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Switzerland Scientists Discovered A New Way to Solve Bitcoin’s Scalability Problem

Blockchain technology began as the innovation which powered the cryptocurrency Bitcoin.

However, in recent years, leaders in banking, finance, and several more organizations have given this innovation more attention than ever before. They seek new technology to replace their systems that are often costly and inefficient to operate.

But, blockchain is not immune to limitations. Low speed and limited scalability still affect the performance of the technology.

Furthermore, cryptocurrencies have gained a lot of attention due to the rise in price. This attention has increased the number of people investing and trading in different cryptocurrencies that have resulted in an increased number of transactions flowing through different networks.

Too many transactions within seconds on crypto platforms have led to scalability issues in some of them, particularly in the most popular cryptocurrency, Bitcoin.

Several people are working on solutions to this problem.

What is the new approach proposed?

The Swiss scientists say to have cracked Bitcoin’s scalability problem. They do it by eliminating the need for consensus among systems to confirm a transaction. The researchers propose a very different approach to validating a transaction in digital currencies like Bitcoin.

Up to now, the consensus within systems has been regarded as essential to resolve Bitcoin’s double-spending problem. Most methods to address this problem comprise of reaching a quorum (i.e., agreement within all systems constituting a blockchain).

However, quorum has many limitations. It is expensive and consumes huge amounts of energy. Also, it can be time-consuming, if transactions accumulate within a blockchain network or if it depends on consensus within systems spread across multiple geographical regions.

But the new study suggests that a quorum is not necessary to validate a transaction. Rather it aims for an agreement about the transaction from a random sampling of systems within a network.

What kind of cryptocurrency fork is this?

The algorithm proposed in this study (the Contagion algorithm) is not a variant of existing consensus algorithms like proof of stake or proof of work.

While proof of work is normally used to decide the consensus value, the Contagion algorithm does not run nodes to elect leaders. Rather, the Contagion algorithm uses a gossip protocol (the same one which is used to communicate headers or nonces of different blocks in Bitcoin) to spread information about a transaction.

To accomplish this task, the Contagion algorithm is made up of three sub-protocols – Threshold, Sieve, and Murmur. The role of the three protocols is to ensure consistency, totality, and validity of a transaction and for sending the original sampled process to a set of randomly picked systems within the network.

The size of the sampled randomly systems confirms whether or not the transaction is valid. The size should be large enough to ensure that hackers are not able to penetrate the system. Also, the size should be smaller than that of a quorum to ensure that it is not more than that of a representation of the entire network.

The Contagion algorithm not only reduces the amount of time and resources needed to confirm a transaction but also uses minimal energy. The energy used to validate and propagate a transaction is that of sending messages on the internet.

These Swiss researchers plan to open source the protocol with the assistance of EU funding to disseminate the study’s findings. Then people can use the protocol to tackle the scalability problem and develop cryptocurrencies, which are “cheap” to run.

Takeaway

The new study indicates that the Contagion algorithm can tackle the scalability problem in cryptocurrencies.

But just like many other blockchain scaling solutions like lightning network, consensus algorithms, and others have their own pros and cons, the Contagion algorithm is no exception. However, the new study is looking promising as it suggests a suitable scaling solution to enable efficient use of cryptocurrencies.

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Worldline and Bitcoin Suisse to Revitalize Swiss Point of Sales with Crypto Usage

Worldline, a top European company in the payments and transactional services industry, has struck a deal with Bitcoin Suisse, a notable Swiss crypto financial services firm, to present crypto payment services to Swiss consumers and merchants both in-web shops and in-store.

This partnership is daunted as the most ambitious project to happen in Switzerland as it seeks to integrate cryptocurrencies into the primary Swiss retail sector. Expressly, the cooperation is intended at leveraging Bitcoin Suisse’s crypto payment abilities and Worldline’s payment service system to propel cryptocurrency usage for transaction purposes in Switzerland.

Through a letter of intent, Bitcoin Suisse will serve as a go-between, whereby it will convert bitcoin into Swiss francs needed in the payment of goods and services. The collaboration is still at infant stages because the pilot project is set for 2020.

