Coinbase

By Muneeb Imtiaz, Senior Product Manager

At Coinbase, we’re reimagining the crypto spending and earning experience by building products that are safe, trusted, and easy-to-use. That’s why we’re enhancing Coinbase Card to give customers more flexibility than ever. Through Coinbase Card’s upcoming rotating rewards structure, customers will be able to earn a wider variety of crypto rewards to diversify their crypto portfolio. We’re also removing the transaction fee for all crypto spending and allowing customers to get paid into Coinbase with no fees on deposits so they can easily fund their card in any currency³. With millions of transactions to date, we plan to remove the waitlist later this spring to allow all US* customers to sign up for Coinbase Card.

Rotating rewards

Customers love earning crypto rewards, and tell us that Coinbase Card encourages them to explore and learn more about different cryptocurrencies. Soon, customers will have the opportunity to easily earn new assets from a rotating list of crypto rewards just by swiping their card. With the rotating rewards structure, customers will continue to earn up to 4% back on every purchase with up-and-coming crypto assets like The Graph (GRT) or popular assets such as Bitcoin (BTC)⁴. Rewards will have an expiration date. If a customer doesn’t select a reward when the next rotation is launched, we’ll automatically give them the reward with the highest crypto-back rate so they can diversify their earnings.

No more fees

Customers love the ability to conveniently spend crypto. While most customers spend USDC, they tell us that the crypto spending fees on non-USDC assets are a barrier to using crypto for everyday purchases. That’s why we’re removing the transaction fee for crypto spending on the Coinbase Card, starting today⁵. By removing this fee, customers now have more flexibility to spend crypto or cash.

Easy funding

As customers spend more, we want to make it easier for them to fund purchases for their card. We’re now giving customers more options to easily load up their card, so they can get some or all of their paycheck deposited into Coinbase with no fees on direct deposits. This means that customers can now receive their paycheck in fiat or crypto and spend crypto without fees, moving more of their financial life into the cryptoeconomy.

Unlimited rewards⁶

Customers can continue to earn unlimited crypto rewards and use their Coinbase Card anywhere Visa® debit cards are accepted. From earning rewards on morning coffee to monthly gym memberships, Coinbase Card continues to be a richly rewarding experience for everyday spending.

With no credit check⁷ or requirement to stake your assets to become eligible, we’re making it easy to sign up and start earning crypto rewards. Join the waitlist for Coinbase Card and we’ll notify you as soon as you’re next in line.

*Coinbase Card will be available to all eligible customers in the US, excluding Hawaii.

¹ Crypto rewards is an optional Coinbase offer.

²No Coinbase transaction fees but a spread applies when customers buy, sell, or trade crypto assets.

³ If you choose to be paid in crypto, Coinbase will automatically convert your paycheck from US dollars to crypto with no transaction fees. See terms.

⁴ Reward options may vary. Check your app for the most updated rewards.

⁵ While this feature is free, other fees may be associated with the card. See Cardholder Agreement for details.

⁶ Spending limits apply, see terms.

⁷ Important information for opening a Card account: To help the federal government fight the funding of terrorism and money laundering activities, the USA PATRIOT Act requires all financial institutions and their third parties to obtain, verify, and record information that identifies each person who opens a Card account. What this means for you: When you open a Card account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

Rewards are for illustrative purposes only, actual reward options may vary.

The Coinbase Card is issued by MetaBank®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Coinbase Card is powered by Marqeta. You may use Coinbase Card to make purchases anywhere Visa Debit cards are accepted.

Meet the refreshed Coinbase Card: More crypto rewards ¹, no more transaction fees² was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Brian Armstrong

At Coinbase, we believe that crypto is the best tool that exists to advance our mission of increasing economic freedom in the world. But for crypto to reach its potential, it needs to be easy for anyone, anywhere in the world to use it.

That’s why we’re excited to be in India this week.

India has built a robust identity and digital payments infrastructure and implemented it at rapid scale and speed. Combined with India’s world class software talent, we believe that crypto and web3 technology can help accelerate India’s economic and financial inclusion goals.

On Thursday, April 7th, we will be hosting a crypto community event in Bangalore to discuss the future of crypto and web3 in India. We will have many special guests. You may register to attend online here. Additionally, Coinbase Ventures, the investment arm of Coinbase, has partnered with Builders Tribe to host a startup pitch event on Friday, April 8th. Please visit the website to learn more about the event and apply.

