In the latter half of 2018, few developments have occupied crypto investors’ headspaces like the industry’s indefatigable pursuit of a bitcoin exchange traded fund (ETF).
This conversation lay largely dormant since the two brothers’ first attempt was rejected by the U.S. securities regulator in March of 2017. But the Winklevosses reignited the conversation when their second attempt at an ETF was shot down by the U.S. Securities and Exchange Commission (SEC) in July of this year.
With the buzz back, the prospect (or failing prospects) of a bitcoin ETF have crowded the headlines of mainstream and crypto media alike. Following the Winklevosses’ failure to secure the coveted first-in-the-industry fund, the ensuing months would see a flurry of decision delays for existing applications, more rejections and revisions of said rejections.
The sheer volume of news surrounding ETFs — and the general complexity of the asset when compared to the simplicity of trading on the bitcoin spot market — makes the industry’s pursuit of one a rich and even abstruse topic.
So let’s see if we can set the record straight.
To start, a short explanation: an ETF is a fund that holds an underlying asset or assets, be they stocks, commodities, bonds, etc., which are then divided into shares for investors to buy. In structure, an ETF functions like a hedge fund, the primary difference being that an ETF is traded on a public market like shares of a stock, while a hedge fund is not.
With that primer in mind, we can now unpack the processes and jargon that constitute an ETF’s many working parts.
Typically, an ETF features four primary stakeholders:
More or less, authorized participants and sponsors are in charge of the ETF’s supply. The participants create or redeem blocks of shares (called creation units) directly from the sponsor; typically, these creation units are settled in-kind, meaning they are purchased for or redeemed in the underlying asset. Once participants have purchased creation units, these units are then divided into shares and traded on public exchanges.
For bitcoin, an ETF would function similarly to ETFs for other commodities like gold and silver. Its sponsor, most likely a trust of sorts, would employ the help of a custodian to store the physical bitcoins backing the ETFs (or, in the case of futures, the futures contracts) and related cash flow, and it would also rely on eager financial institutions to jumpstart circulation by purchasing shares to trade on a regulated, legacy exchange like the NYSE, CME or Cboe.
Many investors see the bitcoin ETF as the hitherto undiscovered holy grail of institutional-grade bitcoin investments, something that could push the market to new heights. In the broader market, ETFs are considered to be a low-barrier, low-cost alternative to other investment vehicles like hedge funds, and per this rationale, community members in favor of a bitcoin ETF say it would finally give institutional investors easy, reliable access to the crypto market. Supporting this thesis, proponents often point to the impacts ETFs had on the underlying gold market, noting that bitcoin would likely experience a similar price stimulation.
Detractors don’t think this is a good thing. They believe that, by encouraging a flood of institutional money, a bitcoin ETF would drown the market in inflated valuations, an argument critics in other markets have made by insisting that ETFs distort prices and liquidity. So the argument goes: Why would we create an investment vessel that could leave bitcoin susceptible to the same inflationary threats that it was created to avoid?
The merits of either argument are for another article entirely, but the perspectives are helpful for understanding why so many players are pursuing an ETF and why there’s so much noise surrounding it.
The following list looks at all past and current applications, some of which were refiled or restructured after the initial applications were rejected by the SEC or pulled by their sponsors.
In chronological order:
File date: July 2013
Status: Rejected March 2017
Sponsor: Winklevoss Bitcoin Trust
Custodian: Gemini Exchange
Listed Exchange: Bats BZX Exchange
Price Data Source: Gemini Exchange
Creation Unit Size: Basket of 100,000 shares
File Date: July 2016
Status: Rejected March 2017
Sponsor: SolidX Management LLC
Custodian: SolidX Management
Other Custodians: The Bank of New York Mellon (cash funds)
Listed Exchange: NYSE Arca
Price Data Source: TradeBlock XBX Index
Creation Unit Size: Basket of 100,000 shares
File Date: January 2017
Status: Withdrawn September 2017
Sponsor: Grayscale Investments LLC
Custodian: Xapo Inc.
Listed Exchange: NYSE Arca
Price Data Source: N/A
Creation Unit Size: Basket of 100 shares
File Date: August 2017 (refiled in December 2017)
Status: Withdrawn September 2017 (and again in January 2017)
Custodian: The Bank of New York Mellon
Listed Exchange: NASDAQ
Price Data Source: N/A
Creation Unit Size: N/A
File Date: December 2017
Status: Rejected at staff level but appealed for review by the Commission in August 2018
Sponsor: ProShares Capital Management LLC
Custodian: Brown Brothers Harriman and Co.
Listed Exchange: NYSE Arca
Price Data Source: Cboe and/or CME bitcoin futures
Creation Unit Size: N/A
File Date: January 2018
Status: Rejected at staff level but appealed for review by the Commission in August 2018
Sponsor: GraniteShares Advisors LLC
Custodian: Bank of New York Mellon
Listed Exchange: Cboe BZX Exchange
Price Data Source: Cboe bitcoin futures
Creation Unit Size: N/A
File Date: February 2018
Status: Rejected at staff level but appealed for review by the Commission in August 2018
Sponsor: Direxion Asset Management LLC
Custodian: Bank of New York Mellon
Listed Exchange: NYSE Arca
Price Data Source: Cboe and CME bitcoin futures exchange
Creation Unite Size: Basket of 50,000 shares
Other Info: Direxion’s ETFs would give investors the option to short bitcoin as well as giving them a 200% short leveraging option and a 125%, 150% and 200% long leverage option — they are the only ETF filing that accommodates leveraged shares.
File Date: June 2018
Sponsor: SolidX Management LLC
Custodian: The Bank of New York Mellon
Listed Exchange: Cboe BZX Exchange
Price Data: MVIS CryptoCompare Bitcoin Index (MVBTC)
Creation Unit Size: Basket of 25 shares
Other Info: ETF is backed by physical bitcoin, but they will be redeemed in cash
File Date: June 2018
Status: Rejected July 2018
Sponsor: Winklevoss Bitcoin Trust
Custodian: Gemini Exchange
Listed Exchange: Cboe BZX Exchange
Price Data Source: Gemini Exchange
Creation Unit Size: Basket of 100,000 shares
File Date: July 2018
Sponsor: Bitwise Investment Advisers, LLC
Listed Exchange: TBD
Price Data Source: Bitwise’s HOLD 10 Cryptocurrency Index
Creation Unit Size: Basket of 25,000 shares
Other Info: Unlike other ETFs, Bitwise’s would be based on the 10 cryptocurrencies in its index fund, not just bitcoin.
The Winklevosses were the first to try and first to fail at filing a bitcoin ETF. Naturally, they set a precedent for other contenders to follow, as subsequent filings were submitted with the frontrunner’s shortcomings in mind. For the SEC, the Winklevosses’ first attempt has become something of a touchstone to evaluate the worth of those that came after it, as the first rejection order is cited in every rejection order the SEC has issued since.
And that’s because the SEC keeps running into the same problems.
In sum, these problems are few and simple. You could boil them down to three interconnected areas of concern: risk of fraud/manipulation, market size and lack of regulation.
To create an ETF for a new asset, applicants must propose a rule change to accommodate that asset in the SEC’s legal framework, and this places the onus on the applicant to prove that the asset and its underlying market are consistent with regulations laid out in the Security and Exchange Act of 1933.
As the rejection would indicate, the Winklevosses’ preliminary attempt wasn’t convincing enough to the SEC.
“[The] Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.
“The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated,” the order reads.
SolidX’s first crack at an ETF would be scrapped with the same verbiage, word for word, nearly three weeks following the Winklevosses’ rejection.
In 2013, when the Winklevosses’ ETF was filed — and in 2017 when it was summarily rejected — there were no federally regulated markets for bitcoin. Of course, the Winklevosses’ own Gemini Exchange is regulated via the New York State Department of Financial Services through one of the much-coveted BitLicenses. But the scale of this regulation is inconsequential to the SEC, so the twins’ first application was fighting a losing battle from the start.
Though by June 2017, they found an opening. The Cboe and CME exchanges launched the world’s first institutional bitcoin futures in December of 2017. By proxy, these were also the first fully federally regulated bitcoin products to trade in the United States.
So the Winklevosses took another stab at it, submitting a revised proposal and petition for review. This time around, the twins’ Gemini Exchange entered into a surveillance-sharing agreement with Cboe’s bitcoin futures market to appease the SEC’s request in the former rejection. As the name suggests, a surveillance-sharing agreement is a self-regulatory accord struck between two or more marketplaces in the same market to police fraud and manipulation. Sharing data and monitoring practices between Gemini and Cboe, then, would seemingly satisfy the SEC’s major concern with the prior application.
Still, the SEC was not impressed. In their filing, the Winklevosses et al. argue that the bitcoin market’s global nature makes bitcoin resistant to conventional mark manipulation tactics. Ironically, this argument backfired, as the SEC found that because of this global market, the Winklevoss Bitcoin Trust couldn’t possibly shield their potential investors from fraud, especially when you consider that the Gemini Exchange (which would source the ETF’s price data) accounts for a sliver of bitcoin’s daily transaction volume.
“BZX has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices,” the rejection reads.
The rejection rationale detailed above would be copy-pasted practically verbatim into the nine rejection orders that would come in the following month, August 2018.
These filings by Direxion, ProShares and GraniteShares, however, didn’t source their price data from the underlying spot market. In fact, the contracts weren’t for physical bitcoin at all — they would be ETFs for bitcoin futures themselves.
The logic here is pragmatic if not a little obvious. Seeing as the Winklevosses were rejected a second time even if they entered into a surveillance-sharing agreement with a regulated exchange, they must have not gone far enough. If the SEC is worried about the regulation status and integrity of the market, then the ETF (and its pricing data) must be based on a regulated market, not just surveillance-share with it.
So Direxion, ProShares and GraniteShares followed in VanEck’s footsteps, which was the first to file for an ETF based on bitcoin futures, bizarrely, before a mainstream futures market even existed (this is why its proposal was initially withdrawn at the SEC’s request).
Unlike its counterpart in physical bitcoin ETFs, these products would divide shares of the Cboe’s and/or CME’s futures contracts, while naturally sourcing pricing data from these markets as well.
These ETFs all claim to have established a surveillance-sharing agreement with the CME’s and Cboe’s regulated futures markets. Even so, these agreements must be with a “market of significant size related to bitcoin,” and in the eyes of the SEC, the CME and Cboe aren’t there yet.
“While CME and [Cboe’s CFE] are regulated markets for bitcoin derivatives, there is no basis in the record for the Commission to conclude that these markets are of significant size,” the rejection notices read.
“Publicly available data show that the median daily notional trading volume, from inception through August 10, 2018, has been 14,185 bitcoins on CME and 5,184 bitcoins on CFE, and that the median daily notional value of open interest on CME and CFE during the same period has been 10,145 bitcoins and 5,601 bitcoins, respectively,” it continues.
With this data in mind, the SEC then says that extrapolating any “meaningful analysis” from this market volume is difficult “because reliable data about the spot market, including its overall size, are unavailable.”
Of course, these rejections were made at the staffing level and are pending review by the Commission itself, so while the staff’s decision doesn’t exactly inspire confidence, it could still be overturned by the SEC’s senior decision makers.
Almost all arguments against these ETFs make their way back to the spot market.
If the ETF prices its data from spot exchanges like Gemini, these markets are too small in the scope of bitcoin’s global trading to definitively defend against fraud. If the ETF prices its data from a regulated derivatives market, there’s no reliable way to measure the significance of this future’s volume against the overall market.
The SEC’s gravest concern when deliberating bitcoin ETF approvals has been related to fraud and manipulation; market size, asset liquidity and reliability of pricing data are also wrapped up in this primary concern. And these concerns don’t even touch on the custody and settlement difficulties offerings would have to hurdle if they redeemed shares “in-kind” with bitcoin itself (there’s a reason most (if not all) of the filings since the Winklevosses’ own have opted to settle contracts in cash, instead).
Ironically, the biggest obstacle to regulating an ETF into existence, then, is the current dearth of regulated entities and structures in the bitcoin market at large. In an interview with Bitcoin Magazine, SEC Commissioner Hester Peirce hit on the catch-22 that the SEC’s rejection creates, as well as explaining that she feels their rejections set a disconcerting precedent for the SEC’s power to vet or denounce the quality of an investment.
“If you really want this market to be more orderly,” she said, “then you’ve got to let some of these forces in that are going to bring order to it,” like an institution-grade product such as an ETF.
Peirce suggested that the rejection of the Winklevoss ETF in particular set a poor precedent. “It plays into a bit of a thread in securities regulations — at the federal and at the state level — which is that there’s an inclination among regulators to almost step into the shoes of the investor and say whether or not the investor should be making that particular decision, based on our assessment of the actual product — in this case, the actual asset. So yes, that is a disturbing precedent, because I can’t make assessments about those things,” she said in the interview.
So far, ETF news has been punctuated by overarching disappointment, but a number of decision-pending files are still crowding the SEC’s desk. As we mentioned earlier, currently, the ETFs pitched by Direxion, ProShares and GraniteShares are up for review by the Commission; VanEck and SolidX’s joint effort, as well as Bitwise’s sweeping ETF of popular coins, are still being reviewed.
This September, Abra’s CEO Bill Barhydt told CNBC that he would bet on an ETF being approved “in the next year,” and Peirce said she was “a bit optimistic” that one is coming. Barhydt believes the right suitor hasn’t called on the SEC yet, but that once it does, the ETF is inevitable, while Peirce thinks that there’s enough interest in the product for an eventual approval.
Until this eventually becomes reality, though, the industry is stuck waiting on what the SEC will do next — something that’s become a constant for 2018 and isn’t likely to change anytime soon.
This article originally appeared on Bitcoin Magazine.
The man who created Atari has moved on to blockchain-based gaming. Neil Bushnell’s X2 Games has been acquired by Canadian-based Global Blockchain (BLOC), a crypto investment firm, in hopes that Bushnell’s expertise will lead to another gaming industry revolution — this time with the help of blockchain technology.
The move will see the Canadian company align its existing efforts to tokenize gaming platforms with X2 Games’ expertise for game development.
BLOC will also merge sections of its media and entertainment business with those of X2 Games Corp. and create a subsidiary for its enterprise and exchange activities, to be run by BLOC’s current management and operational team.
X2 Games is a blockchain-based games publisher that builds multiplayer gaming experiences, leveraging blockchain technology to create unique gaming experiences for conventional and experimental platforms. X2 Games was created by American businessman and founder of Atari Inc. Nolan Bushnell and acclaimed digital animator Zai Ortiz, known for creating visuals for Iron Man’s J.A.R.V.I.S system holograms among others.
Bushnell, known as the “Godfather of the Video Game Industry,” is a Video Game Hall of Famer and has been included on Newsweek’s list of the “50 People Who Changed America.” Bushnell is no stranger to creating blockbuster games with unique “never-been-seen-before-designs.” In addition to launching the first Atari 2600 console into the home gaming market, Bushnell also created Chuck E. Cheese, a video game entertainment center hybrid.
With the acquisition, Blockchain Global will advise X2 Games’ team on the integration of blockchain technology in video games. Bushnell will also become co-chairman of BLOC.
Bushnell hailed the alliance saying the creativity of both companies will drive them forward, in a statement made in the release.
“Without that first charge of creativity, nothing else can take place. This acquisition by BLOC will integrate X2 Games’ innovative game development studio and intellectual property within BLOC’s portfolio of blockchain assets allowing new and revolutionary games to be developed together.”
BLOC President and CEO Shidan Gouran told Bitcoin Magazine that BLOC is passionate about integrating the blockchain into real business use cases.
“Since we began discussions with X2 more than a year ago, it was always clear that there was a synergy between our companies. Now that our company has taken on a greater gaming focus, the decision to combine forces with X2 came naturally. We’re both very excited to get moving on our first projects together, and we look forward to changing the world of video gaming in the years to come.”
Steven Nerayoff, BLOC’s chairman, said the blockchain company has been able to develop three separate companies and is positioned to “disrupt blockchain from the perspectives of mining, exchanges, and innovation.” In addition, he believes segmenting the firm’s “competencies and resources” would allow them to incorporate the strengths of new partners such as X2 Games.