The CEO of Bitcoin Suisse, Dr. Arthur Vayloyan, noted: “Our partnership with Worldline is a major step forward on the journey to bring crypto payments into broader adoption. Bitcoin Suisse is proud to serve as the processor of cryptocurrencies in Worldline’s payment service system. We applaud them for their pioneering spirit in taking this monumental step and pointing the way forward for others.”

On the other hand, Worldline’s CEO, Marc Schluep, stipulated: “As a market leader we have a reputation for introducing latest payment functionalities that enhance the customer journey as well as boost efficiency and profitability for our merchants. Through the cooperation with Bitcoin Suisse, merchants can benefit from an entirely new offering without taking any conversion risk.”

It is fronted by encouraging crypto payments in Switzerland; adoption will be encouraged.

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Bitmain-Backed Digital Assets Company Matrixport Extends Its Crypto Services into Europe

Matrixport, a Singapore headquartered and Bitmain-backed crypto company that offers trading, lending, and custody services, extends its services into Europe through the establishment of its new Zurich office. However, for now, Matrixport will not offer its payment services in Europe. Instead, it aims to apply for a Swiss banking license.

Matrixport is backed by Bitmain, the Chinese crypto mining company, and it has plans to set up a European operations center in Switzerland. By joining other crypto firms based in Switzerland, it aims to reach out to cryptocurrency enthusiasts and institutional investors such as private banks, family offices, and asset managers who always welcome being exposed to cryptocurrency.

As stated by the report, Matrixport’s Chief Operations Officer in Switzerland, Hui Wang said that the company plans to enlist close to 10 staff in the space of two years.

“We will start on a modest scale initially as we establish our name in Europe and establish a pool of clients. We don’t intend to act as a channel for our Singapore HQ, simply referring clients to Asia. We will service our European clients from Switzerland.”

Matrixport is registered under the name of Chaintech in Switzerland and is presently a member of the self-regulatory body QVF, which is looked after by the Swiss Financial Market Supervisory Authority.

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The Federal Council of Switzerland Opts For Better and Fair Blockchain Regulations

The Federal Council of Switzerland has opted for better and fair regulations for blockchain and distributed ledger technology (DLT) in the country which is believed will minimize risk, increase legal certainty and abort blockages which willprevent the possible applications of blockchain/distributed ledger technology.

The Council unanimously adopted the official letter, which contained the idea that they should improve their legal and regulatory procedures for blockchain.

The press release aired that the Council’s December 2018 regulatory report for distributed ledger technology stressed the need to create better regulations for blockchain that will put the country in three forefronts of favorable locations for Fintech and blockchain companies and fight abuses, making sure that the country’s financial integrity and reputation are not smashed. Although the said report showed that the country’s blockchain regulations are well suited, it pointed out the need for improvement, which explains the series of amendments already submitted by the Council March 2019.

During the consultation process, the proposal from the council was reviewed, revised, and improved in so many ways as a consequence of the suggestions and recommendations received in the process. The new legislation is to serve as a blanket framework. All the participants in the consultation process welcomed the Federal Council’s proposal in principle, which the Council will examine for the first time in the first quarter of 2020.

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Road to a US CBDC? Ex-CFTC Chairman Released Written Remarks on Digital Dollar in Davos 2020

J. Christopher Giancarlo, the ex-chairman of the U.S. Commodity and Futures Trading Commission will touch upon his Digital Dollar Initiative and state the advantages of a United States’ Central Bank Digital Currency (CBDC) at the World Economic Forum in Davos.

In the past, the creators of the initiative broadcasted details about the project in two separate Wall Street Journal articles, although none of them have openly highlighted details about a CBDC. In contrast to other cryptocurrencies or stablecoins, the purpose of the CBDC is its digitalization of fiat money issued and approved by the state. Certain areas within the U.S. Government have already explored the increasing potential that the launch of a CBDC could bring.