Coinbase Ventures has already invested $150 million in home-grown Indian technology companies in the crypto and web3 space, and is constantly identifying new opportunities to help Indian founders scale. Coinbase’s Indian tech hub was launched last year and already has over 300 full time employees across India’s state and regions. We are excited to tap into the dynamic Indian software talent to build out our products and will continue to invest heavily in our India hub. We have ambitious plans for India and seek to hire over 1,000 people in our India hub this year alone.

On a personal note, I’ve spent the last week touring India — visiting the sites, and meeting the amazing people. This week, I’ll be joining members of our executive team as we meet with students from top universities, crypto founders, Indian entrepreneurs, and crypto evangelists.

India is a magical place, and I believe crypto has a big future here. We’re excited to help build that future, and this event is an important step.

Namaste, India! 🇮🇳 was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Coinbase Special Investigations Team

In our last post we walked through the basics of blockchain analytics and attribution. In this follow-up post, we will demonstrate how powerful blockchain analytics is and how tricky it can get at scale. We’ll start with reviewing some of the common blockchain analytics scaling methods used in fortifying Compliance programs as well as bolstering sanctions controls.

1. Commonspend

Blockchain analytics software relies on detecting patterns of certain address activities, known as heuristics. The primary heuristic applied to all UTXO blockchains (Unspent Transaction Output, like Bitcoin, Litecoin and their forks) is the commonspend heuristic.

It works as follows: take the following address 1P354Tw8VaSteYph84ext3f4fAYnSJQGuZ, as seen in this Youtube video involving a deposit to LocalBitcoins. So, we know this address belongs to LocalBitcoins and is an individual’s deposit address.

In this transaction we see that our LocalBitcoins address appears as one of the inputs:

Since we know that 1P354Tw8VaSteYph84ext3f4fAYnSJQGuZ belongs to LocalBitcoins and because we know that in order for this address and others to be spending funds together in the same transaction hash (i.e. inputs), the sender must have all of the private keys to each input address. We therefore can reason that all input addresses in this transaction belong to LocalBitcoins. Thus all input addresses belonging to Local Bitcoins can be clustered together.

Some block explorers automatically apply the commonspend heuristic to their analysis. For example, if you take a look at our original address in CryptoID or WalletExplorer, you’ll see that it belongs to a cluster of 990k+ addresses.

This heuristic remains a cornerstone of blockchain analytics. In fact, the most popular blockchain analytics tools already apply the commonspend heuristic to all Bitcoin addresses before they even know what the attributions for the addresses are.

But heuristics, even as straightforward as commonspend, can’t always be trusted.

2. Commonspend isn’t always common

So when does the common spend heuristic not apply? Consider this transaction:

The above transaction has multiple inputs and also multiple outputs. This is a more complex type of a transaction, referred to as coinjoin. Several users who don’t necessarily know each other might decide to participate together in a coinjoin transaction, pooling all their funds together. This is often done through dedicated privacy software such as Samourai or Wasabi wallets.

Coinjoin above leads to obfuscation of funds through seemingly random output addresses. It also renders any commonspend-based analysis ineffective, even though each party that participated in the coinjoin still gets out the same amount of Bitcoin that they originally put in (minus the fee paid to the service). Demixing such transactions is difficult (but not always impossible), and it is just one example of defeating commonspend.

3. Bringing it all together

Now that we’ve learned about ground truth, evidence quality, deconflictions, misattributions, and what commonspend is, let’s walk through how it comes together in identifying addresses belonging to illicit entities, like those 25k we discussed in our previous blog post.

The Office of Foreign Assets Control (OFAC) — a regulatory agency in the US responsible for sanctions enforcement — published a notice designating about 100 addresses, as well as entities they belong to. So, how did we go from under a hundred to over 25 thousand addresses?

3E7YbpXuhh3CWFks1jmvWoV8y5DvsfzE6 was one of the addresses designated by OFAC as belonging to Chatex — Russian Telegram bot that allows users to exchange crypto:

An official government website is a pretty reliable source of information, giving us confidence in the evidence quality. Now we need to assess each address to identify whether it’s a part of a larger group of addresses (e.g. a cluster) controlled by an entity. Using commonspend heuristic, we can associate 3E7YbpX…vsfzE6 address with a group of over 25k addresses. You too can verify this using a public block explorer, such as CryptoID:

After some additional checks we confirmed that all of these addresses belong to Chatex. And since the entity was sanctioned by OFAC, we are required to block respective transactions. It is worth noting that our list of blocked addresses is significantly larger. It includes other sanctioned entities as well as designated individuals. We also engage in proactive work to identify sanctioned activity originating from various jurisdictions, including Russia. But that’s a subject for another blogspot…

Part 2: Blockchain Analytics is Tricky at Scale was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Heidi Wilder, Senior Associate, Coinbase Special Investigations Team

Intro

Bitcoin and many other cryptocurrencies are often referred to as pseudonymous. Everyone can view records on a public ledger, but not necessarily know who’s behind each address or transaction. But what does pseudonymity look like in practice? How are cryptocurrencies tracked? And can you really unmask someone on the blockchain? Let’s find out.

