ALU

Cryptocurrencies

How low will bitcoin go? History provides some clues

Nearly 170 years before the invention of bitcoin, the journalist Charles Mackay noted the way whole communities could “fix their minds upon one object and go mad in its pursuit”. Original Link

Bitcoin’s nightmare year gets even worse

Cryptocurrencies continued their slide with a fresh bout of losses on Friday after the SEC dashed hopes that a bitcoin exchange-traded fund would appear before the end of this year. Original Link

Farzam Ehsani reveals new crypto venture VALR

Former blockchain lead at RMB Farzam Ehsani has revealed details about his new venture, VALR, a digital asset trading platform in South Africa, which is being launched in partnership with Bittrex. Original Link

Too early to call the bottom for bitcoin

Bitcoin is headed for the biggest gain since April, providing some welcome relief to battered cryptocurrency investors – but it may be too soon to call a bottom. Original Link

Bitcoin slump looks like a real currency crisis

The virtual currency’s behaviour since the start of the year doesn’t just look like a bubble bursting; it looks more like a currency under attack Original Link

Battered bitcoin miners are calling it quits

Bitcoin miners hit hard by the cryptocurrency’s crash may be throwing in the towel. Original Link

Bitcoin crashes below $4 000

The great crypto crash of 2018 plunged deeper over the weekend. Original Link

No bottom in sight as cryptocurrency pain deepens

The great cryptocurrency crash of 2018 is heading for its worst week yet, with bitcoin sinking toward $4 000 and most of its peers tumbling on Friday Original Link

No end in sight for crypto selloff as bitcoin breaches $4 500

Turmoil engulfed cryptocurrency markets again on Tuesday, with every major coin extending a rout that’s rocking confidence in the nascent asset class. Original Link

Crypto market convulses as bitcoin sinks

The slide in cryptocurrencies accelerated on Monday, with bitcoin piercing below the $5 000 mark for the first time since October 2017. Original Link

Bitcoin extends rout after cryptocurrencies plunge 12%

Bitcoin continued its slump after losing 12% on Wednesday and triggering the biggest cryptocurrency sell-off since February. Original Link

Ripple is aiming to overtake Swift banking network

Ripple Labs is gaining new customers because financial firms are seeking faster, more up-to-date technology than the Swift banking network, CEO Brad Garlinghouse said. Original Link

Interview: Luno country manager Marius Reitz

In this episode of the podcast, Duncan McLeod interviews Luno South Africa country manager Marius Reitz. The conversation touches on everything from investing in cryptocurrencies to where Luno is going next. Original Link

South Africans really want to own bitcoin: new research

New research commissioned by Luno shows there is a great deal of interest among South Africans in owning at least one cryptocurrency. Original Link

Nasdaq wants to help stamp out cryptocurrency fraud

The cryptocurrency industry is plagued by scandal. Stock exchange operator Nasdaq says it can solve the problem. Original Link

Bitcoin at 10: how it all started and what the future holds

In the next 10 years, it remains possible that the technology underlying bitcoin will transform global money. Original Link

No R&D tax incentive for cryptocurrency developers in SA

South African innovators hoping to position the country as a hub for fintech innovation are bound to be disappointed by a seemingly small tax law change being proposed. Original Link

Here’s what roiled cryptocurrencies on Monday

A sudden exodus from the most popular dollar-linked cryptocurrency rippled through digital asset markets, saddling some investors with losses while propelling bitcoin to its biggest gain in more than three weeks. Original Link

Epicenter Cryptocurrencies with Brian Fabian Crain

Podcasting about cryptocurrencies is a strange occupation. You get emails all the time from companies doing a token sale that you would never want to be affiliated with. You get angry tweets from anonymous Twitter accounts that are on one side of the Bitcoin scaling debate. You get to interview extreme personalities, and the technical discussions can be highly educational.

Brian Fabian Crain started the Epicenter podcast four years ago. Podcasting about cryptocurrencies allows a podcaster to report on a wide range of areas: economics, software, philosophy–and the stories within the blockchain world itself. Epicenter is one of my favorite podcasts about cryptocurrencies because Brian is always prepared enough to ask sophisticated questions.

In this episode, we talked about ICOs–when does an ICO make sense? It seems that many token economies could function just as well without a token involved. We discussed the scaling approaches of Bitcoin and Ethereum–why are these two blockchains taking very different approaches to their scaling plans? And we talked about Chorus, the company that Brian founded to build infrastructure for proof-of-stake cryptocurrencies.

I enjoyed talking to Brian about all these different subjects, and look forward to having him on again in the future.

Transcript

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Three months after launch, this unbanked crypto exchange made $7.5m in profit

Photo credit: cooldesign / 123RF.

With the price of bitcoin soaring past US$10,000 this week, the idea of trading it for a less proven token sounds crazy. But for the nouveau riche of the cryptocurrency world, it’s an opportunity to invest in faster-moving currencies.

“Most guys who are holding bitcoin are high-risk, early adopters. They have a high tolerance [for] swings,” explains Changpeng Zhao, founder of Binance, a cryptocurrency exchange operating out of Tokyo. “Sometimes it’s not even about the money. People just want more.”

Sometimes it’s not even about the money. People just want more.

That’s one of the drivers behind growing exchanges like Binance, which deals exclusively in cryptocurrency – no dollars or fiat currency of any kind. Instead, traders buy and sell bitcoin, ether, and a variety of tokens from different initial coin offerings (ICOs), a cryptocurrency-based crowdfunding model that’s raised more than US$3.7 billion for blockchain projects this year. It’s a way for bitcoin traders to diversify their holdings through riskier tokens with potentially higher returns.

Zhao says Binance’s exchange processes about US$500 million in trade every day, of which the company takes a 0.1 percent fee – which drops to 0.005 percent if users pay commission in Binance Coin (BNB), Binance’s own token. In its first quarter ending in October, the company reported a profit of about US$7.5 million in commission fees.

Not bad for an exchange that launched in July.

“This year, ICOs have definitely contributed to exchange volume,” he says. The increasing number of bitcoin buyers has boosted trade as well, as it’s the first cryptocurrency most people become familiar with. Still, there’s a lot more room to grow, emphasizes Zhao.

“The crypto space even today is a very small part of the overall market potential,” he says, pointing out that the traditional equity market is much larger. “This is just the beginning.”

Surviving China

The 40-year-old Zhao’s foray into cryptocurrency can be traced back to poker. In Shanghai, he used to play in a private group that included Bobby Lee, now CEO of BTCC, one of the largest cryptocurrency exchanges in China. Ron Cao, managing director of venture capital firm Sky9 Capital, played as well. In 2013, Cao urged Zhao to get into bitcoin – this was around the time when Lee bought BTCC.

See: Q&A: Veteran VC Ron Cao reflects on almost 20 years of investing

“We had a group of guys that played poker together,” remembers Zhao. “Ron and I have always been pretty good friends, and on a poker table, you can tell the other guy’s personality pretty well. So we always had respect for each other.”

The more you deal with fiat, the more authorities can control you.

He then left his job at Fusion Systems, an IT and business consultancy, and dove in as head of development at Blockchain, a software platform for digital assets. In 2014, he became CTO of OkCoin, a major exchange for fiat and cryptocurrency in China. A year later, he left that too amid controversy between his friend, bitcoin evangelist Roger Ver, and OKCoin.

This year, Zhao felt it was the right time to move into a purely cryptocurrency exchange (what he calls ‘exchange 2.0’), as he watched the volume of cryptocurrency exchanges like Poloniex rise.

