Mercedes-Benz to Use Blockchain Tech for Sustainable Transaction Book Supply Chains

Mercedes-Benz to Use Blockchain Tech for Sustainable Transaction Book, Supply Chains

                                

German automobile brand Mercedes-Benz Car has developed a platform

based on blockchain technology to increase transparency and sustainability in complex supply chains, according to press release published on Feb. 25. Mercedes-Benz, a division of Daimler AG, a German multinational automotive corporation, has partnered with United States-based software company Icertis for cooperating in the development of blockchain tech for supply chain use.

Mercedes-Benz has announced that that they have jointly developed and programmed a prototype with Icertis based on blockchain technology that allows for the storage of documentations and contracts in complex supply chains. The project allows for the creation of a transparent and sustainable mapping of sorted documents across the entire supply chain, the press release notes. The parties have now entered the testing phase of the pilot project. Underlining the complexity of the modern supply chains, Wilko Stark, a member of the divisional board of Management Mercedes-Benz, states that blockchain tech could affect “nearly the entire value chain,”

adding:

"Blockchain technology has the potential to fundamentally revolutionize our procurement processes […] With our Blockchain-prototype, we are in the first step testing one of diverse possible applications with the aim of increasing transparency beyond our direct suppliers."

As Cointelegraph wrote on Sep. 26, Porsche AG, another major German automobile manufacturer, announced their plans to increase investments in blockchain-related startups in order to “gain access to trends, new technologies and business models.” Earlier this month, one of largest general trading company in Japan, Itochu Corporation, officially announced the start of a proof-of-concept aimed at developing a blockchain-backed traceability system that would allow buyers and sellers to record transaction details about supply chains through a smartphone app, as Cointelegraph reported on Feb. 1.

Article Produced By
Max Yakubowski

Max Yakubowski has a Ph.D. in Linguistics and Anthropology, with a focus in innovative technology and its cultural and social influence. He joins Cointelegraph after working as a freelance copywriter and blogger.

https://cointelegraph.com/news/mercedes-benz-to-use-blockchain-tech-for-sustainable-transaction-book-supply-chains

Thomas ClaimCo.in

Dow Jones’ watchlist of 24 million high-risk clients has leaked

Dow Jones’ watchlist of 2.4 million high-risk clients has leaked

                                

A watchlist of risky individuals and corporate entities

owned by Dow Jones has been exposed, after a company with access to the database left it on a server without a password. Bob Diachenko, an independent security researcher, found the Amazon Web Services-hosted Elasticsearch database exposing more than 2.4 million records of individuals or business entities. The data, since secured, is the financial giant’s Watchlist database, which companies use as part of their risk and compliance efforts. Other financial companies, like Thomson Reuters, have their own databases of high-risk clients, politically exposed persons and terrorists — but have also been exposed over the years through separate security lapses.

A 2010-dated brochure billed the Dow Jones Watchlist as allowing customers to “easily and accurately identify high-risk clients with detailed, up-to-date profiles” on any individual or company in the database. At the time, the database had 650,000 entries, the brochure said. That includes current and former politicians, individuals or companies under sanctions or convicted of high-profile financial crimes such as fraud, or anyone with links to terrorism. Many of those on the list include “special interest persons,” according to the records in the exposed database seen by TechCrunch.Diachenko, who wrote up his findings, said the database was “indexed, tagged and searchable.”

From a 2010-dated brochure of Dow Jones’ Watchlist, which at the time had 650,000 names of individuals and entities. The exposed database had 2.4 million records. (Screenshot: TechCrunch)Many financial institutions and government agencies use the database to approve or deny financing, or even in the shuttering of bank accounts, the BBC previously reported. Others have reported that it can take little or weak evidence to land someone on the watchlists.The data is all collected from public sources, such as news articles and government filings. Many of the individual records were sourced from Dow Jones’ Factiva news archive, which ingests data from many news sources — including the Dow Jones-owned The Wall Street Journal.

But the very existence of a name, or the reason why a name exists in the database, is proprietary and closely guarded. The records we saw vary wildly, but can include names, addresses, cities and their location, whether they are deceased or not and, in some cases, photographs. Diachenko also found dates of birth and genders. Each profile had extensive notes collected from Factiva and other sources. One name found at random was Badruddin Haqqani, a commander in the Haqqani guerilla insurgent network in Afghanistan affiliated with the Taliban. In 2012, the U.S. Treasury imposed sanctions on Haqqani and others for their involvement in financing terrorism. He was killed in a U.S. drone strike in Pakistan in August 2012. The database record on Haqqani, who was categorized under “sanctions list” and terror,”

included (and condensed for clarity):

DOW JONES NOTES:
Killed in Pakistan's North Waziristan tribal area on 21-Aug-2012.

OFFICE OF FOREIGN ASSETS CONTROL (OFAC) NOTES:

Eye Color Brown; Hair Color Brown; Individual's Primary Language Pashto; Operational Commander of the Haqqani Network

EU NOTES:

Additional information from the narrative summary of reasons for listing provided by the Sanctions Committee:

Badruddin Haqqani is the operational commander for the Haqqani Network, a Taliban-affiliated group of militants that operates from North Waziristan Agency in the Federally Administered Tribal Areas of Pakistan. The Haqqani Network has been at the forefront of insurgent activity in Afghanistan, responsible for many high-profile attacks. The Haqqani Network's leadership consists of the three eldest sons of its founder Jalaluddin Haqqani, who joined Mullah Mohammed Omar's Taliban regime in the mid-1990s. Badruddin is the son of Jalaluddin and brother to Nasiruddin Haqqani and Sirajuddin Haqqani, as well as nephew of Khalil Ahmed Haqqani.

Badruddin helps lead Taliban associated insurgents and foreign fighters in attacks against targets in south- eastern Afghanistan. Badruddin sits on the Miram Shah shura of the Taliban, which has authority over Haqqani Network activities.

Badruddin is also believed to be in charge of kidnappings for the Haqqani Network. He has been responsible for the kidnapping of numerous Afghans and foreign nationals in the Afghanistan-Pakistan border region.

UN NOTES:

Other information: Operational commander of the Haqqani Network and member of the Taliban shura in Miram Shah. Has helped lead attacks against targets in southeastern Afghanistan. Son of Jalaluddin Haqqani (TI.H.40.01.). Brother of Sirajuddin Jallaloudine Haqqani (TI.H.144.07.) and Nasiruddin Haqqani (TI.H.146.10.). Nephew of Khalil Ahmed Haqqani (TI.H.150.11.). Reportedly deceased in late August 2012.

FEDERAL FINANCIAL MONITORING SERVICES NOTES:

Entities and individuals against whom there is evidence of involvement in terrorism.

Dow Jones spokesperson Sophie Bent said: “This dataset is part of our risk and compliance feed product, which is entirely derived from publicly available sources. At this time our review suggests this resulted from an authorized third party’s misconfiguration of an AWS server, and the data is no longer available.” We asked Dow Jones specific questions, such as who the source of the data leak was and if the exposure would be reported to U.S. regulators and European data protection authorities, but the company would not comment on the record. Two years ago, Dow Jones admitted a similar cloud storage misconfiguration exposed the names and contact information of 2.2 million customers, including subscribers of The Wall Street Journal. The company described the event as an “error.”