The public nature of blockchains allows for a certain degree of predictive analysis, enabling researchers to associate addresses and transactions with entities and sometimes individuals. Anybody can look at blockchain, but what makes a difference is the accurate interpretation of this public data, as well as corroborating it with other types of information gathered externally. Once combined such data can be used for blockchain analytics.

Blockchain analytics is widely used for market intelligence, trend analysis, and investigations, among many emerging spaces. The main objective of blockchain analytics is attribution — linking specific assets and events to particular entities or even individuals.

Attributing ownership, however, is often nuanced because outside observers can only infer it depending on factors such as availability and quality of the evidence. Evidence means proof that indeed an address belongs to an individual or entity. Unless you own an address yourself, it is very difficult to say with absolute certainty who an address is owned by. This is why it’s more fitting to consider blockchain analytics more of an art than science.

Let’s understand the basics of blockchain analytics and learn why attribution is often more complicated than it looks.

Attribution Basics

Can you tell what entity this address belongs to:

1JxXMEbYX6juuEK7QPe6CxGXywQ91ZB5mZ?

Is it an exchange? Is it a darknet market? Or maybe a private (otherwise known as an unhosted) wallet? To answer this question we need to dig for some ground truth.

1. Ground Truth Evidence

A search for truth often starts with plain googling or crowd-sourced sites like BitcoinAbuse.com:

Websites like BitcoinAbuse.com can be used by anyone to anonymously report BTC addresses linked to suspicious activity. Sadly, the reliability of such information can be very low. According to Blockchain.com, our address of interest received over 767 BTC. WalletExplorer.com implies this address is linked to a large offshore cryptocurrency exchange, which is corroborated by commercial blockchain analytics tools.

Indeed, commercial blockchain analytics tools identify this address as belonging to a large offshore cryptocurrency exchange.

So what about the nature of the activity? Is the exchange user involved in ransomware?

Further research connects this address to an exchanger called Coinguru.pw:

Coinguru allows users to swap between various cryptocurrencies, providing nothing more than an email address.

At this point you’re probably asking yourself: so who does this address belong to?

• the BitcoinAbuse crowd-reported ransomware operator?
• A large offshore cryptocurrency exchange?
• Coinguru?
• …all of the above?!

Well, the answer is complicated.

We have first-hand evidence of 1JxXMEbYX6juuEK7QPe6CxGXywQ91ZB5mZ being used by Coinguru, an exchange service operating an account on a large offshore cryptocurrency exchange. Exchangers like Coinguru often use bigger platforms’ infrastructure to reduce costs and get access to liquidity. We refer to these as nested services. These also cater to users who might not want to go to the trouble of creating their own accounts on an exchange. In fact, some nefarious actors may use these services to cash out of illicit funds.

For labeling purposes, it would suffice to say this is an exchange-owned address. If a regulator or a law enforcement agency investigating ransomware related transactions decides to enquire about the details, the cryptocurrency exchange will refer them to Coinguru who would be best positioned to provide further information on specific transactions.

2. Evidence quality and standard of proof

Evidence can vary in quality and blockchain analytics is no exception. Sometimes you might stumble upon a “smoking gun”, but it’s more likely you will need to spend time corroborating incomplete, circumstantial, fragmented or straight out misleading evidence. Nevertheless, even the weakest evidence can hint on a particular activity or entity behind it.

As we’ve already witnessed, crowd-reported sources such as BitcoinAbuse stand on the bottom of the reliability ladder. Not that they should be fully discounted, but evidence leading to attribution of crypto addresses is best gathered directly from the source. In the case of exchange services, the source would be their website displaying a deposit address.