This article originally appeared on Bitcoin Magazine.
The International Monetary Fund (IMF) and the World Bank have weighed in on sovereign considerations and global implications of blockchain and other financial services technologies.
The Bali Fintech Agenda, released at the conclusion of their annual meeting, distills the issues and concerns around disruptive technologies like distributed ledgers and smart contracts. The 12-point agenda intends to provide guidance to countries in their assessments of policy options around specific circumstances and priorities.
“Countries are demanding deeper access to financial markets,” World Bank Group President Jim Yong Kim said in statement on the agenda framework. “The Bali Fintech Agenda provides a framework to support the Sustainable Development Goals, particularly in low-income countries where access to financial services is low.”
IMF Managing Director Christine Lagarde echoed the sentiment. Pointing to the estimated 1.7 billion adults around the world without access to the financial services sector, she said, “Fintech can have a major social and economic impact for them and across the membership in general. All countries are trying to reap these benefits, while also mitigating the risks.”
As outlined in an IMF press release, the focus of the 189 member countries must include the following goals:
Especially for low-income countries, small states and the underserved, fintech can hasten access to financial services and financial inclusion, deepen financial markets and improve cross border payments and remittance transfer systems.
By facilitating telecommunications and digital infrastructures, countries foster open and affordable access and ensure a conducive policy environment.
Enabling a policy framework addressing risks around market concentration and moving to foster standardization, interoperability and transparent access to key infrastructures ensures a level playing field while promoting innovation, consumer choice and access to high-quality financial services.
Enabling countries to leverage promising new pathways for economic and financial development supports growth and alleviates poverty. Achievement toward this end entails the inclusion of fintech in efforts toward financial and digital literacy “while fostering knowledge-sharing between public- and private-sector players, civil society, and other stakeholders.”
Information-sharing and exchange supports improved monitoring and includes the maintenance of dialogue with current industry leaders and innovators as a means of identifying emerging opportunities and risks and to “facilitate the timely formation of policy responses.”
As issues arise around emerging financial technologies, regulators and policymakers must be prepared to modify and adapt frameworks to a degree proportionate to risks. “Holistic policy responses may be needed at the national level, building on guidance provided by standard-setting bodies.”
Mitigate risk around criminal misuse of fintech through use of technologies that strengthen anti-money laundering compliance and combat financing of terrorism.
Legal frameworks that fail to keep pace with fintech innovation and evolving global markets undermine the general trust and reliability of financial products and services. It’s important to enable a legal framework with clear and predictable rules.
While fintech could help central banks improve services — including the potential issuance of digital currencies as well as expanding access to and improving the resilience of payments services — monetary policy must also safeguard financial stability and even expand social safety nets when necessary.
The integrity of the financial system must maintain resilience to cyber attacks and other disruptions. Robust infrastructure development includes implications that reach beyond the financial sector and move into the digital economy as a whole. Issues here include data ownership, protection and privacy, cybersecurity, operational and concentration risks, and consumer protection.
International cooperation assists in ensuring effective policy responses to foster opportunities and to limit risks that could arise from divergence in regulatory frameworks. “The IMF and World Bank can help in facilitating the global dialogue and information-sharing” with an eye toward building a global consensus.
As fintech continues to blur financial boundaries and amplifies interconnectedness, spillovers and capital flow volatility, the potential to affect the balance of risk in global financial security increases.”The IMF and World Bank could help in improving collective surveillance and assist member countries via capacity building, in collaboration with other international bodies.”
This article originally appeared on Bitcoin Magazine.
Binance has announced a $2.5 million investment in Australian travel startup TravelbyBit in a move to introduce a blockchain-based, point-of-sale (POS) payment system across major airports around the world. Travelers will be able to visit local merchants at select international airports and use mobile wallets like Coinomi and Dash Wallet for POS payments. There are also plans to add support for Binance’s official mobile wallet Trust Wallet.
“There is no better fit than being able to use your crypto when traveling, just after you land in a foreign country, where you may not have the local currency,” Changpeng Zhao, CEO of Binance, stated in the announcement.
Australia has been a relatively friendly region for cryptocurrencies for a while. The country has built a positive outlook on digital currencies starting from declaring Bitcoin along with other cryptocurrencies as legal tender, to its clear rules on exchange registration and taxation of crypto purchases.
Brisbane, known as the Mecca for all visitors to Australia, is the third largest city and the capital of Queensland. It welcomes millions of tourists and pulls in billions of dollars per year for the Australian government. Earlier this year, the Queensland government gave TravelbyBit a grant to turn the state into a crypto haven for tourists. The startup used the funding to deploy its POS system to over 200 merchants nationwide. The TravelbyBit platform has also been integrated into Brisbane’s airport — making it the first airport in the world to accept cryptocurrencies.
In correspondence with Bitcoin Magazine, Wei Zhou, CFO at Binance, stated his enthusiasm with the investment and said Binance was looking forward to rinsing and repeating the model that has been so successful in Brisbane to other parts of the world.
“With the support of the Queensland government, TravelbyBit has turned Brisbane into a true crypto-friendly tourism destination. TravelbyBit is helping over 30 retail stores and restaurants in the Brisbane airport — and over 200 other locations in Queensland — accept digital currencies, including Binance’s own BNB token. Now, Binance is working with TravelbyBit to replicate this successful model and move the tourism industry forward in other regions.”
TravelbyBit’s partnership with Binance will allow the startup to introduce its blockchain-based POS system, currently being used at the Brisbane airport, into other international airports worldwide, so travelers can enable cryptocurrency payments for tourists across the world without the need to exchange fiat currencies at expensive rates. The startup’s POS system currently supports Bitcoin (BTC), Ethereum (ETH), Dash (DSH) and Litecoin (LTC), and it will now include Binance Coin (BNB) — in a move to increase the use cases for BNB.
Caleb Yeoh, CEO of TravelbyBit, stated the benefits of cryptocurrencies for the travel industry, which he believes will cut out exchange rates or leftover currencies after a trip.
“Imagine traveling with multiple stopovers and only needing a single currency. We’re working with the most innovative airports and retailers who want to offer their consumers non-traditional payment options and a chance to experience cutting-edge technology.”
This article originally appeared on Bitcoin Magazine.
It’s no secret that DApps have struggled to achieve adoption; in fact, according to stateofthedapps.com, the most popular DApp currently has just 1,811 daily active users (DAUs). In our opinion, the poor adoption rates of DApps can be attributed to the high adoption costs of using DApps, such as the time required to sign up, monetary cost or the fear of loss. These adoption costs are particularly high relative to the perceived value gained, especially when compared to Web 2.0 platforms that are designed with much lower adoption costs.
Crypto Kitties (which is currently the third most popular DApp with 530 DAUs) is a perfect illustration of the high barrier to entry faced by users. Before users can start to build up their Kitty collection, they are required to have a desktop or laptop, own some Ether and have a Metamask account. Assuming a user has all three, they must also make sure that they don’t lose their password or seed words, as recovering these is simply not possible (a fear of loss that most users are not accustomed to).
When comparing this signup process to that of Web 2.0 platforms, for the pragmatic user, these requirements are too cumbersome. Web 2.0 apps have invested considerable effort in streamlining the time and mental effort required to interact with their platforms, with companies such as Apple taking a “two taps away” approach. And so, unsurprisingly, the user experience of Web 2.0 is still years ahead of current DApps.
Such high adoption costs at the initial stages of an innovation are nothing new. History is littered with examples of innovative products, including mobile phones, computer and mobile operating systems and the internet, that initially were not accessible to the majority of users due to the complexity and costs of using them. However, as the technology improved and costs dropped, adoption grew.
In his 1991 book Crossing the Chasm, Geoffrey Moore argued that the key to achieving breakthrough adoption for high-tech innovations was overcoming the “chasm” in order to reach the “early majority” (the pragmatists). He describes this chasm as the massive gap that lies between the early adopters (tech enthusiasts and visionaries) and the early majority, which exists when a new product has the potential to be highly disruptive and thus require behavioral changes.
Thus far, when it comes to DApps, the pragmatists are not willing to put up with what can be seen as a bad user experience compared to the UX offered by Web 2.0 platforms (i.e. they are not willing to change their behaviors). Current DApps have not yet been able to cross over this chasm and are, instead, only managing to reach the “early adopters.”
Source: (Moore, 1991; Nesmith, 2018)
The question is, then, how can DApps successfully achieve this crossing?
We believe that crossing the chasm will come with a DApp that is centralized, with decentralized functionality i.e. a hybrid, quasi-centralized approach.
Now, before the pitchforks are raised, we first ask you to hear us out. A hybrid approach would allow the “early majority” to use DApps with the low barrier to entry that they are accustomed to with Web 2.0 apps. This low-friction approach would expose and inform the early majority of the value offered by Web 3.0 functionality and, in doing so, cross the chasm. In other words, this approach would whet the appetite of the early majority for Web 3.0 and leave them wanting more. And so, as time goes on and more adoption occurs, DApps will incorporate more Web 3.0 and less Web 2.0 functionality, before finally reaching full Web 3.0.
In the past, hybrid solutions were not possible; that is, one could not experience the magic of a mobile phone (it is magic) without, well, having a mobile phone: The landline system couldn’t expose the user to mobile phone functionality.
In crypto, this is different; we have the Web 2.0 world (with its low adoption cost), and we can use this low cost to our advantage while decentralized infrastructures are being built out. After all, the main thing that decentralization enables is trust (well, strictly operating without it).
We believe that this can be adopted as a philosophy by the early majority before the technology has caught up to enable it. As an example, let’s go back to Crypto Kitties and apply this philosophy. The in-game rarity of the cats would still be guaranteed by Web 3.0 functionality; however, the sign-up process would incorporate more Web 2.0 functionality, such as allowing mobile users (possibly through an app) and allowing the use of USD on the platform. Such changes would make the Crypto Kitties platform far more accessible to the early majority.
We bet you’re saying, “Wait, but Bitcoin couldn’t be quasi-centralized, so this approach is obviously wrong.” Yes, you are right, a quasi-centralized, censorship-resistant digital currency (cash or gold) wouldn’t work.
This, however, does not mean that such a quasi-centralized approach is wrong. Rather, it is use-case and sector specific. In fact, if one investigates Bitcoin further, many users interact with it through centralized businesses. For example, users on exchanges like Coinbase or wallets like Jaxx interact with Bitcoin in a quasi-centralized manner. Users do this because the centralized businesses reduce friction for users. The key aspects of Bitcoin (inflation rate, consensus) are decentralized, but many of the user-facing aspects (storage, sale, transfer, etc.) use centralized Web 2.0 functionality.
It would, therefore, seem that, even when wealth is at stake, users are comfortable with centralized solutions and are unwilling to overcome the current high adoption cost of true decentralization. Another example is the gaming industry, which we believe is a perfect target market for quasi-centralized DApps to experience a breakout success.
Why is gaming primed for this type of breakout? Three main reasons: 1) Gamers, as a whole, are accustomed to high adoption costs of learning and then grinding on a new game. 2) Gamers enjoy trying new ideas and concepts, such as a new scarce currency. 3) Gamers already assign a lot of value to digital goods. The amount of money Fortnite makes on skins is frightening, but it’s also a good indication of the value gamers assign to being able to express themselves digitally. Actually owning the digital asset is the natural progression within many games.
An example of a quasi-centralized game is the augmented reality mobile game, Augmentors. Here, players can purchase a package using fiat currency from the in-app store. Each package contains several elements including, but not limited to, creatures, consumables and Emeralds. Databits is the standard crypto-asset and Emeralds is an off-chain asset that is pegged to Databits at a set ratio. But, critically, from the perspective of the early majority, Augmentors is just a normal mobile game. They don’t need to know that it is a crypto-backed game that aims to be the first mobile game to guarantee in-game asset rarity. All they know is that players can train and customize their creature and thus increase its rarity and can legally sell it for real money, outside of the game. The technology behind it disappears for the majority of users.
In summary, we believe that the first breakout successes of Web 3.0 will be DApps that harness Web 2.0 to build themselves initially — and that’s okay. Also, we acknowledge that such a hybrid solution will eventually be deemed unacceptable to users in the long term, but a compromise in the short term is ultimately needed in order to achieve long-term success by breaking through to the early majority. Such a quasi-centralized approach and a breakout success will expose the early majority users to the value that can only be offered by Web 3.0 functionality. Nudging us closer to a future Web 3.0 world.
Disclosure: This is a guest post by James Kilroe and Seamus Hennessy of Newtown Partners. Newtown Partners is an investor in Augmentors and holds Databits. View expressed are theirs alone and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.
This article originally appeared on Bitcoin Magazine.
Kin Ecosystem Foundation, the nonprofit governance organization for the Kin cryptocurrency, has announced the appointment of Matthew DiPietro as its chief marketing officer (CMO) today, September 18, 2018. Prior to joining Kin as its CMO, DiPietro was senior vice president of marketing at Twitch, the world’s leading video platform and community for gamers, where he drove mainstream adoption of live streaming.
Messaging app Kik was founded in 2009, and it became known as the first chat app that went viral in 2010, growing from zero to a million users within 15 days. The company also became the first chat app to add its own digital currency when it launched the KIN token early last year.
Kik believes that through its token it can bring together the areas of communications, information and commerce in a new way that will fuel how today’s generation and future ones connect.
The KIN token launched on Ethereum’s blockchain, then switched to Stellar’s, and then in a bid to eliminate transaction fees for its users, it forked Stellar to create the Kin blockchain. The KIN token recently achieved 1.2 million transactions per day.
The Kin Ecosystem Foundation is the nonprofit organization managing the development of the KIN token.
In an interview with Bitcoin Magazine, DiPietro explained why he decided to leave Twitch for the Kin Ecosystem Foundation.
“It reminds me very much of the early days of Twitch. It’s an exciting concept with audacious goals, a talented team, and killer technology,” he commented.
“We have a once-in-a-lifetime opportunity to drive adoption of a transformative technology that can fundamentally change the relationship between consumers and developers. I’m looking forward to creating and executing a marketing strategy that helps make that happen.”
DiPietro joins Kin after spending eight years at Twitch, where he created the company’s brand and led marketing initiatives at all levels, including the creation of TwitchCon in 2015, the company’s annual convention for Twitch creators and their communities.
From being the only marketing employee at Twitch, DiPietro grew the team to over 40 people who worked on the platform’s branding, content, communications and much more. Before Twitch, DiPietro also managed marketing for Socialcam, a social, mobile video application, often called “Instagram for video,” which was later acquired for $60 million.
Kin’s appointment of a former Twitch executive follows the growing trend that sees blockchain startups poach experienced executives from traditional business sectors. Earlier this year, Ripple brought in Kahina Van Dyke, the former global director of financial services and payments partnerships at Facebook, as senior vice president of business and corporate development. Gemini, the Winklevoss twins’ cryptocurrency exchange, also hired Robert Cornish of the New York Stock Exchange (NYSE) to serve as its first chief technology officer.
DiPietro, however, believes the real talent resides in the people making the bets on the companies, not the other way around.
“I think what we’re seeing is the first round of experienced talent coming into [the] space because we can start to see the outlines of what success looks like. There’s now enough information to start making educated bets, whereas previously it was anybody’s guess. I’m betting on Kin.”
In his new role, DiPietro will be driving marketing strategy for the Kin brand, platform and its associated products and services.
“What I hope to be able to do is to bring a level of clarity to the value proposition,” DiPietro said.
“Too many crypto projects can’t identify their customer, the customer problem, and the value proposition, and are unable to tell this story in a clear, compelling way. I want to tell that story for Kin because it’s a good one.”
DiPietro’s appointment comes on the heels of Kin’s accelerated momentum in the crypto industry, including the announcement of the Kin Developer Program and the launch of the Kinit Beta app, the first publicly available app dedicated to Kin.
The Kin Developer Program has committed nearly $3 million for qualified developers who can create relevant use cases using the Kin cryptocurrency in their apps. The program promises to reward individual developers who provide “meaningful experiences in consumer apps” with up to $140,000 in cash and Kin currency.
For Kin’s new CMO, what Twitch did in its early days is similar to what Kin is trying to do for decentralizing messaging services.
