweeted that his exchange would be liquidating its entire FTX Token (FTT) position amid insolvency rumors and shady business dealings with sister firm Alameda Research. The announcement prompted a bank run on FTX, from which it could not recover.

On Nov. 11, former FTX CEO Sam Bankman-Fried announced that FTX, FTX US and Alameda Research were filing for bankruptcy.

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Hackers keeping stolen crypto: What is the long-term solution?

In the long run, the industry needs to come together and step up its cybersecurity game in a big way rather than seek out such temporary fixes.

Even as the ongoing Binance-FTX saga continues to dominate the crypto airwaves, there has been a growing trend — an uneasy one at that — that has been garnering the attention of many digital currency enthusiasts in recent months, i.e., hackers returning partial funds for discovering exploits within a protocol. 

In this regard, just recently, the bad actors behind the $14.5 million Team Finance attack revealed that they would be allowed to stay in possession of 10% of the stolen funds as a bounty. Similarly, Mango Markets, a Solana-based decentralized finance (DeFi) network that was recently exploited to the tune of over $110 million, revealed that its community of backers was working toward reaching a consensus, one that would allow the hacker to be awarded $47 million as a reward for exposing the exploit.

As this trend continues to garner more and more traction, Cointelegraph reached out to several industry observers to examine whether such a practice is healthy for the continued growth of the digital asset market, especially in the long run.

A good practice, for now

Rachel Lin, co-founder and CEO of SynFutures — a decentralized crypto derivatives exchange — told Cointelegraph that on one hand, the habit of encouraging “black hatters” to turn “white hat” encourages the industry to raise its standards of best practices, but it’s still not uncommon for popular protocols to be forked or simply copied and pasted, leaving them replete with hidden bugs. She added:

“We’d be remiss to say that this is healthy where in an ideal world, there’d be only white hat hackers. But the transition we’re seeing in which hackers are returning some of the funds, which wasn’t previously the case, is a strong step forward, particularly in sensitive times like these where it’s becoming clearer that many projects and exchanges are connected and could impact the ecosystem as a whole.”

On a somewhat similar note, Brian Pasfield, chief technical officer for decentralized money market Fringe Finance, told Cointelegraph that while the idea of giving hackers a fraction of the money they cart away for discovering loopholes can be seen as unhealthy and almost unsustainable, the fact of the matter remains that ultimately the hacked projects have no choice but to utilize this approach. “This is a better alternative than resorting to law enforcement’s approach to nab the perpetrators and recover the funds, which takes a very long time, if successful at all,” he added.

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Speaking more technically, Slava Demchuk, co-founder of crypto compliance firm AMLBot, told Cointelegraph that since everything is on-chain, all of a hacker’s actions are traceable, so much so that the hacker has almost a 0% chance of using the illegally obtained digital assets. He added:

“When the hackers agree to return some of these stolen funds, not only does the project usually not prosecute the hacker, it even allows them to be able to use the remaining funds legally.” 

Lastly, Jasper Lee, audit tech lead at SOOHO.IO, a crypto auditing firm for several Fortune 500 companies, said that this kind of white hat behavior could be healthy for the blockchain industry in the long run since it provides the opportunity to identify vulnerabilities within DeFi protocols before they become too large. 

He further told Cointelegraph that out in non-blockchain industries, even if a hacker finds a vulnerability in a given code, it is difficult for them to go public with that information because it could cause severe legal issues. “In traditional hacking, it is very rare that a hacker returns the funds they have taken, as doing so would likely reveal their identity,” Lee said.

Not everyone agrees

David Carvalho, CEO at Naoris Protocol, a distributed cybersecurity ecosystem, stated in unequivocal terms that allowing hackers to keep funds in such a way not only undermines the entire ethos of a decentralized financial system but it promotes behavior that fosters distrust.

“It cannot continue to be seen as something to be tolerated on any level. The fundamentals of a safe and equitable financial system don’t change,” he told Cointelegraph, adding, “The premise that the only way to solve the hacking issue is to make the problem part of the solution is fatally flawed. It may fix a small crack for a short period of time, but the crack will continue to grow under the weight of the flimsy fixes and result in a destabilized market.”

