It’s a balmy 80 degrees on a mid-December day in Singapore, and something is puzzling Allen Day, a 41-year-old data scientist. Using the tools he has developed at Google, he can see a mysterious concerted usage of artificial intelligence on the blockchain for Ethereum. 



Ether is the world’s third-largest cryptocurrency (after bitcoin and XRP), and it still sports a market cap of some $11 billion despite losing 83% of its value in 2018. Peering into its blockchain—the distributed database of transactions underpinning the cryptocurrency—Day detects a “whole bunch” of “autonomous agents” moving funds around “in an automated fashion.” 



While he doesn’t yet know who has created the AI, he suspects they could be the agents of cryptocurrency exchanges trading among themselves in order to artificially inflate ether’s price. 



“It’s not really just single agents doing things on their own,” Day says from Google’s Asia-Pacific headquarters. “They’re forming with other agents to have some larger group effect.” 



Day’s official title is senior developer advocate for Google Cloud, but he describes his role as “customer zero” for the company’s cloud computing efforts. 



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As such it’s his job to anticipate demand before a product even exists, and he thinks making the blockchain more accessible is the next big thing. 



Just as Google enabled (and ultimately profited) from making the internet more usable 20 years ago, its next billions may come from shining a bright light on blockchains. If Day is successful, the world will know whether blockchain’s real usage is living up to its hype.



Danish researcher Thomas Silkjaer is using Google&#8217;s BigQuery to map publicly available information about XRP cryptocurrency addresses. The craters represent some of cryptocurrency&#8217;s largest exchanges.



Last year Day and a small team of open-source developers quietly began loading data for the entire Bitcoin and Ethereum blockchains into Google’s big-data analytics platform, BigQuery. Then, with the help of lead developer Evgeny Medvedev, he created a suite of sophisticated software to search the data.



In spite of a total lack of publicity, word of the project spread quickly among crypto-minded coders. In the past year, more than 500 projects were created using the new tools, trying to do everything from predicting the price of bitcoin to analyzing wealth disparity among ether holders. 



When it comes to cloud computing, Google is far behind Amazon and Microsoft. Last year Google pocketed an estimated $3 billion in revenue from cloud ser­vices. Amazon and Microsoft, meanwhile, generated about $27 billion and $10 billion, respectively.



Day is hoping that his project, known as Blockchain ETL (extract, transform, load), will help even the playing field. But even here Google is trying to catch up. Amazon entered blockchain in a big way in 2018 with a suite of tools for building and managing distributed ledgers. 



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Microsoft got into the space in 2015, when it released tools for Ethereum’s blockchain. It now hosts a range of services as part of its Azure Blockchain Workbench. But while Amazon and Microsoft are focusing on making it easier to build blockchain apps, Day is focusing on exposing how blockchains are actually being used, and by whom. 



“In the future, moving more economic activity on chain won’t just require a consensus level of trust,” says Day, referring to the core validating mechanism of blockchain technology. 



“It will require having some trust in knowing about who it is you’re actually interacting with.” In other words, if blockchain is to go mainstream, some of its beloved anonymity features will have to be abandoned.



A native of Placer County, California, Day got his first computer at the age of 5 and a few years later started writing simple programs. A fascination with volcanoes and dinosaurs turned his interest to life sciences, and he ultimately graduated from the University of Oregon with a dual degree in biology and Mandarin in 2000. From there he headed to UCLA to pursue a doctorate in human genetics and helped build a computer program to browse the genome.



 This Silkjaer image uses data for the XRP cryptocurrency to show the movement of funds across the entire ledger of transactions, culminating in a snapshot of funds in an actual user&#8217;s wallet.



It was at UCLA where Day began relying on distributed computing, a concept that is core to blockchains, which store their data on a large network of individual computers. In the early 2000s Day needed to analyze the massive amounts of data that make up the human genome. To solve this problem he hooked many small computers together, vastly increasing their power. 



“Distributed-systems technology has been in my tool kit for a while,” Day says.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I could see there were interesting characteristics of blockchains that could run a global supercomputer.” </blockquote>



Hired in 2016 to work in the health and bio­informatics areas of Google, Day segued to blockchains, the hottest distributed-computing effort on the planet. But the talents he had honed—sequencing genomes for infectious diseases in real time and using AI to increase rice yields—were not easily applied to decoding blockchain. 