“If you do fiat to crypto […] you have to have a bank account that can accept money,” he says. “That has its own advantages and problems. You have to deal with regulatory issues and usually you’re tied to one country.”

Changpeng Zhao, founder and CEO of Binance. Photo credit: Binance

Binance doesn’t have to deal with banks at all. “We don’t touch fiat so we don’t have a bank,” he explains. “But we have to deal with a lot of different wallets, [so] we have to integrate a lot of different wallets – we have to keep all of them secure.”

The lack of fiat has helped Binance in others ways too, particularly during China’s crackdown on ICOs and bitcoin exchanges in September. The fact that Binance was purely a cryptocurrency exchange meant that they weren’t contributing to capital outflows – a large concern for the Chinese government.

“The more you deal with fiat, the more [authorities] can control you,” says Zhao. “The bank will freeze your bank account. They can make the wire transfer slow.”

The company was also lucky – a week before the ban was announced, Zhao’s team moved all their servers out of China. Now, the founder is working on opening another office in Hong Kong and has moved the company’s core team out of mainland China.

When there’s rumors of a China ban, people panic and sell.

“At least in China, [fiat-to-cryptocurrency exchanges] are not very possible in the foreseeable future. So crypto-to-crypto exchanges emerged,” says Chris Zhou, cryptocurrency trader and head of China operations at BTC Media, a media outlet focusing on digital currency. Cryptocurrency-exclusive exchanges are “a way to bypass the tightening regulation.”

“In the meantime, it is also a sign that people are trying to use bitcoin or ether as a standard cryptocurrency. To every other coin, this acts as a benchmark crypto. I think this is going to be a trend,” he tells Tech in Asia.

The excitement around regulations this year has helped drive volume for the young exchange. Earlier this year, Japan recognized bitcoin as a form of money, opening the flood gates for Japanese investors and exchanges such as bitFlyer, which this week announced plans to expand into the US. Even China’s ICO ban has boosted trade.

“When there [are] rumors of a China ban, people panic and sell,” explains Zhao. “Even though the price might be going down, the volume will be high. Hence the commission fees charged by the exchange – the revenue from exchanges – will be high.”

“The worse you can expect is no news. Then it just stays flat,” he says. “There’s no trade.”

Hacking fears

Binance’s core team, including He Yi, Binance’s co-founder and ex-OKCoin co-founder. Photo credit: Binance

Besides facing competition from the industry’s more established and larger exchanges, such as Bittrex and ShapeShift, security will certainly be an ever-present challenge for Binance. The short history of cryptocurrency is riddled with exchange hacks, notably Mt. Gox, which reportedly lost US$460 million to hackers in 2014.

“I still use crypto exchanges, but I keep to my favorites and abstain from leaving too much money there because I’ve been burned by two exchange hacks and closures, namely Cryptsy and Mintpal,” says T.M Lee, co-founder of CoinGecko, a data platform that tracks hundreds of cryptocurrencies.

“I lost a lot of altcoins there, which are worth a lot today – not much then,” he adds.

I’ve been burned by two exchange hacks and closures.

Zhao says the company practices multifaceted security measures, from using network security to prevent social engineering attacks to securing its physical office locations. Different groups of white-hat hackers conduct penetration tests on Binance’s system monthly, he adds.

Of course, savvy traders – or traders that have had bad experiences – won’t rely on exchanges to keep their money safe. For those who aren’t trading tokens every day, it is often deemed safer to store cryptocoins in their own wallets, where they have more control over withdrawal.

On top of security, Binance is prioritizing team expansion and opening more office locations. The company also runs an incubator called Binance Labs, and is working on its own ICO listing platform and developing a decentralized exchange.

(Correction: This article was updated three hours after publishing to correct Binance’s daily trade volume.)

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Digix gets $1.3m seed funding to turn gold into cryptocurrency

Copyright: <a href='https://www.123rf.com/profile_dariohayashi'>dariohayashi / 123RF Stock Photo</a>

Photo credit: dariohayashi / 123RF

Singapore-based Digix has secured US$1.25 million in seed funding, it announced today.

The round was led by Japanese VC firm Global Brain, with Shanghai’s Fenbushi Capital – one of Asia-Pacific’s most prominent backers of blockchain-related startups – also participating.

See: Japanese VC firm Global Brain to start investing in ICOs

The funding will help the startup continue building its DigixDAO platform for trading gold-backed digital tokens on the Ethereum blockchain.

By tokenizing gold bullion, Digix is aiming to create a cryptocurrency that can provide more stability for investors. Unlike the majority of cryptocurrencies currently being traded, each Digix token will represent a real, physical asset – in its case, a piece of gold stored in a secure vault somewhere in Singapore.

This reflects the concept of the gold standard, under which most of the world’s currencies were directly linked to the value of gold. Most countries abandoned the gold standard in favor of the fiat system – where the value of money is not based on the value of a commodity – during the 20th century.

By using the distributed ledger, Digix is able to securely record and track ownership of its gold-backed tokens.

Twice the tokens

Digix has created two digital tokens so far.

Digix Gold (DGX) is the result of its tokenization of gold reserves, with each unit of DGX representing 1 gram of gold.

DigixDAO (DGD) was distributed as part of the startup’s initial coin offering (ICO) in March last year. The DGD token is not backed by gold and, like most tokens that can be thought of as cryptocurrencies, its value can go up and down depending on market forces and exchange rates.

In addition to giving its holders the ability to claim rewards on DGX transactions, DGD also grants them a say in the way the Digix ecosystem is run.

As a result of the token sale, the platform became a decentralized autonomous organization (DAO) – an economic entity governed according to smart contracts on the blockchain, theoretically removing the need for a traditional corporate structure.

Buyers that hold DGD over a certain amount will be able to submit proposals to the DAO as to the direction the platform should take in order to encourage adoption of DGX. All DGD holders will be able to vote on such proposals.

In its ICO, Digix managed to raise 465,134 Ether – worth close to US$5.5 million at the time. This will be spent in accordance with decisions made by DAO members.

Much has been made of the apparent conflict between ICOs and traditional VC funding. Earlier this year, money raised by ICOs surpassed that of VC seed funding in internet-related startups.

See: Easy money? Top token players weigh in on the ICO vs venture capital debate

The consensus among panellists at Tech in Asia Tokyo earlier this year was that both fundraising formats could and should be seen as complementary.

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Crypto-card provider Change raises $17.5m in ICO

Copyright: <a href='https://www.123rf.com/profile_risto0'>risto0 / 123RF Stock Photo</a>

Christmas market in Tallinn, Estonia, where Change is partnering with the government on its e-residency scheme. Photo credit: risto0 / 123RF.

Singapore-based Change has raised the equivalent of US$17.5 million from its initial coin offering (ICO), it announced today.

The startup said it will use the funding for product development. It is creating a banking platform for cryptocurrencies, incorporating a debit card, digital wallet, and payments app.

The first of these – the Change Card – is scheduled to launch next month. It will enable its holders to spend cryptocurrency in “millions” of online and offline locations worldwide, the startup said in a statement.

Change is also building a marketplace that aggregates different financial services from a range of third-party fintech companies. These service providers can use an open API to integrate with Change’s marketplace.

The startup’s goal is to become a “one-stop shop” for cryptocurrency users around the world, simplifying how they store, manage, and do transactions with their cryptocurrency holdings within a single app. 

For example, someone who has made substantial profits over a period of time by buying cryptocurrencies will be able to use the Change marketplace to diversify their investment. They might allocate some of those profits to micro-loans offered by a startup in Indonesia, or to a mutual fund suggested by a robo-advisor in Singapore.