According to DiPietro, Twitch stood out for its unwavering focus on the creators. First, it created a category for them and then figured out a way to compensate them for the value they created without burdening the consumer.
“In many ways, what we’re trying to do with Kin is to make that concept scalable across platforms and consumer apps. We are laser focused on the app developer and the consumers they serve. Kin provides a viable path to building a world in which all parts of the ecosystem are compensated appropriately for the value they create,” he concluded.
This article originally appeared on Bitcoin Magazine.
LinkedIn has been keeping its finger on the pulse of the United States’ most thriving startups, and crypto organizations are showing tremendous signs of life — and growth.
The business and employment social media site released its LinkedIn Top Startups list this Thursday, September 6, 2018. Split into two articles, the list details the U.S.’s most dominant startups, weighing each company’s worth with in-house data that looks at “employee growth; jobseeker interest; member engagement with the company and its employees; and how well these startups pulled talent from [the company’s] flagship LinkedIn Top Companies list.” To be eligible, companies could be no older than seven years and must have had at least 50 employees.
Interspersed between the expected ilk of general tech and software startups, cryptocurrency and blockchain companies had an impressive showing among their mainstream industry peers.
Coming in just behind Uber adversary Lyft and low-calorie ice-cream company Halo Top Creamery, respectively, Coinbase ranked third on the list. In describing the six-year-old cryptocurrency wallet and vendor, LinkedIn notes that its services house over 20 million accounts — twice the number of clients Charles Schwab has on its books. At 500 employees strong, the company hopes to double its manpower by year’s end.
Right behind number six — stock-trading service Robinhood (which, while not focused on cryptocurrencies, does offer crypto trading) — comes Ripple. With over 100 clients, the blockchain-based banking platform delivers its services to institutions like Santander, RBC and American Express. The company of 250 employees hopes to add 75 more by 2019. Slinging a bit of mud, the company boasted to LinkedIn that this dedication to expansion — along with an impressive clientele — is what distinguishes Ripple from other crypto startups that are “playing in the sandbox.”
Outside of the top 10, the Winklevosses’ Gemini straddles the list’s upper and lower division at 25. LinkedIn highlights the Winklevosses’ hitherto unsuccessful attempts to list a bitcoin ETF, as well as their spearheading of an SRO (self-regulatory organization) for cryptocurrency exchanges. Among its 150 employees, the description draws attention to Robert Cornish, Gemini’s newly acquired CIO, whom it “poached” from the New York Stock Exchange.
Just below Gemini, Ethereum incubator ConsenSys tops the latter half of the rankings. Ethereum co-founder Joseph Lubin heads the organizational body, and its impressive staff of 965, the largest of any of the crypto companies surveyed, is spread across departments for technological development, consulting, education and investing. Earlier this year, the company partnered with Amazon to launch Kaleido, an enterprise-grade, blockchain software-as-a-service kit available on Amazon Web Services.
At 47, Axoni, a fintech firm focused on blockchain and distributed ledger technology, brings up the rear as the last crypto-related company on the list. Founded in 2013, the 50 employee company is starting to make a name for itself, as an infusion of $32 million in venture capital from market heavyweights like Goldman Sachs, Nyca Partners and Andreessen Horowitz has given the fledgling firm expectations to live up to.
A detailed version of LinkedIn’s terminology, along with qualifiers and exceptions, reads as follows:
LinkedIn measures startups based on four pillars: employment growth, engagement, job interest and attraction of top talent. Employment growth is measured as percentage headcount increase over one year, which must be a minimum of 15%. Engagement looks at non-employee views and follows of the company’s LinkedIn page as well as how many non-employees are viewing employees at that startup. Job interest counts what rate people are viewing and applying to jobs at the company, including both paid and unpaid postings. Attraction of top talent measures how many employees the startup has recruited away from LinkedIn Top Companies, as a percentage of the startup’s total workforce. Data is normalized across all eligible startups. The methodology time frame is July 1, 2017 through June 30, 2018.
To be eligible, companies must be independent and privately held, have 50 or more employees, be 7 years old or younger and be headquartered in the country on whose list they appear. We exclude all staffing firms, think tanks, nonprofits, accelerators and government-owned entities.
This article originally appeared on Bitcoin Magazine.
Maerki Baumann — a private bank based in Zurich, Switzerland — has announced it will manage its clients’ cryptocurrency assets. This makes it the second Swiss bank to make such an announcement following Hypothekarbank Lenzburg (Hypi), which stated in June that it would open business accounts for cryptocurrency companies.
The bank recently published an article on its website entitled, “Cryptocurrencies — What Exactly Are They?” Written by the company’s deputy head of IT and digitization Milko G. Hensel, the article offers a brief description of some of the world’s best-known and most established digital currencies, such as bitcoin and ether. It then explains that, while the bank is prepared to “accept funds generated through cryptocurrencies,” it does not condone investing in cryptocurrencies given their volatility and speculative natures.
“We would advise against any major investment in cryptocurrencies at present,” the article explains. “In our view, cryptocurrencies are unsuitable for long-term investors due to the uncertainties set out above.”
First established in 1932, Maerki Baumann is a family-owned bank that has primarily offered asset management and investment advice for institutional clients. At press time, it supervises about $649 million USD in client holdings.
The bank openly admits that its knowledge of cryptocurrencies is limited, though it will provide “experts” to investors looking to take advantage of its new services. In addition, it is also advising clients to consult with Bitcoin Suisse — a digital currency firm — for further information.
“Maerki Baumann closely monitors the development of these investment vehicles and the underlying regulation without our commitment to engage in this arena,” the bank says in a statement.
“This concerns investments in cryptocurrencies, as well as the technologies required to trade and store these instruments. We currently see cryptocurrencies as alternative investment vehicles, but we have limited experience and data (prices, volatility, trading volumes, etc.) available in our house.”
Switzerland is becoming a global hub for cryptocurrency and blockchain-related projects. SIX Group — the parent company of Maerki Baumann — announced last July that it will be launching a fully integrated digital asset infrastructure. Known as the “Swiss Digital Exchange,” the venture is set to open its doors early next year under the guidance and supervision of the country’s national financial regulator.
Furthermore, the country’s wealthy town of Zug has been dubbed “Crypto Valley” — a take on northern California’s esteemed “Silicon Valley” — due to the 200 to 300 individual cryptocurrency businesses it currently plays host to.
This article originally appeared on Bitcoin Magazine.
American troops serving overseas will be able to cast their votes in West Virginia through a mobile voting platform based on blockchain technology in the federal elections in November 2018.
The mobile voting platform, Voatz, will use facial recognition software to match each user’s “selfie-style video of their face” to their government-issued ID, according to a CNN report. Once approved, voters will be allowed to cast their ballot on the app. Ballots will then be anonymized and recorded on the blockchain.
Voatz is a Boston-based startup that combines internet-based voting with blockchain technology. The platform was created to encourage citizen engagement and tackle low participation in local elections.
West Virginia Secretary of State Mac Warner commented, “There is nobody that deserves the right to vote any more than the guys that are out there, and the women that are out there, putting their lives on the line for us.”
Warner also clarified some misconception that the app was going to replace traditional balloting, by saying it was an option and troops can still “cast paper ballots if they like.”
Earlier this year, state officials ran a pilot of the Voatz mobile app for deployed troops and their dependents in Harrison and Monongalia counties and found the results to be satisfactory.
Warner’s office also claimed in the report that “four audits of various components of the tool, including its cloud and blockchain infrastructure, revealed no problems.”
In a previous interview with Bitcoin Magazine, Voatz co-founder and CEO Nimit Sawhney said that Voatz has been working to connect disenfranchised citizens and ensuring that the platform remains accessible to all, regardless of geography or socioeconomic status.
“Aside from major government-issued IDs such as driver’s licenses, state IDs or passports, Voatz has experience using the 10 different kinds of official documents for the purposes of verifying a voter’s identity,” said Sawhney.
Charles Stewart III, a political scientist at MIT, credits West Virginia for being bold enough to trial the technology, even though he doesn’t yet believe the Voatz app is ready for “prime time.”
“There is something to be said sometimes for small-scale pilots where we can learn the trade-offs,” he remarked.
While enthusiasm has been building around using the blockchain for voting in the state, a couple of experts seem to oppose the idea.
Joseph Lorenzo Hall, the chief technologist at the Center for Democracy and Technology, believes “mobile voting is a horrific idea,” while Mark Schneider, president of Verified Voting, said “no” when asked if he thought mobile voting was a great idea.
Schneider believes a mobile app creates more opportunity for hacking and meddling.
Michael L. Queen, Warner’s deputy chief of staff, told CNN that officials would allow each county to decide whether they will use the app in the upcoming elections.
This article originally appeared on Bitcoin Magazine.
The Queensland government in Australia is backing a cryptocurrency point-of-sale system that officials believe will help boost tourism throughout the area. Thus far, they have given over $8 million in Australian dollars ($6 million USD) to roughly 70 different companies that will work to inspire innovation and create new ideas within the region’s travel space.
The project is headed by the digital currency startup TravelbyBit, which sells travel experiences online using cryptocurrency. The company has received over $74,000 USD ($100,000 AUD) in federal grant money to fund its new system.
“Tourism is one of Queensland’s most important industries,” says innovation minister Kate Jones. “TravelbyBit has devised a clever way to make it easier for visitors to our state to pay for their purchases with a growing number of local businesses accepting cryptocurrency payments. That’s why we’ve invested to help them scale-up their operations and create more jobs in Queensland.”
Among the first major businesses adopting cryptocurrency payment practices include the Bundaberg Rum Distillery and Museum, which is visited by several thousand tourists each year, and the Bundaberg Airport. Thus far, TravelbyBit’s digital payment protocols have been implemented into over 150 merchants across the continent, though Queensland boasts the highest rate of adoption. Though bitcoin is its staple currency, TravelbyBit also accepts Litecoin, Dash, Ethereum and XEM.
Company co-founder and CEO Caleb Yeoh explains, “We have partnered with Brisbane Airport Corporation to launch the world’s first digital currency-friendly airport and integrated our cutting edge, blockchain-powered point-of-sale system across the regional tourism towns of 1770 and Agnes Water. With this next phase of technology, we are targeting a different brand of tourist — the tech-savvy traveler from anywhere in the world that is looking to book travel experiences ahead of their trip and use digital currency to pay for their adventures.”
Other businesses to receive federal monies include the Townsville-based FlyFreely, which has developed a software system that handles flight planning and approval processes for commercial drones. The venture has garnered approximately $185,000 ($250,000 AUD), while Visional Technologies has received $74,000 ($100,000 AUD) to boost its ultra-fast electronic vehicle charging platform.
Jones states, “These companies will use the funds to ramp up market development and expand their workforce. Through a highly competitive, independently assessed process, they showed they have innovative products, talent, and the right mindsets to take their businesses to new levels and reach new markets.”
In addition, Queensland is planning to shell out a further $54 million ($73 million AUD) over the next four years through industry research fellowships and other entrepreneurial programs.
“We will ensure we back our entrepreneurial spirit, and grow opportunities for business and industry,” assures Treasurer Jackie Trad.
This article originally appeared on Bitcoin Magazine.
Google is the latest tech giant to offer blockchain technology to its customers. The company announced that it would be introducing open-source integrations for applications built with both Ethereum and Hyperledger later this year through its Google Cloud Product marketplace.
Speaking with Bitcoin Magazine, executive director of Hyperledger Brian Behlendorf explains, “This decision follows a similar path taken by Amazon Web Services, Microsoft Azure, and cloud-hosting services offered by Oracle, Huawei and IBM to offer ready-made templates for their ‘blockchain as a service’ offerings. There is growing interest in blockchain enterprise development options. This is one of the kinds of services offered by more than 60 companies participating in the Hyperledger Vendor Directory.”
Google has allegedly held an interest in blockchain technology for years and was the most active investor in blockchain startups and applications between 2012 and 2017, after Japan’s SBI Holdings.
According to Behlendorf, the search engine’s interest in Hyperledger is due in part to its latest project entitled “Hyperledger Fabric.” He states that Fabric is a leading enterprise blockchain platform that runs dozens of production enterprise networks across finance, healthcare and supply chain applications. It also has hundreds of pilots in operation.
Behlendorf is confident Hyperledger can bring a lot to the table and offer Google’s customers access to an array of new tools and products they never even knew existed.
“We hope Google finds Hyperledger Fabric and other related technologies to be capable and easy-to-support options for its customers to build and operate enterprise blockchain networks and applications,” he says.
“As it is open-source, and all development is done publicly, we think Google will benefit from the high velocity of development on Fabric by the broad and active user and developer community. Hopefully, they’ll find bugs and help us fix them! That will help them provide a better offering than any proprietary or in-house alternative might. For us, the potential for more developer contributions — and maybe another logo to add to our vendor directory — will be really helpful.”
Founded in December 2015, Hyperledger is a vendor-neutral home for the collaborative and open-source development of blockchain technology platforms and tools. As a “coin agnostic” system, it does not require a specific token or currency to operate and is not funded by initial coin offerings (ICOs). The company boasts over 250 members in its consortium and uses this technology to build products and services for both internal and resale purposes.
This article originally appeared on Bitcoin Magazine.
Cryptocurrency exchange Binance is making plans to expand operations into South Korea, reports Business Korea.
Per the report, Binance CEO Changpeng Zhao hinted at his company’s expansion plans while speaking at the Blockchain Partners Summit in Seoul last weekend.
While South Korea is presumed to be the third-largest crypto market after the U.S. and Japan, it hasn’t been a smooth ride for the cryptocurrency exchanges operating there. Bithumb and Coinrail were hacked earlier this year, while tax authorities have raided Coinone on tax evasion allegations.
Binance seems to be undeterred by all this, as it has been laying the groundwork for its expansion into South Korea for a while. Last year, the company added Korean language support to its site.
While there is no official data on the exchange’s user base in South Korea, its volume seems significant enough for the company as it has moved from language support into hiring top Korean executives to man critical roles in the country. Jeon Ah-rim and Choi Hyung-won were hired as local marketing manager and director of its social impact fund, Binance Lab, respectively.
Binance, the world’s largest cryptocurrency exchange by daily volume is always expanding as it seeks to achieve its goal of earning $1 billion in net profit in 2018. With an operational base in Hong Kong, the company has grown so fast that it has more users worldwide than Hong Kong has citizens.
The company, which started in Beijing, has been battling regulatory issues at every turn. It moved to Hong Kong right before cryptocurrency exchanges became illegal in September 2017. It has opened offices in Tokyo, the island of Jersey, Uganda and, more recently, Malta, where it seeks to “grow its operations” in a country that is friendly toward crypto businesses.
Binance’s expansion into South Korea comes at a time when lawmakers are seeking to fast-track crypto regulations and lift the ban on ICOs.
The EU’s Policy Department for Economic, Scientific and Quality of Life Policies released a report entitled “Virtual currencies and central banks monetary policy: challenges ahead.” Authored by Marek Dabrowski and Lukasz Janikowski, the report comes at the request of the European Parliament’s Committee on Economic and Monetary Affairs, and its findings are a focal point for the committee’s July 2018 Monetary Dialogues.
Referring to cryptocurrencies as virtual currencies (VCs), the report examines the functionality of cryptocurrency as a monetary instrument; its most popular iterations in bitcoin, ether and other popular currencies; and its ramifications for governments and their central banks.
In evaluating cryptocurrencies as a novel, potentially disruptive technology, the report ultimately concludes that “[policy] makers and regulators should not ignore VCs, nor should they attempt to ban them … VCs should be treated by regulators as any other financial instrument, proportionally to their market importance, complexity, and associated risks.”
Even so, the report is measured in its findings, and it does expose the limitations cryptocurrencies and their contingent blockchain technology currently pose. Directing its analysis to the question of crypto’s chances to supplant current central banking practices, the report succinctly concludes “the answer seems most likely ‘no.’”
In summary, the report reads as a more comprehensive and balanced analysis for cryptocurrency’s possible economic impact than the Bank of International Settlements own. The Swiss bank’s document, which roused the skepticism of leading industry voices, provided outdated research and findings that conveyed a shallow understanding of the industry outside of Bitcoin’s impact.