Before Day and Medvedev released their tools, just searching a blockchain required specialized software called “block explorers,” which let users hunt only for specific transactions, each labeled with a unique tangle of 26-plus alphanumeric characters. Google’s Blockchain ETL, by contrast, lets users make more generalized searches of entire ecosystems of transactions.



To demonstrate how customers could use Blockchain ETL to make improvements to the crypto economy, Day has used his tools to examine the so-called hard fork, or an irrevocable split in a blockchain database, that created a new cryptocurrency—bitcoin cash—from bitcoin in the summer of 2017. 



This particular split was the result of a Hatfield and McCoy “war” within the bitcoin community between a group who wanted to leave bitcoin as it was and another who wanted to develop a currency that, like cash, was cheaper and faster to use for small payments. 



Using Google’s BigQuery, Day discovered that bitcoin cash, rather than increasing so-called micro-transactions, as the defecting developers claimed, was actually being hoarded among big holders of bitcoin cash.



 “I’m very interested to quantify what’s happening so that we can see where the legitimate use cases are for blockchain,” Day says. “Then we can move to the next use case and develop out what these technologies are really appropriate for.”



Day’s work is inspiring others. Tomasz Kolinko is a Warsaw-based programmer and the creator of a service that analyzes smart contracts, a feature of certain blockchains that is designed to transparently enforce contractual obligations like collateralized loans but with less reliance on third parties, like lawyers. Kolinko was frustrated with his blockchain queries.



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In December, Kolinko met Day at a hackathon in Singapore. Within a month of the meeting, Kolinko was using Google’s tools to search for a smart contract feature called a “selfdestruct,” designed to limit a contract’s life span. Using his own software in conjunction with Day’s, Kolinko took 23 seconds to search 1.2 million smart contracts—something that would have taken hours before. 



The result: Almost 700 of them had left open a selfdestruct feature that would let anyone instantly kill the smart contract, whether that person was authorized or not. “In the past you couldn’t just easily check all the contracts that were using it,” Kolinko says. “This tool is both the most scary and most inspiring I’ve ever built.” 



Day is now expanding beyond bitcoin and ethereum. Litecoin, zcash, dash, bitcoin cash, ethereum classic and dogecoin are being added to BigQuery. Independent developers are loading their own crypto data sets on Google. 



Last August, a Dutch developer named Wietse Wind uploaded the entire 400 gigabytes of transaction data from Ripple’s XRP blockchain, another popular cryptocurrency, into BigQuery. 



Wind’s data, which he updates every 15 minutes, prompted a Danish designer named Thomas Silkjaer to create a heat map of crypto flows. The resulting colorful orb reveals at a glance more than a million crypto wallets, including big ex­changes like Binance and London’s crypto debit card startup Wirex, which are neck deep in XRP transactions. 



“Google has been a bit of a sleeping giant in blockchain,” says BlockApps CEO Kieren James-Lubin, who is partnering with Google to sell enterprise blockchain apps. 



In addition to Day’s work, Google has filed numerous patents related to the blockchain, including one in 2018 to use a “lattice” of interoperating blockchains to increase security, a big deal in a world where untold millions of crypto have been stolen by hackers. 



The company is also pushing its developers to build apps on the Ethereum blockchain, and Google’s venture arm, GV, has made a number of significant investments in crypto startups. 



The giant, it seems, is waking up.



-Michael del Castillo; Forbes Staff

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Navigating Bitcoin, Ethereum, XRP: How Google Is Quietly Making Blockchains Searchable

As the price of bitcoin cratered last year, falling 83% and erasing $250 billion in market value, one company has secretly been making a killing with some rather unusual business transactions. 



Selling to a paradoxical mixture of bitcoin-believing crypto entrepreneurs and hedge funders out to profit off what they hope is the demise of cryptocurrency, bitcoin lending firm Genesis Global Capital originated $1.1 billion in cryptocurrency loans last year, according to a report released today.



Charging interest rates that ensure that its pockets get lined regardless of whether a customer loves or hates crypto, the company is leading the way as a rising tide of crypto startups compete to stay cash positive in this epic bear market.