Change has also partnered with the government of Estonia on its e-residency program, which gives entrepreneurs the opportunity to establish and run a European Union-based company online from anywhere in the world. Its services will be made available to anyone who acquires Estonian e-residency.

Spare change

According to the company’s ICO whitepaper, the Change Token (which will be listed as “CAG” on exchanges) has been “carefully engineered to be the flagship currency in all of Change’s ecosystem, facilitating fund transfers between different investment opportunities and financial services.”

Users who make investments through the Change marketplace will get a proportion of returns in the form of CAG. They will also be able to use the token to make purchases with the Change Card. Card purchases made using CAG will be rewarded with a 0.1 percent rebate in CAG, or a 0.05 percent rebate for purchases made in other currencies.

CAG is currently listed on the KuCoin exchange.

Change is one of several fintech startups in Southeast Asia that aims to make cryptocurrencies easier to spend and interchange with fiat currency in everyday life. Fellow Singapore outfit TenX – which has also released a cryptocurrency debit card and ewallet – raised US$80 million in its token sale last June. During the same month, Hong Kong’s Monaco raised US$26.7 million in an ICO for its Visa-backed cryptocurrency card.

Change previously secured US$200,000 in funding from angel investors in early 2016.

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Singapore’s latest crypto-exchange scoops $1m seed funding from Fatfish

Photo credit: krunja / 123RF

A new cryptocurrency exchange set to be launched in Singapore has raised US$1 million in seed capital from Australia’s Fatfish Internet Group.

Kryptos-X was founded by Tony Mackay, the Australian entrepreneur behind Chi-X Global, a network of alternative stock trading platforms.

Mackay and his team have chosen to situate the startup in Singapore as they consider it “a well-regulated environment” with scope for additional players to enter the market, according to a press release.

Coinhako and FYB-SG are among the Singapore-based companies currently operating cryptocurrency exchanges in the country, while a number of others – such as Luno and Quoine – also have a local presence. Several foreign players, including Coinbase, are also accessible to Singaporeans.

The electronic marketplace… will not need to be regulated in accordance with the policy of MAS.

Kryptos-X said in the statement that it is “being established as an electronic marketplace for high-volume and high-frequency trading of bitcoin and other major virtual currencies.” It will “initially offer services in Singapore in accordance with the Singaporean regulatory framework for digital token offerings,” though it expects to expand to other jurisdictions in the future.

The Monetary Authority of Singapore (MAS) recently published a paper offering “general guidance” on the regulation of digital token sales – otherwise known as initial coin offerings (ICOs) – where businesses sell their own cryptocurrencies to raise funds.

In its paper, MAS stressed that digital tokens it determines to possess characteristics of capital market products – such as equity shares, debt instruments, or units in collective investment schemes – will fall under the purview of Singapore’s Securities and Futures Act (SFA).

See: Singapore to regulate ICOs that resemble equity and debt offerings

Kryptos-X claimed in its statement that it will “deal exclusively with blockchain technology-based digital tokens and cryptocurrencies that do not carry features of securities nor collective investment schemes… The electronic marketplace accordingly will not need to be regulated in accordance with the policy of [MAS].”

However, it also said that it may engage in the offering of tokens that resemble security interests in the future. Another Fatfish portfolio company, SmartFunding, holds a capital market services license which may allow it to trade such tokens under Singapore law should the the two enter into a partnership.

Kryptos-X is expected to launch within the next three months. Of the US$1 million from Fatfish, 40 percent will go towards hiring team members, with another 40 percent devoted to building software. The remaining 20 percent will cover incidental set-up costs.

The investment deal will see Kryptos-X and Fatfish form a joint venture, of which Fatfish will own a stake equivalent to 27 percent of total voting shares.

Converted from Australian dollar. Rate: US$1 = AU$1.32.

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Tomorrowland: Indian state’s pilot shows the world how to put land records on blockchain

Photo credit: Rajarshi Mitra.

Property fraud is rampant in India and takes many forms. It’s one of the biggest avenues for investing black money. One way is to hold property in other people’s names, and this practice is called benami, which means ‘false name.’

In this murky scene, the government does not only lose revenue, but buyers can also be duped when the same property is sold to multiple entities. What exacerbates it is rampant corruption. The Indian government introduced a new law and have seized benami properties worth US$282 million since November last year.

We have already given up a lot of our black boxes. We will lead this transformation.

Sprawled across 160,000 sq km on the east coast with a population of over 50 million, the state of Andhra Pradesh wants to use blockchain technology to tackle the problem. Blockchain’s immutability can make land records tamper-proof. Its visibility to multiple entities also makes the system transparent.

The state is running a pilot by Swedish startup ChromaWay to put land records on a blockchain in fintech hub Vizag.

Doing a pilot is one thing, but executing it on the ground can upset the apple cart even within government. So, does Nara Lokesh, the state’s IT minister, expect resistance from vested interests who have gotten used to exploiting the current system?

“We have already given up a lot of our black boxes. Land records have been made online,” Lokesh tells Tech in Asia, referring to the ePragati program launched recently in the state to digitize government services.

The next move for e-governance is blockchain, starting with land records but with potential applications in several other areas like health services, food supplies, and finance. “We will lead this transformation. That’s the only way we can get rid of corruption also,” adds Lokesh.

ChromaWay CEO and co-founder Henrik Hjelte (right) makes a presentation to Andhra Pradesh IT minister Nara Lokesh (wearing white shirt). Photo credit: Nara Lokesh.

Last month, ChromaWay made a pitch for the government project and got the nod to run a pilot. A similar project in its home country Sweden has progressed beyond the trial stage and has a wider ambit of buying and selling property. Apart from involving the land registry, banks, buyers, sellers, and agents, it deals with titles and other documents like mortgages as well as payments.

“In Sweden, we focus on the whole process of real estate transactions. Here in Andhra Pradesh, it’s more about storage of titles, security aspects, and transparency,” says ChromaWay co-founder and CEO Henrik Hjelte, who has been a developer for over 25 years. He was a finance and IT consultant before becoming an early blockchain entrepreneur.

See: Crypto boom spawns blockchain accelerators

In Sweden, banks phone each other on the last day to confirm if the payment for a property deal has arrived, Hjelte explains. Inefficiencies such as this can be reduced by using blockchain.

“Digital signatures and a transparent blockchain lets everyone see where they are in the process, whether everything is signed in the right order. It’s like a workflow solution,” says Hjelte.

Colored coins

Photo credit: Coloredcoins.org

ChromaWay was one of the earliest developers of blockchain technology. In 2012, co-founder and CTO Alex Mizrahi came up with one of the first ways to associate real-world assets like land deeds with addresses on the bitcoin network – in other words, a bitcoin-based blockchain. Most blockchain tokens today are based on contracts using the ERC20 standard of Ethereum. But Chromaway’s Colored Coins project preceded Ethereum.

“Vitalik Buterin was in the open-source product we had for a while before he built Ethereum,” recounts Hjelte. “It was the first project to use protocol-issued tokens on bitcoin.”

Vitalik Buterin was in the open-source product we had for a while before he built Ethereum.

The so-called Bitcoin 2.0 expanded the use of the bitcoin blockchain from representing cryptocurrency to other assets as defined in various tokens. Each color in the so-called colored coins represented a different asset, like land, gold, or currency.

Hjelte, Mizrahi, and a third co-founder, Or Perelman – who were based in Sweden, Ukraine, and Israel, respectively – had only met online when they started ChromaWay. The company initially worked with a bank in Estonia on a mobile-based payment system using colored coins.

“It was an eye-opener for banks. But we were very early,” says Hjelte. “No one was doing anything like this until 2014.”