Recent comments by Giancarlo, expressly state that the Digital Dollar Initiative will provide for a framework that will enable practical ways to begin a dollar CBDC. “The Project will ultimately seek to identify options for a CBDC solution that enhances monetary policy effectiveness and financial stability.”, he added.

Despite skepticism from several central banks internationally, Giancarlo elaborated that the implied effect of these digital currencies on the national bank’s financial system and the domestic economy are under uncertainty. Moreover, there are other concerns such as privacy, security, fraud, and money-laundering. Nevertheless, Giancarlo counters that “The adoption of a digital dollar in the U.S. is seen as critical to a possible orderly recalibration of the dollar’s attractiveness relative to other digital currencies to support stable international monetary conditions.”

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Switzerland’s Sygnum Crypto Bank Launches Swiss Franc-Backed Stablecoin to Facilitate Trading of Financial Assets

Sygnum Bank, Swiss regulated digital asset bank, has unveiled a stablecoin dubbed Sygnum Digital CHF (DCHF) – a cryptocurrency pegged to the Swiss Franc. It is the first stablecoin revealed by a regulated Swiss bank.

Stablecoin to promote efficiency

The Swiss bank introduced the digital version of the Swiss franc to increase transaction ease and efficiency between other digital assets and fiat currencies. The value of the fiat-based stablecoin is pegged on the country’s national Swiss franc and is built on blockchain technology. The stablecoin may be transferred in real-time, resulting in almost immediate settlement of transactions and thus eliminating the need for intermediaries. This reduces cost, complexity, and time while mitigating counterparty risk.

Sygnum Bank targets institutional clients with its fiat-based stable coin, emphasizing that the coin is designed to serve a fundamental role in the digital asset ecosystem, as it aims to enable full integration of the asset tokens into banking infrastructure.

Mathias Imbach, Co-founder of Sygnum Bank said in a statement, “We have focused on the development of the Sygnum DCHF as it is essential for bringing the digital asset economy to life. It creates significant operational efficiencies, and at the same time, fosters the development of new business models. Soon, the Sygnum DCHC will also be leveraged by other market participants to facilitate immediate settlement of asset transfers.”

Sygnum Bank’s head of tokenization, Markus Hartmann, stated that the stablecoin would significantly enable execution of smart payment structures like dividend payouts and other corporate actions.

Sygnum’s tokenization solution aims to give corporates the capacity to raise new capital by generating digital assets based on existing financial assets. The solution is also designed to enhance the life-cycle management of securities investment and issuance, part of which is based on executing automated corporate actions.

For all stablecoins issued by the crypto bank, it will hold the same amount in Swiss currency as collateral in the Swiss National Bank (SNB).

The crypto bank supports multiple fiat currencies for deposits like SGD, EUR, USD, and CHR, where such balances can be transferred into Sygnum stablecoin tokens through an internet banking portal.

Sygnum clients can securely hold, trade, and buy several digital assets such as Ethereum, Bitcoin, and other cryptocurrencies in one account. Soon, the crypto bank expects other digital assets like security tokens to be made available.

The Swiss Sygnum crypto bank holds a Singapore banking license

Sygnum Bank is one of the first organizations globally to begin banking services in the crypto field. Based in Switzerland, the crypto bank has made the country a pioneer in the adoption of blockchain and cryptocurrency technology. So far, the Swiss bank has successfully developed in Switzerland, which made the organization look for new global markets. Singapore was deemed as the perfect opportunity to set Sygnum to introduce its services in Asia, where there is a high interest in cryptocurrencies. Sygnum successfully received the Singapore banking license (capital markets services license) that enabled the firm to offer banking and digital assets in Singapore. The CMS license enabled Sygnum to expand its activities in a completely new Asian market. As it solidifies its position in the Asian market, Sygnum’s future target is Europe.

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Switzerland Parliament Blockchain Act Reform Validates Crypto and Digital Assets

The Swiss parliament has reformed and clarified legislation for blockchain technology and digital currencies (cryptocurrency) activity in the country, bringing digital assets closer to a mainstream means of exchange and investment.