By contrast, the European Union’s report plays devil’s advocate for both cryptocurrency’s strengths and its weaknesses and examines the asset class from a variety of angles.
In its introductory analysis, the report consistently returns to the idea that cryptocurrencies are utilized as “a contemporary form of private money.” As private money, they “have no intrinsic value in the sense that they are not linked to any underlying commodity or sovereign currency,” the report claims, though it does admit that “in this respect, they do not differ from most contemporary sovereign currencies.”
The report continues to give a simple and cogent breakdown of cryptocurrency’s economic characteristics and technological features. It continues to provide brief descriptions of the market’s top three most popular assets (BTC, ETH and XRP) and the acceptance of cryptocurrency by popular merchants and services.
Subtitled “Potential economic advantages and disadvantages of VCs (risks and opportunities),” the report then launches into a subsection to weigh crypto’s pros and cons.
To summarize, the authors highlight a number of merit-worthy advantages. They cite the typical rallying cry of crypto-enthusiasts — that the assets allow for low-fee, transnational, fast and near-anonymous transactions. This is especially useful in developing or impoverished nations where citizens lack access to traditional financial instruments, the report states.
This last benefit, however, is marred by the learning curve cryptocurrencies present to new users. The authors also provide counter arguments for cryptocurrency’s promise to deliver fast, low-fee transactions, questioning the long-term sustainability of a blockchain network and the potential for higher fees once mining rewards become a thing of the past.
Among other disadvantages, the report also discusses scalability concerns, the ecological impact of mining and the shady online practices that anonymity can facilitate. Still, the “fear that VCs will facilitate money laundering, the financing of illegal activities, tax avoidance, the circumvention of capital controls … and fraudulent financial practices,” the report states, “may be legitimate in some instances but must not be generalised,” as by and large,“transactions in VCs result from the free business choices of economic agents.”
Delving further into crypto’s limitations, the report continues to point out the inherent risks of investing in a largely unregulated, speculative market, citing the 2018 market’s diminishing returns and the vulnerability of centralized exchanges.
The report finishes the section with a brief overview on the cryptocurrency regulatory policies of the United States, Switzerland and China.
In its second section, the report concludes, “For all of the above-mentioned reasons, one must be prepared that VCs will remain a stable component of the global monetary and financial architecture for several years to come.”
…one cannot exclude the possibility that a number of users and transactions will increase to the extent that VCs will become a fully-fledged substitute of sovereign currencies in the future. We assume that VCs have potential to serve as full-fledged private money regardless of their future share in the overall volume of transactions and financial assets.
As such, Dabrowski and Janikowski warn that “economists who attempt to dismiss the justifications for and importance of VCs, considering them as the inventions of ‘quacks and cranks’ (Skidelsky, 2018), a new incarnation of monetary utopia or mania (Shiller, 2018), fraud, or simply as a convenient instrument for money laundering, are mistaken.”
“VCs respond to real market demand,” they continue, and they believe that attempts to regulate or ban cryptocurrencies out of existence are misguided and inconsequential. Instead, policy makers should provide clear, cohesive regulations that treat cryptocurrency as a formal, taxable asset throughout the globe.
Given their global, trans-border character, it is recommended to harmonise such regulations across jurisdictions. Investment in VCs should be taxed similarly to investment in other financial assets.
All of this said, the authors still hold that cryptocurrencies pose little threat to the central bank status quo, and the report’s third and final section devotes its word count to a brief history of central banking practices and how cryptocurrencies are covering the same historical ground as other private monetary systems.
Ultimately, the report finds that, except in cases of extreme political, social or economic unrest, cryptocurrencies likely will never replace government-issued tender. It does admit that, in these extreme cases, they may stand in as substitute currencies for a faltering national currency in the throes of hyperinflation, as we have seen with bitcoin’s popularity against the bolivar in Venezuela in recent years.
“Despite their technological advances and global reach, VCs are far from being able to challenge the dominant position of sovereign currencies and the monetary policies of central banks, especially in major currency areas. However, in extreme cases, such as during periods of hyperinflation, financial crisis, political turmoil, or war, they can become a means of currency substitution in individual economies,” the report reads.
Even with this analysis, the report ends on an optimistically-balanced note, recognizing that the industry still has legs to run and the possibility of future innovation to take it further. Checking itself on its prior claims, it suggests that, with the right technological advancements, cryptocurrency’s potential should not be underestimated.
One cannot rule out that future progress in the area of information technologies can bring even more transparent, safe, and easier to use variants of VCs. This might increase the chances for VCs to effectively compete with sovereign currencies, including the major ones.
Banco Masventas in Argentina announced via its Facebook page that it is introducing a new program that will allow customers to make cross-border payments using bitcoin. The institution has partnered with the Latin America–focused exchange startup Bitex — founded in 2014 — to potentially compete with SWIFT, a global, bank-owned messaging network.
SWIFT, which stands for the Society for Worldwide Interbank Financial Telecommunication, is built to handle and process international bank payments. Unfortunately, the project has been suffering from security issues since it first entered the monetary arena.
Banco Masventas is now the first financial establishment to base its cross-border payment system on the Bitcoin network. The website states that the service is set to enable international transfers to as many as 50 countries and that payments can be processed in 24 hours or less. Translated from their website, the service “allows you to reduce costs associated with international transfers, as there are no international banks [serving] as intermediaries.” The move was reportedly inspired by the bank’s goal to enhance its digital services and lower transaction costs.
One of the establishment’s principal shareholders, José Dakak, stated that the bank is also looking to grow its list of international customers. “One of the actions was to contract Bitex as a strategic partner in the implementation of the Bitex platform for payments and collections operations for our clients abroad,” he explained.
Dakak then added, “The customers will ask the bank to do an international payment, and the bank uses Bitex as a provider. For the customer, it’s transparent, they don’t touch, they don’t see the bitcoin. We are a provider for them, and they are not touching bitcoin.”
Aside from accelerating transaction times, Bitex — according to its website — will provide heightened security for customers by enforcing “strictest compliance rules,” including know-your-client (KYC) measures. The company has also contracted one of the “Big Four” accounting and audit firms, Deloitte, to review and report on specific procedures, operations and balance funds.
Argentina’s blockchain and cryptocurrency ambitions have witnessed regular growth over the past several months, and the Argentinian government has been relatively welcoming to the technology. Earlier this year, for example, new legislation paved the way for approximately 4,000 bitcoin ATMs, which are now being installed throughout the country. In April, Argentina became one of the first countries to declare an official “Bitcoin Day.”
The Polish Credit Office BIK, the largest credit office in Central and Eastern Europe, in partnership with Distributed Ledger Technology (DLT) provider Billon, will implement a blockchain technology solution for storage and secure access to highly sensitive customer information.
“Our cooperation with Billon is long-term,” said Mariusz Cholewa, president of BIK. “We believe that blockchain technology will transform how the financial sector communicates sensitive data with clients. Our solution will soon be expanded to include electronic delivery with active confirmation and remote signing of online agreements. It is also important that the solution meets the legal requirements of a durable medium of information, as well as the requirements of the EU General Data Protection Regulation [GDPR], which comes into force this month.”
BIK, which is owned by domestic and foreign banks in Poland, including the major banks, tracks over 140 million credit histories of over 1 million businesses and 24 million people in Poland, providing data on the credit history of bank clients, credit unions, etc. from the entire credit market in the country.
“Our partnership is a start of a true revolution in information management,” said Andrzej Horoszczak, founder and CEO of Billon. “It is our firm belief that the cooperation between Billon and BIK is the first step to introducing mass use of blockchain technology for trusted document management.”
According to Horoszczak, the solution that Billon has created with BIK provides the world’s first GDPR-compliant blockchain platform which can streamline customer service processes and manage the implementation of customer rights such as the “right to be forgotten.”
Founded in 2012, Billon is an FCA registered eMoney institution with offices in the U.K., U.S. and Poland. According to the company, Billon’s DLT solution, self-described as the “document blockchain” and built on a proprietary blockchain structure that does not require use of central databases, allows the safe, convenient and cost-effective storage, and sending of documents without running a risk of unauthorized access, tampering with the content or information loss.
“This solution returns control of user data back to consumers, creating a level playing field between individuals and big corporations,” added Horoszczak. “The benefits of this solution can have an impact beyond the financial sector, and we anticipate that it will soon be adopted by institutions across industries such as telecommunications, insurance and utilities.”
The DLT solution used for the BIK project will keep every document in accessible, long-term storage, independent of the status of the contractual relationship status between the service provider and the user. Patents have been filed and, according to Billon, the technology is ready to be implemented at performance levels that rival traditional centralized databases.
“Over the years, BIK has gathered over 140 million credit histories cross different sectors that will benefit from superior security, integrity, and immutability,” Horoszczak explained to Bitcoin Magazine.
“This revolution will also change the paradigm in the financial and insurance world — now consumers will command the visibility and integrity of their insurance claims, bank and loan documents all through to retirement plans using our blockchain technology. With Billon, you will also be able to clearly see when and what changes have been made to documents, giving consumers the capability to challenge and provide counter terms if required; all tracked on the blockchain.”
Blockchain technology holds great promise in Ethiopia, the largest coffee producer in Africa, but getting a foothold in the country is a challenge due its constraining bureaucracy. One blockchain company is finding inroads by directly collaborating with the government.
IOHK, the company behind the Cardano blockchain, has announced a partnership with the government of Ethiopia to explore how blockchain technology could benefit the country. As part of that, IOHK is offering to train up to 100 Ethiopian software developers in the Haskell programming language.
On Thursday, May 3, 2018, Charles Hoskinson, CEO at IOHK, signed a memorandum of understanding (MOU) with Minister Getahun Mekuria Kuma, representing an official partnership with the Ethiopian Ministry of Science and Technology. The signing took place during a blockchain forum held at the ministry.
“Today is a great day in Ethiopia,” the minister said in speaking to forum attendees. He hinted that the greatest use case for blockchain technology would be tracking the country’s main export. “In Ethiopia, we have been working on the possibility of adopting blockchain for marketing of agricultural products, especially for coffee,” he said.
Government buy-in is crucial to establishing any large scale business or technology in Ethiopia. “If you don’t have it, it is not really going to happen,” John O’Connor, director of African operations at IOHK, told Bitcoin Magazine. “The Ministry and Dr. Getahan have been integral in the work we have done so far.”
While IOHK will provide free Haskell training, the ministry will help IOHK recruit students for the course and aid IOHK in navigating the business environment in the country.
Cardano, which launched in October 2017, is written in Haskell, a functional programming language. Although Haskell is more challenging to learn than more popular languages, like Java or C++, it is a good match for formal verification, which is a method for ensuring that mission critical code behaves the way it is intended.
Last time IOHK taught a Haskell course, all of the students were male. This time, the tables will turn. The minister wants the first batch of students from Ethiopia to be women to “promote and highlight the importance and participation of women in coding.” The ideal applicant will be a recent graduate from an Ethiopian university with a computer science or related degree, he said.
Hoskinson told Bitcoin Magazine, that the next Haskell course could start as soon as July 2018 and would likely be in IOHK’s Blockchain Research Lab in Edinburgh, Scotland. IOHK, which has previously held Haskell courses in Athens and Barbados, says it plans to hire promising graduates of the course as full-time developers to work with IOHK.
Coffee is a crucial export for Ethiopia, home to 100 million people. In fact, coffee is thought to have been first discovered in Ethiopia in the 15th century, later spreading far and wide through the Ottoman empire. Unlike in Brazil and other areas of the world, coffee grows freely in the plateaus of Ethiopia.
“This is the only place in the world where coffee just grows,” said O’Connor, a 27-year-old, who is half Ethiopian and half Irish. “You don’t need to do anything. It is just there. You can literally just forage around and pick it off the ground.” Because of that, little investment has been made in improving production efficiency of coffee, he said.
Ninety-five percent of the coffee grown in Ethiopia comes from small holdings and rural farms, and there are a number of things that can be done to increase coffee yield and improve marketing. One of the biggest challenges, for instance, is proving the origins of coffee. That is where the blockchain steps in.
The idea is that blockchain technology (specifically, a private or permissioned version of the technology, such as Cardano Enterprise) would allow all participants in the supply chain to trace and track coffee as it makes its way from rural farms to wholesale buyers.
Once data is stored on the blockchain, purchasers will know with certainty if the coffee is pure and where it came from, and regulators will be able to gain information about any pesticides used in production, for example.
Blockchain applications also have the potential to make payments and extend loans to farmers. “Coffee drives the economy here and there is so much potential to improve it; hopefully with blockchain products,” O’Connor said.
IOHK is not the first company to contemplate tracing coffee on the blockchain. Starbucks is working on a blockchain-based project to trace coffee with producers in Costa Rica, Colombia and Rwanda, while Colorado-based startup bext360 is using blockchain technology to trace coffee coming from Uganda.
While many in the West often overlook Africa as an emerging blockchain innovation center, a deeper look across the continent tells a very different story. The Blockchain Africa Conference came to a close last month in Johannesburg, South Africa. Around the same time, the Kenyan government set up a task force to study the impact of the technology. There are plenty of other blockchain communities growing around Africa too, in places like Nigeria, Sudan and Algeria.
Although not without difficulties, the growing connectivity and an advancing computer science field — especially at institutions like Makerere University in Uganda — show the African blockchain ecosystem is evidently building agency.
And it has the potential to make a massive impact on local economies and communities alike. During a speech, the United Nations Economic Commission for Africa, Managing Director of the IMF Christine Lagarde noted, “So [blockchain] is not just about saving money, it is also about creating more transparency, promoting stronger accountability, and in the end, delivering a better life for every citizen.”
For many, cryptocurrency mining is providing a big leap forward. Communities have sprouted up across the region. But with global bitcoin mining using more power than most African countries (only South Africa, Egypt and Algeria consume more), it’s hard to see how it’s going to be sustainable on the continent. On the flipside, solar power just might have the force to push bitcoin mining in Africa to the next level. Here’s how.
Bitcoin mining farms have begun popping up around the world to mine bitcoin in bulk. But while Egypt’s hot climate seems like an unfavorable place to do so, a community has developed to mine bitcoin in secret.
According to the Bitcoin Africa article linked above, many miners keep a low profile for fear of being charged for working with black market foreign currencies. Still, bitcoin mining farms are spreading across Cairo. One of the main reasons for the boom is that electricity is cheaper compared to other economies. With lower overheads paid out in the local currency, miners get more back in bitcoin.
Bitcoin mines are spread throughout other countries, too. IT Software company Ghana Dot Com (GDC) opened what it claims to be the country’s first bitcoin mine back in 2016, for example. (GDC is a descendant company of Network Computer Systems, which introduced internet in Ghana in 1993.) In South Africa, bitcoin mining hardware store Bitmart just opened in 2018. There’s also active communities in Nigeria, Gambia, Uganda, Ethiopia and Kenya.
One Nairobi-based miner, Eugene Mutai, has received a fair share of press for the mining facility in his apartment. He told Bloomberg that, in the global market, bitcoin mining has leveled the playing field for him. Without a college degree, he’s been able to move into the Kenyan middle class.
Certainly, parts of Africa aren’t exactly the ideal place to be mining bitcoin due to the hot climate — the average temperature in Ethiopia, for example, is 93 °F year round. Even more significantly, about 600 million people living in Sub-Saharan Africa don’t have access to electricity. And, while nearly 1 billion people in the region might gain access to electricity by 2040, an estimated 530 million people will still not have electricity access due to population growth.
Each country in Africa has its own nuanced problems and solutions; however, in a good handful of African countries, solar power is emerging as a viable option for combatting these electricity woes — and there are already several solar projects on the go.
In Morocco, for example, there’s the 800MW Noor Midelt solar complex. According to Reuters, the estimated $2.4 billion (€2 billion) project has been supported by the African Development Bank, the World Bank, the European Union and the European Investment Bank, among other institutions. In addition, Seychelles just announced they’re planning to install Africa’s first floating solar project, which is expected to contribute 5.8 GWh annually to the country. There are also giant solar farms in South Africa, Uganda, Kenya, Morocco and Burkina Faso. Many produce so much energy, in fact, they hope to one day export solar energy to Europe.