The scene is very different now, with ICOs (initial coin offerings) taking off in the last two quarters of 2017. Governments, banks, and large corporations are actively seeking blockchain-based projects. Andhra Pradesh, for example, is motivated not only by the potential to reduce corruption in land registration, but also by a desire to be an early adopter of groundbreaking tech.

This state is only three years old. Andhra Pradesh was split into two in 2014, with the new state Telangana being carved out of it after a decades-long agitation. Hyderabad will remain the capital of both states for a maximum of 10 years, after which it goes to Telangana.

Andhra Pradesh chief minister Chandrababu Naidu, who had built Hyderabad into a tech hub by famously persuading Bill Gates to base Microsoft India’s headquarters there, now wants to turn Vizag into a fintech hub. Naidu, who is also the father of Lokesh, promised delegates at a blockchain conference in Vizag last month that the state would open up government projects to them.

“Politicians can drive this (adoption of blockchain),” says Hjelte. “I found some guys from my country looking to set up a base here… The chief minister and IT minister turning up for a blockchain event is something that won’t happen in my country,” he adds with a laugh.

See: ‘World’s largest fintech hub’ expands from Singapore to Vizag

But core challenges remain in both Andhra Pradesh and his home country of Sweden, where the real estate blockchain is in its third phase. In Sweden, ChromaWay has run into legal issues, such as a law that requires physical signatures on land documents. “Different jurisdictions can have different rules,” says Hjelte. “Everything takes time in enterprises, banks, and the public sector.”

In India, the challenges can be even more basic – tattered maps, records not updated for decades, longstanding disputes over boundaries and land usage, multiple owners, and so on. It’s an arduous task to get a fix on the land assets before converting them into digital records, which is the first step in building a real estate blockchain.

J A Chowdary, special chief secretary and IT advisor to the Andhra Pradesh chief minister, hopes that tech will resolve these issues. An IIT Madras post-graduate in solid state technologies, Chowdary was the managing director of Nvidia in Hyderabad and a tech entrepreneur before joining his current position with the AP government.

We have to look beyond naive thinking about the technology. We need real solutions that actually work with the inclusion of everyone.

Andhra Pradesh has come up with an 11-digit unique ID called Bhudhar that combines India’s biometric citizen ID Aadhaar with land titles – bhumi means land in most Indian languages. The Bhudhar project matches surveys on the ground with satellite imagery for verification. Eventually, once a Bhudhar number is assigned to a piece of land and its owner, it can be used for updating records and all other transactions.

Naidu, Lokesh, and Chowdary form a trio with the drive and resources to make Vizag one of the first places to put land records on a blockchain. The Indian government is also exploring ways to use blockchain for land records, distribution of subsidies, and other purposes where its transparency and immutability solve problems. Dubai, Brazil, and Georgia are among other early adopters of blockchains for land titles.

But Hjelte cautions against getting carried away with the idea of tokens for everything. They need to have a utility in the system instead of just being bolted on to a product. And they should be usable by all.

“Can we assume every inhabitant of Vizag would have a private key and would know how to use it?” asks Hjelte. “We have to look beyond naive thinking about the technology. We need real solutions that actually work with the inclusion of everyone.”

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Singapore to regulate ICOs that resemble equity and debt offerings

Boat Quay, Singapore. Photo credit: doe5999 / 123RF.

The Monetary Authority of Singapore (MAS) has published a paper offering “general guidance” on the regulation of digital token sales – otherwise known as initial coin offerings (ICOs).

Digital tokens that MAS determines to have characteristics of capital market products will fall under the purview of Singapore’s Securities and Futures Act (SFA). These products include securities such as equity shares, debt instruments, and units in a collective investment scheme (CIS) where different investors pool their money into a portfolio.

Published yesterday, the paper follows the central bank’s August statement clarifying its regulatory stance on ICOs.

The paper reiterates what MAS indicated in that earlier policy note, where it said that some digital tokens issued in ICOs possess the characteristics of security holdings in the businesses making the offering.

As such, organizations issuing tokens that MAS considers to be akin to capital markets products must publish a regulation-compliant investment prospectus and register it with the central bank.

However, in its paper MAS also says that some smaller ICOs may be exempt from these prospectus requirements if:

  • The total value of the offering does not exceed S$5 million or the equivalent in foreign currency within any 12-month period
  • It’s a private placement offer made to no more than 50 people within any 12-month period
  • The offer is made to institutional investors only
  • The offer is made to accredited investors

MAS stresses that all of the above cases are subject to certain conditions, including advertising restrictions.

Required licenses

In terms of digital token issuers and intermediaries, MAS has also updated its advice. The paper says that any organization offering tokens that constitute a capital markets product must hold a capital markets services license, unless they are otherwise exempted.

Platforms that facilitate the trading of digital tokens — such as cryptocurrency exchanges – must also be approved by MAS as a recognized market operator under the SFA. Likewise, firms offering financial advice on digital tokens require a financial adviser’s license.

All in all, the MAS paper does not radically change the lay of the land when it comes to ICOs in Singapore. Rather, it follows the path MAS appears to have taken so far, of gradually updating its guidance as trends and developments in the digital token space become clearer over time.

MAS said that the contents of its paper are “not exhaustive, have no legal effect, and do not modify or supersede any applicable laws, regulations or requirements.”

Editing by Judith Balea

(And yes, we’re serious about ethics and transparency. More information here.)

About Jack

Sweltering in Singapore. Email: jack@techinasia.com Twitter: @jacknwellis

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OpenBazaar with Brian Hoffman

Cryptocurrencies give us a decentralized financial system. OpenBazaar is a decentralized commerce system.

A merchant can log onto OpenBazaar and post a listing for an item–for example, a t-shirt that I want to sell for $15. My item listing will spread throughout the OpenBazaar P2P network. A shopper can download the OpenBazaar desktop application and see my listing for a t-shirt. The shopper can pay me $15 in bitcoin, and I will send the t-shirt to their address.

If I were selling that shirt on Amazon, the corporation would take a cut of that transaction. OpenBazaar has no transaction costs–so users get to save some money. However, users also miss out on the benefits of a corporate marketplace.

Amazon makes sure that the seller will send the item to the buyer, and makes sure that the buyer pays the seller. On OpenBazaar, an escrow system is needed to place money in the hands of a neutral third party until the goods are delivered. Amazon ensures that the distributor sends the item to the customer. On OpenBazaar, users need to figure out how to send the goods to each other.

Brian Hoffman was the first developer to start working on OpenBazaar. The project has grown significantly since his initial commit, and OpenBazaar now has buyers, sellers, and open source committers. There is a clear desire for an open system of commerce.  Brian is also the CEO of OB1, a company that provides services on top of OpenBazaar. OpenBazaar is a protocol–and other companies will undoubtedly emerge to build on top of it as well.

In our conversation, Brian discussed how OpenBazaar works–the peer-to-peer protocol, the escrow system, the dispute resolution, and the open source community management. It is a fascinating, unique project, and I hope you learn something about it from this episode.

To find all of our old episodes about decentralized technology and blockchains, you can download the Software Engineering Daily app for iOS and for Android. In other podcast players, you can only access the most recent 100 episodes. With these apps, we are building a new way to consume content about software engineering. They are open-sourced at github.com/softwareengineeringdaily. If you are looking for an open source project to get involved with, we would love to get your help.

Shout out to today’s featured open source contributor Justin Lam. He has been working on improving the iOS codebase, and I know all the SE Daily mobile users appreciate his effort. Thanks Justin!

Transcript

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Otonomos alleges ex-CEO mishandled company resources; ex-CEO denies

Judge's gavel - court

Photo credit: Brian Turner.