The ultimate attribution comes from the ability to interact with the service, earning such evidence the highest confidence score. However, this is often prohibited, especially when investigating activities such as terror funding (TF). In cases like these, research shifts into the world of open source intelligence (OSINT). Much can be learned from aggregator websites, online forums, chat groups, mobile communication platforms, hidden domains on the Tor network and information scraping in an automated fashion by third party vendors. But even the best evidence is not helpful without proper investigative tools.

3. Deconflicting misattribution

Blockchain investigation tools include blockchain analytics software, private and open source databases, search engines, etc. The best investigative practice is to combine a mix of these tools, including commercially available software, and corroborate evidence using independent sources. Sometimes, however, those sources can offer conflicting information.

For instance, consider this address: 1N9SxKeNvFoBFuFKEDU8yFCwPwoeHqgmhu.

Imagine an investigator receiving intelligence linking this address to the sale of Child Sexual Abuse Material (CSAM). Attribution of this address will vary depending on which blockchain analytics tool you consult: some don’t have it labeled at all, while others attribute it to a merchant service. Open source research confirms this particular service allowed users to upload files and sell them for various cryptocurrencies. Addresses like the one above were generated for every user and were all connected to different types of activity, depending on what an individual user was buying.

While some uploads to this merchant service have been benign, some were identified as illicit, according to the Internet Watch Foundation (IWF), a non-profit combating the distribution of CSAM. Reportedly, the same merchant service was also used for ransomware decryptor key uploads. So, can the address of interest belong both to an illicit vendor and to the merchant service? Yes.

The correct way to attribute this service in a blockchain analytics tool would be to take all of the known addresses associated with the service and label them accordingly. Then, as a result of investigating individual addresses and their related activities, specific labels should be applied in accordance with documented findings. Labeling the whole service as illicit would be a misattribution. It can negatively impact tools and services that rely on blockchain analytics data, such as transaction monitoring systems or law enforcement subpoenas, leading to increased false positive alerts and erroneous leads.

4. The unknown unknowns

Back in October 2019, a medium article was published with a flashy title — “Huge Ethereum Mixer”. A Russian data scientist analyzed ETH flows between February and September 2017 claiming that “…68% of total Ethereum transaction value [is] controlled by one system… Funds come and leave within one hour, and addresses are never used again.” The researcher spent a great deal of effort analyzing the behavior of the “mixer”, its transaction patterns, and share of total transactions across Ethereum over time. At the center of the article was this diagram:

Notice how most large exchanges at the time are present: Kraken, Poloniex, Bitfinex, etc. Can you guess which one(s) are missing?

Hopefully, at this point it’s fairly evident that an external observer cannot possibly gain a full picture or claim 100% confidence in attribution. Keep in mind, when it comes to blockchain, everyone is an external observer, with the exception of addresses you control.

Stay tuned for the second part, where we’ll dive deeper into examples of how blockchain analytics can both enlighten and confuse.

Part 1: Blockchain Analytics is More of an Art Than Science was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Paul Grewal, Chief Legal Officer

Bad facts make bad law. We see this in jurisdictions all over the world, especially when it comes to digital assets. Unfortunately, we are about to see this again — this time in the European Union — in the form of a revision to the Transfer of Funds Regulation. If adopted, this revision would unleash an entire surveillance regime on exchanges like Coinbase, stifle innovation, and undermine the self-hosted wallets that individuals use to securely protect their digital assets. The vote will likely take place this week so time is running out.

Here are the bad “facts”:

(1) digital assets like Bitcoin, Ethereum and others are a primary way criminals hide and move money

(2) law enforcement has no way to track these movements

(3) requiring collection and verification of personal information associated with self-hosted is not a violation of their privacy

State of play

The truth is that digital assets are in general a markedly inferior way for criminals to hide their illicit financial activity. That’s why, according to the best research available, by far the most popular way to hide illicit financial activity remains cash. Unlike with cash, law enforcement can track and trace digital asset transfers with advanced analytics tools. None of this requires upsetting the settled privacy expectations of wallet holders because the open architecture underlying digital assets is public and offers unprecedented transparency into transaction details. The records are also permanent — no one (not crypto companies, not governments, not even bad actors) can destroy or alter information. In short, digital assets and the immutable nature of their blockchain technology actually enhances the ability to detect and deter illicit activity. But rather than embracing and leveraging the benefits that arise from the increasing use of digital assets, the EU’s proposal would cast them aside and impose a host of new privacy invasions on wallet users.

For example, all crypto transactions will be deemed “travel rule eligible”. This means crypto is treated differently to fiat (which has a 1,000 EUR threshold), which establishes a clear advantage for traditional financial service providers over new technology, with significant anti-competition and anti-innovation implications.