Article Produced By
Zack Whittaker

Security editor

Zack Whittaker is the security editor at TechCrunch.

https://techcrunch.com/2019/02/27/dow-jones-watchlist-leak/

Thomas ClaimCo.in

Blockchain Post-Trade Platform Vakt Partners With Majority of North Sea Oil Market

Blockchain Post-Trade Platform Vakt Partners With Majority of North Sea Oil Market

                                

Vakt, a blockchain-based post-trade platform

for oil, has signed up four new clients, according to a statement published on the platform’s website on Feb. 25. As per Etienne Amic, Vakt’s recently appointed CEO, the company has partnered with four new clients prior to its official launch at International Petroleum Week, which starts in London today, Feb. 26. The new users of the platform join major industry players that initially backed Vakt, including BP, Shell and Total, along with traders Gunvor and Mercuria, the press release notes. Other Vakt investors reportedly include industry giants Chevron, Equinor and Reliance Industries. The new contracts mean that Vakt will be used in about two-thirds of all oil deals in the North Sea region. According to Amic, the significant level of adoption in the energy sector could motivate others to

examine blockchain solutions:

“We felt that we needed about 60 to 70 per cent of a market to reach ignition point [that would] incentivise other people to join.”

According to the announcement, the platform is planning to expand its blockchain services to barges of oil products in northern Europe and United States crude pipelines. Vakt, whose main goal is to improve the routine of commodity trading and eliminate unnecessary paperwork and contracts, was launched back in November 2018, boasting major oil firms and banks as partners. Earlier this month, Amic — formerly a JPMorgan Chase executive — was appointed as Vakt’s new CEO. As Cointelegraph reported, he will be responsible for commodities trading. A similar platform was launched last year in Switzerland by a group of major global banks, trading firms and a leading energy company. The venture, dubbed Komgo SA, oversees a blockchain-based platform for commodity trading financing.

Article Produced By
Ana Berman

https://cointelegraph.com/news/blockchain-post-trade-platform-vakt-partners-with-majority-of-north-sea-oil-market

Thomas ClaimCo.in

Cowboys on the Block: Inside Wyoming’s Race for Crypto Prominence

Cowboys on the Block: Inside Wyoming’s Race for Crypto Prominence

                               

In the first month of 2019, the state of Wyoming

has performed yet another series of power moves showcasing its continued commitment to becoming America’s new crypto hub, even despite recent changes in political leadership. The incoming governor, Mark Gordon, made room for some blockchain talk in his inauguration speech, celebrating the state’s innovative approach to regulation and touting a handful of homegrown startups. Over the next couple of weeks, Wyoming’s legislature erupted with a series of groundbreaking crypto-related bills that is only comparable to a similar wave in March of last year.

America’s least populous state, whose economy has been always skewed toward mining and agriculture, looks determined as ever to deliver on the promise to become the nation’s “crypto valley.” Consonant with this jaunty tune, blockchain startups have indeed started pouring into the area. Perhaps Wyoming’s biggest signing this year so far is the relocation of Iohk, the company behind the Cardano blockchain.

The sweeping changes that the Cowboy State’s lawmakers have recently passed or introduced as bills include defining three categories of digital assets and treating them as property; granting assets designated as virtual currencies the same legal status as money; authorizing banks to hold digital assets in custody; allowing corporations to issue certificate tokens that represent shares; and creating a regulatory fintech sandbox aimed at further diminishing any regulatory hurdles to industry startups. These developments look more radical than many of the other states’ recent blockchain-savvy moves, as they often explicitly challenge a variety of disparate federal approaches to crypto regulation.

Celebrating the news of another revolutionary piece of crypto legislation from Wyoming, one could wonder: Is this for real? Are they serious about this? What is it they are really shooting for? Putting Wyoming’s newfound crypto drive in a broader context could shed some light on how and why the state of ranchers and miners decided to boldly reach out to the crypto industry.

Courting the giants

It is not unprecedented for a small state far removed from traditional technology and financial hubs to be courting a burgeoning new industry amid regulatory uncertainty — something that often happens after the initial period of explosive growth. Once a state is willing to tweak its laws to provide a greenhouse level of care and protection to a particular class of enterprises, moving from the comfort of coastal urban areas into some windy plains doesn’t seem like

that much trouble any more.

An unlikely romance between Citibank and South Dakota provides a textbook example. In the early 1980s, when the initial gold rush of early credit card lending business began stalling under the weight of regulations — such as strict interest rate caps — policymakers in the Midwestern state saw their chance. Taking advantage of a Supreme Court ruling that allowed banks to charge the highest interest rate allowed in their home state, South Dakota introduced a batch of lax banking laws and invited banks to feel themselves at home. In 1981, Citibank was the first to respond to the call, bringing thousands of new jobs into the area. The city of Sioux Falls now has about 20,000 financial sector jobs, while South Dakota holds more bank assets than any other state.

Another place in the United States that definitely knows how to attract out-of-state enterprises is Delaware. Its hospitality extends beyond just tech businesses, or any specific kinds of businesses, for that matter — the state has long been known as a tax haven and is now home to almost a half of all U.S. public corporations. More recently, it has seen a surge in limited liability corporations (LLC) registration, thanks to relative ease of incorporation and a small flat LLC tax. Delaware also has a far-reaching statewide blockchain initiative, which apparently became the inspiration for one of the fresh Wyoming bills. Against the background of the already highly welcoming corporate climate, however, Delaware’s set of blockchain-friendly policies inevitably looks less salient than the Cowboy State’s legislative onslaught.

Underlying interests

So, how exactly does the influx of digital-money businesses promise to benefit Wyoming? Perhaps the simplest hunch is that the state is looking to capitalize on registration and incorporation fees. Delaware’s example is enticing: Once you have a steady stream of newcomers from all over the place, you can enter a virtuous circle by keeping the fees low and attracting even more enterprises. State Rep. Tyler Lindholm, who has been behind most of Wyoming’s key blockchain legislation, openly admitted to looking at the Northeastern state as a benchmark, and noted that his state was making about $30 million in fees, against Delaware’s $1.2 billion.

If there is one thing that is potentially more lucrative than attracting a whole new industry to your jurisdiction, it is harboring a new industry that barely exists elsewhere. This is basically what the digital asset custody bill does. By authorizing banks to administer digital assets under the new regulatory framework, Wyoming sets out to reach an ambitious goal of enabling them to comply with the Securities and Exchange Commission’s (SEC) regulations for “qualified custodians.” This is nothing less than a bid to establish a regulatory environment that would allow for the entirely new class of services to emerge within the state: digital asset custody.

It is worth noting that Wyoming’s attraction to blockchain technology is not a standalone phenomenon, but rather a part of a larger effort to diversify the economy. The official commitment to expanding the state’s technology sector is at least seven years old, while theEconomically Needed Diversity Options for Wyoming (ENDOW) program was established in 2017. It was the ENDOW executive council that included recommendations for legislative action on several technological initiatives last year, including a series of blockchain-related bills.