This investment in energy infrastructure could eventually help make bitcoin mining in Africa a more sustainable endeavor which, if implemented on a large scale, might actually help push Africa’s industry forward.
In an article on Greentech Media, author Tam Hunt writes: “It can make good financial sense to use solar power to mine bitcoin. Solar plants can provide power that is cheaper than grid power in areas with good insulation and low construction costs. The price of power is also known with some certainty over time because there are no fuel costs and thus no volatility.”
Not only can mining with solar energy drive the bitcoin industry in many African countries forward, but it will give greater parts of the population across the continent access to the global market. Instead of being held back by highly inflated currency or local tenders impacted by government turbulence, bitcoin mining is enabling many Africans to get ahead. And if solar power is brought into the mix, it can prove to be a truly sustainable leap forward for economies and individuals alike. After all, in parts of Africa there is a huge necessity for it. The power requirements to mine bitcoin are globally unsustainable. And since access to electricity in Africa is already problematic, solar power could be the answer.
This is a guest post by Nabyl Charania, Chairman and Chief Executive Officer of Rokk3r. Views expressed are his own and do not necessarily reflect those of BTC Media or Bitcoin Magazine.
Goldman Sachs, one of the most well-known investment banking and financial services providers in the world, announced plans to trade bitcoin futures contracts – a Wall Street first. Goldman’s competitors like JP Morgan have so far shunned the risks and volatility associated with trading bitcoin and have yet to make public forays into the space.
In the next few weeks, the firm plans to deploy its own capital to buy and sell bitcoin futures contracts and non-deliverable forwards, or futures with greater flexibility, on behalf of their institutional clients.
Futures contracts are legally binding agreements that allow purchasers to buy or sell assets at a fixed price at a specified time in the future. Traditionally, futures contracts are used to hedge exposure or to “go long” on an asset if a trader believes price will increase.
It is important to note that bitcoin futures enable Goldman to trade on the underlying bitcoin cryptocurrency, without being directly exposed to it. Goldman will not (yet) come directly into contact with the Bitcoin blockchain.
Justin Schmidt, Goldman’s first digital asset trader, will handle the firm’s bitcoin trading efforts. As reported by The New York Times, Schmidt is considering trading bitcoin itself, provided Goldman can secure regulatory approval and mitigate the risks associated with holding cryptocurrency.
Goldman cites client interest as a catalyst for their entry into the bitcoin space. Traditional clients have indicated that they would like to hold bitcoin as a scarce commodity, similar to gold. Hedge funds and endowments have also reached out to Goldman asking for best custodial practices for storing and handling newly received bitcoin donations.
Since the financial crisis, Goldman has emphasized a technology-first approach and is perhaps trying to gain a strategic advantage over its competitors on Wall Street. The firm, in the capacity of an intermediary, has already helped customers who want to buy and sell bitcoin futures on the Chicago Mercantile Exchange and the Chicago Board Options Exchange in the past.
Goldman’s competitors have not shared plans to formally trade bitcoin, criticising bitcoin as a “bubble” and a “fraud.” Notably, JP Morgan CEO Jamie Dimon described bitcoin a “terrible store of value.”
Goldman, on the other hand, does not view bitcoin as a fraud, though it acknowledges that bitcoin does not have the traditional characteristics of a currency.
It remains to be seen whether or not other firms will follow Goldman’s lead. After all, most bitcoin prices are extremely volatile and are derived on unregulated exchanges all over the globe. These factors could potentially expose clients to prices affected by market manipulation and steep losses.
As a result of Goldman’s formal entry into bitcoin trading, one key question remains unanswered: What kind of information asymmetry does Goldman Sachs currently possess to confidently trade bitcoin futures contracts for their clients that other firms don’t have?
In line with their Vision 2030 commitment to adopt advanced technology including blockchain, Saudi Arabia’s state-owned oil company Aramco is working towards adopting blockchain technology for management and accounting.
Second only to the U.S. in world oil production, Saudi Arabia sees an opportunity to pull ahead and become the number one oil producer in the world.
Saudi Arabia’s petroleum sector accounts for 42 percent of the country’s Gross Domestic Product, 87 percent of their budget revenues and 90 percent of export earnings.
In an interview with Bitcoin Magazine, Nick Spanos, CEO and co-founder of Zap.org, and founder of Blockchain Technologies Corp and the Bitcoin Centre NYC, talked about the Saudis’ enthusiasm for blockchain technology:
“Saudi Arabia is kicking the tires, and that’s huge. As part of their ambitious Vision 2030, Saudi Arabia as a whole is doing everything it can to modernize and diversify their economy. It means they’re open to doing things differently — and to doing big things with blockchain,” said Spanos.
Everyone we meet is thrilled about the potential of blockchain. It’s not just for oil, and you’ll see a lot come from here very soon.
Spanos and Zap.org have developed a secure supply management and smart contracts DApp specifically for the oil and gas industry called EnergyLedger. Spanos explained:
“Since the beginning of oil production, there’s never been a way to truly secure and track the process to prevent fraud, nor any way to automate the chain-of-custody and settlements to virtually eliminate the window for human error. All of this is now possible.
“Zap.org’s next-generation smart contracts are revolutionizing blockchain applications everywhere, and we also realized that the energy sector needed a dedicated, custom solutions provider, so Zap.org is powering EnergyLedger, the killer decentralized application for oil and gas.”
The existing oil infrastructure — flow meters, pipelines, barrels, tanks, terminals and trucks — are tied into the Internet of Things and onto the blockchain, via Zap.org’s oracles.
Each time a barrel is produced, it will be matched with a utility token generated from that particular flow meter, which constantly reports to the smart contract.
At each point in the process, from upstream to downstream, that barrel will be tracked and everyone involved in the process — the contractors, the tax collectors, the truckers — will only be paid at the moment that they’ve verifiably performed what needs to be done for that barrel.
It’s all automated, and overhead costs will be slashed as thousands of accountants, finance professionals and back office traders will no longer be needed.
According to Investopedia, the world’s top five oil producers in 2016 were the U.S. (14.86 m. b/d), Saudi Arabia (12.39 b/d), Russia (11.24 m. b/d), China (4.87 m. b/d) and Canada (4.59 m. b/d).
While the U.S. oil industry hasn’t embraced blockchain technology, Spanos says that there are many other oil-producing nations looking to use it. He says:
“There’s [blockchain] activity on most continents, notably in Mexico, Venezuela, Chile, UAE, China, Singapore, Nigeria, Russia and more. They’ve reported that they’ve already implemented blockchain or are testing it for wider applications.”
“The U.S. appears to be lagging; we have yet to hear of anyone in the U.S. industry testing blockchain, other than a small drilling firm in Texas that we just began working with.”
Spanos agreed that it was odd that all of the high-profile oil industry blockchain trials are happening outside of the U.S. but suspects that it won’t be the case for much longer.
“One reason is the regulatory climate, in which blockchain industry startups choose instead to create hubs abroad, where there isn’t this cloud of doubt hanging over them from what the regulators will do to the industry,” says Spanos.
“Even as the regulatory environment under the new president has become more favorable, blockchain will still go a long way to helping with regulatory compliance. The cost savings along the line will bring costs — and prices — down for the U.S. consumer and manufacturing.”
Spanos concluded that the U.S. oil industry will likely be converting to a blockchain soon.
“America is heading toward energy independence, and if it wants to remain competitive and continue this trend, then it will seek to match or surpass what the competition is doing — and they won’t be doing it the same way for much longer,” Spanos noted.
Anyone who does not implement what blockchain has to offer, in some way or another, will fall behind. The benefits are just too immense.
Cryptocurrency trading by financial firms could increase in 2018, according to a new Thomson Reuters survey, with approximately 20 percent indicating they are considering trading cryptocurrency over the next 3–12 months. The survey was conducted among more than 400 clients across all of Thomson Reuters trading solutions, including Eikon and REDI, as well as its FX platforms.
“Cryptocurrency is still a relatively small part of the trading market, but this survey makes clear this niche segment is starting to enter the mainstream of the financial services industry. This is a major change from a year ago,” said Neill Penney, co-head of Trading at Thomson Reuters, in a statement. “The most important thing for our clients is seamless access to news and data around cryptocurrencies to facilitate informed trading decisions.”
News and information provider Thomson Reuters, whose shares are listed on the Toronto and New York Stock Exchanges, has operated in more than 100 countries for more than 100 years. Thomson Reuters financial information products and services cover both traditional and emerging asset classes like crypto assets. It currently provides prices for bitcoin and other cryptocurrencies via its flagship financial desktop platform Eikon, as well as MVIS indices and CME bitcoin futures.
The company also recently launched a new version of its MarketPsych Indices (TRMI v3.0), which includes the first sentiment data feed for Bitcoin. Cryptocurrency news and social media sites are scanned and scored in real-time, aiming to capture market-moving sentiments.
“While bitcoin and its crypto asset cousins have mainly become a phenomena among individual retail investors, the rollout shows one of the ways that digital tokens are gradually entering the world of institutional investing,” noted Quartz.
Thomson Reuters intends to introduce further capabilities in this sector throughout 2018.
Among the participants in the survey who indicated they would trade cryptocurrencies in 2018, approximately 70 percent said they were planning to do so over the next 3–6 months with an additional 22 percent planning to trade over the next 6–12 months. The survey also found generally widespread familiarity with cryptocurrencies.
“Over the last three years, Thomson Reuters has been focused on exploring the application of smart contracts through the provision of market data with BlockOne IQ,” Sam Chadwick, director of strategy in innovation and blockchain at Thomson Reuters, said in conversation with Bitcoin Magazine. BlockOne IQ is an Oracle framework for private distributed ledgers operating on Corda or Ethereum that allows application developers to use signed content from Thomson Reuters within smart contracts.
“Throughout 2017 though, it’s been clear that beyond the potential use cases of smart contracts, industry participants are increasingly seeing the potential of crypto assets as a new asset class as it provides financial institutions with operational effectiveness and is starting to become an asset that their institutional clients are increasingly interested in holding as part of a diversified portfolio,” Chadwick told Bitcoin Magazine.
A digital media pioneer, liberal news and commentary site Salon launched in November 1995 just as online news was starting to get its teeth. This was back when the internet was still ramping up. Publishers and advertisers had a simpler relationship then.
Despite its wonders, the internet has made advertising models increasingly complicated. Where advertisers and publishers once had a one-on-one relationship, today’s ads go through a series of intermediaries before they reach their target audience. This opens the door to high-tech fraudsters who do things like siphon money away from advertisers by spoofing them with fake impressions. The problem has gotten so bad that, by some estimates, one third of paid-programming impressions are not viewed by actual people.
Striving to find a solution, Salon is teaming up with IBM and nonprofit AdLedger to participate a proof-of-concept permissioned blockchain for programmatic ad buying. The hope is that blockchain technology will squash out fraud by bringing transparency to the ad-tech supply chain, giving advertisers clarity in regards to where their ad dollars are going.
“This proof of concept will not only help publishers like us regain more control over our inventory, but will also illuminate where inefficiencies exist within the long and complex supply chain,” said Ryan Nathanson, chief operating officer of Salon Media Group, in a press release announcing the project on April 18, 2018.
AdLedger, a non-profit research-and-development consortium, is using the trial as way to educate its members about the potential of blockchain technology and also to begin forming rules and standards around putting ad tech on the blockchain. Salon will participate in the trial project as a publisher, while IBM is taking the dual role of advertiser and technology provider. Salon and IBM are both members of the AdLedger consortium.
The project itself is being built on Hyperledger Fabric, an open-source framework for permissioned blockchains, based partly on code contributed by IBM.
“To be clear, the goal is not to develop production-ready software; the goal is to really expose the potential of blockchain and show our members what it can do so they feel comfortable putting those rules and standards into place,” Christiana Cacciapuoti, executive director at AdLedger, told Bitcoin Magazine.
As she explained, at its core, the proof of concept will be an actual ad campaign that is run on the blockchain with the goal of helping the teams work out how blockchains should be implemented in the the digital media industry. The teams will be looking to answer questions like which consensus algorithm makes most sense, what data needs to be hashed onto the blockchain, and what things are better handled off chain.
“As an advertiser, we know better than anyone that the current digital advertising system is broken,” Chad Andrews, global solutions leader of advertising at IBM, said in a statement. “We believe that blockchain can help our advertising dollars go further by eliminating unnecessary intermediaries, and combining disparate sources of data and reconcile immediate metrics based on measurement KPIs tied to campaign delivery.”
The project should launch in the next few weeks, Cacciapuoti said, with the ad campaign running for at least a month so the data collected is statistically significant. Eventually, the findings will be published in a white paper.
International insurance broker Marsh is working with IBM to develop a commercial blockchain solution that will allow businesses to certify that the contractor they are about to hire has the proper, up-to-date insurance coverage necessary to begin work.
The solution will be built on Hyperledger Fabric, an open-source permissioned blockchain framework, using IBM Blockchain Platform, a cloud-based blockchain application development solution, Marsh said in a statement yesterday, April 16, 2018.
Insurance standards organization ACORD will provide input on the project, and Dallas-based ISN Software Corporation, which supplies contractor and supplier management services, will be the first client to use the new solution.
Marsh is aiming to solve an important problem. Businesses often hire contractors, vendors and other third parties to work for them or provide services, but before doing so, they need to know that the vendor has proper liability insurance, so the business is covered in the event something goes wrong or a vendor performs substandard work.
Typically, a client will request a certificate of insurance (COI), also known as an ACORD certificate, which is a document that has all the information on it to show a client has up-to-date insurance coverage. The problem with PDFs or paper documents is they can be faked. Documents can can also get misplaced, lost or damaged.
Blockchains, on the other hand, are nearly impossible to tamper with. By putting proof of insurance on the blockchain, parties that need evidence of insurance can ideally trust the coverage is up to date and historically correct. Marsh said it expects its blockchain solution to allow clients to speed up necessary business functions such as hiring contractors and transferring risk, while increasing coverage certainty.
“Marsh sees great opportunity in leveraging blockchain technology to better serve our clients by maximizing efficiency and creating new opportunities in the insurance value chain,” said Sastry Durvasula, chief digital officer at Marsh.
Sandip Patel, general manager, insurance industry, at IBM, believes that simplifying the insurance verification process is a key business enabler. “This is an ideal example of how blockchain can be used on a much broader scale to drive real business results,” he said.
Currently in the pilot stage, Marsh’s new blockchain network is expected to go into production later this year. ISN will be the first Marsh client to try out the solution, putting its contactors’ policies on the ledger for hiring businesses to check.
“The insurance industry has been dependent on paper certificates of insurance, manually populated by an insurance agent,” said Brett Parker, technical insurance lead, at ISN. “By digitizing the policy information, we can streamline the process saving our customers time to focus on their core competencies.”
Austin-based blockchain-as-a-service company Factom is partnering with FPT Software, an IT services company stationed in Vietnam. The two enterprises will work with each other to develop a new blockchain technology platform through Factom Harmony — a system that creates audit records regarding data, decisions, activities and events. The purpose of the platform is to digitize and store files by utilizing simple APIs and Factom’s blockchain solutions, so information can become confirmable and auditable respectively.
Founded in 2014, Factom, Inc. specializes in designing and producing faster blockchain applications to handle large data for complex institutions. Among the organization’s clientele are the U.S. Department of Homeland Security and the Bill and Melinda Gates Foundation.
FPT provides informational technology, products and digital engineering services to large businesses in the U.S., Asia and Europe in industries like manufacturing, energy and utilities, healthcare and communications.
CEO of Factom Paul Snow explained:
“The partnership between Factom and FPT is a valuable opportunity to showcase the practical use and applications for blockchain technology on an enterprise scale. FPT and Factom share a vision of the future where blockchain-as-a-service is available to all companies looking to preserve, ensure and validate their data or decisions.”
The new platform will seek to deliver innovative solutions to Factom’s business patrons like workshops and proofs of concept (PoCs) and give them access to advanced blockchain solutions, while also enhancing FPT’s digital and product engineering services. FPT says that it will work with Factom directors to make sure its own staff is trained on Factom’s technology to give the company quicker access to the blockchain.