The saga of blockchain startup Otonomos continues as the firm has submitted a writ of summons and statement of claim against its former CEO, Han Verstraete, in the High Court of Singapore.

The public document, seen by Tech in Asia, contains allegations against Verstraete that had not surfaced before, including mishandling of company funds and hijacking company email accounts after his termination.

In the meantime, the original Otonomos.com domain now shows an Ethereum crowdfunding campaign by Verstraete to raise legal funds.

Verstraete, who was CEO and founder of Otonomos, first alleged he was being forced out of the company in late September through a post on Medium. He then made specific allegations against the startup’s board of directors in a follow-up post that involved board members Dymon Asia Ventures’ Christiaan Kaptein, Fenbushi Capital’s Remington Ong, and Otonomos CTO and current interim CEO Manogaran Thanabalan.

The board currently consists of Kaptein, Ong, Thanabalan, and Verstraete.

The writ we saw includes, among other things:

  • Allegations that Verstraete repeatedly mishandled company funds for his personal use, including traveling abroad, making personal expenses, transferring company funds to his personal bank accounts, and withholding cryptocurrency funds from the company. Otonomos alleges losses to the tune of at least US$410,000.
  • Allegations that Verstraete entered into an advertising deal for the company’s logo to appear on a yacht during a boat race in Hong Kong. Otonomos claims the US$120,000 deal was “extravagant and unreasonable” for the startup and that Verstraete decided to go ahead with it regardless.
  • Allegations that Verstraete paid himself additional salary on top of his regular one for a number of months during 2016 and 2017. The writ alleges that Verstraete admitted this during a board meeting.
  • Allegations that Verstraete diverted company resources to another company he founded while running Otonomos, called Peerfinds. Peerfinds is a mobile app that lets users recommend restaurants, shops, and places to stay.
  • Allegations that Verstraete, after being fired as CEO by the board, hijacked the Otonomos.com domain and impersonated Thanabalan in email correspondence to Otonomos clients.

In the writ, Otonomos further alleges that the board repeatedly notified Verstraete about these issues and called him to board meetings, to which it says Verstraete only offered partial explanation. According to the document, Verstraete was terminated from his CEO position because of this.

Otonomos has not commented further on the situation, as it seems legal proceedings are underway.

In a statement to Tech in Asia, Verstraete denied these allegations. “Their claim is saturated with falsehoods. The allegations will be eliminated one by one in the court procedure and we should allow this process to run its course,” he said.

Verstraete further confirms that the Otonomos.com domain is registered in his name. Otonomos has since switched to Otonomos.io and is currently operational.

Dymon Asia Ventures sent the following statement to Tech in Asia: “We strongly refute any allegation of impropriety, wrongdoing, or unethical behavior by Dymon Asia Ventures or any Dymon employee.”

Editing by Terence Lee and Judith Balea

(And yes, we’re serious about ethics and transparency. More information here.)

About Michael

A Greek in Asia, Michael covers startups in Singapore and beyond. Drop him a line at michael@techinasia.com or say hi to him on Twitter: @michaeltegos

Original Link

SparkLabs gets in on blockchain frenzy with $100m VC and cryptocurrency fund

SparkChain managing partner Joyce Kim. Photo credit: Joyce Kim.

Global venture capital and accelerator network SparkLabs Global Ventures announced its latest initiative today: SparkChain Capital, a US$100 million fund aimed at tapping the craze for all things cryptocurrency-related.

The new fund has a dual purpose. The majority of the capital will be used to make equity investments in promising startups in the blockchain space. The remainder will be used to buy cryptocurrency, including digital tokens issued by companies as part of their initial coin offerings (ICOs).

It is also planning to run its own ICO later in the year.

SparkChain is headed up by Joyce Kim, a co-founder and former director at Stellar – the San Francisco-based non-profit that just teamed up with IBM and a number of major banks to launch a global blockchain platform for rapid cross-border transactions.

blockchain-amercia

Photo credit: Namecoin.

Kim tells Tech in Asia that the fund will primarily target participation in series A rounds, with each investment in the range of US$1 million to US$3 million. The aim is to invest in around 15 to 20 companies in total, with some funds earmarked for follow-on investments in those same startups.

According to a press release, SparkChain will additionally have “a small targeted holding of actual cryptocurrencies,” which it “will not actively trade.”

“We are presently capping our investments into cryptocurrency and ICO holdings at 10 percent of initial fund capital,” says Kim. “We will be able to invest in ICOs as well, but as expected, potential ICO investments will go through a very rigorous vetting process.” Investment decisions relating to cryptocurrency and digital tokens will be made by evaluating numerous factors and keeping a close eye on the overall state of the market, she adds.  

The ICO market is very exciting, but we think it is still too young and volatile to be dedicating a larger portion of assets.

As to why SparkChain will not engage in trading these cryptocurrency holdings,  Kim explains that this is not a focus for the fund at present. “There are many crypto hedge fund options for investors out there, and this isn’t our team’s strength,” she says. “We’re experienced in helping companies grow and make an impact in the world.”

The rationale behind the 90/10 split is that Kim believes the fund will benefit from this hybrid investment strategy. “We are dedicating the bulk of the fund to making equity investments in companies and entrepreneurs, because we believe will find the best and brightest teams committed to building companies that will be successful in the long term and help avoid many of the flash in the pan projects,” she says. “The ICO market is very exciting, but we think it is still too young and volatile to be dedicating a larger portion of assets to it.”

SparkChain is slating its own token sale for some point later this year. “The ICO will allow a wider audience that is crypto-interested to invest in a fund that is managed by seasoned venture investors with deep knowledge of the blockchain space.”

Original Link

Crypto boom spawns blockchain accelerators to help startups raise funds with ICOs

Image credit: Pixabay.

Until the start of this year, less than US$300 million had been raised through ICOs – initial coin offerings. As of October 11, that figure had reached US$2.67 billion, according to Coindesk’s ICO tracker.

Source: Coindesk ICO tracker.

ICOs raised three times as much money as early stage VC funding in the second quarter of this year, according to CB Insights. That trendline is most likely going up as cryptocurrency trading shot up last week, after a short lull last month when China banned ICOs and clamped down on exchanges. The bitcoin rate rebounded to reach a record level of US$5,800 by the end of the week. The higher the bitcoin value, the more resources available to those who want to diversify their cryptocurrency holdings with new coins.

Source: CB Insights.

Startup hubs around the world are buzzing with excitement over this new form of raising funds, mixed with fears of a bubble. Many ICOs are based on nothing more than whitepapers, and scamsters are plenty in this new age gold rush. But as the blockchain technology underlying cryptocurrency gets wider interest, an ecosystem is emerging to support a “decentralized and democratized” alternative to VC funding of innovation.

“We are interested in how companies like Y Combinator can use the blockchain to democratize access to investing,” says the Silicon Valley accelerator’s president Sam Altman, even though he thinks “ICOs are definitely a bubble right now.”

Anybody with cryptocurrency can participate in wealth creation via an ICO, unlike VC funding which is mostly confined to accredited investors and high net worth individuals.

The Startereum program partners angel networks in five cities to help blockchain startups with seed funding, building products, and doing ICOs.

For startups, it can be a faster way of raising funds than chasing VCs with a narrow view of what’s fundable and scalable. That too without diluting equity. But those who are serious about it – and not just get-rich-quick schemers – need an understanding of how to apply blockchain technology and what is essentially a new financial model.

Not surprisingly, incubators and accelerators are coming up to evangelize blockchain and back early innovators. IBM has launched a blockchain accelerator, offering to provide coaching as well as IBM’s blockchain software. US fintech consulting firm Synechron has started six accelerators, each with a different use case for blockchain such as cross-border payments, KYC (know your customer), and mortgage lending.