One more reason to double down on blockchain liberalization has been the flight of money transmitters from the state over the last few years — and the need to get them back.  Contrary to the proclaimed tech-friendly spirit, the Wyoming Money Transmitters Act, which was passed in 2011 and came into full effect in 2014, imposed cumbersome licensing requirements on crypto exchanges. This forced Coinbase and a handful of others to halt their operations in the state by 2015. The series of laws enacted last March included provisions that crypto exchanges be exempted from the money transmission laws. A few months later, Coinbase returned to Wyoming.

Wyoming Blockchain Coalition

If some important legislative developments have taken place somewhere in the U.S., probably someone has lobbied for it. Lurking behind all the news reports of Wyoming’s blockchain regulation advancements is the group called the Wyoming Blockchain Coalition, as well as the names of several of its prominent members. Among them, Caitlin Long is the undisputed headliner.

A Wyoming native with a passion for “honest ledgers,” Long spent more than two decades working for the likes of Morgan Stanley before heading the blockchain startup Symbiont. Having realized that she couldn’t legally donate to the University of Wyoming in crypto, Long got the idea that the state law could use some improvement. That’s how the Wyoming Blockchain Coalition came about. Consisting initially of Long and a few of her friends, the group eventually drew in many of the state’s forward-thinking notables. Their names can now be found among those who sponsored the groundbreaking bills.

Not only are some state politicians members of the coalition, they are also personally invested in local blockchain enterprises. Sen. Ogden Driskill became involved last year with BeefChain — a Wyoming-based startup that is building an immutable ledger designed to track free-range cattle. Another legislator who often makes headlines in crypto media, Rep. Tyler Lindholm, acts as the chief of ranching operations for the same company.

It appears that Wyoming’s impressive push for blockchain leadership relies on several major ingredients. There is evidently a consensus among the elites as to the urgent need for expanding and promoting the state’s technology sector — and somehow they decided that the trendy distributed ledger technology might be their best bet. There is also a tried and tested strategy for small states that are eager to get ahead: tailoring legislation to the needs of whomever they are betting on. Yet, even when all the structural factors are in place, things are unlikely to work unless there are leaders on the ground, who value and understand the innovation they are pushing for. With the blockchain-savvy ranchers of Wyoming, this seems to be the case.

Article Produced By
Kirill Bryanov

Kirill Bryanov is a PhD researcher at Lousiana State University. His scholarly interests center on political and societal implications of communication technology, with a focus on blockchain-powered decentalized architectures.

https://cointelegraph.com/news/cowboys-on-the-block-inside-wyomings-race-for-crypto-prominence

Thomas ClaimCo.in

Initial Country Offering as Next Big Thing For ICOs: Expert Blog

Initial Country Offering as Next Big Thing For ICOs: Expert Blog

             

One week ago Belarus President Alexander Lukashenko

signed the Decree "On Digital Economy Development" that legalizes ICO, cryptocurrencies and smart contracts. Two months ago the Republic of Abkhazia announced its plans to raise $1 bln in an ICO. Abkhazia followed Venezuela, the first country to consider crypto as a funding mechanism, with its well-publicized plan to roll out an oil-backed token called “Petro.” Puerto Rico has had an awful decade and its government is more than $70 bln in debt. Recently cryptocurrencies’ capitalization was around $400 bln, now – more than $500 bln. What about ICO for $70 bln to make “crypto valley” in the US there?

Government-in-the-cloud

In 1996, one of the founders of the Electronic Frontier Foundation, John Perry Barlow, wrote "A Declaration of the Independence of Cyberspace." A seminal text for its time,

it says:

"Cyberspace consists of transactions, relationships, and thought itself, arrayed like a standing wave in the web of our communications. Ours is a world that is both everywhere and nowhere, but it is not where bodies live."

Estonian e-government services can be run from anywhere. In the old days, a government in exile would quickly lose legitimacy. Sheltering in another country, it would lack the infrastructure to do its work. But today an Estonian government in exile could just carry on. It helps to clarify the differences between a nation, a state and a geographical country.

In general, a nation is a group of people within an area who perceive themselves as a unique entity, a country is that geographical area itself, and a state is a set of political organizations that those people agree to adhere to. By disconnecting the Silicon-based functions of the state from the actual soil-based country, Estonians are protecting their nation. But it's more than that. Estonians are successful in their efforts and they can build a digital state infrastructure that can be hosted anywhere. It doesn't have to be an officially recognized state – if we can deterritorialize a state, could we perhaps “state-ify” a nation? It could be backed up and turned off, reduced to a suitcase full of hard drives, only to boot back up again when the time is right.

Country-as-a-service – CaaS

You are probably familiar with SaaS – “software as a service.” It’s basically paying for software/hardware as you use them, rather than buying them. These services used to cost you a lot, but are now free or near enough. That’s where governance is going. Government services could become plug and play apps you stitch together to suit your business or lifestyle. There’s no logical reason why governance shouldn’t be delivered as SaaS (CaaS).

The most interesting (and promising) Blockchain-related industries are strictly outside of the cryptorealm – they include solutions for healthcare and logistics, land sale support, governmental and corporate workflow solutions. Estonia, a global leader in e-government, has recently launched a unified medical record database, accessible to hospitals and insurance companies, in partnership with the Blockchain startup Guardtime. Prescrypt works along the same lines in partnership with SNS Bank and Deloitte in the Netherlands, BitHealth – in the United States.

Swedish government together with ChromaWay and a partner bank is going to test Blockchain smart contracts for the land registry, to simplify life of buyers, sellers, and banks, using land as collateral on a regular basis. BitFury launches a similar initiative in Georgia, whereas BitLand enters Ghana and Honduras (and have plans to expand to Nigeria and Kenya). UAE launches Blockchain strategy to become paperless by 2020.

The state of Delaware, hosting numerous companies from other states and countries, is to introduce a Blockchain-based system of company registration, an issue of shares, recording of Board Resolutions, redistribution of shares as a result of purchase and sales transactions. British Everledger assists banks, insurers and open marketplaces in a reduction of risk and fraud by digitally certifying diamonds, art objects and high-end bottles of wine.

In comparison with the current focus on ICO-backed startups investments into Blockchain-based GovTech startups (to support their growth and building of the ecosystem of such services) looks very promising: Governance is the next big thing for ICOs and Blockchain world. This new ecosystem, such “borderless country in the cloud” could be like creation of Israel 2.0. Anyway, it seems short-sided to talk about geographical borders in the modern online-world, especially in terms of decentralized economy and Blockchain-community.

Article Produced By
Vladislav Solodkiy

Vladislav Solodkiy is a managing partner at Life.SREDA, Singapore-based fintech-VC, author of The First Fintech Bank’s Arrival book.

https://cointelegraph.com/news/initial-country-offering-as-next-big-thing-for-icos-expert-blog

Thomas ClaimCo.in

ETH Futures Case: The Industry’s Feedback to CFTC Reviewed

ETH Futures Case: The Industry’s Feedback to CFTC, Reviewed

              

On Feb. 17, the United States Commodity and Futures Trading Commission (CFTC)

stopped accepting public comments regarding the Ethereum (ETH) mechanism. Previously, as 2018 was drawing to a close, the agency requested the feedback on the cryptocurrency to better understand the technology and how it compares to Bitcoin (BTC). The CFTC, which oversees the futures and options market in the U.S., has long determined that Bitcoin is a commodity, and therefore falls into its regulatory purview. In December 2017, the agency allowed two major regulated exchanges — the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) — to list BTC futures on their platforms. Now, given that Ethereum, like Bitcoin, has been cleared of being classified as a security, the watchdog might be preparing to greenlight Ethereum futures contracts.

