It was a long year. From total blockchainisation to cyberattacks to tremendous bitcoin price growth, CoinFox reviews the things that have changed the blockchain world.
Bitcoin price surge
Bitcoin price does not stop rising, as crypto enthusiasts keep repeating their “to the Moon” mantra. Investors who bought bitcoins at a profitable rate are rubbing their hands. Bitcoin exchange rate began surging in late 2015, but 2016 has exceeded analysts’ most venturous expectations.
At the beginning of 2016, bitcoin traded at $434. The instability of the world’s biggest economies, like the United States and the European Union, catalysed the public interest in cryptocurrencies. The uncertainty around the presidential rally in the US, increasing decentralisation sympathies in Europe – these are the factors that have pushed up bitcoin price to its 3-year high.
A rapid growth of public interest in the cryptocurrency was registered prior to the UK referendum on Brexit. If in May, a month before the referendum, bitcoin traded at about $440 per unit, by 19 June the cryptocurrency rose to $768. After the referendum, bitcoin returned to $580 but the upward trend continued. It overcame the $700 mark in November, and in December easily took the barrier of $800 and then $900.
In the last days of 2016, bitcoin trades at $950-970. Crypto enthusiasts are now expecting the cryptocurrency to storm the $1000 barrier soon.
The bitcoin historical maximum rate so far is $1138, registered on 25 November 2013 on the exchange platform Mt. Gox, which later scandalously collapsed. On other exchanges, bitcoins did not exceed $1,000.
Meanwhile, expert members of the bitcoin community predict that the growth of the cryptocurrency is not going to stop. The analysis of Danish Saxobank, CEO of which Lars Christensen is an active bitcoin supporter since 2014, suggests that the digital currency has a potential to reach $2,100.
TheDAO and Ethereum split
The Decentralised Autonomous Organisation (TheDAO) was created by developers from Slock.it with the help of the core Ethereum team. It was not just a crowdfunding platform, but a decentralised investment fund managed by all participants via blockchain-based voting.
TheDAO’s crowdsale started on 28 April and lasted until 28 May with DAO tokens sold for ethers. Over a few opening days of the sale, the platform collected $15 million in what became the most successful crowdfunding at that time. The total amount attracted neared 11 million ETH or about $150 million.
But TheDAO’s triumph was not meant to last long. As soon as 17 June, the organisation was under attack. The exploiters drained cryptocurrency from The DAO to one of the child DAO’s created using the platform’s split function. The attacker called the function recursively inside the original split, thus repeatedly collecting ether within a single transaction. About 3.6 million ethers was stolen that cost over $50 million before the exchanged rate drastically dropped.
Ethereum devs applied a hard fork in order to freeze the stolen funds, but the decision split the Ethereum community. Some claimed that the hard fork recalling transactions in the blockchain contradicted the system’s main principle, i.e. decentralisation and immutability. As a result, an alternative “unforked” version of Ethereum network carried on with its own Ethereum Classic (ETC) token. The new cryptocurrency gained some popularity and began trading on cryptocurrency exchanges alongside its mainstream ETH twin.
Getting paid for posting your thoughts on a social network? Easy. Meet Steemit, a blockchain-based incentivised online publishing platform. It started in test mode in May 2016, and the full-blown official launch followed in July. The project became a sensation.
In early July, Steemit made the first payment: the platform distributed 10% of its market cap between authors and first members of the newly established community. The total volume of payments amounted to $1.3 million. After that, the popularity of Steemit was growing exponentially. The price of Steem token surged more than 10 times in two weeks, while the platform’s market cap exceeded $409 million, putting Steemit on the third place after bitcoin and Ethereum.
However, by the end of 2016, Steem price returned to its initial level. At the moment, Steemit is ranked as the ninth blockchain system by its total capitalisation ($40 million), according to Coinmarketcap, but still remains the top of its kind.
In October, the Russian-speaking decentralised social network Golos (“Voice”), was created under the license of Steemit and on the basis of its blockchain. Its shares the same operation principle: bloggers are paid in crypto tokens, as users are able to up- or downvote their publications. Everyone can get a reward for their own votes and comments as well as original content provided. In November, Golos launched a crowdfunding campaign attracting 600 bitcoins or about 34 million rubles in investments.
The bitcoin community met 2016 among a bitter debate about how to solve the scaling problem and increase the speed of transactions. Some defended the idea to implement a hard fork and increase the block size immediately. Others predicted a split of the system in case of a hard fork (the kind that later happened to Ethereum).
A new scaling method called Segregated Witness was announced at the end of 2015 at the Hong Kong meeting attended by the leading blockchain companies, bitcoin exchanges and developers.
SegWit was developed by the Bitcoin Core team.
In March, the Core developers launched the final test version of SegWit, and the first test block was mined in April. By the end of April, the open-sourced SegWit code was released.
In August, the Bitcoin Core team released a new client version, Bitcoin Core 0.13.0, and in November the SegWit code was activated with the client version 0.13.1. As of December 30, 42.73% of all blocks (2341 units) updated to Bitcoin Core 0.13.1. In order to activate SegWit throughout the network, it is necessary to gain the support of 95% of nodes.
According to the roadmap discussed during the Hong Kong meeting, the approximate time of the hard fork implementation was set in July 2017. But it will happen only if the decision receives broad support of the bitcoin industry.
2016 saw a remarkable change in the official rhetoric concerning the legal status of cryptocurrencies in Russia. The country is one of the world’s largest bitcoin markets with the weekly trade volume of 320 million rubles or $5.19 million, as of the end of December.
Back in 2014, the Ministry of Finance began the work on a draft law with an intent to ban the use of cryptocurrencies in Russia completely. Over time, the document underwent multiple revisions since various government agencies could not reach a consensus on the issue. In 2015, the Ministry’s position towards bitcoin was gradually toughening. At one point, a version of the draft law suggested up to 7 years in jail or fines of up to 2,5 million rubles for mining or selling the cryptocurrency.
In June 2016, however, the regulator suddenly suggested giving cryptocurrencies the same status as foreign fiat currencies. It meant the ban on issuance within the country but the permission to purchase cryptocurrencies to use them abroad. In October, Deputy Minister of Finance Alexey Moiseev made a statement that circulation of cryptocurrencies in the country was too limited to present any serious threat, whereas their direct ban would do “no good” to the development of the blockchain technology.
The statement was reinforced by Russia’s Federal Tax Service declaring in November that the use of cryptocurrencies was in no way prohibited by Russian legislation and from the fiscal point of view was the same as foreign currency transactions.
As of now, the work on the “bitcoin ban bill” is officially suspended.
Elena Platonova, Svetlana Nosova