A similar sentiment is echoed by Tim Bos, co-founder and chairman of ShareRing — a blockchain-based ecosystem providing digital identity solutions — who believes that this is a terrible practice. “It’s akin to paying criminals who hold people hostage. All this does is makes the hackers realize that they can commit a huge crime, be rewarded for it, and then there are no repercussions,” he told Cointelegraph.

Carvalho noted that just because a hacker is nice enough to return part of the funds doesn’t make it a good practice since these episodes still result in people and DeFi platforms losing a lot of money.

“We can’t afford to associate decentralized finance with nefarious security fixes. For mass adoption by both enterprises and individuals, we need the security systems across the Web2 and Web3 ecosystems to be trusted and hackproof. Having a cohort of hackers ostensibly calling the shots in the cybersecurity space is crazy, to say the least, and does nothing to promote the industry,” he said.

Setting a bad precedent for the industry?

Lin noted that even among traditional Web2 companies — like the FAANGs of this world — hackers are incentivized to discover bugs and zero-day exploits in exchange for certain incentives. However, this often comes with strict requirements and having white hat hackers discover these loopholes is viewed as being healthy for the ecosystem. She noted:

“Major exploits or discoveries typically put the industry as a whole and in-house security teams on alert. But it’s a slippery slope. I’d argue we’d need to define what a ‘white hat’ hacker is. For example, could you consider a hacker who’s cornered and reluctantly returns only 10% of the funds a white hat hacker?”

Lee believes that these fat paychecks can serve as a significant impetus for white hats to carry out more such ploys. However, he pointed out that instead of seeing 100% of a protocol’s funds being hacked or disappearing for good, it’s always better for the protocol’s users that a portion of the appropriated funds are recovered.

On a more optimistic note, Demchuk noted that the DeFi market is community-driven and, therefore, such actions could be viewed positively, as hackers themselves are often asked to work for the projects they exploited, making their activities real-life penetration tests.

What’s the solution?

It is no secret that a large portion of the Web3 ecosystem (and its associated cybersecurity solutions) still runs on yesterday’s Web2 architecture, making them highly centralized. This, in Carvalho’s opinion, is the elephant in the room that most Web3 platforms don’t want to talk about. He believes that if these pressing issues are not solved using decentralized solutions, the standards for smart contract execution and publishing will not be not fundamentally changed or improved, adding:

“These types of breaches will continue to happen because there is no accountability or criminalization of hacking activity. I believe a ‘just pay the hacker’ approach is going to increase the risk for DeFi and other centralized/decentralized platforms because the fundamental weaknesses are not resolved.”

Bos noted that the core problem here isn’t the hacking or the fake bounties that are rewarding the hackers but an apparent lack of audits, quality security processes and risk reviews, especially from those projects that have in their coffers millions of dollars worth of crypto assets. 

Recent: FTX collapse: The crypto industry’s Lehman Brothers moment

“Established banks are virtually impossible to hack into because they spend a lot of money on security reviews, risk audits, etc. We need to see the same level of technical oversight in the crypto industry,” he concluded.

Therefore, as we head into a future driven increasingly by decentralized technologies, one can say that the hackers are simply demonstrating how much more work the crypto sector as a whole needs to put into its security practices.

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What is a 51% attack and how to detect it?

Despite the inordinate amount of resources needed to engineer them, small-cap cryptocurrencies are still susceptible to a 51% attacks.

Despite being underpinned by blockchain technology that promises security, immutability, and complete transparency, many cryptocurrencies like Bitcoin SV (BSV), Litecoin (LTC) and Ethereum Classic (ETC) have been subject to 51% attacks several times in the past. While there are many mechanisms by which malicious entities can and have exploited blockchains, a 51% attack, or a majority attack as it is also called, occurs when a group of miners or an entity controls more than 50% of the blockchain’s hashing power and then assumes control over it. 

Arguably the most expensive and tedious method to compromise a blockchain, 51% of attacks have been largely successful with smaller networks that require lower hashing power to overcome the majority of nodes.

Understanding a 51% attack 

Before delving into the technique involved in a 51% attack, it is important to understand how blockchains record transactions, validate them and the different controls embedded in their architecture to prevent any alteration. Employing cryptographic techniques to connect subsequent blocks, which themselves are records of transactions that have taken place on the network, a blockchain adopts one of two types of consensus mechanisms to validate every transaction through its network of nodes and record them permanently.