According to a report from Swiss Info, the “Blockchain Act” in Switzerland has been duly reformed by the country’s Senate after the law had was passed through the House of Representatives completely unopposed.

As detailed, the reformed Blockchain Act has brought about key updates, ranging from company bankruptcy to securities trading. Under the new law, a well defined legal basis for the trading of digital-only securities has been created. The reformed law also helps outline the legal processes for reclaiming digital assets from bankrupt companies. From indications, the law should take effect in the first quarter of 2021.

Adjudged to have a fair blockchain and crypto-centric policies, the move by the Senate body in the Alpine country has endeared blockchain stakeholders. “As of next year, Switzerland will have a regulatory framework that is among the most advanced in the world,” said Heinz Tännler, President of the Swiss Blockchain Federation.

The Reformed Law Will Consolidate Switzerland Current Blockchain Growth

Switzerland is renowned as a fast-growing hub for the world’s blockchain industry and the county currently houses about 900 blockchain companies with an estimated total staff of about 4,700 as gleaned from the Swiss Info report. These figures are billed to rise when the new bill comes into full effect.

The currently reformed laws take a deep precedent from the Swiss’ Federal Council’s clamor for better and fair blockchain regulation. With the yearnings heard and the Blockchain Act reformed, the question of its impact hinges on the heart of many.

The new law is expected to stir the highly blockchain and crypto skeptical Switzerland banking sector into seeing the technology and its associated innovations in a new light. Failure to stand up for blockchain and cryptocurrencies can make existing banks to lose customers to Sygnum and Seba Crypto AG, the two blockchain firms that have been granted banking licenses by the country’s top banking regulator, The Financial Market Supervisory Authority (FINMA).

As recently announced, the canton of Zug in Switzerland plans to start accepting taxes in cryptocurrencies from the beginning of next year.

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Swiss Central Bank Announces its Central Bank Digital Currency Trial a Success

Even though Switzerland’s central bank has not decided on the way forward in its central bank digital currency (CBDC) issuance, it has hailed the testing phase a success. The digital franc trial entailed settling large scale transactions between financial institutions through an experiment dubbed Project Helvetia.

Boosting trade efficiency

Project Helvetia was run by the Bank for International Settlement (BIS), the Swiss National Bank (SNB), and Swiss bourse operator SIX. As per the announcement:

“It looked at using central bank digital currencies (CBDCs) for so-called wholesale transactions between financial institutions to make trading assets on a planned SIX exchange that will specialize in digital versions of conventional assets more efficient.”

The SNB has aired its skepticism regarding digital currencies like Facebook’s Libra, which was recently rebranded to Diem because they might undermine its capacity to undertake monetary policy meant to attain its objective of price stability.

SNB’s governing board member Andrea Maechler acknowledged:

“The project showed wholesale CBDCs were feasible from a technical and legal viewpoint, but the outcome did not mean the SNB was committed to issuing one.”

The International Monetary Fund (IMF) recently delved into this issue and asked central banks not to throw caution to the wind when developing CBDCs because they have to develop robust legal frameworks for them to work.

Next trial phase scheduled for the third quarter of 2020

Cross-border payments are to be incorporated into the next trial stage planned for the third quarter of 2021. Global central banks are ramping up CBDC research because they see them as game-changers in easing domestic and international payments, given that transfers will be channeled through the internet and possibly even offline.

Last month, Olaf Scholz, the German Finance Minister, noted that the digital euro was an ideal financial instrument needed to fill the void triggered by the high demand for digital money from businesses and consumers in Europe. He, therefore, asked the relevant authorities to speed up the rollout of the European Central Bank (ECB) digital currency.

Switzerland’s New Regulations for Blockchain And DLT Trading Facilities Usher In A New Era Of Clearer And Lighter Regulatory Regimes

Switzerland’s reputation as the most business-friendly country for blockchain and distributed ledger technology (DLT) ventures has cemented its role in fostering the development of global applications for tokenized economies – and global companies such as Dfinity and Diem have flocked to its borders and now call it home.