Discussing Factom’s credentials, CEO of FPT Software Phuong Dang stated:
“Their technology platform will enable us to deliver a superior experience to our customers by delivering cutting-edge, differentiating blockchain solutions. With Factom’s blockchain platform Harmony and FPT Services, we will enhance operational efficiency and effectiveness for our clients in no time. This is a testimony to our global talent pool and the strengths of our technology.”
With nearly 20 years of experience in the tech industry, FPT Software is valued at over $2 billion and employs roughly 30,000 individuals in Vietnam and abroad. Headquartered in Hanoi, the company also has a U.S. branch in Richardson, Texas, designed to focus on digital transformation for Fortune 1000 clients. The company also houses several delivery units throughout major American cities like New York, Chicago, Los Angeles and Sunnyvale in the Silicon Valley.
While most of the early buzz around Bitcoin centered on it as a new, fast, cheap and permissionless method of online payment, the focus has moved from medium of exchange to store of value over the past few years. It’s clear that bitcoin is useful for censorship-resistant payments that may not otherwise be possible without this new technology, but much more of the recent hype has been around tracking the price more than anything else at this point.
Although general activity on the Bitcoin network has continued to rise, a recent report from blockchain analytics firm Chainalysis shows that a growing percentage of this activity is related to trading on exchanges.
There are a variety of reasons as to why the average person on the street is not interested in using bitcoin for payments. For example, the user interfaces are still hard for non-techies to use, network congestion leads to high fees, and price volatility is not something people are used to dealing with in their wallets (at least in most developed countries).
On top of that, one other key issue is often overlooked: capital gains taxes.
In the United States and many other countries, capital gains taxes must be paid every time an individual uses some of their bitcoin stash to make a purchase, as long as the bitcoin price has gone up since those bitcoin were first acquired.
For example, let’s say someone buys 1 bitcoin when the price is $1,000. This person simply holds that bitcoin for a couple of years, and then it is eventually worth $10,000. If this person goes to the store and purchases a television for $500, they’re effectively selling a portion of their bitcoin holdings at a profit. These gains are supposed to be taxed.
When you imagine this person earning bitcoin on a regular basis and buying something as small as a meal or a coffee every day, it becomes easy to see how keeping track of everything would be quite cumbersome, especially when bitcoin wallets offer pretty much zero assistance in this area at this time.
Even if the buyer and seller involved in a transaction are both bitcoin enthusiasts, it wouldn’t make much sense to make a deal denominated in bitcoin; the tax headache is not worth it.
Instead, it makes much more sense for individuals in places like the United States to simply convert $1,000 or so worth of their bitcoin holdings to the local currency by way of a bitcoin debit card for spending every now and then.
It’s unclear how many people have effectively become tax evaders by accident because they’re spending their bitcoin gains without reporting them. Obviously, those involved in illicit activities tend to be less concerned with the tax implications of using bitcoin for online payments because they’re already attempting to hide these transactions from the authorities anyway.
So what’s the solution to the usability issues caused by capital gains taxes? One might be through a change in tax law, at least in the United States.
The Cryptocurrency Tax Fairness Act introduced in Congress last year would exempt bitcoin transactions under $600 from capital gains taxation. This means bitcoin users would only have to calculate the tax implications of their bitcoin payments if they’re in amounts greater than $600. Notably, this is the same exemption that already applies to foreign currencies.
The passage of this act would do wonders for the usability of bitcoin for payments by Americans.
Another useful tool for avoiding tax-related usability issues with bitcoin may be hedging options in wallets. This is already available with Abra.
The basic idea is that you hold bitcoin in a smart contract hedged to U.S. dollars or any other currency to avoid bitcoin’s price volatility. This setup would be useful for anyone who is interested in using bitcoin for payments but not necessarily gaining exposure to the price swings of the cryptoasset.
If someone can hold bitcoins as U.S. dollars, they no longer have to worry about gains or losses whenever they make a transaction; however, they also lose access to the store-of-value properties of bitcoin in this situation.
Speaking with Mad Money host Jim Cramer, NVIDIA CEO Jensen Huang recently claimed that “cryptocurrency is here to stay,” and he “doesn’t see the craze ending anytime soon.”
Though it first came to fruition in 2008, bitcoin gained a solid taste of mainstream popularity in 2017 when its price began rising faster than anyone had anticipated. The year started with a single bitcoin trading at nearly $1,000, though things ended on a higher note when the currency nearly grazed the $20,000 mark.
Since January 2018, bitcoin and other virtual currencies have experienced serious drops in their prices, but Huang is convinced that cryptocurrency remains as popular as ever.
“Cryptocurrency will be here,” he stated in the interview while discussing the future of finance. “The ability for the world to have a very low-friction, low-cost way of exchanging value is going to be here for a long time.”
NVIDIA is a technology company based in Santa Clara, California. Some of the enterprises’ staple products are its graphics processing units or GPUs. These small processors, Huang explains, were some of the main reasons the company first decided to get involved in cryptocurrency last year.
The GPUs have a powerful ability to mine virtual currencies, and blockchain technology requires computers that can be distributed “all over the world” while remaining immutable and safe. Thus, Huang felt his company’s products could be greatly beneficial to cryptocurrency miners:
“The reason why cryptocurrency became such a popular thing on top of our GPUs is our GPU system is the world’s largest installed base of distributed supercomputing. Our processor serves as the perfect processor to enable this supercomputing capability to be distributed, and that’s the reason why it’s used.”
Interestingly, Huang noted that while the chips were no doubt powerful and crucial to the mining industry, he and his fellow executives are “not ready to move” on this just yet. For the time being, NVIDIA is primarily involved in the gaming business, data centers and self-driving cars, and cryptocurrency and mining operations account for only small portions of the company’s profits.
In fact, NVIDIA currently has no alleged involvement in Bitcoin, per Huang’s comments at a recent GPU technology conference. He said its processors are predominantly used to mine ether, which accounted for roughly 6 percent of the company’s GPU sales in 2017.
“Ethereum ‘ether’ was designed as an algorithm to ensure no singular entity (or a few entities) has the power to control the ether,” he said. “It was designed so that the algorithm requires the type of computing capabilities — the type of processing capabilities — that are made possible by GPUs in a distributed system. The GPU is popular with Ethereum because the GPU is the single largest distributed supercomputer in the world. It is the only supercomputer that is literally in everyone’s hands, and no single entity can control the currency.”
He says that the influence of cryptocurrency isn’t likely to affect how they do business in the present, though he’s very confident this could change in the future:
“Gaming is a much bigger business; data center is a much bigger business; our professional graphics is a much bigger business, and, of course, in the future, everything that moves will be autonomous, and we’ll have autonomous capabilities, and that’s going to be a much bigger market, but cryptocurrency gave it that extra bit of juice that caused all of our GPUs to be in such great demand.”
Newegg Inc., the online e-commerce site that is rivaling Amazon for sales in technical equipment and electronics, is expanding its payment options to include bitcoin for its customers in Canada.
Apparently unfazed by recent price volatility and citing “the increasing mainstream awareness of cryptocurrencies,” Newegg is showing its confidence in the future of the cryptocurrency by extending its current policy of accepting bitcoin payments from U.S. customers to Canadian customers.
BitPay manages Newegg’s bitcoin-related transactions in the U.S. and will now manage all Canadian bitcoin payments with what Newegg calls “the most powerful bitcoin API in the industry.”
BitPay’s CEO and co-founder, Stephen Pair, said in a news release:
“Newegg was an early e-commerce adopter of bitcoin, and that leap of faith the company took in 2014 put Newegg on the map as a bitcoin-friendly place for tech enthusiasts to shop.”
He added, “We’re seeing a lot of traction in Canada, and we’re happy to see Newegg extend its bitcoin payment option north of the border.”
Newegg uses BitPay’s API to create and manage invoices, manage bills, issue refunds and view merchant ledger entries. Newegg noted that “BitPay’s singular focus on building enterprise-grade merchant tools helped the company achieve 99.99% uptime — unrivaled reliability in the industry.”
Recently BitPay announced a partnership with the South Korean exchange Bithumb to enable businesses there to issue invoices in bitcoin.
Newegg, a California-based retailer, first started accepting bitcoin from American customers in August 2014 and has never looked back.
According to the company, bitcoin payments from the U.S. have represented “a small but growing stream of purchase transactions.”
“In 2014 Newegg was among the first major companies to offer customers a bitcoin payment option,” said Danny Lee, CEO of Newegg.
“Since that time the value of bitcoin has skyrocketed and customers holding bitcoin have considerably more purchasing power. We believe the time is right to broaden our acceptance of bitcoin to our customers in Canada.”
According to Newegg, it is the leading tech e-retailer in North America with customers in more than 50 countries in Europe, Asia, Latin America and the Middle East, and has more than 36 million registered users.
The company says it is consistently ranked as one of the best online shopping destinations and regularly earns industry-leading customer service ratings.
Has cryptocurrency lost its footing? Following a three-month period of drooping prices, it appears interest in bitcoin and digital currencies is falling to new lows, and the market value is sinking along with it.
Most major data stems from online searches and Google Trends. One source claims that searches relating to bitcoin and cryptocurrency have slumped by 80 percent since last October. In addition, it says that searches in Japan and South Korea — two of the world’s largest bitcoin havens — have fallen to their lowest levels since March of 2017.
Looking at a recent Google chart, one can see that amongst the three top cryptocurrencies — bitcoin, ether and litecoin — bitcoin is the only one that remains a “global trend.” Ethereum still boasts interest in certain parts of Asia and Eastern Europe, but Litecoin doesn’t appear anywhere.
Source: Google Trends
Another source dated in January 2018 discusses search patterns of the previous three months, and suggests that general interest in crypto has dropped so significantly, the price could ultimately hit $7,100.
This was an understatement compared to what really occurred. Back in February, the price of bitcoin briefly fell below $6,000 in what was considered a new low following “Red Tuesday” and the recent sell-off that had taken place. Though the price recovered somewhat by early March, this prediction became a reality in the short term.
In addition, interest in bitcoin and cryptocurrency related jobs are on the decline according to Indeed.com, though blockchain gigs remain stable enough.
This news comes, however, less than two weeks after Indeed reported a massive surge in cryptocurrency-related job posts. The site claims that the number of advertisements for crypto and bitcoin jobs amongst tech leaders has jumped by over 620 percent since November of 2015.
This could suggest that interest has only dropped for the time being and intrigue in the cryptocurrency arena remains stellar in the long term. It is to be expected that investors and followers of bitcoin would feel disheartened by rapid price declines and the loss of value, but crypto and blockchain technology arguably remain forces to be reckoned with, especially in the tech industry.
Furthermore, job growth within bitcoin enterprises has ultimately grown in regions like India. This is especially hopeful considering the country’s present stance on cryptocurrencies. Job growth in the virtual asset sector has grown by nearly 300 percent since November 2017, and searches on Indeed.com for India have risen by a whopping 52 percent.
Regulators in India have repeatedly targeted cryptocurrency exchanges and commented that bitcoin and digital currencies are not “legal tender.” A task force has been officially developed to increase efforts against money laundering and other illicit activities, and new regulations could be implemented by late March.
Still, approximately 10 percent of cryptocurrency transactions occur in India. Combined with present job searches and the overall growth in India’s bitcoin arena, there is evidence suggesting that a decline in bitcoin interest is not occurring on a global scale.
What we’re probably witnessing is a “shift” in interest. It’s not that regard for cryptocurrency is on the decline; instead, interest may be adapting as people learn more, and universal intrigue is taking less of a general stance and gravitating more toward more specific terms and topics. Bitcoin and Ripple searches, for example, remain prominent in countries like Ghana, Singapore and Austria. Terms like “ripple price” and “bitcoin bubble burst” dominate most of the cryptocurrency-related searches in these nations, while Bolivia and Australia-based searches suggest more interest in things like bitcoin cash.
We are also witnessing a change in the types of investors behind cryptocurrency, who may ultimately be influencing search numbers. When bitcoin inched past $10,000 last year, the number of people interested in bitcoin grew to exponential levels. Platforms like Coinbase saw their userbases explode practically overnight, though it’s possible many of the people climbing aboard had little research under their belts. Uninterested in the long-term effects, it’s probable they merely saw crypto as a route to garner fast wealth.
As the price of bitcoin waned in early 2018, several of these new investors, simply looking to strike it big, likely turned away when their hopes of becoming overnight millionaires were dashed. Thus, while interest and search volume would naturally decrease, it still appears some of these new traders may have been young people who have stayed surprisingly loyal to cryptocurrency.
Many sources show that millennial interest in cryptocurrency has stayed strong to the point that several are even using educational funds to invest. Younger generations may be helping to prevent bitcoin and altcoin interest from falling away altogether.
Analysts are also predicting that overall interest in crypto could spike again later this year. Many remain bullish on virtual assets, particularly bitcoin, and suggest it could reach new price highs by the summer of 2018.
Fundstrat’s Thomas Lee, for instance, suggests that bitcoin might jump to $20,000 by July of this year. He says the behavior exhibited by bitcoin today is reminiscent of its behavior following an April–July 2013 sell-off, which was followed by what he calls a “monster rally.” He says if bitcoin continues its present track, $20,000 is a reasonable figure.
Lee is not alone in his sentiment. Abra CEO Bill Barhydt says a new “price boom” is on its way in the coming months, and all “hell will break loose” once this occurs. He says that bitcoin and other forms of cryptocurrency are in for some huge jumps; hedge-fund managers and other wealth-driven individuals already see their volatility as potential opportunities and are swiftly adding them to their portfolios.
Growing interest among the mega-rich could potentially cause prices to spike once again. Should that happen, it’s likely safe to say that general interest in cryptocurrency and bitcoin will surpass numbers witnessed in 2017.
Popular South Korean cryptocurrency exchange Bithumb is partnering with digital payment service provider Korea Pay Services (KPS) to pave the way for widespread digital asset adoption in the country. Both companies are working to give over 6,000 of the country’s retail outlets the option of accepting cryptocurrency payments for goods and services.
South Korea has proven both beneficial and important to the cryptocurrency community. Presently, the nation stands as the third-largest market for cryptocurrency trades behind the U.S. and Japan.
At the same time, South Korea has been the subject of several harsh regulatory moves since December 2017. Trouble began when regulators began “clamping down” on foreign individuals looking to open South Korean cryptocurrency exchange accounts. To enjoy the benefits of such accounts, users must be fully nationalized citizens.
In addition, government officials are banned from owning any forms of cryptocurrency, while anonymous trading has been outlawed within the nation’s borders. Transactions can now only occur through fully recognized users.
Still, Bithumb’s latest venture offers evidence that cryptocurrency remains widely popular in South Korea.
“Shoppers will be able to buy products at about 6,000 stores from brands such as Café Drop Top, Yankee Candle and Sulbing, one of Korea’s most popular dessert shops,” quotes regional news outlet Joongang Daily.
An official of Bithumb also stated that executives felt they were making the right decision, and paving the way for what was likely to be a crypto-dominated future:
“We have taken the landmark step … We will try hard to set up an environment in which cryptocurrencies are used extensively.”
The size of Korea Pay Services also illustrates just how influential its partnership with Bithumb could be. Per the Economic Review, KPS “is the first domestic company to provide mobile gift certificates and solutions through more than 400 domestic channels, including Starbucks, Outback and Kakao Talk, based on alliances with major domestic franchises.” The company also boasts over 200 individual franchise partners.
Bithumb says that, for the plans to work, barcodes will be built into mobile apps that allow customers to make payments to participating establishments via cryptocurrencies held at the exchange. Executives say they are seeking to launch these new services by summer of 2018, then increase the number of stores to 8,000 by the year’s end.
Bithumb is among South Korea’s top-performing cryptocurrency exchanges and is second only to Upbit, whose daily trading volume exceeds that of Bithumb by nearly $400 million according to Coinmarketcap.com.
The company previously expanded its customer service center in Gangnam — an affluent and prestigious region of South Korea’s capital of Seoul — and brought its total number of consultation centers from four to eight. The company offers user support in several languages, including English, Chinese and Japanese.