While nodes in a proof-of-work (PoW) blockchain need to solve complex mathematical puzzles in order to verify transactions and add them to the blockchain, a proof-of-stake (PoS) blockchain requires nodes to stake a certain amount of the native token to earn validator status. Either way, a 51% attack can be orchestrated by controlling the network’s mining hash rate or by commanding more than 50% of the staked tokens in the blockchain.

To understand how a 51% attack works, imagine if more than 50% of all the nodes that perform these validating functions conspire together to introduce a different version of the blockchain or execute a denial-of-service (DOS) attack. The latter is a type of 51% attack in which the remaining nodes are prevented from performing their functions while the attacking nodes go about adding new transactions to the blockchain or erasing old ones. In either case, the attackers could potentially reverse transactions and even double-spend the native crypto token, which is akin to creating counterfeit currency.

Needless to say, such a 51% attack can compromise the entire network and indirectly cause great losses for investors who hold the native token. Even though creating an altered version of the original blockchain requires a phenomenally large amount of computing power or staked cryptocurrency in the case of large blockchains like Bitcoin or Ethereum, it isn’t as far-fetched for smaller blockchains. 

Even a DOS attack is capable of paralyzing the blockchain’s functioning and can negatively impact the underlying cryptocurrency’s price. However, it is improbable that older transactions beyond a certain cut-off can be reversed and thus puts only the most recent or future transactions made on the network at risk.

Is a 51% attack on Bitcoin possible?

For a PoW blockchain, the probability of a 51% attack decreases as the hashing power or the computational power utilized per second for mining increases. In the case of the Bitcoin (BTC) network, perpetrators would need to control more than half of the Bitcoin hash rate that currently stands at ~290 exahashes/s hashing power, requiring them to gain access to at least a 1.3 million of the most powerful application-specific integrated circuit (ASIC) miners like Bitmain’s Antminer S19 Pro that retails for around $3,700 each. 

This would entail that attackers need to purchase mining equipment totaling around $10 billion just to stand a chance to execute a 51% attack on the Bitcoin network. Then there are other aspects like electricity costs and the fact that they would not be entitled to any of the mining rewards applicable for honest nodes. 

However, for smaller blockchains like Bitcoin SV, the scenario is quite different, as the network’s hash rate stands at around 590PH/s, making the Bitcoin network almost 500 times more powerful than Bitcoin SV.

 In the case of a PoS blockchain like Ethereum, though, malicious entities would need to have more than half of the total Ether (ETH) tokens that are locked up in staking contracts on the network. This would require billions of dollars only in terms of purchasing the requisite computing power to even have some semblance of launching a successful 51% attack. 

Moreover, in the scenario that the attack fails, all of the staked tokens could be confiscated or locked, dealing a hefty financial blow to the entities involved in the purported attack.

How to detect and prevent a 51% attack on a blockchain?

The first check for any blockchain would be to ensure that no single entity, group of miners or even a mining pool controls more than 50% of the network’s mining hashrate or the total number of staked tokens. 

This requires blockchains to keep a constant check on the entities involved in the mining or staking process and take remedial action in case of a breach. Unfortunately, the Bitcoin Gold (BTG) blockchain couldn’t anticipate or prevent this from happening in May 2018, with a similar attack repeating in January 2020 that lead to nearly $70,000 worth of BTG being double-spent by an unknown actor. 

In all these instances, the 51% attack was made possible by a single network attacker gaining control over more than 50% of the hashing power and then proceeding to conduct deep reorganizations of the original blockchain that reversed completed transactions.

The repeated attacks on Bitcoin Gold do point out the importance of relying on ASIC miners instead of cheaper GPU-based mining. Since Bitcoin Gold uses the Zhash algorithm that makes mining possible even on consumer graphics cards, attackers can afford to launch a 51% attack on its network without needing to invest heavily in the more expensive ASIC miners. 

This 51% attack example does highlight the superior security controls offered by ASIC miners as they need a higher quantum of investment to procure them and are built specifically for a particular blockchain, making them useless for mining or attacking other blockchains.

However, in the event that miners of cryptocurrencies like BTC shift to smaller altcoins, even a small number of them could potentially control more than 50% of the altcoin’s smaller network hashrate. 

Moreover, with service providers such as NiceHash allowing people to rent hashing power for speculative crypto mining, the costs of launching a 51% attack can be drastically reduced. This has drawn attention to the need for real-time monitoring of chain reorganizations on blockchains to highlight an ongoing 51% attack. 