In Asia, Japanese VC Global Brain has said it wants to invest in ICOs and started Blockchain Labs for community-building and knowledge-sharing. Singapore blockchain startup founders Kai Cheng Chng of Digix and Jun Hasegawa of Omise are on its advisory board.

Startup Tunnel, a three-year-old Delhi-based accelerator, is one of the first to jump into this space in India. It has launched a Startereum program – its name inspired by the cryptocurrency Ethereum whose blockchain forms the base for many ICOs. The program partners angel networks in five Indian cities to support blockchain startups with early funding, building blockchain-based products, and finding a path to an ICO. Headstart Network in Bangalore and Chennai, Yournest Angel Fund in Delhi, Forge Accelerator in Coimbatore, and Swan Angel Network in Indore are partners for the pan-India program.

Token economics

Blockchain startups issuing tokens have to contend with a nascent technology and business model in addition to the usual challenges faced by any other startup, explains Startup Tunnel’s general partner Aditya Dev Sood to Tech in Asia.

“What will be the token economics? At this point in India, very few people have even seriously thought about it. There are straightforward problems that can arise if your tokens begin to go too high or too low. Or if you have a utility token model, you need to have some expertise around it,” says Sood. “So we’re working hard to discover those individuals within India as well as globally who can contribute their experience with the token model here.”

I ran into Sood at two almost back-to-back blockchain conferences in India’s financial capital Mumbai and emerging fintech hub Vizag. I also ran into more Russians and Ukrainians than I have at any other tech event in India, reflecting the early lead eastern Europe has taken in adopting ICOs. Indian founders were mostly there to get their feet wet.

See: Everything you wanted to know about initial coin offerings but were afraid to ask

So, what has Startereum been attracting with its call for blockchain startups? “We are seeing a lot of would-be cryptocurrency exchanges,” Sood tells me. “Now this is not a terrible thing; obviously the ecosystem has to grow from somewhere, and right now we only have three well-placed exchanges in India. We need enough exchanges that are handling a diversity of technologies and tokens, so I would not say ‘no’ to exchange propositions.”

Cloud-based blockchain solutions and supply chain logistics applications have come up, “but applications are still open and we look forward to seeing more radical, innovative things,” says Sood.

On his wish list are healthcare data management and solar tech on the blockchain. “I would also love to see some contracts and transaction systems that integrate supply chains with marketplaces in some innovative way,” says Sood. “These ideas I think are going to start gushing forth within a six to 12-month horizon. But our commitment is also to explore potential tokenization of projects that have not completely figured out their token model.”

He points out that when Airbnb and ride-sharing began with a platform model, it didn’t make obvious sense. But huge opportunities arose in what is now characterized as Uberification. “I wouldn’t say anybody in the world is very clear right now about what would be a tokenizable project and what would not be. That’s what it means to be at the forefront actually testing and trialing a number of these models.”

Product before ICO

Image credit: Bandboo

One of the opportunities accelerator programs like Startereum could explore is to be a feeder to large corporations interested in the new possibilities for efficiency and reliability from shared, distributed ledger systems. A speaker at the blockchain event in Mumbai, for example, was Jaspreet Bindra, digital innovation head of the Mahindra Group that is implementing a blockchain logistics solution.

New York-based Boldstart Ventures, an early stage fund, recently started a blockchain accelerator focusing on solutions using the Hyperledger Fabric – a plug-and-play blockchain framework hosted by the Linux Foundation. It eases the formulation of “smart contracts” that provide the application logic for building a blockchain. “We feel like there’s a tremendous amount of corporates using Hyperledger Fabric, but there aren’t as many startups working in that area. We’d like to bridge the gap,” says Ed Sim of Boldstart Ventures.

Governments are also getting interested in using blockchain for a variety of purposes from elections to land records. The Vizag conference, for example, was kicked off by the state’s chief minister, Chandrababu Naidu, who invited blockchain tech providers to participate in government projects, assuring them that all red tape would be cut to facilitate this. The transfer of land records and transactions to a blockchain-based system could curb black money and boost the state’s revenue.

So even as the early excitement around cryptocurrency and ICOs has revolved around trading and speculation, the focus is now shifting to the actual products that will be built using blockchain. We may see more ICOs coming up that are based on minimum viable products and not just whitepapers. That may need an ecosystem of mentors, incubators, and seed investors to jump-start product development before going to an ICO for later stage funding and scaling.

See: Omise rival Cashaa, one of world’s ‘top 100’ blockchain firms, launching ICO

Startereum’s Aditya Dev Sood (second from right) moderating an ICO panel discussion at the blockchain business conference in Vizag. Photo credit: Tech in Asia.

“Our model is predicated on equity participation in high growth companies. As we move forward into blockchain, that would translate into some ratio of equity and token participation for tokenizable projects,” explains Sood. “Again, there’s tremendous variation here. You have impact-oriented token projects which do not expect their tokens to infinitely inflate and grow. In such a situation your token participation is not going to be a source of growth, but the equity will be the source of growth.”

Tokens tied to some utility can pose a dilemma unlike a pure cryptocurrency token like Bitcoin. Russian startup AdHive, for instance, showcased an Ethereum-based token at the Mumbai conference. It’s used for transactions between video bloggers and native advertisers on the site. Now, in the event of an ICO and the token value shooting up, there would be an incentive to hang on to the token instead of using it in transactions, which would then have to return to the use of fiat currency. That would kill the initial purpose of creating the token.

“So they need a mechanism to counteract that by issuing new tokens under certain trigger conditions. The microeconomics of token design is to then anticipate what those trigger conditions would be for this kind of action to be taken with the consent of a majority of the community,” explains Sood.

There are many challenges ahead, including the uncertain regulatory environment for ICOs. But apart from the practicalities of helping startups navigate this space, what excites Sood are “the decentralizing effects of blockchain technologies on social economic inclusion that earlier forms of capital were fundamentally unable to do.”

He calls himself an “anthropreneur,” harking back to his PhD in anthropology at the University of Chicago before his current avatar as startup mentor. So, to him, the impact of blockchain on human culture is just as fascinating as its potential to disrupt business models.

Original Link

Brief: Fujitsu trials blockchain money transfers with Japan’s three biggest banks

Copyright: <a href='https://www.123rf.com/profile_josefkubes'>josefkubes / 123RF Stock Photo</a>

Photo credit: josefkubes / 123RF.

The news:

  • Fujitsu is teaming up with Japan’s three largest banking groups – Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group (MUFG) – to conduct a joint field trial of a person-to-person money transfer service using a blockchain.
  • The trial – which will begin in January next year and last for three months – is part of Fujitsu’s development of a blockchain-based service, including a mobile app, to securely transfer money between customers of different banks.
  • Fujitsu and the three banks will use the trial to verify that the system can link a money transfer account set up for an individual on the platform with the user’s actual bank account.

Why it matters:

  • Japan has been making its pitch to become the world leader in blockchain adoption. MUFG principal analyst Tatsuto Fujii said that the bank wants to use the technology to “open up a door to new ways of thinking about payments.”
  • Blockchain-based cryptocurrencies have become increasingly popular in the country, with the Japanese yen accounting for around a third of bitcoin trading volume by July this year. While some countries have begun to tightly control – or even ban – cryptocurrency trading, Japan has sought to regulate the industry. Earlier this month, the government approved 11 local companies to operate cryptocurrency exchanges.

Editing by Terence Lee

(And yes, we’re serious about ethics and transparency. More information here.)