Around 30 public comments were submitted in response to the CFTC’s request: Coinbase, Circle and Craig Wright were among respondents

On Dec. 11, the CFTC announced it was seeking public comments and guidance regarding the Ethereum network. Specifically, the agency required the feedback to better understand the cryptocurrency and its underlying technology, as well as the differences and similarities between Ethereum and Bitcoin, including the “opportunities, challenges, and risks” associated with the altcoin.

Further, on Dec. 17, the regulator followed up on its initial statement and published a respective Request for Information (RFI) with the Federal Register in order to collect the information. The CFTC requested public comments on 25 different questions regarding Ethereum — namely its security and market features, as well as use cases of applications based on its network. The agency also noted that it oversees the commodity futures markets as per the Commodity Exchange Act (CEA), meaning that the CFTC will most likely use the comments to assess the possibility of approving Ethereum futures. The watchdog

wrote:

“The Commission is seeking public feedback in furtherance of oversight of these markets and regulatory policy development. The input from this request will advance the CFTC’s mission of ensuring the integrity of the derivatives markets as well as monitoring and reducing systemic risk by enhancing legal certainty in the markets.”

Moreover, the CFTC noted that the results of the RFI will also be used by its fintech initiative dubbed LabCFTC. Founded in May 2017, LabCFTC is a dedicated hub for “engagement with the fintech innovation community,” aiming to examine “new regulatory fintech developments in the marketplace,” as previously explained by CFTC Chairman Christopher Giancarlo. Finally, the 60-day deadline was announced as well, as the document stated that comments must be sent not later than Feb. 17, 2019.

According to the CFTC website, a total of 43 entries were submitted by the public before the deadline. After taking a closer look, it becomes clear that 14 of those entries are either advertisements, generally irrelevant comments or identical copies of other statements. Hence, only 29 RFI entries represent comments on Ethereum submitted by the public. Those were filed by industry participants such as Coinbase, Circle, ConsenSys and Craig Wright, among others. Here is the list of selected, generalized questions proposed by the CFTC, along with answers from certain crypto companies and trading associations.

How do the current functionalities and capabilities of Ether and the Ethereum Network compare to those of Bitcoin?

The Ethereum Foundation: Switzerland-based nonprofit organization comprised of global team of developers

The Ethereum Foundation argued that, on the Bitcoin blockchain, each account simply stores a certain amount of Bitcoin as well as “a script in an ultra-minimal programming language that determines how to verify who has the right to spend these bitcoins.” Ethereum, on the other hand, supports the creation of smart contracts, the foundation argued. Smart contracts, in turn, are featured in applications that are “not financial in nature but simply use the blockchain as a source of high-assurance computation and data storage.”

Circle: Goldman Sachs-backed startup focused on making instant money transfers

Circle compared Bitcoin and Ethereum in the context of payment transactions, also explaining that, unlike Bitcoin, the Ethereum network supports additional tokens that utilize its

smart contracts feature:

"As with bitcoin, Ether can be used to pay for transactions and can be used for payments. Unlike bitcoin, tokens on the Ethereum network can be generated using smart contracts and can be used in smart contracts and transfers."

The Futures Industry Association: international trade organization for the futures industry with around 180 corporate members

The Futures Industry Association (FIA) also suggested that Ethereum is generally more versatile than Bitcoin, but warned the CFTC to measure additional risks caused by this difference.

The association stated:

"With the Ethereum Network’s architecture, risk management is potentially more complicated than for Bitcoin by orders of magnitude. Whereas Bitcoin is a payment unit on a shared and distributed ledger for transactions, Ether is a unit of work on a distributed functionality tool that offers super-computing power on the Ethereum Network, in exchange for value.”

Craig Wright: leader of Bitcoin SV, nChain chief scientist and self-proclaimed “Satoshi Nakamoto”

Craig Wright also reached out to the CFTC with a comment. Notably, in the introduction, he reiterated his previous claim that he is actually the original inventor of Bitcoin. Further, Wright harshly criticized Ethereum while arguing that Bitcoin can also support smart contracts in theory, but that ability was allegedly damaged by its

core developers:

"Ethereum is a poorly designed copy of bitcoin designed with the purpose of completing the promise of smart contracts and scripting that were delivered within bitcoin but which were hobbled by the core developers of bitcoin."

Would transitioning ETH to a proof-of-stake (PoS) consensus make it more prone to manipulation?

The Futures Industry Association Principal Traders Group: FIA’s lobby group that represents principal traders

The FIA’s Principal Traders Group suggested that, hypothetically, if Ethereum fully migrates to the PoS model, a participant could open up multiple validator accounts on its blockchain to their benefit. However, the community will still hold enough instruments to deal with such manipulation, the trading association argued, citing Vitalik’s views on

the proof-of-stake design:

“If a malicious group of validators attempted to prevent others from joining or executed a 51% attack, the community would simply coordinate a hard fork and slash the offending validators’ deposits. See Vitalik’s proof-of-stake design philosophy, where he addressed this issue, here.”

ConsenSys: blockchain tech company led by Joseph Lubin, Ethereum co-founder

ConsenSys argued that, “under the current proof?of?stake plans for the Ethereum Network,” the risk that someone succeeds in manipulating the Ethereum Protocol is low, and even lower than under the current proof-of-work

(PoW) system:

“In particular, any party that stakes ether to validate blocks on the Ethereum Network will have less of an ability to directly impact the network, even relative to their proportional ‘staked wealth,’ than miners on proof?of?work protocols relative to their proportional hash power. In fact, […] under the Ethereum Network’s planned proof?of?stake protocol, even if a validator controlled 1/3 of the entire ether staked in the protocol, the validator’s probability of obtaining enough control to do damage is less than one in one trillion.”

Circle

Circle also agreed that the PoS-based network is generally safer than PoW, arguing that the community would notice any suspiciously rapid increase in

the token’s value:

“Additionally, there may not be enough of a given PoS-based token’s supply on exchanges, so sourcing the liquidity necessary to purchase a majority of tokens may not even be possible.”

Craig Wright

The self-proclaimed Satoshi Nakamoto argued that “there is no working proof of stake-model,” and that “all proof of stake mechanisms collapse into single-user control and allow alteration rather than the creation of an immutable record.” He cited his experience of testing “the equivalent a proof of stake mechanisms” in 2003-2007 to support those statements.

What impediments or risks exist to the reliable conversion of Ether to legal tender?