MIT Media Lab’s Digital Currency Initiative (DCI) is one such initiative that has built a system to actively monitor a number of PoW blockchains and their cryptocurrencies, reporting any suspicious transactions that may have double-spent the native token during a 51% attack.

Cryptocurrencies such as Hanacoin (HANA), Vertcoin (VTC), Verge (XVG), Expanse (EXP), and Litecoin are just a few examples of blockchain platforms that faced a 51% attack as reported by the DCI initiative. 

Of them, the Litecoin attack in July 2019 is a classic example of a 51% attack on a proof-of-stake blockchain, even though the attackers did not mine any new blocks and double-spent LTC tokens that were worth less than $5,000 at the time of the attack. 

This does highlight the lower risks of 51% attacks on PoS blockchains, deeming them less attractive to network attackers, and is one of the many reasons for an increasing number of networks switching over to the PoS consensus mechanism.

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Bitcoin will shrug off FTX ‘black swan’ just like Mt. Gox — analysis

There might not be much new to worry about when it comes to the FTX aftermath and Bitcoin resilience.

Bitcoin (BTC) will recover from the FTX “black swan event” just like other setbacks, trading team Stockmoney Lizards believes.

In a tweet on Nov. 12, the popular commentator argued that the week’s events were actually nothing new for Bitcoin.

FTX “a real black swan event”

Despite falling 25% in days, BTC/USD is not doomed as a result of the insolvencies impacting FTX, Alameda Research and possibly other major crypto companies.

For Stockmoney Lizards, the unravelling, while sudden, is not hugely different to liquidity crises from earlier in Bitcoin’s history.

“We have indeed seen a real black swan event, the FTX bankruptcy,” it said.

“The history of BTC is lined with such events and the market will recover from it as it did in the past.”

An accompanying chart flagged similar “black swan” moments from the past, stretching back to the Mt. Gox hack in 2014.

Two other notable events were the hack of exchange Bitfinex in 2016 and the March 2020 COVID-19 cross-market crash.

BTC/USD annotated chart. Source: Stockmoney Lizards/ Twitter

As Cointelegraph reported, ex-FTX executive Zane Tackett even offered to copy Bitfinex’s liquidity recovery plan from the time of its $70 million loss by creating a token. FTX subsequently filed for Chapter 11 bankruptcy in the United States.

Reactions have included frank appraisals of the crypto industry, with Filbfilb, co-founder of trading suite Decentrader, forecasting a multi-year recovery process.

Changpeng Zhao, CEO of Binance, which at one point planned to buy FTX, has warned that the industry has been “set back a few years.”

Exchange BT reserves near five-year low

Meanwhile, the loss of user confidence is already showing up in declining exchange balances.

Related: Hodlers in loss sit on 50% of BTC supply after $5.7K Bitcoin price dip

According to data from on-chain analytics platform CryptoQuant, the BTC balance of major exchanges is now at its lowest since February 2018.

The platforms tracked by CryptoQuant finished Nov. 9 and 10 down 35,000 and 26,000 BTC, respectively. Both days were multi-month records, nonetheless not surpassing the single-day tally from Jun. 17 — 67,600 BTC.

Exchange outflows continue to be monitored by industry analysts, among them CryptoQuant contributor, Maartunn.

Bitcoin exchange reserves chart. Source: CryptoQuant

More broadly, voices have been calling on social media users to withdraw funds from custodial wallets.

“Bitcoin exchanges are run by people who learned fiat finance,” Saifedean Ammous, author of the popular book, “The Bitcoin Standard,” wrote in part of a Twitter post.

“Gambling with depositors’ money is normal & healthy for them, because in the fiat system the central bank destroys the currency to bail them out every time it goes wrong.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Binance CEO CZ on FTX crash: “We’ve been set back a few years”

With one of the biggest crypto businesses falling overnight after getting caught misappropriating user funds, CZ believed the episode was devastating for the industry, which took away a lot of consumer confidence.

Crypto exchange FTX joined many other fallen projects — including Terra (LUNA), 3AC, Celsius and Voyager — in filing for bankruptcy in 2022. Owing to the devastation caused by multi-billion dollar losses suffered by businesses and investors, the man running the biggest crypto exchange, Binance CEO Changpeng “CZ” Zhao, envisions an era of greater regulatory scrutiny in the near future.