Among the worst of the proposed provisions are new obligations on exchanges to collect, verify and report information on non-customers using self-hosted wallets. For instance, one provision requires exchanges to not only collect personal data about wallet users who are not their customers, but to also verify the data’s accuracy before allowing a transfer to one of their customers. In fiat terms, this would basically mean you cannot take money out of your bank account to send to someone else until you share personal data with your financial institution about that person and verify their identity. Not only is this verification requirement nearly impossible to do but requiring exchanges to engage in extensive data collection, verification, and retention about non-customers runs against core EU data protection principles of data minimization and proportionality.

Another dangerous provision would require exchanges to inform “competent authorities” of every single transfer from a non-customer’s self-hosted wallet equal to or greater than 1,000 EUR — regardless of any suspicion of bad activity. The proposal even leaves the door open to a total ban on transfers to self-hosted wallets even though there is no evidence that such a ban would have any impact on illicit activity at all. Like we said, bad facts make bad policy.

Make your voice heard

There’s precious time to act and we need to make our voices heard. A vote on Parliament’s draft proposal could come as early as Thursday, March 31st. If you care about protecting the privacy of individuals, and focusing the law on solutions that actually address legitimate concerns about the illicit use of digital assets, now is the time to speak up and be heard. We must speak with one, strong voice against this proposal before it’s too late.

Making your voice heard ahead of Thursday’s critical EU vote was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Coinbase’s Applied Researcher, Yehuda Lindell, has won the prestigious “Test-of-Time” award for 2022 from the International Association of Cryptologic Research (IACR). The “Test-of-Time” award recognizes papers published 15 years ago that have had a lasting impact on the field of cryptography. Yehuda’s pioneering work was published a year before another important paper you may be familiar with: “Bitcoin: A Peer-to-Peer Electronic Cash System”.

His 2007 paper, “An Efficient Protocol for Secure Two-Party Computation in the Presence of Malicious Adversaries,” was the first to outline a two-party multi-party computation (MPC) protocol that was efficient enough to be implemented. In layman’s terms, secure two-party computation allows two “people” to solve a problem while keeping critical information private. For example, it solves the classic millionaires’ problem by allowing two people to understand who has more money without revealing their respective net worths. Yehuda’s work laid the foundation for future practical constructions.

Why cryptography is critical

Beyond their shared etymology related to something “hidden” or “secret”, cryptocurrency and cryptography are very intertwined. Cryptography’s mathematical and technological innovations underpin the entire crypto industry. The Bitcoin white paper makes this clear by introducing a cryptographic protocol in place of a trusted third party to validate transactions. This shift makes decentralization possible by “allowing any two willing parties to transact directly.”

Cryptography is essential to enabling transactions that are anonymous, secure, and “trustless.” The final point is the least obvious and perhaps most important. You don’t need a bank, credit card company, government, or other third-party intermediary since cryptographic tools such as public-private key encryption provide secure, direct confirmation.

Coinbase invests in fundamental research

Coinbase cares deeply about the security and reliability of our systems and the crypto industry as a whole. Investing in fundamental research is a core part of our mission to increase economic freedom in the world. We are honored to have Yehuda on our team and to support research that advances our mission.

If you feel strongly about advancing the field of cryptography, come work with us.

Coinbase Applied Researcher advances the field of cryptography was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Hierarchical Threshold Signature Scheme — An Approach to Distinguish Singers in Threshold Signature Scheme

This report updates on what AMIS, Coinbase Crypto Community Fund grant recipient, has been working on over the first part of their year-long Crypto development grant. This specifically covers their work on hierarchical threshold signature.

Introduction

AMIS is a financial technology company creating bonds between traditional and decentralized worlds. We provide security and accessibility for blockchains as well as for cryptocurrencies. With us, our customers can manage blockchain technology with ease and confidence.

What is MPC?

Distributed computing in computer science focuses on achieving the common purpose by a system having separate components, which are connecting, interacting, and conveying messages to each other. Multi-Party Computation (abbrev. MPC) makes sure the desired tasks are executed securely in a distributed system to prevent malicious entities. Many malicious entities steal the inputs of all components in the system or induce to deviate the correct results for their own purposes. Therefore, any secure protocols of MPC require the following two properties:

• Privacy: Each party should not learn anything more than its prescribed output.
• Correctness: Each party is guaranteed the correct output.

Why do we need to merge crypto private keys with MPC?