Known for its bottom-up, decentralized economic and political environment, Switzerland offers the ideal ecosystem for disruptive technologies. It has led the way with cryptocurrencies by creating the first regulatory body in the world to establish clear guidelines for ICOs and classifications for tokens, in addition to many other landmark legislative moves to ensure the success of cryptocurrency and DLT companies.

In January 2021 Switzerland will introduce a new license type for trading venues focusing on digital assets (DLT Trading Facilities), creating a clearer and lighter regulatory regime. A DLT Trading Facility is a new form of license for security tokens and other forms of digital assets. This legislation also provides a new license for “Uncertified Registered Securities” to stabilize the uncertainty surrounding civil law treatment of security tokens.

The Swiss regulatory bodies also recognized that to meet the expected needs of fintech start-ups and larger players alike, the DLT Trading Facility License can be applied for in two versions: A smaller, leaner license with lower requirements as well as a more comprehensive license type for higher transaction volumes.

[Source: MME Legal | Tax | Compliance]

The country’s clearly defined tax schemes for blockchain and DLT companies, access to an established ecosystem of service providers with expertise in the blockchain industry, such as law firms, banks, and tax regulation experts, create a supportive business environment. Switzerland’s long tradition in the fintech and the financial sector – and with its thriving “Crypto Valley” – will continue to be the choice of both startups and established global players building new applications for a tokenized economy.

As the global headquarters of the newly renamed Diem Association – formerly known as Facebook’s Libra – Switzerland will see the birth of the stablecoin Diem Dollar as soon as regulatory approval is granted by the Swiss Financial Market Supervisory Authority (FINMA), it is expected to be approved sometime in January.

Switzerland ranked number one of the ten most blockchain-friendly countries in Europe [Source: BlockShow Europe 2019].

An unparalleled brain trust: crypto-friendly research and educational institutions

One of the reasons both U.S. and global crypto and DLT companies flock to Switzerland is due to the unparalleled access to an educated and diverse talent pool made possible by the country’s federal institutes of learning and a two-tiered educational system.

The first university professorship in blockchain was created at the University of Basel in 2018 and the two federal science and technology institutes in Lausanne and Zurich have been recognized as global leaders in crypto education [Source: Coinbase, 2019].

World-renowned institutes committed to DLT and blockchain advances assure access to a highly educated and skilled workforce prepared for the explosive growth in cryptocurrency, DeFi, and blockchain in the 2020s.

The Blockchain Center at the University of Zurich has become the most active academic cluster in Switzerland. It is led by 22 professors who work to investigate blockchain topics from a multidisciplinary perspective.

The remarkable body of research institutions and educational programs devoted to DLT and blockchain technologies are unmatched in the world and make Switzerland an attractive choice for EMEA headquarters and research facilities for crypto companies.

An innovation-friendly regulatory network by design

FINMA’s introduction of unsupervised sandbox regimes in 2017 allowed young fintech startups to grow by not requiring a banking license to accept deposits from the public if certain criteria are met. Rather than stifling innovation, young companies have the freedom to explore and develop before they become regulated.

With clear metrics and guidelines once they approach “bank-like” status, these promising start-ups then apply and are integrated into the regulatory structure. Since 2019, companies who obtain a fintech license have been able to accept public deposits of up to 100 million Swiss francs, greatly simplifying blockchain and crypto companies’ access to the Swiss market.

The innovative sandbox regime introduced only three years ago has had a dramatic effect on the number of fintech and crypto startups that flock to Switzerland. To date, Switzerland boasts:

● The first regulated crypto banks, SEBA and Sygnum

● 842 blockchain-related companies

● These companies employ over 4,400 employees

● This environment has birthed five unicorns: Ethereum, Dfinity, Polkadot, Bitmain, and Diem, with more anticipated.

[Source: CV VC Top 50 Report H2/2019]

A legacy of firsts in the cryptocurrency ecosystem

The city of Zug was the first state authority in the world to accept Bitcoin as an official means of payment, thus the birth of Switzerland’s “Crypto Valley.” Zug also saw the creation of Ethereum, an open-source platform for decentralized applications resulting in the second most significant cryptocurrency next to Bitcoin.