ErisX: Chicago-based, Wall Street-backed crypto exchange

ErisX noted that Ethereum owners face certain problems like price volatility and liquidity risk related to finding ready counterparties with offsetting interest when looking to cash out on their tokens, “which is similar to other assets that are not legal tender.” Further, the exchange compared Ethereum to gold in the sense that it is difficult to convert both of those assets into the legal tender physically, while future contracts significantly

simplify that task:

“The efficiency that futures contracts introduce into the gold market enables gold owners to convert their assets into legal tender more efficiently and at better prices than may otherwise be available in the absence of the futures contract. Regulated futures markets can be similarly expected to benefit the Ether market.”

Coinbase: major U.S. crypto exchange

Coinbase essentially used this question to remind the agency that most risks associated with the conversion of cryptocurrencies into legal tender exist due to the unregulated nature of the crypto market. Ideally, the exchange continued, all trading platforms must follow thorough Anti-Money Laundering (AML) and Know Your Customer (KYC) policies, among

other factors.

“As with any freely-traded asset, the price of Ether can fluctuate based on a variety of factors. The greater the percentage of volume trading on the exchanges with capabilities listed above, the more that the market price will reflect true supply and demand for the product.”

Circle

Circle appeared more confident about the conversion of Ethereum into legal tender:

“There are not many impediments or risks associated with converting Ether to and from legal tender. Ethereum is one of the most liquid crypto assets available on spot trading platforms, and there are numerous trading platforms that also contain fiat on-ramps, including Coinbase, Gemini, Kraken, Bitstamp, itBit, HBUS (Huobi), and others.”

How would the listing or trading of derivative contracts on Ether affect the cryptocurrency itself?

ErisX

ErisX stressed that the introduction of a regulated futures contract on Ethereum “would have a positive impact on the growth and maturation of the market,”

adding:

“The introduction of standardized futures contracts […] may have the effect of making the market more accessible, at lower risk, with lower volatility, for a larger, broader diversity of actors. This includes the potential for greater liquidity, more effective price discovery, and more efficient risk transference. A higher quality market invites greater participation, which can lead to increased quality in a positive feedback loop.”

Circle

“Generally, we believe the listing and trading of derivative contracts would be orthogonal to the functionality of the Ethereum Network, as networks are designed to be used independent of the existence of trading markets for their respective tokens,” Circle noted. The startup, however, continued by stressing that, under sufficient scrutiny provided by the CFTC, the risks associated with Ethereum derivative contracts should be mitigated.

Coinbase

The U.S. exchange argued that financially settled futures products “would not likely have a substantial impact on the Ethereum network.” In fact, Coinbase added, it could reduce price volatility, which, in turn, could result in “greater commercial usage.”

Conclusion:

CFTC received mostly positive comments, large crypto players ask to regulate the industry

Overall, the CFTC received mostly positive feedback from crucial crypto and futures industry participants. The negative comments were provided mostly by a private individual — who put “Ethereum Fraud” under his company name, arguing that listing ETH futures would “validate fraud,” among other things — and Craig Wright.

The message from major U.S. crypto players such as Circle and Coinbase was clear: The industry needs more definite regulatory measures from the watchdogs. Interestingly, last week, CFTC Commissioner Brian Quintenz suggested that participants in the cryptocurrency market should create a self-regulatory structure, citing the CFTC’s lack of crypto statutory oversight capability. As Cointelegraph previously reported, the CFTC’s progress in reviewing Ethereum could have been significantly delayed due to the U.S. government shutdown in January.

Article Produced By
Stephen O'Neal

Stephen O'Neal is a Sociology major from Leeds. He's passionate about crypto and all the stuff you can spend it on.

https://cointelegraph.com/news/coinbase-wallet-users-can-now-back-up-their-private-keys-on-google-drive-and-icloud-how-safe-is-it

Thomas ClaimCo.in

Blockchain and the City: New York State as a Tough Model of Crypto Regulation

Blockchain and the City: New York State as a “Tough” Model of Crypto Regulation

              

Recently the New York Department of Financial Services (NYDFS) 

granted statewide virtual currency licenses to two applicants: stock trading service Robinhood and cryptocurrency ATM operator LibertyX. The state’s regulatory regime, commonly known as BitLicense, imposes a set of strict disclosure and consumer-protection requirements on any business that offers cryptocurrency-related services to New York residents. Since the framework was introduced in 2015, only a handful of companies had their applications approved by the NYDFS: The elite club of BitLicense holders now counts just 16 entities, the two newcomers included.

The state has also demonstrated that it keeps close tabs on those who might be in violation of the compliance procedures: In September last year, the New York state attorney general's office published a report that raised concerns over price manipulations that were possibly taking place on cryptocurrency exchanges, and referred three of them to the state’s financial regulator.

While many American states strive to appeal to crypto businesses by implementing lenient policies and easing red-tape pressures on industry startups, New York has championed a regulatory approach more rigorous than that of most nation-states. Many influential figures in crypto community are cross with what they perceive as a vast governmental overreach, yet there seems to be no shortage of firms still ready to take on the pains of obtaining the license. But in the big picture, is this type of regulatory climate that exists in the world’s financial capital beneficial for the crypto industry, mainstream adoption and the Empire State itself?

Reasons to comply

For any company somehow related to finance, the benefits of doing business in New York and with New York residents are obvious. The number of powerful financial institutions per square foot is staggering, the Wall Street money is just a glance away, and a consumer market of almost 20 million people is no small deal, either. This is especially true if you are a prominent player in the nascent fintech industry longing for mainstream adoption.

New York legislators in Albany are well aware of their jurisdiction’s unique position as a major financial hub, and have been long acting accordingly. Martin Weiss, founder of Weiss Research and Weiss Cryptocurrency Ratings, explained that the tendency for strict state-level regulation has a

long history:

“Traditionally, Albany has been tougher than many other states in regulating — insurance, for example. They are the toughest state in regulating financial markets, too. They see themselves responsible for keeping the financial center.”

In the case of crypto, Weiss argued, New York’s centrality to the world’s financial system is a powerful enough factor to overcome the logic of crypto regulation applicable to almost

any other territory:

“Cryptocurrencies are, in essence, borderless. Regulation, in order to catch up, would also have to be borderless, crossing not only state boundaries but also national boundaries. New York is in a unique situation because it regulates a major financial center, the largest in the world. So as long as all those corporations want to remain domiciled in New York, legislators in Albany do have a jurisdictional reach that sticks. In most places in the world, if you try to regulate cryptocurrencies, they’ll just move to another jurisdiction. That is bound to happen with most of cryptocurrency institutions. But that’s not the case with New York.”

Vigilant New York state authorities became concerned with Bitcoin regulation fairly early: Ben Lawsky, the state’s Superintendent of Financial Services, first sketched the contours of what would become BitLicense in July 2014. Regulations came into full effect almost a year after, forcing both existing and incoming players to either comply or quit.

Backlash

Hardly surprisingly, not everyone took the news well. During the summer of 2015, big names such as BitFinex and ShapeShift pulled out of the New York market; crypto exchange Kraken announced cessation of services to New York residents in a blog post that called BitLicense “a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.” Erik Voorhees and Jesse Powell, the bosses of ShapeShift and Kraken, respectively, remained BitLicense’s staunch critics, calling for the regulation’s repeal ever since.