In the world of blockchain, the possession of private keys is the control of your assets. How do you protect your private key? A natural answer is that you entrust professional custodial service to manage private keys. However, it is easy to become the target of hackers. On the other hand, if users hold private keys, it is very likely to be stolen by adversaries due to weak awareness of information security, or some inappropriate operations.

Inspired by the practice of maintaining treasure maps, a naive idea is to divide the map into many parts and hide them in the distributed places. In this setting, the cost of attacks will increase owing to multiple spots. The next upcoming question is how to safely take these parts out for use. Since we are now in a distributed system, MPC becomes a natural option to solve the issue. This is because each component can safely and correctly execute the computational requirements guaranteed by MPC.

Threshold signature scheme (abbrev. TSS), a special application of MPC technology, dramatically decreases the risk of private key management. Most importantly, TSS does not save the private key, which is *split* into many parts called “share”, on the server and provides risk control as well as separation of duties. Meanwhile, compared to multi-signature, TSS provides the native multi-signature capability for those blockchains that lack shorter signatures and better privacy. These significant advantages make TSS suitable for implementing hot wallets without revealing private keys and providing the service in real-time.

Who is Alice?

Compared to TSS, shares in this Hierarchical Threshold Signature Scheme (abbrev. HTSS) are allowed to have different ranks. The main merit of this scheme is vertical access control such that it has “partial accountability”. Although TSS achieves joint control to disperse risk among the participants and avoid single points of failure, the importance of all shares is equal. It is impossible to distinguish which share gets involved in an unexpected signature which is because TSS only supports horizontal access control. For example, an important contract not only requires enough signatures but also needs to be signed by a manager. In the HTSS framework, assigning different ranks of each share induces that any valid signature generated includes the share of the manager. We call this library Alice. The aim of Alice is to provide an open and audited TSS Library. At the same time, we will also organize some useful cryptography libraries independently in the developing process. In addition, AMIS will continuously keep updating this library and fixing potential security issues.

By means of sharing articles in the medium and opening research papers and libraries continuously, AMIS is motivated to a progressively higher capability. More precisely, we have:

• Open source： Hierarchical Threshold Signature Scheme library (Alice),
• 2 Party computation of BIP32 (POC),
• Gas Price Prediction.

Except for academic research, AMIS also developed the following products:

• Enterprise wallet service,
• Qubic wallet,
• Qubic Creator A platform “NFT as a service”.

Roadmap and progress

In March, we will implement a new protocol of ECDSA: UC Non-Interactive, Proactive, Threshold ECDSA with Identifiable Aborts including Key Generation, Key-Refresh & AuxiliaryInformation, Three-Round Sign, and Six-Round Sign. The part that hasn’t been integrated yet is the echo protocol which provides a secure broadcast environment for each node but adds one extra round of communication.

For EdDSA, we also adopt the well-known protocol: FROST, which supports the elliptic curves: ed25519 and sr25519. However, this part has not been integrated into the master branch of Alice. Of course, the above libraries also support Hierarchical secret sharing. We hope to complete all the above-mentioned tasks in May and prepare to audit in June. Finally, I am very grateful for the support of Coinbase’s grant, so that we can continue to accomplish this project.

Coinbase is officially seeking applications for our 2022 developer grants focused on blockchain developers who contribute directly to a blockchain codebase, or researchers producing white papers. Learn more about the call for applications here.

Hierarchical Threshold Signature Scheme — An Approach to Distinguish Singers in Threshold… was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Coinbase Security Team

As part of our mission to build a more fair, accessible, efficient, and transparent financial system enabled by crypto, we actively monitor for security threats not only to Coinbase but to the crypto ecosystem as a whole. As we have discussed in our previous blog posts on industry-wide crypto security threats and airdrop phishing campaigns, malicious activity against any crypto user or business is bad for the industry. That’s why it’s important to have a community mindset when we see security threats in the wild. As they say, rising tides lift all boats.

Recently, our security teams have uncovered ongoing mining pool scams targeting users of self-custody wallets. These scams have primarily leveraged malicious smart contracts on the Ethereum network. Based on blockchain research into known scammer wallets, Coinbase estimates these have resulted in the theft of over $50 million in crypto assets from a variety of non-custodial wallet applications. These scams target those using any decentralized wallet browser (e.g. Coinbase Wallet, Metamask, Trust, etc).