Officials have also joined hands with Innovation Corp, a Korean travel website that lists over 50,000 different hotels and vacation rentals. The partnership allows travelers to pay for their accommodations using over a dozen unique cryptocurrencies.
Today, March 22, 2018, at the government’s second International Fintech Conference, Exchequer Chancellor Philip Hammond announced the launch of a Fintech Sector Strategy that looks to keep the U.K. on the forefront of the industry.
The primary component of this new strategy will be the introduction of a Crypto Assets Task Force composed of representatives from the Bank of England (BOE), HM Treasury and the Financial Conduct Authority (FCA). The purpose of this team will be twofold: promote the U.K.’s position as a leader in the emerging world of digital currency, while concurrently establishing the infrastructure needed to monitor the “potential risks” associated with the crypto space.
This development follows a recent shift in the British government’s public attitude toward cryptocurrency. In January 2018, at the World Economic Forum, Prime Minister Theresa May voiced her apprehensions toward virtual currency and suggested that stronger regulations should be considered “very seriously” — a sentiment that was echoed earlier this month by BOE governor Mark Carney who, in an interview with CNBC, decried the “speculative mania” that surrounds crypto assets.
His rhetoric, and that of the British government, has since changed. On March 18, preceding the G20 summit, Carney released an official letter through the Financial Stability Board (FSB) that dramatically reasserted his position. It stated that at its current size “crypto assets do not pose risks to global financial stability” and that their underlying technologies “have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.”
He did admit, however, that due to the rapidly evolving nature of the market, that this initial assessment could change — and change quickly. As digital currency becomes more integrated and interconnected with the economic system at large, emphasis should be placed on “support monitoring and timely identification of emerging financial stability risks.”
It would seem that the announcement of the Crypto Assets Task Force represents an attempt by the British government to follow up on this recommendation. By combining three of its most preeminent financial institutions, the U.K. hopes to create a watchdog with the resources necessary to monitor the immediate risks and long-term benefits of this developing technology. Whether this move will be adequate to alleviate anxieties that have arisen in response to the recent volatility of the crypto marketplace is yet to be seen.
Twitter and Square CEO Jack Dorsey recently had some remarkably positive remarks about bitcoin. Predicting the future of finance, he suggested that the “father of cryptocurrencies” is likely to become the world’s only currency within the next 10 years.
Speaking with The Times, Dorsey stated:
The world ultimately will have a single currency. The internet will have a single currency. I personally believe that it will be bitcoin.
Dorsey’s optimism comes at a time when bitcoin and virtual money have been deemed “not that significant” by varying regulators. During Argentina’s recent G20 summit, several panel members stated their belief that it was not necessary to globally regulate cryptocurrencies just yet.
They did, however, request that affiliate countries submit their recommendations for regulation by this coming July, so, while advocates of bitcoin may not see changes to the cryptocurrency infrastructure in the immediate future, that could change as early as this summer.
Still, cryptocurrency was a large topic at this year’s summit, and many agreed that for now, things would remain as they are.
Even longtime opponents like the Bank of England’s Mark Carney ultimately changed their sentiment. Carney, who has long discussed concerns of illicit activities surrounding virtual money, published a letter on the eve of the summit’s start explaining that cryptocurrency did not pose serious risks to the financial industry, as it only accounted for a small percentage of current transactions.
Right now, Dorsey doesn’t feel bitcoin is strong enough to take over the financial market, nor does he feel it has what it takes to serve as an “effective” currency, calling it “slow” and “costly” during his interview. He is leaving it to payment processing companies, like his own Square, to make bitcoin more acceptable to businesses.
Additionally, he has stated there are “newer technologies” emerging that build off the blockchain which should make bitcoin more accessible to the public in the long run.
Dorsey says that most modern-day bitcoin holders aren’t interested in spending their coins or using them to buy goods or services. Rather, they’re seeking to hang on to them for as long as possible to see how high they can spike in value. This, combined with the currency’s volatility, high transaction fees and low merchant adoption rate has prevented the currency from achieving all it can.
But Dorsey is confident that bitcoin will someday be used for everyday purchases, from cups of coffee to haircuts.
“We see it as a long-term path toward greater financial access for all,” he explains.
Dorsey has previously gone on record to describe bitcoin as the “next big unlock” for global finance, and his company, Square, released an illustrated children’s book discussing the advantages of cryptocurrency.
Twitter recently made headlines when it announced that it would be following in the footsteps of Facebook and Google by banning cryptocurrency and ICO-related ads. The social media giant is allegedly joining the fight to prevent scammers and fake companies from having their time in the limelight, thus paving the way for bitcoin’s legitimacy. The price fell nearly $700 soon after, though it quickly rebounded.
In December 2017, High Fidelity announced the launch of Avatar Island, a Virtual Reality (VR) space where High Fidelity users can purchase items for their avatars, all contributed by digital artists from around the world, and pay with High Fidelity’s own blockchain-based cryptocurrency, the High Fidelity Coin(HFC).
High Fidelity is a next-generation platform for Virtual Reality (VR) worlds developed by Philip Rosedale, the creator of the once very popular Second Life. Despite a very promising start, Rosedale’s previous creation never achieved mass popularity. But perhaps Second Life was just too advanced. “[The] most surprising thing about Second Life is not that it’s still a thing, but that 13 years after its inception, it is still way ahead of its time,” noted a 2016 Motherboard story.
High Fidelity supports next-generation VR interfaces that could give it a critical boost in usability and appeal. Perhaps the release of “Ready Player One,” Steven Spielberg’s film adaptation of Ernest Cline’s cult book, scheduled to be released in the U.S. on March 29, 2018, will give VR and High Fidelity a boost toward critical mass.
In September 2017, High Fidelity announced that it was developing a blockchain for intellectual property protection and an in-game cryptocurrency. In February 2018, the company introduced a key feature in the HFC ecosystem: the ability for users to pay other users directly, with HFC. HFC person-to-person payments can be either given “in-hand” to another user that is nearby in the virtual world or sent to a connection in the user’s friends list.
“We believe that a strong gig economy will emerge in virtual worlds, in High Fidelity and beyond, where people from all over the world can offer each other services and find a new place to work,” said Rosedale. “A frictionless cryptocurrency that can be exchanged directly between avatars, in addition to the blockchain ownership systems for digital assets that we deployed last December are the key enablers of this trend.”
In an interview with New World Notes, a blog focused on VR and virtual worlds, Rosedale argues that blockchain technology is well suited to social VR payment systems. Replying to a VentureBeat post, in which fellow VR developer Adam Frisby criticized blockchain technology saying that it isn’t ready for prime time, Rosedale defended High Fidelity’s choice.
Frisby’s point is that current blockchain-based transactions can’t be fast, low-cost and decentralized at the same time. In the real world, cryptocurrency systems are still far from the efficiency and throughput (transactions per second) of the major credit card networks. Similarly, in game worlds, “some of the largest online game economies manage more than a million user-to-user transactions per day, instantaneously, with no fees,” says Frisby. “And yet, I can name half a dozen startups trying to inject an expensive and slow blockchain into this very problem.” Frisby is also unhappy with the fact that lost cryptographic keys can’t be recovered.
Rosedale’s answer to the last point is that the keys are entirely in the hands of the user, which is a good thing. Rosedale also pointed out that the High Fidelity permissioned blockchain is up and running and has 2-second settlement times.
High Fidelity opted for a new, public but “permissioned” blockchain, because the Bitcoin and Ethereum blockchains have limited throughput and high transaction fees, which makes them unsuitable for HFC. The High Fidelity blockchain is based on the Elements codebase from Blockstream.
Rosedale argues that social payment systems for global VR worlds should be open to people without credit cards, and should support direct user-to-user payments with seamless cross-border transactions. For example, content creators need the ability to sell their creations to customers that may be located anywhere.
The market for virtual goods can be significant. At the apex of Second Life’s popularity in the late 2000s, thousands of developers were able to earn a full living by selling virtual creations. If, as Rosedale and his team hope, High Fidelity will achieve and exceed Second Life’s past popularity, the High Fidelity marketplace could play an important role in the gig economy.
According to Rosedale, the only viable solution for social payment systems in global VR worlds is to use either a cryptocurrency or a custom-built solution. Since a full, global custom-payment system is expensive to develop and maintain, blockchain technology is the best option.
“The cryptocurrency approach shares the work with other companies because the actual exchange of local currency into or out of the cryptocurrency can be done by an exchange,” says Rosedale.
In a conversation on the High Fidelity forum, Rosedale said that HFC will be traded on external cryptocurrency exchanges soon. “We will probably start by establishing simple ways to exchange HFC for the larger cryptocurrencies like ETH or BTC so that people can start making money from their content creations,” he said.
At this moment, High Fidelity is giving initial HFC grants to users, but the only way for users to obtain HFC is to “physically” (that is, virtually) go to the “Bank of High Fidelity” and meet with High Fidelity staff.
Speculators shouldn’t, however, rush to High Fidelity and buy HFC hoping for a spectacular rise of the value of High Fidelity’s cryptocurrency. Rosedale explained that HFC is designed to have a stable value for trade, so it is different from other cryptocurrencies. “[It] doesn’t make sense to hold it for the expectation of future gains,” he said. “We are working on an algorithmic strategy to increase the money supply automatically as usage of HFC increases, probably using an oracle monitoring the exchange rate. Again, the goal is price stability, not speculation.”
In the future, the HFC could be linked to an ERC20 token on the Ethereum blockchain, which could enable smart contracts in the High Fidelity economy.
“Where it is useful, we will build bridges between our HFC blockchain and other blockchains,” said Rosedale. “Probably the most obvious example would be bridges to the Ethereum blockchain, so that people could choose to move currency or asset information there for trade. We are also excited about other upcoming blockchains, such as EOS, that may offer the high transaction rates and low fees that caused us to ‘roll our own’ with HFC for now.”
Last week, on March 15, 2018, Lightning Labs unveiled their beta for the Lightning Network in a flash of media attention and enthusiasm. The Lightning Network has been heralded as a solution to Bitcoin’s scalability issues, and the developments were greeted by the community with tremendous optimism.
A little less than a week later, the Stellar network team has announced that they will be integrating the Lightning Network. That makes Stellar among the first projects to formally announce integration of the Lightning Network since the beta release last week.
“We’re super excited about Lighting,” Stellar founder Jed McCaleb told Bitcoin Magazine in an interview. “It’s a great idea and a necessary one if any of these protocols are going to achieve their vision.”
To McCaleb, Stellar isn’t an exception, and he believes that the Lightning Network will be integral to the growth of the platform going forward:
“We have a lot of partnerships that have been announced and that will be announced soon that will start pushing the threshold for what Stellar can do. In order to keep the network efficient and stable, we need something like Lightning.”
The blog post echoes these sentiments, as it claims that the Lightning Network will help Stellar move forward into a more scalable future. McCaleb has actually toyed with the idea of implementing the Lightning Network since the technology’s theoretical infancy. In a 2015 blog post, he wrote somewhat of a treatise on the subject, outlining how the network operates and stating that a “Lightning-like system” is already feasible on Stellar.
With today’s announcement, McCaleb and the rest of the team are dropping the “like” and keeping the “Lightning,” going for a full-scale implementation on Stellar’s platform. They’ve released a tentative timeline regarding this implementation that included a BUMP_SEQUENCE testnet on April 1, 2018; beta implementation for state channels on August 1, 2018; a livenet on Stellar for these state channels and a Lightning Network Beta on October 1, 2018; and fully functional livenet for the Lightning Network on December 1, 2018.
The addition of the BUMP_SEQUENCE operation and state channels are hallmarks of Stellar’s individual implementation of the technology and reflect McCaleb’s original plans for Stellar’s use of it. Like payment channels on Bitcoin’s Lightning Network, state channels will be the off-chain avenue through which users can conduct payments, but they’ll be open to additional network features, as well, “such as … creating, deleting or changing permissions on accounts.”
These channels will make use of source accounts and sequence numbers to keep tabs on payments before the finalizing transaction is sent to the network. As the name suggests, a source account represents a user’s account on a state channel, and the sequence number tracks the number and sequence of payments made within that channel.
According to the blog post, “The new operation enables transactions to arbitrarily increase the sequence number of a target account.”
The team will release further developments to detail how state channels can be used for “multi-hop payments” between users without established channels and cross-chain atomic swaps. In addition, it invites peer review and feedback from the community and researchers as the current schematics are not final.
For now, though, McCaleb and the rest of the team are focused on getting the ball rolling so Stellar users — and the rest of the crypto ecosystem — can start reaping Lightning’s benefits:
“There’s three main benefits,” he said to Bitcoin Magazine. “There’s the scalability benefit, obviously — Stellar can scale pretty well right now but Lightning takes that much, much further; there’s privacy benefits, as Lightning allows transactions to be kept off the public ledger; and then there’s also interoperability,” he said in reference to the prospect of Atomic Swaps.
“It should make a much more flexible, interoperable ecosystem which is good for everyone.”
Cash App is a peer-to-peer payment system from Square that allows people to pay each other directly and quickly. This new update has been in trial mode for select users over several months and is now available to the public.
Users will have access to bitcoin trading directly in the app with no additional fees being added by Square. Transactions fees will be set at a mid-market price that is averaged from various exchanges. Users are limited to purchases of up to $10,000 worth of bitcoin per week. The new feature is available to all Square customers except for those in New York, Georgia, Hawaii and Wyoming.
For people new to bitcoin and cryptocurrency trading, the process is simplified by Square as they are the ones holding on to your bitcoin and executing the transactions: the bitcoin is tied to your Cash App account, not your device.
While Square has a long history of secure transactions, this centralized system of holding users’ private keys is not an ideal security practice (see the recent Coincheck hack), so users will have to consider whether they want to trade security for ease of use.
To help newcomers to the cryptocurrency space, the company has created an interactive webpage to explain bitcoin to the average person. It also created an online picture book for children called My First Bitcoin and the Legend of Satoshi Nakamoto.
The relatively high transaction fees on the Bitcoin network were a major topic of conversation last year, but these fees have been plummeting so far in 2018. According to data from CoinMetrics, bitcoin miners are now collecting less than a third of the value they were collecting in fees at one point in December 2017.
So what’s causing this decline in the costs of on-chain transactions? Is it as simple as declining demand leading to a lower price? Are there other factors at play? Let’s take a closer look.
In 2017, the congestion on the Bitcoin blockchain led to a bidding war over block space, especially as speculative interest in bitcoin continued to rise over the course of the year.
According to CoinMetrics, bitcoin transaction fees started 2017 at an average of $0.30, but they eventually peaked at over $40 in December. As the price tripled during a month-long stretch from mid-November to mid-December, those who were purchasing bitcoin for the first time simply did not care about how much they were paying in on-chain transaction fees.
This chart from CoinMetrics shows the bitcoin price and average transaction fee.
As the speculative frenzy around the bitcoin asset has calmed a bit in 2018, the number of transactions broadcast to the Bitcoin network has also declined. According to data from Blockchain, the number of transactions added to the mempool per second has declined by nearly 50 percent from the December highs.
The number of transactions added to the mempool per second is at the same levels as May 2016. Data via Blockchain.info.
It’s possible that bitcoin fees are now lower simply because the FOMO around getting some bitcoin before the price goes to the moon has subsided, leading to a decline in demand for block space.
Since transaction fees are denominated in bitcoin, a falling bitcoin price can also mean a decrease in U.S.-dollar denominated transaction fees.
This chart from CoinMetrics shows the level of correlation between transaction fees denominated in bitcoin and U.S. dollars.
Although the reasoning behind the drop in transaction fees seems pretty straightforward, there could also be other factors at play.
One explanation that has been floated on social media is that a large amount of new hashing power has come online, which has increased the frequency at which blocks are found. This would effectively increase the capacity of the network.
The average number of blocks mined per day should be around 144, based on the 10-minute block time target, but around 164 blocks were mined per day in the month of January 2018. However, this is not a new phenomenon.
As BitGo engineer Mark Erhardt recently pointed out on Twitter, Bitcoin has long operated at a rate faster than 10 blocks per minute due to the fact that adjustments to the mining difficulty are only made every two weeks. As more hashpower is added to the Bitcoin network during nearly every difficulty adjustment period, the pace at which blocks are mined increases until the difficulty is eventually readjusted once again.