The success of Ethereum helped create a global ecosystem that stretches from German speaking Zurich, Basel, Lucerne and Bern to French speaking Geneva, Neuchatel and Lausanne as well as Ticino, Switzerland’s Italian speaking region, each with its own approach and expertise in the cryptocurrency ecosystem.

In 2018, Switzerland’s regulatory body, FINMA, became the first regulator in the world to publish clear guidelines on ICOs and classifications for tokens. Later that year, the Geneva cantonal authorities released the very first guide dedicated to supporting ICO project promoters.

A favorable legislative and tax system for the decade of crypto and blockchain

In June 2020, Swiss authorities passed a legislative package impacting around a dozen financial laws which brought favorable changes to the blockchain and DLT sector while at the same time, leaving untouched, the respective tax laws which were already seen as highly favorable to this emerging sector.

In 2019, funding of the top 50 Crypto Valley companies totaled US$7.8 billion, and US$3.7 billion for H12020 [Source: CVVC Insights]. As Swiss companies thrive, U.S. companies such as 21Shares, IBM (whose R&D lab was established in Zurich in 1956), and the aforementioned unicorns Dfinity and Diem, reap the benefits of this crypto sandbox.

Switzerland’s newest kid on the block, Diem, plans to develop policies for sanctions compliance and to fight money laundering and terrorist financing, all of huge concern to regulators and Western governments [Source: VentureBeat, 2020].

Crypto and DLT companies looking to put their growth trajectory into hyperdrive should consider the market access advantages Switzerland offers as the 2020s become the decade of cryptocurrencies and blockchain technologies.

Christoph Besmer is the Trade Commissioner for Switzerland and Head of Investment of the Swiss Business Hub USA. For more information visit Blockchain Hub Switzerland or contact christoph.besmer@eda.admin.ch.

Spain Bank BBVA Launches Bitcoin Trading Service in Switzerland

Spanish banking giant BBVA has announced that the financial institution launches a new Bitcoin trading service on Monday for private banking clients in Switzerland interested in digital asset investment.

The Spanish Bilbao-based bank stated that it is starting to operate its new Bitcoin trading and custody services on Monday and plans to roll out services of other cryptocurrencies soon. However, the multinational bank said that it would not provide advice on such types of investments.

After six months of testing the Bitcoin service with a selected group of users, BBVA is now making the trading available to its customers in Switzerland.

BBVA Switzerland’s Chief Executive Alfonso Gomez stated that the bank had noticed a significant appetite among investors for cryptocurrencies or digital assets to diversify their portfolios despite their high risk and volatility.

On Friday, BBVA stated the new Bitcoin trading services would only be available to customers in Switzerland because the nation has clear regulation and widespread adoption of digital assets. The bank sees Switzerland as having relatively comprehensive regulations around digital assets, set out by the nation’s Financial Market Supervisory Authority(FINMA ).

“It’s an extension to new countries, or other types of customers will depend on whether the markets meet the appropriate conditions in terms of maturity, demand and regulation,” Gomez said.

BBVA is present in Switzerland through a wholly-owned franchise focused on international banking services. The bank, an international bank in 35 countries globally, has more than 130,000 employees and serves 66 million globally.

Bitcoin Coming to Banks

Currently, an increasing number of large investment banks are showing interest in launching Bitcoin trading and custody for their customers. In April, Goldman Sachs and JPMorgan announced plans to make cryptocurrencies more accessible to the public. Last month, Citi Group revealed that it is offering crypto trading services after witnessing surging client interest.

Efforts to offer Bitcoin trading services come amid rising institutional interest in cryptocurrency. Investors and firms see Bitcoin as a hedge against inflation as central banks and governments turn on the stimulus taps.

El Salvador has become the first nation to adopt Bitcoin as a legal tender currency. However, central banks across the globe have frequently warned investors about losing their money in crypto investment.

In recent weeks, major countries like China and the US have signalled a stricter approach to cryptocurrency regulations while building their plans to create their own central bank digital currencies.