The scam typically follows this chain of events:

• Victims are contacted via social media and/or other messaging services by scammers claiming to offer an attractive crypto investment opportunity to stake USDT (Tether) in their wallet for a guaranteed return
• Victims are directed to visit a fraudulent website that can only be accessed via a crypto wallet browser or extension. These websites generally contain fake reviews, endorsements, live-feed payouts, and partner lists to add an appearance of authenticity
• Scam sites will often fraudulently claim to be sponsored by or partnering with recognizable crypto brands such as Coinbase, Binance, and MetaMask
• Example mining pool landing page

Source: Scam Site

• Clicking the ‘Receive’ button displays a pop up similar to this

Source: Scam Site

• Clicking this ‘Receive’ button will then display a fake pop-up designed to impersonate the Coinbase Wallet interface. The permissions that are displayed are not the true permissions that are actually being requested and are intentionally displayed in a way to attempt to trick users into clicking ‘Connect’

Source: Scam Site

• Viewing the smart contract via a trusted token approval checker shows the true permissions being requested. The scammer gains delegated transaction approval status with an unlimited transaction allowance within the victim wallet, meaning the scammer can approve USDT sends of any amount on behalf of this wallet.

Source: etherscan.io

• Attackers will remove USDT from the victim’s wallet and the scam site will show that their balance is increasing. Scammers will frequently reassure victims that if they add more funds, they will get more USDT in returns by mining.
• At the end of the period, the funds are not returned to the victim and no profits will be received.
• If the victim contacts customer support via the fraudulent website, the attacker may indicate they detected irregular activity on the account and that in order to fix that issue, the victim would need to pay additional USDT to ‘release’ the funds. However, no funds are ever returned regardless of whether or not the victim makes payment.

The following security steps can be taken to defend your assets:

• Be wary of investments that claim a guaranteed return
• Be wary of investment advice and opportunities from unknown or untrusted sources
• Do not visit or connect self-custody wallets to any unknown site
• Do not hold high value assets in the same wallet used to regularly interact with dapps. Use cold storage or custodial solutions such as the freely available Coinbase Vault.
• Use a token approval checker to validate actual permissioning on self-custody wallets and revoke approvals that you did not knowingly authorize.

Coinbase is working with industry partners to take down these sites and developing ways to warn users when visiting known scam sites in order to help limit the damage caused by this type of scam.

Security PSA: Mining Pool Scams Targeting Self-Custody Wallets was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

The Dev Migration — Leaving Web2 for Web3

An interview with Varsha Mahadevan, Software Engineering Manager

In the last six months, Google searches for ‘Web3’ have grown more than 33x as people begin to look into the movement towards decentralization. This term has become synonymous with a more transparent and equitable way for individuals to participate in building the next generation of applications and platforms that will shape how we live, work, and interact with each other. To better understand what’s going on behind the scenes, we spoke with Varsha Mahadevan, to dive into why developers are leaving Web2 for Web3 projects.

Varsha spent the past 20 years working as a developer building high quality products at Microsoft and BankBazaar.com before joining Coinbase as a Software Engineering Manager.

COINBASE: Developers are leaving Web2 for Web3 in droves. Why do you think that is?

VARSHA: Data shared in a recent report by Electric Capital, indicates that a majority of the developers that are currently building in Web3 just entered the space last year. A big reason behind why we’re seeing this mass migration of Web2 developers into Web3 is because developers love being at the bleeding edge of all innovation.

Web3 is shaping up to be a brave new world with possibilities no one imagined would exist just a few years ago. The ecosystem of protocols, tools, and services that power Web3 development are still nascent. It is natural that Web3 attracts the brightest minds that seek to shape this future.

COINBASE: What are the biggest differences and similarities you see between Web2 and Web3?

VARSHA: When it comes to Web2 vs Web3 architecture, the concept of utilizing distributed systems isn’t entirely new or revolutionary. What’s fundamentally different between Web2 and Web3 boils down to values.

Web1 was a world wide web consisting largely of content consumers and only a select few content creators while Web2 opened the doors to user generated content and brought a large emphasis on usability and interoperability. However, this came at the cost of relinquishing control of user’s identity and data and instead put that power and control in the hands of a select few.

Web3 is the evolution of the world wide web which has been defined as read, write, and own, and aims to enable users to have ownership over the content they create — and projects they build. In Web3, no single entity controls the network and everyone can participate in a trustless environment that’s governed by a set of consensus protocols. Users are, instead, empowered with transparency and verifiable guarantees of the data they receive and send without putting their trust in any central authority. These grounding values make Web3 a more equitable internet for participants and builders alike.