Aside from decrying the redundancy of regulation, opponents often point out how the pace at which licenses get approved is dismally slow — it is not uncommon for a company to wait for three years to be approved, as it happened with Genesis Global Trading. This part of the process alone can put smaller companies at a disadvantage. As Kevin Hobbs, CEO of the blockchain consultancy Vanbex Group,

told Cointelegraph:

“We believe that these strict regulations hinders cryptocurrency innovation in the Empire State. BitLicense is particularly restrictive for small companies to bear. Since only the largest companies possessing ample resources able to comply with the strict regulations. The BitLicense became effective in New York on June 24, 2015 but in the three years since then, only five crypto-related companies have been approved for a BitLicense in the state. Indeed, these one-size-fits-all regulations ultimately stifles innovation.”

Pushback from the more regulation-averse flank of crypto community has also received some political support: Larry Sharpe, a Libertarian Party candidate in the 2018 New York gubernatorial election, argued that the BitLicense regime serves to entrench the incumbent’s dominance in the market, and proposed to eliminate the licensing process. His bid in the November 2018 election, however, was unsuccessful.

Maybe it’s not that bad?

Those who are on board with the New York authorities’ rigorous policies toward cryptocurrency usually speak in the language of benefits to institutional and mainstream adoption. The idea is that the robust, large-scale crypto enterprises that prove capable of complying with the licensing requirements could draw the whole ecosystem closer to the core of the incumbent financial system that New York embodies. Robinhood, the recent addition to the pool of BitLicense holders, could definitely play this role. As Sky Guo, CEO of smart contract platform Cypherium,

put it:

“A great part of Robinhood’s value to our space will be as a leader in quasi-institutional compliance. New York is the center of traditional finance, and the state's licensing process — for good reason — prioritizes the integrity of its complex systems. For these reasons, Robinhood will be a great bridge between the two communities. Because Robinhood aims to open public access to traditional finance mechanisms, the company has a natural affinity for crypto projects and the DLT space in general.”

In addition to institutional-level shifts, Robinhood is poised to help the cause by adding a share of its regular stock users to the ranks of crypto community, notes

Eric Ervin, CEO of Blockforce Capital:

“Long-time cryptocurrency believers may not be migrating over to the Robinhood crypto platform anytime soon due to its lack of certain features that are available on other crypto trading platforms. However, the increased trust instilled by the issuance of the BitLicense may be enough to convince current Robinhood users who are on the fence to give the service a try. Robinhood’s significant user base in the state of New York will open the door to new crypto investors.”

Finally, there are signs that the Empire State’s regulatory framework is evolving into something more flexible and dynamic. More companies have seen their applications for a crypto license approved in the last year than in the previous three.  A seemingly lighter version of the approval process is now applied to companies seeking permission to offer crypto custody. According to reports from inside the state legislature, a task force is being assembled to focus entirely on digital currency. Guy Hirsch, Managing Director of trading platform eToro US,

told Cointelegraph:

“We think that New York regulators are making a genuine effort to make the state competitive for the blockchain era. BitLicenses have been approved on a more regular basis recently. NYDFS have issued several novel approvals for crypto custody. They also have put together a very clear Q&A on their website that provides a coherent framework for companies to buy, sell, hold, and transmit cryptoassets in a compliant manner.

“A lot of us think that the financial services industry will run on a blockchain. If this assumption turns out to be true then New York, being the financial capital of the world, has a vested interest in making sure it remains as such in decades to come.”

New York has gravitated toward a tight regulatory model that, at least according to the majority of state representatives, fits its status of the global financial center the best. In the years to follow, this model will enter a competition with alternative conceptions of how to do it. Martin Weiss hopes that this competition will ultimately yield a uniform, globally enforced

regulation:

“What you’ll find is various jurisdictions experimenting with regulation: Malta, UK, Russia, Belarus — some taking a much more liberal attitude, some taking stricter attitudes — and over time, the model that works the best will become the predominant model globally. We’ll hopefully see a global regulatory regime enforced by supranational organizations like the IMF [International Monetary Fund] or the BIS [Bank for International Settlements] or something like that. New York is establishing a tough model.”

Article Produced By
Kirill Bryanov

Kirill Bryanov is a PhD researcher at Lousiana State University. His scholarly interests center on political and societal implications of communication technology, with a focus on blockchain-powered decentalized architectures.

https://cointelegraph.com/news/blockchain-and-the-city-new-york-state-as-a-tough-model-of-crypto-regulation

Thomas ClaimCo.in

Parity Developer Quits Ethereum Projects Amid Outrage Sparked by Recent Tweet

Parity Developer Quits Ethereum Projects Amid Outrage Sparked by Recent Tweet

               

Afri Schoeden, release manager at blockchain infrastructure firm

Parity Technologies, has quit all Ethereum projects after a controversial tweet that sparked outrage on social media. Schoeden spoke to blockchain media BreakerMag on Thursday, Feb. 21. In his tweet, Schoeden reportedly criticized Serenity, also known as “Ethereum 2.0” — a final upgrade for the Ethereum network that brings its mainnet over to a proof-of-stake (PoS) consensus algorithm. The tweet, which has since been deleted,

reportedly read:

“Polkadot delivers what Serenity ought to be…”

Polkadot is Parity’s upcoming protocol aimed at linking different blockchains. Schoedon told BreakerMag that he will “no longer work on Ethereum or Ethereum-related projects,” but will remain with Parity. He explained the meaning of the recent

tweet:

“Polkadot is not a direct competitor to Ethereum and chains like Ethereum were always an integral part of the Polkadot vision. The focus of my tweet wasn’t Polkadot or competition, but Serenity, which is, in my eyes, rolled out too slowly, and I fear that it [won’t] matter anymore once we get there. People didn’t get that, and only I am to blame for not getting the message straight.”

Moreover, Schoeden believes that the Ethereum community needs to find some shared values and

goals:

“I also fear that Preethi [Kasireddy] was right last year when she said that we might need to talk about the values (again) to find out what the community really stands for.”

Following the controversial tweet, users immediately accused the developer of “betrayal,” along with “sabotaging” Ethereum from within and having a conflict of interest. Schoeden subsequently clarified that the discussions forced him to quit

Ethereum:

"I did not quit social media, I quit Ethereum. I did not go dark, I just left the community. I am no longer coordinating hard forks, building testnets, or contributing otherwise. I did not work on Polkadot, I never did, I worked on Ethereum. I did not hate Ethereum, I loved it."

The pre-release of Ethereum 2.0 kicked off in early February. The Constantinople hard fork, an upgrade to the Ethereum, network — which encloses separate Ethereum Improvement Proposals (EIPs) in order to soften the transition from the current proof-of-work (PoW) to PoS — is scheduled for Feb. 27.

Constantinople faced its first delay in October 2018 due to a consensus issue that was detected on the Ropsten testnet. In January, smart contract audit firm ChainSecurit found a vulnerability in the Constantinople hard fork. The critical issue, which could have allowed for reentrancy attacks via the use of certain commands in Ethereum smart contracts, caused another dealy. Blockchain entrepreneur Andreas Kristof even insinuated that Schoeden was directly responsible for Serenity’s delay.