With one of the biggest crypto businesses falling overnight, CZ believed the episode was devastating for the industry, which took away a lot of consumer confidence. Speaking at Indonesia Fintech Summit 2022, he said:

“I think basically we’ve been set back a few years now. Regulators rightfully will scrutinize this industry much, much harder, which is probably a good thing, to be honest.”

Regulations in crypto historically circled around Know Your Customer (KYC) and Anti-Money Laundering (AML). However, CZ reiterated his long-standing belief that regulations must focus on exchange operations, such as business models and proof of reserves. As a result, he believed that tighter regulatory scrutiny around crypto business operations is around the corner.

CZ sharing his thoughts on FTX and the future of crypto during Indonesia Fintech Summit 2022. Source: YouTube

While FTX’s collapse is bound to have a short-term impact on retail investors, in the longer term, this is a wake-up call for discussions about how to handle risks across crypto ecosystems. Speaking specifically about FTX, he said:

“The last three days is just a revelation of problems. The problems were there way longer. This problem wasn’t created in the last three days.”

CZ pointed out that the biggest red flag about FTX was Alameda Research’s financials, which were full of FTX Tokens (FTT) that made him finalize the decision to sell off Binance’s FTT holdings worth over $2 billion at the time.

The following day, FTX CEO Sam Bankman-Fried reached out to CZ with a deal that “did not make sense from a number of fronts”. At the same time, CZ hoped to get an over-the-counter (OTC) deal for protecting users:

“Original intention was let’s save the users, but then the news of misappropriating user funds, especially U.S Regulatory Agencies investigations (made us realize) we can’t touch that anymore.”

CZ believes that increasing transparency and educating regulatory agencies about crypto audits and cold wallet information will make the industry much healthier. Finding the right balance of rules is not ask, he said.

The entrepreneur highlighted the need for easy tools for saving private keys and other security functionalities but argued that the crypto ecosystem will grow in incremental steps and not giant leaps.

Related: Binance Proof-of-Reserve pledge gains support following FTX crisis

Taking a proactive approach in regaining investor confidence, Binance published a new page titled “Proof of Assets,” which displays details about the exchange’s on-chain activity for its hot and cold wallet addresses.

“Our objective is to allow users of our platform to be aware and make informed decisions that are aligned with their financial goals,” said Binance in an official statement.

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Time Travel: It Might Be Something More or Less Than Most People Think

In October of last year I wrote a book titled Time Travel. And, in Iight of that, I thought I would share with you some intriguing aspects of my research; something that made me change my mind on certain aspects of the matter of time travel, and to a significant degree. I’ll show you what I mean. The publisher stated: “Fact or fiction? Real or impossible? Movement through time explored, examined and explained! Albert Einstein’s theory of relativity postulates, and scientists have proven, that the faster you travel, the slower time moves. Clocks on airplanes, satellites and rockets are slower than clocks on Earth, and time travel is indeed real. Can time machines, time-tunnel wormholes or tales of fictional time-traveling heroes be so far-fetched? Covering the history of time travel in both reality and fiction, Time Travel: The Science and Science Fiction investigates the long history, myths, science and stories of movement from the present to the past and into the future.” The publisher also said: “The idea of time travel fascinates because it offers the possibility, however remote, of revisiting and recapturing moments from our youth. And if travelers of the future have secretly visited us – well, that proves that our future is secure. Stories of time travel abound in books and film, and it’s been a source of endless fascination – and speculation – surrounding UFO sightings and conspiracy theories.” Yes, it was all there. But, as my research expanded, things began to change: I saw time travel in a different way – as many do when they get deep into the whole controversy. Take, for example, a certain man who exploded on the time travel scene a little more than two decades ago.

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Bizarre Cases from the Golden Age of Spontaneous Human Combustion

One very pervasive and ongoing corner of the world of unexplainable phenomena is that of what is called “spontaneous human combustion,” which is when a human being is immolated by a fire that seems to have no discernible cause or eternal source of ignition. In most cases there are strange details surrounding these cases, such as bodies that were charred by extremely high temperatures, yet left the surroundings or even clothing untouched, or of cases in which certain body parts have somehow managed to remain unscathed while everything else is ash. Such cases were particularly widespread and popular during the 19th century, and here we will look at a selection of some of the strangest from that era.

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