COINBASE: What does it mean for a developer to have ownership over their product in the Web3 world?

VARSHA: In a decentralized world there is a paradigm shift in how developers think and design products. Products are built to be self-sustaining without the need for ownership and authority. In the world of Ethereum, products are built as smart contracts which are deployed as immutable transactions. The traditional notion of versioning products does not exactly exist. Newer and better smart contracts can be built as new products.

COINBASE: What kind of incentives and advantages are there for Web2 developers to join a Web3 company like Coinbase?

VARSHA: In my opinion, Coinbase is at the forefront of innovation in all of the core product areas of Web3, viz. CryptoCurrency, DeFi, NFT, DAO. It truly believes in making these easy, secure and accessible to one and all, cross borders and geographies. While it chases these lofty goals, it is deeply rooted in its engineering, infrastructure, and machine learning investments. This to me is a perfect blend and hard to resist for individuals with an appetite for challenges.

Companies like Coinbase also offer developers a great place to learn and strengthen their skills while learning from some of the best and the brightest builders in Web3. Coinbase specifically also has a recently-implemented Project 10% initiative that invests in employee-led ventures.

COINBASE: What does the Web3 tech stack look like?

For Web2 developers, it’s important to understand the current Web3 tech stack, which consists of

• Layer 1 blockchains (Ethereum, Solana, Cosmos, NEAR, Tezos, Fantom, Polkadot)
• Layer 2s & sidechains (ZK Sync, Polygon, Arbitrum, Optimism)
• Developer Environments (Hardhat, Truffle, Foundry, Anchor)
• File Storage (IPFS, ARweave, FIlecoin),
• APIs (indexing & querying),
• Identity (Wallet Connect, Ceramic Self ID)
• Clients (web3.js, Ethers.js, Anchor)

This tech stack currently powers a two hundred billion dollar market cap that’s led by two major categories: decentralized finance (DeFi) and non-fungible tokens (NFTs).

Across DeFi and NFTs, protocols and smart contracts are the backbone of making it all work, and many of them are built using programming languages such as Solidity, Rust, and Web.js.

Simply put, Web2’s ‘backend technologies’ are the protocols of Web3.

The Dev Migration — Leaving Web2 for Web3 was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Rupmalini Sahu, Senior Product Manager

At Coinbase, we’re focused on offering more ways for customers to earn crypto rewards. Today, we’re expanding our staking offerings to include Cardano (ADA) with plans to continue to scale our staking portfolio in 2022.

Cardano is one of the top ten most valuable cryptocurrencies by market cap. It’s a proof-of-stake blockchain designed to be a next-gen evolution of Ethereum — with a blockchain that seeks to be more flexible, sustainable, and scalable. Cardano aims to enable smart contracts to allow developers to build a wide range of decentralized finance (DeFi) apps, new crypto tokens, games, and more. When users stake their crypto, they make the underlying blockchain of that asset more secure and more efficient. And in exchange, they are rewarded with additional assets from the network, which are paid out as rewards.

While it has been possible for individuals to stake Cardano on their own, or via a delegated staking service, the process can be confusing and complicated. With today’s launch, Coinbase is offering an easy, secure way for any retail user to actively participate in the Cardano network and earn rewards.

With Coinbase staking:

• You can begin earning rewards on your crypto. The current estimated annual return for Cardano staking on Coinbase is ~3.75% APY. Once your initial holding period completes (20–25 days), you’ll receive rewards in your account every 5–7 days.
• You will always maintain control. Your Cardano always stays in your account; you just earn rewards while keeping your crypto safely on Coinbase. You can opt out any time you want.

The Cardano network sets the underlying return rate depending on the number of staking participants. Coinbase distributes the return to customers, less a commission.

You shouldn’t have to be an expert crypto trader to grow your crypto portfolio. Offering simple ways for our customers to earn crypto through staking is an important step in building an open financial system. You can learn more about staking rewards on Coinbase at coinbase.com/staking.

To get started, simply buy Cardano on Coinbase, or deposit Cardano to your Coinbase account from an external wallet, and you’ll start earning rewards immediately.

You can sign up for a Coinbase account here and download the iOS or Android app to start earning staking rewards today.

For eligibility criteria, please visit our support center.

*The APR rate is based on the estimated protocol rate, which is subject to change. Customers will be able to see the latest applicable rates directly within their accounts.

Coinbase Expands Staking Offerings to Include Cardano was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.