Article Produced By
Ana Berman

https://cointelegraph.com/news/liechtensteins-bank-frick-launches-institutional-crypto-trading-platform

Thomas ClaimCo.in

How MIT Joined Ethereum in the Race for the PoS Blockchain

How MIT Joined Ethereum in the Race for the PoS Blockchain

               

As reported by Cointelegraph on Jan. 24,

the press service of the Massachusetts Technical Institute (MIT) announced the development of a new cryptocurrency design based on the proof-of-stake (PoS) protocol. Ethereum — Algorand’s closest competitor, according to the existing estimates — will launch its PoS system sometime between 2019 and 2021. Scheduled updates required for a gradual transition from the proof-of-work (PoW) to a PoS algorithm have been regularly postponed by the Ethereum Foundation due to network vulnerabilities and failures in the process of the network’s upgrade.

Trilemma: It's all about scalability

The term “trilemma” was first used by Vitalik Buterin when referring to the phenomenon when only two of the following parameters can be achieved at the same time within the framework of the blockchain ? security, decentralization and scalability. If the first two qualities successfully coexist in the current state of the blockchain, the final one has not yet been achieved. The fact is that the current blockchain system is designed in such a way that each node stores information about the entire network and processes all transactions. This mechanism provides a maximum degree of security but, at the same time, reduces scalability. The blockchain cannot process more transactions than is processed by a single node. That is why Bitcoin currently processes about three to seven transactions per second (TPS), and Ethereum about seven to 15 TPS.

Ethereum’s perspective on the scalability

In order to find a solution, the Ethereum team has developed an entire roadmap, which provides a framework to gradual transition to a PoS consensus within the Casper project, as well as Ethereum's layer one and layer two solutions. The layer one is represented by sharding, which splits the global network nodes into groups (segments), so each group of nodes has the same bandwidth as the current Ethereum network. Then they are connected to each other through cross-references, so the network remains unified and receives almost unlimited scaling opportunities, depending only on the total number of full-featured network nodes. Development of the layer one includes channels similar to the Lightning Network, such as the Raiden Network and the model of the “childchain,” or sidechain, on which the Plasma solution is based.

The complexity of these mechanisms, as well as the fact that some of these changes, especially intra-network adjustments of protocols, require coordination between the relatively large user base and Ethereum developers, have caused the launch dates of the various phases of the roadmap to be postponed several times, with developers reconsidering the security settings.

Algorand’s take on scalability

Algorand intends to get ahead of Ethereum and release pure PoS later this year. The new cryptocurrency design — named Vault — will work on the basis of the Algorand blockchain, which was first presented at the Financial Cryptography and Data Security Conference on April 4, 2017. The author of the solution is Silvio Micali, a professor at the MIT and recipient of the Turing Award, who, in 1982, together with Shafi Goldwasser, created the first public-key probabilistic encryption system. According to Micali,

trilemma is false:

“The trilemma is false. The fact that 2000+ prior blockchain projects could not simultaneously be secure, scalable and decentralized is not proof that achieving all these three properties is impossible.  Algorand exists to solve this exact challenge and we are advancing the limits of blockchain by means of technological breakthroughs like our pure of proof stake algorithm.”

Data storage and bandwidth

The creators of Vault and Algorand promise users that they will not have to download the entire blockchain to their computer. This requires only a small part of the information about operations

in the network.

“With Vault, a blockchain compression technology, we want to make sure that Algorand will avoid the storage and bandwidth costs associated with other blockchain protocols, which in turn make it a more viable blockchain solution for companies to adopt. The most exciting parts of Vault are that it frees up local storage on nodes, distributes the storage costs of the Algorand blockchain across different parts of the network by sharding (without sacrificing security), and reduces the bandwidth required to join the network by allowing new nodes to avoid checking every block since day one.”

The technical presentation of the project prepared by MIT states that the Vault’s block size is 10 megabytes, which is equivalent to 10,000 transactions, and each block contains a hash of the previous block. For comparison, to verify transactions in the Bitcoin network today, the user must download 500,000 blocks with a total data volume of about 150 gigabytes. At the same time, MIT assumes that it is required “to keep all account balances in order to check new users and ensure that they have enough funds to complete the transactions.”

To reduce the amount of stored data, Vault applies a special principle of data separation. Vault’s blockchain, like Bitcoin, stores transactions in a Merkle tree, but it is divided into fragments assigned to different groups of users. Each of them needs to store transactions only from its fragment and root hashes. For verification of transactions outside the assigned fragment, a special method has been developed for searching a group of nodes that intersect the entire tree. So, there is no need to check all the blocks from the very beginning. Ethereum developers plan to scale the PoS network with the interaction of two layers ? sharding and Plasma, in which, according to Buterin, it will be possible to conduct tens of thousands of

transactions per second.

“If you add 100x from Sharding and 100x from Plasma, these two together basically give you a 10,000x scalability gain.”

The Ethereum foundation suggests a PoS blockchain model in which nodes can work in parallel – “shardchain.” The model is quite similar with the one used by Algorand, and implies that each node has to carry a small part of data in order to complete a transaction — and each shardchain is a separate blockchain having separated accounts, state and

transactions.

“Imagine that Ethereum has been split into thousands of islands. Each island can do its own thing. Each of the islands has its own unique features and everyone belonging on that island, i.e. the accounts, can interact with each other and they can freely indulge in all its features. If they want to contact with other islands, they will have to use some sort of protocol.”

In order to achieve high bandwidth, Ethereum plans to process part of the transaction outside the blockchain by means of its second layer, Plasma. Plasma may be regarded as a childchain that could run entire applications featuring thousands of users with minimal interaction between it and the Ethereum mainchain. However, this childchain would also be able to produce its own childchains, essentially creating numerous branched blockchains, all of which are connected to the mainchain. Since operations on those sub-chains won’t have to be replicated across the entire mainnet, they could move a lot faster and reduce transaction fees. Unlike similar solutions from other projects — for example, EOS — Algorand will work on a pure PoS system,

Micali said:

“Algorand's consensus model is a Pure Proof-of-Stake (PPOS) model based on a Byzantine agreement protocol. This means that the blockchain is distributed and fault tolerant without any form of centralization and will continue to function as long as more than two thirds of the currency is in honest hands.”

The secret is in the use of a Verifiable Random Function (VRF) — created by Micali back in the 1990s — which performs a secret cryptographic sortition to select committees to run the consensus protocol. This allows the Algorand blockchain to reach the scale and performance necessary to process transactions of

millions of users.

“Essentially, when a new block is proposed to the blockchain, a committee of ‘voters’ is selected to ‘vote’ on the proposed block. If more than two-thirds of the ‘votes’ are cast by honest users, then the block is deemed valid and will be certified. Committee members are chosen based on the number of algos they have. Committees are made up of randomly selected accounts with voting power dependent on their online stake.”

Will the trilemma be solved?

Despite the repeated delay of the Constantinople release — a fundamental intermediate update on the road to PoS — Afri Johnson, an Ethereum developer, assumes that Ethereum 2.0 and PoS will not be delayed, since they are being worked on by several independent teams and

will go live soon:

“Furthermore, it's important to understand that Proof-of-Stake, the so-called ‘phase 0’ / the ‘beacon chain,’ will not be a hardfork, unlike other milestones. We will see beacon chain testnets very soon, within weeks or months. And I expect that we can reach the Serenity milestone within a year, optimistically speaking.”