About Jack

Sweltering in Singapore. Email: jack@techinasia.com Twitter: @jacknwellis

Original Link

Japan and blockchain tech are a match made in heaven

Tatsuto Fujii, principal analyst at Mitsubishi UFJ Financial Group (L), Yuzo Kano, CEO at bitFlyer (M), and Mio Takaoka, partner at Arbor Ventures (R) on stage at Tech in Asia Tokyo 2017. Photo credit: Michael Holmes Photo / Tech in Asia.

Blockchain is about a whole lot more than cryptocurrencies. But it was inevitable that digital tokens would dominate a discussion at Tech in Asia Tokyo 2017 on the impact that blockchain tech is having on Japan’s financial services industry.

It makes sense. While blockchain is seen to have significant potential applications across a wide variety of contexts – and not just within finance – bitcoin and other cryptocurrencies have been the most tangible encounter with the technology for most people.

And Japan is one country that has shown particular enthusiasm for this new paradigm. The government in Tokyo passed a law recognizing bitcoin as legal tender back in April; while just last week, regulators in the country endorsed 11 companies to operate cryptocurrency exchanges.

Speaking on stage at Tech in Asia Tokyo 2017, Mio Takaoka, partner at Hong Kong-based VC firm Arbor Ventures, pointed out that the volume of bitcoin being exchanged with Japanese yen has skyrocketed in recent months – presumably as a result of this high-level acceptance, in part at least. This trend is highlighted by research from Coindesk, indicating that Japanese buyers are becoming increasingly active on the cryptocurrency markets.

Worldwide bitcoin trading volume, January 2011-January 2017. Image credit: ‘State of Blockchain – Q2 2017,’ Coindesk.

Worldwide bitcoin trading volume, February-July 2017. Image credit: ‘State of Blockchain – Q2 2017,’ Coindesk.

More than money

Joining Takaoka on stage, Tatsuto Fujii, principal analyst at Mitsubishi UFJ Financial Group, suggested the broader potential of cryptocurrencies and the blockchain tech that underpins them could serve to boost Japan’s economy. In fact, the country’s financial services industry is trying to shift terminology in order to encourage greater adoption.

“Rather than calling it ‘cryptocurrency,’ we call it ‘digital currency,’” he explained. “We think that can open up a door to new ways of thinking about payments, and additional ways to use these digital coins.”

Tatsuto Fujii, principal analyst at Mitsubishi UFJ Financial Group, on stage at Tech in Asia Tokyo 2017. Photo credit: Michael Holmes Photo / Tech in Asia.

All speakers on stage were in agreement that the number of Japanese buying and trading cryptocurrencies was only likely to rise. One positive result of this would be greater willingness to use blockchain in settings outside of cryptocurrencies, such as banking and public services.

You never know when you’re in bubble.

The secure-by-design technology could be used to create a nationwide digital identity system for Japan along the lines of India’s Aadhaar, said panelist Yuzo Kano, founder and CEO at cryptocurrency exchange operator bitFlyer. “So for instance, when you need to move house from one place to another, you need to go to a local government office to change your address, change your details with all the utility companies, and so on,” he said. “But a central system means this can be done almost at once… Japan is quite behind in this field I think. But blockchain can make it easier.”

In the financial sphere, banks and other service providers face other obstacles to adoption. Outsiders who have visited Japan often remark on the continued use of “old-school” technology there, that has largely disappeared elsewhere in the developed world – from the persistent popularity of fax machines, to gigantic ATMs that accept passbooks and coins, but not foreign plastic. Cheques likewise remain in widespread use. “How do you get that on the blockchain?” said Fujii. “A check is usually paper – but it can be done… without damaging the culture of paying by check in Japan, we can preserve it by digitalizing it.”

The ‘B’-word

Earlier this month, JP Morgan CEO Jamie Dimon described bitcoin as a fraud “worse than tulip bulbs.” He was referring to the infamous 17th century “tulipmania” bubble in the Netherlands, which saw prices for the plant bulbs reach extraordinary highs before catastrophically collapsing – leaving many investors broke.

Yuzo Kano, founder and CEO at bitFlyer, on stage at Tech in Asia Tokyo 2017. Photo credit: Michael Holmes Photo / Tech in Asia.

It isn’t the first time that “the B-word” has been used to describe the cryptocurrency boom. Amid Japan’s growing enthusiasm for all things blockchain, Kano offered caution to would-be virtual currency prospectors. But he said that the bubble talk alone should not necessarily put them off investing in tokens – and stressed the distinction between cryptocurrency trading, and the wider world of blockchain technology.

“You never know when you’re in bubble. In the 1980s, Japan was in a massive bubble – but we didn’t realize until it burst,” he said, in reference to the massive inflation of stock and real estate prices in the country that resulted in the economic downturn of the “Lost Decade” during the 1990s and 2000s. But he added that, unlike tulips, blockchain technology is useful in a potentially massive number of context because it allows unmatched security. “So you cannot really say blockchain is the same as the tulip bubble.”

This is part of the coverage of Tech in Asia Tokyo 2017, our conference which took place September 27 and 28.

Original Link

Here are the 11 cryptocurrency exchanges approved by Japanese regulators

Bitcoins

Photo credit: lightboxx / 123RF.

Yesterday, Japan’s Financial Services Agency (FSA) revealed that it has approved 11 companies to run cryptocurrency exchanges in the country. The official endorsement of these operators comes several months after the FSA decided to take a more active role in the burgeoning cryptocurrency market.

The regulator ordered exchange operators to register with it back in April, and laid out various requirements that would have to be met for them to be allowed to continue offering exchange services.

The approved operators are:

All but one of the operators are based in Japan. China’s Bitbank is the only foreign player to receive the FSA’s endorsement so far. The agency says it is currently considering a further 17 companies for possible approval.

These are the cryptocurrencies and company-issued digital tokens that the 11 approved exchanges are able to trade at the current time:

BCH – Bitcoin Cash
BCY – Bitcrystal
BTC – Bitcoin
CICC – Caica Coin
ETC – Classic Ether
ETH – Ether
FSCC – Fisco Coin
LTC – Litecoin
MONA – Monacoin
NCXC – NCXX Coin
PEPECASH – Pepe Cash
SJCX – Storjcoin X
XCP – Counterparty
XEM – Nem
XRP – Ripple
ZAIF – Zaif
ZEN – ZenCash

The table below shows which cryptocurrencies and digital tokens are handled by each of the approved exchange operators.

Editing by Malavika Velayanikal

(And yes, we’re serious about ethics and transparency. More information here.)

About Jack

Sweltering in Singapore. Email: jack@techinasia.com Twitter: @jacknwellis

Original Link

Brief: Japan approves 11 cryptocurrency exchange operators, no plans for ICO ban

版権: <a href='https://jp.123rf.com/profile_sarawinter'>sarawinter / 123RF 写真素材</a>

Downtown Tokyo. Photo credit: sarawinter / 123RF 写真素材.

The news (extracted from Reuters):

  • Japan’s Financial Services Agency (FSA) today approved 11 companies [PDF link, Japanese] as operators of cryptocurrency exchanges.
  • The FSA has laid out various requirements for exchange operators, such as building secure systems, segregation of customer accounts, and checking customer identities.
  • Earlier this month, Japanese officials said they had no plans to ban digital token sales or initial coin offerings (ICOs).