“It should be possible for people to go long and short bitcoin,” says Michael Moro, the CEO of Genesis Global Capital. “It can’t just be a long-only market. It should be perfectly okay to take the other side, to think that prices are going to fall, and to make that short bet.”



Genesis passed the billion dollars in bitcoin loans milestone on December 14, 2018, less than three months after announcing it had made $500 million in loans since its launch in March 2018. To put that another way, Genesis made another $500 million in bitcoin loans during the last quarter of 2018.



As the price of bitcoin fell 39% over the last two months of the year, Genesis experienced its busiest period so far. New hedge funds and trading firms utilizing “spot” borrowing, combined with new business including crypto collateral—and even the occasional traditional cash loan in exchange for crypto collateral—increased Genesis’ active loans outstanding to $153 million, up from $23M in Q3 2018.



Interest rates on the cryptocurrency loans range from about 10% to 12% for highly liquid cryptocurrencies like bitcoin, depending on how risky Genesis deems the way the customer plans to use the loan. The less liquid the cryptocurrency, the higher the starting interest rate.



The massive increase in loan originations was jump-started by a 16% drop in the price of bitcoin on November 14, as a result of interest from short sellers looking to profit from the drop. Brian Kelly, a cryptocurrency investor who&#8217;s been a Genesis customer for five years, sees this kind of transaction activity as crucial to the health of the cryptocurrency ecosystem. “Having an active two-sided market should help liquidity improve overall,” he says.



But not everyone shorted crypto. In fact, Moro says that only about 11% of bitcoin loans were used to bet against bitcoin’s rising price. Instead, he says, the most popular use of bitcoin was for companies like bitcoin ATM firms that need to take short-term possession of bitcoin, accounting for 50% of all loans, followed by those buying cryptocurrency on one exchange and then selling on another at a higher rate, a process call arbitrage.



Bitcoin was the most frequently borrowed cryptocurrency, comprising 75% of all the originated loans. Ether (ETH) and XRP were the second and third most frequently borrowed cryptocurrencies, with ETH borrowing more than doubling since Q3 but still comprising less than 10% of the total loan book. XRP composition since Q3 is down 50%, which Moro attributes to the cryptocurrency&#8217;s relative strength over that period. The concentration of loans outside the top three decreased as a result of bitcoin jumping nearly 10% in one month.



Heading into Q4, Genesis&#8217; loan portfolio was about 60% BTC and 40% alt-coins, with XRP constituting nearly 50% of altcoins, according to the report. Prior to Q4, 98% of bitcoin on loan was used exclusively for hedged use cases such as arbitrage, basis capture, and remittance.



Genesis is in the unusual position of being run by a parent company, Digital Currency Group, that has invested in more than 125 cryptocurrency startups globally. That company is headed up by Barry Silbert, the founder of SecondMarket, which was acquired by Nasdaq in 2015 to help startups sell shares before they go public.



As a result of having direct access to this pipeline of venture-backed and, more importantly, venture-vetted crypto startups, Moro’s other company, SEC registered Genesis Global Trading, started unofficially lending crypto as far back as 2014 to what he calls the company’s “friends and family” clients. “We didn’t think about too much of it at the time,” he says. &nbsp;



But by the end of 2017, at the peak of a crypto-frenzy that saw the overall cryptocurrency market reach $800 billion, Moro joined a fleet of other companies looking to profit even in a down market and spun off the trading company’s lending operations into a stand-alone entity.



As a result of this rising interest, Genesis is far from the only company in the space. Last year hedge fund manager Michael Novogratz’ company, Galaxy Digital, invested $52.5 million in crypto lending startup BlockFi. Other competitors include crypto startup Aave, which raised $16.5 million in an initial coin offering (ICO) in part to power its EthLend lending product, and early entrant Salt Lending, which was founded as far back as 2016.



Facing this rising tide of competitors, Genesis is looking to even further diversify its revenue streams. Moro says that while 75% of the $153 million he has in the portfolio is denominated in bitcoin, 13%, or about $20 million, is for lenders who don’t want to sell their bitcoin at today’s low price of $3,381, down from its all-time high of $19,000 in 2017, but want to generate a bit of revenue by using it as collateral for cold hard cash.



“We wanted to see if there was a demand for that, and there was,” he says.



-Michael del Castillo Forbes Staff

Tag: Ethereum

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