During one of the latest presentations of Ethereum 2.0 on Oct. 31, Buterin suggested that its launch is not so far away. Earlier, he said that the blockchain in its current state is doomed until PoS starts functioning.

Article Produced By
Julia Magas

Julia is good at analysing cryptocurrency and blockchain market, as well as finding the deep and most demanding information, even when it's practically impossible. Julia writes for a number of digital information resources, raging from music to technology and game reviews. Practices some trading for experimental and analytical purposes.

https://cointelegraph.com/news/how-mit-joined-ethereum-in-the-race-for-the-first-pos-blockchain

Thomas ClaimCo.in

Why Bitcoin Ethereum and the Entire Crypto Market Are Down in Value

Why Bitcoin, Ethereum and the Entire Crypto Market Are Down in Value

              

The way I see it, investors — and specifically in Q4 — wanted to buy Bitcoin (BTC)

and Ethereum (ETH) for the sole purpose of exchanging it for specific ICO tokens they wanted to invest in. The buyers of Bitcoin and Ethereum did not want to own Bitcoin or Ethereum. They wanted to buy the newly issued initial coin offering (ICO) tokens, but they needed to buy Bitcoin and Ethereum as a short way to get what they ultimately wanted. The owners of Bitcoin and Ethereum did not want to sell. They were watching the price of their holdings increase, so why would they? They were also believers in Bitcoin and Ethereum. So, in a “bid-ask world,” the price went up.

Then, those startup companies that completed their ICOs became whales, which began — as a group — to unload their tokens in December and January, thereby flipping the dynamic of the huge demand for Bitcoin and Ethereum to all sellers of Bitcoin and Ethereum. After the New Year’s hangover faded, the startups needed to exchange their crypto for fiat in order to pay engineers and build their startups.

Then, it was a run-on-the-bank panic. Pressure from the United States regulators in Q3 and Q4 of 2017 resulted in a slowing and near total halt of ICOs by early 2018. After that, ICOs either stopped or radically slowed. New token issuers began to accept fiat without the need to pass through Ethereum, which killed more demand and left only sellers and “hodlers” and no buyers. In a “bid-ask world,” the market tanked. An interesting dynamic of the current market is that the prices of all cryptocurrencies are highly correlated to each other. Just look at the price of any token on CoinMarketCap, and you will notice a perfect correlation among the prices of most of them. Bitcoin and Ethereum go up and down together, and most other tokens are correlated in the same way. It shouldn’t be that way, but without any banks analyzing and reporting on these startups — the way they do for Apple, Amazon, Microsoft, etc. — that’s the way it is for now. So, Bitcoin can raise or drop the price of your token, but it now appears that gravitational pull works in both directions.

In 2018, something else developed. It became clear that all of these funded ICOs were not diligenced by real tech experienced angels or VCs — they were mostly not tokens you would really want to invest into. Previously, all of these coins were correlated to the rising price of Bitcoin and Ethereum, but now it is dragging them down. They are all correlated, and the big section of the overall market cap is sinking the ‘crypto ship’ in general.

               

What will happen is that all of these weak startups

will eventually be flushed out, and we will be left with some decent and even amazing companies. Today, the consumer retail investors of Southeast Asia and around the world are no longer gambling and throwing cash at the latest ICO to pitch at some blockchain event — or at least not at the volumes of Q4 2017. It used to be 20 percent institutional (VC) investors and 80 percent retail. Now, it's 80 percent institutional investors, if not more. It makes sense to me that, if strongly branded VCs like a16z, Pantera Capital and 7BC.VC invest into a startup from their wide funnel of investments after conducting VC-grade due diligence, consumer retail investors will want to invest — following the VC's lead in jurisdictions where this complies with local securities law (or, in the U.S., if the startup filed an S1, Reg A+, etc.).

Now is the time for the arrival of experienced VCs to raise real VC funds, generate large volumes of deal flow, process that deal flow with fully centralized and decentralized teams qualified to conduct proper due diligence, fund the best ones, as well as help these portfolio companies execute and manage investor risk via diversification and portfolio construction. We have seen a return to sane equity funding — and not just for tokens. Investors now own equity and tokens. Some “pure play” decentralized cases require only tokens — but again with real, old-school due diligence — before just throwing money around. We are also seeing a return to market valuations, rather than a team of high school dropouts seeking a $50 million or $100 million pre-money valuation without ever having met a payroll or accomplish any substance prior to getting that kind of valuation.

The new companies to be funded in 2019 — and to be listed in 2019, 2020 and 2021 — will be far better on average than the 2017 cohort, resulting in a rebound in the market. Experienced VC-backed entrepreneurs are now working on blockchain startups, which means the population of management teams has evolved beyond the original Bitcoin anarchists.

Bitcoin itself is resilient, proven by its survival of multiple Mt. Gox-type events and numerous up-and-down cycles. The long-term curve for Bitcoin is up and to the right. After the infamous coins run out of cash and disappear, the market will become much more robust. Many of the managers became delusional due to their experience of traveling the world and completing their ICOs, thinking that BTC and ETH would only go up and up while failing to exchange enough of their crypto for fiat. Not only did they have startup risk, but they foolishly added FX (foreign exchange) risk.

So, the good news is that these weak, never-should-have-been-funded startups will run out of cash sooner than expected, because their crypto is worthless when converted to fiat than they thought at the time they completed their financings. The flushing out of these coins currently weakening the market will drive the market up. Today, startups exchange their crypto into fiat the moment they get it.

            

I also predict that we will see a few killer startups

take off and generate mass adoption, which will bring mainstream users into the crypto world and — in a gravitationally correlated world — this will lift the tide of the entire market. We will probably see some video game become a huge sensation — like Angry Birds — or something that will drive the adoption of a token. I expect to see something else come along that no one ever thought of — like Skype — that everyone begins to use, which will pull huge populations into the crypto world, as the value will just simply be there.

It is imperative that all businesses move onto the blockchain so that no party can tamper with the numbers of how many “widgets” were sold or with who gets paid what. All business, government and health care data should be on the blockchain — and pretty soon, it will be unacceptable without it to enter into a business agreement and trust the other party to tell you how many widgets were sold in China, the U.S. or Africa. Once these business transactions or elections are on the blockchain and no one can tamper with the data, all sides can trust each other. The big picture here is that the market will see a major rally and long-term trend up and to the right.

2019 might be an excellent time to invest in a blockchain-focused VC fund or invest into blockchain startups taking on-board lessons from top-performing VCs that have a strong entrepreneur-experienced investment team with experience in achieving top-quartile venture capital IRR performance and cash-on-cash performance.

Article Produced By
Andrew Romans

Andrew Romans is a Silicon Valley-based venture capitalist at 7BC.VC and Rubicon Venture Capital as well as an author of two top-10 books on Venture Capital on Amazon and Masters of Blockchain.

 

https://cointelegraph.com/news/why-bitcoin-ethereum-and-the-entire-crypto-market-are-down-in-value

Thomas ClaimCo.in

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