Having said that, the 164 blocks per day number from January 2018 is a bit more than normal, and 162 blocks were mined per day in December 2017 as well. For 2017 as a whole, the average number of blocks mined per day was around 153, which is near the historical average per day.
So, if an extra 10 blocks were being mined per day in December 2017 and January 2018 (as compared to the all-time average), then there was effectively an increase in the supply of block space by more than 600MB over that time, as blocks have been a little over 1MB in size each.
In addition to the increased supply of block space by way of more blocks mined on a daily basis, there have also been a number of efficiency improvements enabled in terms of how the blockchain is used by those who wish to create transactions. Bitcoin writer and researcher David Harding recently wrote on this topic on the Bitcoin Wiki. Some methods of cutting down on transactions fees mentioned by Harding included transaction batching, Segregated Witness (SegWit), dynamic fee estimation and UTXO consolidation.
Transaction batching is when a payment is sent to multiple recipients via one on-chain transaction. Data made available by outputs.today appears to show an increase in the use of batching over the course of 2017, including an noticable increase starting in late November 2017.
Another article written by Harding indicates this technique could enable transaction fee savings of up to 80 percent.
Another way to lower transaction fees for everyone is to use SegWit, which is a soft fork that has enabled an increase to the block size limit (and thus the supply of block space). That increase to the block size limit is only enabled if users take advantage of the feature. At press time, around 14 percent of transactions were using SegWit.
While there was an increase in SegWit transactions over the weekend, this appears to have been caused by users taking advantage of the currently low fees to move their funds to SegWit addresses.
In addition to batching and SegWit, other methods of using the blockchain more efficiently, such as UTXO consolidation and dynamic fee estimation, may also be leading to generally lower transaction fees.
While fees paid on the network have clearly declined, some bitcoin wallets have not taken advantage of the new state of the transaction fee market.
Relatively new website transactionfee.info allows bitcoin users to check the price efficiency of any recent transaction. Users of the site can also let others know which wallet, exchange or other bitcoin service was used to generate the transaction. This allows visitors to get a better idea of which services are best at estimating an efficient transaction fee price.
On the homepage, digital asset brokerage Coinbase is often listen as a sender of transactions that could have been sent for an 80 to 90 percent lower fee.
According to the site, other bitcoin services that routinely use much larger fees than what is necessary include ShapeShift, Xapo, Electrum and Gemini.
Coinbase has received some criticism due to the fact that the extremely popular bitcoin custodian has not implemented batching or SegWit. Having said that, Coinbase CEO Brian Armstrong recently tweeted that the company is working on both methods of lowering fees for their customers.
Putting all of this information together, it becomes easier to understand why bitcoin transaction fees have been falling so quickly this year. However, the large number of different variables at play make it difficult to say there is one reason that fees have declined. As these variables change again in the future, fees could rise rather quickly once again.
The Institutes has announced a new blockchain framework called RiskBlock to provide more streamlined and secure proof of insurance. Nationwide Insurance is the first company to begin rolling out product on the platform.
RiskBlock is the first blockchain framework delivered from the newly formed RiskBlock Alliance and the first of its kind that is designed specifically for the risk management and insurance industry. The Institutes RiskBlock Alliance is an industry-led, insurance-focused consortium that developed the RiskBlock framework.
RiskBlock will provide insurers with real-time verification of insurance coverage; allow law enforcement to verify proof of insurance efficiently without relying on paper forms; provide insurers with a streamlined and cost-effective way to offer proof of insurance; and, in the near future, will allow insured clients to share trusted, third-party verified proof of insurance with a click on their mobile devices.
“The current way that drivers provide proof of insurance is cumbersome and uncertain,” said Christopher G. McDaniel, executive director of The Institutes RiskBlock Alliance in a statement. “Sharing proof of insurance through blockchain is key to streamlining the process of providing proof and marks the start of our efforts to revolutionize many other aspects of the insurance industry. Our collaboration with Nationwide is the first step toward a better overall system.”
The membership of the Alliance includes over 30 companies as members, ranging from the top 10 carriers to brokers and reinsurers. Nationwide Insurance is the first to use the platform in a pilot program to simplify real-time insurance coverage verification, eliminating paper insurance cards and providing a mobile app for real-time verification. ac
The coverage verification is an initial use case and the Alliance anticipates its members will be able to better serve policyholders and reduce costs by streamlining claim payments and premiums, reducing fraud through centralized recording of claims and improving acquisition of new policyholders by validating accuracy of customer data.
Kodak, the iconic photography company first established in in the 1880s, has joined the blockchain and ICO age. Today, January 9, 2018, it announced a new blockchain-based platform with WENN Digital to empower and protect image makers, photographers and artists.
The new platform, known as KodakOne, will enable users to register their work and license it with the platform. The image rights management platform will utilize the new KODAKCoin cryptocurrency to provide photographers with a new revenue stream and secure platform for protecting their work.
The smart contract associated with KODAKCoin will ensure that photographers receive payment immediately upon their work being licensed in addition to receiving a share of the overall platform revenue. The platform will also continually scan the web to monitor and protect the artist’s IP and assist them in dealing with illegal use of their work.
“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” said Kodak CEO Jeff Clarke in a statement. “Kodak has always sought to democratize photography and make licensing fair to artists. These technologies give the photography community an innovative and easy way to do just that.”
The KODAKOne platform and KODAKCoin cryptocurrency were developed for Kodak by WENN Digital. Their ICO will begin on January 31, 2018, and is open to accredited investors from the U.S., U.K., Canada and other select countries. This ICO is issued under SEC guidelines as a security token under Regulation 506 (c) as an exempt offering.
In a report published on January 3, 2018, Royal Bank of Canada (RBC) Capital Markets analyst Mitch Steves confidently stated that the cryptocurrencies and blockchain technology applications market could increase thirteenfold in 15 years, reaching $10 trillion.
Steves’ report, titled “Crypto Currency & Blockchain Technology: A Decentralized Future — A Potential Multi-Trillion Dollar Opportunity,” has been sent to RBC’s clients. A short summary has been shared on Twitter.
In a video published by CNBC, Steves, who often covers high technology stocks including Nvidia, whose value has been boosted by cryptocurrency mining, defends his bullish expectations on blockchain technology and its applications. According to Steves, cryptocurrencies represent only a part of the $10 trillion pie, the bulk of which is in the rest of the ecosystem existing around blockchain technology and cryptocurrencies.
“I think what people misunderstand about the cryptocurrency space is that it’s not only a store of value, but it also allows you to secure the internet,” says Steves. Blockchain-based cryptocurrencies will permit creating decentralized versions of value storage services like Dropbox or iCloud. The $10 trillion figure represents one third of the current size of the market for value storage.
Steves argues that blockchain technology will permit creating a “Secure World Computer,” a decentralized world computer without a third-party intermediary, intrinsically more secure because there won’t be centralized servers that can be hacked, and suggests that next-generation killer apps will be built on top of this secure layer.
The smart move for investors, according to Steves, is to get involved with cryptocurrencies directly. As far as traditional stocks are concerned, Steves mentions public companies like AMS and Nvidia, whose chips power cryptocurrency mining hardware, and the private companies that make ASIC chips for bitcoin mining. At the same time, Steves warns that cloud service providers are likely to be the most impacted from blockchain technology, with negative results if they don’t manage to adapt.
According to Steves, the value of the blockchain technology market is also growing due to international remittances — the sending of payments overseas is currently estimated at half a trillion dollars per year — “fat protocol” layers that increase in value as the applications grow, and throughput scaling efforts, such as the Lightning Network, which “appear on track to deliver scaling that accommodates higher transactions/second, ultimately driving higher utility and network value.”
While warning that the cryptocurrency space has many risks, Steves argues that the opportunity appears vast, with constant technology updates, and a multi-trillion dollar market will likely emerge.
In a recent, related article published by the RBC, Frédérique Carrier, managing director and head of investment strategy for RBC Wealth Management in the British Isles, argued that, while cryptocurrencies are unlikely to replace traditional money, blockchain technology could have wide-ranging implications in many industries and for investors in the medium-to-long term.
The potential of blockchain technology “makes it a technology well worth watching closely, which we intend to do,” notes Carrier, adding that RBC is experimenting with blockchain technology in its personal, commercial and capital markets businesses. RBC recently announced the implementation of a blockchain-based shadow ledger for cross-border payments between the U.S. and Canada.
On December 18, 2017, HashChain Technology, a cryptocurrency mining company, went public for the first time on the TSX Venture Exchange under the ticker symbol KASH, joining at least eight other crypto-related startups including HIVE Blockchain Technologies (Genesis Mining).
At least 50 more blockchain and cryptocurrencies firms are preparing to list on the TSX in the coming year, including Hut 8 Mining Corp., according to Harris Fricker, CEO of GMP Capital Inc., noting that the TSX Venture Exchange tends to be less risk-averse than many other stock exchanges around the world.
In the past, the TSX Venture Exchange has been mainly for smaller companies trading oil and gas, traditional mining and, recently, medical marijuana futures according to Fricker. He says that “at least eight cryptocurrency-related stocks are now trading in Canada.”
HashChain stock started trading today at $2.20 CDN a share. The company has already raised $4.4 million with 41,179,000 common shares both issued and outstanding, in preparation for today’s launch on the TSX.
HashChain says it will initially mine the altcoin Dash but will go on to mine bitcoin in January 2018. After that they say they will “be supporting highly scalable and flexible operations across all major cryptocurrencies.”
The company is counting on their Canadian location to give them an edge:
“Our ideal location for mining will maximize revenue on each coin, and our proprietary approach to operations can sustain rapid growth and scalability.”
HashChain CEO Patrick Gray told Bitcoin Magazine in an interview that although their office is in New York, mining operations will be run out of Vancouver, Canada.
“We have our mining operation in Vancouver because it’s the optimal location to reduce the costs of large-scale mining. Canada has cheap internet, low energy costs and a cold climate that greatly reduces the cost of cooling mining equipment,” noted Gray.
“We monitor these operations 24/7 from New York with a web interface that ensures IP, temperature, hashrate, wattage, fans and memory are all operating at maximum efficiency. This allows us to minimize expenses for each coin mined.”
As a start, HashChain is mining on the Ethereum blockchain using high-performance ASIC 100 Dash mining rigs. It has also purchased 770 ASIC bitcoin rigs.
“One of HashChain’s core advantages is that our operations are in Canada, which is one of a few places globally that offers the most energy-efficient mining conditions,” said Gray.
“On top of that, there is likely to be new rigs on the market in the near future that reduce the amount of energy required to mine at high hashrates, similar to how the market largely moved from GPUs to ASICs for this reason. From a general standpoint, as the country begins to move towards renewable energy, this could lessen the environmental impact as well.”
HashChain hopes to set up more mining locations in cool climates, with low-cost energy and reliable high-speed internet, what the company calls the “trifecta” most critical to mining success.
They are also currently working on proprietary software capable of monitoring hash rates of equipment so they will automatically switch computing power to the currency that is most profitable at that time.
Blockchain development companies and the cryptocurrency press have been paying their workers in cryptocurrencies for years, but one realizes that the times are truly changing when mainstream companies start paying their workers in bitcoin.
GMO Internet Group, a Japanese provider of a full spectrum of internet services for both the consumer and enterprise markets, is introducing a system for employees to receive part of their salary in bitcoin.
Headquartered in Tokyo, GMO Internet Group comprises more than 60 companies in 10 countries. In view of the group’s size and financial muscle, this initiative is likely to boost the mainstream adoption of the practice of paying salaries in cryptocurrencies.
The move is partly motivated by the desire to promote the adoption of Bitcoin, which is a strategic priority for GMO. In fact, the group is vigorously active in bitcoin trading and mining services, as well as mining hardware development. Therefore, anything that is good for Bitcoin is also good for GMO.
In May 2017, GMO launched a cryptocurrency exchange, initially dubbed Z.com Coin and later rebranded as GMO Coin, which features cryptocurrency FX and trading on both computers and smartphones. The exchange offers two types of services: cryptocurrency FX, which is an over-the-counter (OTC) bitcoin margin trading and cryptocurrency trading, which enables buying and selling of virtual currency in JPY in addition to basic features allowing customers to send and receive bitcoins.
In September 2017, GMO announced the upcoming launch of a new bitcoin mining business. “We will operate a next-generation mining center utilizing renewable energy and cutting-edge semiconductor chips in Northern Europe,” GMO stated, emphasizing that they will invest in R&D and manufacturing of hardware including the next-generation mining chip.
“We will use cutting-edge 7 nm process technology for chips to be used in the mining process, and jointly work on its research and development and manufacturing with our alliance partner having semiconductor design technology.” The mining business is scheduled to start in January 2018.
GMO expressed its belief that cryptocurrencies will develop into “new universal currencies” available to anyone from any country or region who wants to freely exchange value, “creating a new borderless economic zone.”
The option to receive part of the salary in bitcoin will initially only be available to employees of one GMO company — GMO Internet Co. Ltd. — starting in March 2018, but it will be gradually extended to more than 4,000 employees in other GMO companies based in Japan.
The minimum bitcoin payment will initially be 10,000 yen (~$88) and the upper limit will be 100,000 yen (~$881). Each salary payment in yen will be reduced by the amount of bitcoin paid, using the exchange rate at the GMO Coin exchange.
Mainichi Japan notes that Japan’s labor code stipulates that businesses must pay employees in a recognized currency such as the yen, but, according to GMO, the move is in accordance with the law because any payments in bitcoin would be consensual, with a chosen amount to be deducted from paychecks and put toward purchasing bitcoin. The cryptocurrency is rising in popularity in Japan with an increasing number of retailers accepting it as a form of payment.
GMO Internet Group wants to contribute to the development of cryptocurrencies in the world by promoting cryptocurrency-related initiatives throughout the group. In particular, GMO wants to promote ownership of bitcoin among its employees — who can be the best evangelists for the group’s products and services related to the digital currency — to improve the employees’ exposure to and understanding of Bitcoin.
“Employers can now pay employees a portion of their net earnings in bitcoin by collaborating with niche payroll solution providers such as Bitwage, Wagepoint, or Bitpay, who manage the back-end mechanics, eliminate exposure to price volatility, and reduce compliance and governance risks,” noted Deloitte principal Eric Piscini.
A recent overview of cryptocurrency payroll processors and early adopting clients notes that offering salaries in bitcoin could make it easier for companies to retain and attract talent. Besides compensating current employees, “[cryptocurrencies] could help businesses more effectively tap into the open talent economy, where individual contributors may be drawn to business partners that offer payout features only cryptocurrency makes possible: fast peer-to-peer payments across country borders with minimal friction (or total freedom) from traditional banking systems,” said Piscini.
For now, the GMO press release is available only in Japanese.
During the webinar, I conducted a poll of the audience to find out what stage they had reached in moving their applications to JDK 9. Given the title of the webinar, I assumed this would be a good group to ask. The results were both revealing and interesting. I ran the webinar twice: once for developers in EMEA and once for developers in the Americas.
The question I asked was “What are your plans for moving to JDK 9?” The results are shown in the graphs below as percentages.
Now, I know that there are “lies, damn lies, and statistics” and it’s true the sample size was less than 150, but I think this gives a reasonable indication of JDK 9 adoption. As an additional data point, during my keynote presentation at the Java Days Kiev, I asked the 800 developers in the audience who was using JDK 9. Not a single person raised their hand.
I believe there are several reasons that JDK 9 will have little adoption in production:
Most of the developers I’ve spoken to recently have said they will continue to use JDK 8 in production until at least the next LTS release, which will be in September 2018. The consensus seems to be that JDK 9 and 10 (at least that’s what it’s called this week) will be used to figure out how to move to JDK 11 when it arrives.
Oracle’s stated plan will make the transition between LTS releases quite challenging for developers. The problem is that there will be no overlap for public updates. When JDK 11 is released, it will contain new features that may well affect application compatibility. Since JDK 8 will no longer have public updates users are faced with two choices, either pay for a commercial support contract or jump to the next LTS release and hope that their applications don’t break or need substantial changes to make them work correctly.