Why it matters:

  • Japan’s stance on cryptocurrencies and ICOs contrasts with those of its neighbors. Authorities in China effectively banned ICOs earlier this month, following up with a crackdown on cryptocurrency exchanges just a few days later.
  • Earlier today, South Korea’s financial services regulator announced its own ban on ICOs.
  • Speaking on stage at Tech in Asia Tokyo 2017 earlier this week, technologist and startup consultant Daniel Saito remarked that the FSA is in the process of drafting regulations for cryptocurrency trading and ICOs, and is working on approvals for companies operating in these areas. “They are literally going through the huge list of ICOs out there, analyzing whitepapers, doing the math,” he said.

Editing by Michael Tegos

(And yes, we’re serious about ethics and transparency. More information here.)

About Jack

Sweltering in Singapore. Email: jack@techinasia.com Twitter: @jacknwellis

Original Link

Brief: South Korea will ban ICOs too

Seoul by twilight. Photo credit: aomami / 123RF Stock Photo.

The news (extracted from Reuters):

  • South Korea’s Financial Services Commission announced today it will ban raising money through all forms of cryptocurrencies – what’s known as ICO or initial coin offering.
  • The commission will hit any firm or party involved in issuing of ICOs with “stern penalties,” although details are not available.
  • The regulator arrived at this decision after meeting with the finance ministry, the Bank of Korea, and the National Tax Service.

Why it matters:

  • South Korea is the second country to outright ban ICOs after China, which cracked down on token sales earlier this month.
  • ICOs are proving very profitable for companies, with nearly US$2 billion raised through token sales in 2017 so far.
  • Regulators worldwide are still unsure how to deal with token sales. Singapore’s MAS is currently considering the issue, while the SEC in the US is putting together a “cyber unit” that will look into suspicious token sales, among other matters.

Editing by Judith Balea

(And yes, we’re serious about ethics and transparency. More information here.)

About Michael

A Greek in Asia, Michael covers startups in Singapore and beyond. Drop him a line at michael@techinasia.com or say hi to him on Twitter: @michaeltegos

Original Link

How crypto-mutual fund Astronaut aims to minimize risk in ICO investing

Photo credit: Astronaut.

In 2017 alone, nearly US$2 billion has been raised through initial coin offerings (ICOs), outpacing venture capital seed investments. If you’re one of those who want to get in on the action but don’t know where to start, you’re not alone.

Distinguishing promising and trustworthy token sales from the ones that are out to steal your money is no easy task. Participating in desired ICOs and trading tokens on exchanges can also be tedious and difficult.

These are the problems Matthew Dibb and his team want to solve through Astronaut Capital, a service that allows retail and institutional investors to participate in the growth of a variety of cryptocoins through a single token – the “Astro” token. That way, instead of investing in and conducting due diligence on each ICO separately, investors put their money in Astronaut, a kind of crypto-mutual fund.

Astronaut itself is currently holding an ICO. Its goal is to raise US$22 million, which it will use to invest in other ICOs. Whoever buys its token indirectly participates in these other ICOs and earns through:

  • Quarterly ether income distributions, which grow as Astronaut cashes in on gains from the assets under its management
  • Capital gains from trading the Astro token, whose value is aligned with the value of the fund

What will determine the success of its investment strategy is its wholly-owned cryptocurrency research arm in Singapore, Picolo Research.

Independent assessment

Picolo is a free service that basically assesses how risky an ICO is. For example, it gives a token sale five stars with a “buy” tag if it’s “a high conviction buying opportunity,” or two stars with a “risky” tag if it comes with a big risk of losing capital. Sometimes, they tag it outright as a “scam” that should be avoided at all costs. The tags and ratings are accompanied by commentaries detailing why the ICOs were rated as such and their strengths and weaknesses.

It has been operating for some time before the team stumbled upon the idea of an ICO investment fund.

Picolo, now with more than 10,000 subscribers, started out as a passion project. Last year, Dibb and some partners were trading cryptocurrencies for clients, some of whom asked for institutional-grade reports on ICOs to guide them on the best bets.

Coming from an investment background, the partners were used to that kind of work. Dibb is the director of Wise-owl, which he claims is the biggest research company for microcap stocks in Australia. These microcaps – with market valuations below US$10 million – are generally in their early stages and built on a concept you can barely verify due to scarce information in the marketplace. So making the transition to ICOs, which are very similar, was easy.

“We really enjoyed doing those ICO reports and we said this is something that the public market will probably want,” said Dibb. “We felt there was a need.”

True enough, with nothing but a couple of sample reports, Dibb and his partners launched a contact form on Product Hunt and Beta List. Surprisingly, 6,000 people signed up in a week.

Industry stakeholders we spoke with recognized the need for assessment tools in the rapidly growing ICO market.

“They will definitely play a big role,” said Julian Hosp, co-founder and president of TenX, which closed one of the largest ICOs when it raised US$80 million in a matter of minutes back in June.

“But that’s only if their research is done independently and in the users’ best interest,” he noted.

“This is quite a difficult task and a few platforms are trying to achieve it. The challenge will be bridging the gap between independence and financing, and whoever manages that in a profitable yet still unprejudiced way will win,” Hosp added.

Photo credit: cooldesign / 123RF.

Takashi Sano, venture partner at Global Brain, a Japanese VC firm investing in blockchain startups, echoed the same view. “Having more information in this market is needed and third-party opinion has value.”

There are plenty of sites that provide ICO assessment, but most of them are paid by the ICOs themselves to produce the reports, said Zach Piester, chief development officer at Intrepid Ventures, a Hong Kong-based VC that focuses on blockchain startups. “The more you spend the more favorable you look.”

That’s the problem they aim to address through Picolo, said Dibb, who is financing the service out of his own pocket. “The purpose is to be able to put out transparent, totally independent market research.”

“We have not taken any money or remuneration from companies to do our research and write our reports,” he emphasized.

Picolo’s analysts are also not allowed to participate in ICOs on a personal capacity to avoid conflict of interest. “This is part of our ‘Chinese walls’ as they are called in investment banking.”

Determining factors

Most companies launching ICOs are in their idea and pre-revenue stage. It’s nearly impossible to know which ones will survive, let alone actually take off. The recent phenomenon has also given rise to “pump-and-dump” schemes and blatant ripoffs where companies take money but fail to build the promised product.

So how does Picolo analyze risk? Again, an approach akin to covering the microcap sector, it bases its research off several fundamental and technical factors, such as the structure of the token, anticipated capital to be raised, and management and team track record – their professional background and businesses they’ve built or exited – just to cite a few.

Dibb recalled the time they put out a report about a US-based startup called Paragon, which aimed to bring transparency and standardize supply in the marijuana industry. “Their CEO was an ex-beauty queen and model who hadn’t really started a business. The company paid a whole bunch of high-profile rappers, hip-hop artists to promote it. What we did was look at the team – they’re raising millions worth of ether, are they going to be able to execute?”

They also watch out for ICOs without a maximum cap on the amount of funding they want to raise. “When we see an ICO and instead of just raising their target of US$10 million – they raise an extra US$50 million – we ask ‘what are they going to do with it and why do they need it?’ That has happened so many times,” he explained.

Astronaut has also been able to identify successful token crowdsales, such as 0x Project (ZRX), which it tagged with a “buy” at roughly $0.05. The ICO token hit as high as $0.34 and is now trading at $0.22.

Dibb’s team – the investment committee – consists of five people who come from a mixture of technical development, analysis, corporate finance, as well as private equity (PE) backgrounds. “Investment committees also exist in PE firms, family offices, etc, so we’ve sort of replicated exactly what that is and how successful that is,” he said.

Matthew Dibb. Photo credit: Astronaut.

Zooming in on security

Probably the hardest thing about the ICO market is its susceptibility to phishing scams and hacking, Dibb stated. Phishing attacks, which have stolen a combined US$225 million this year, fool investors by redirecting them to a mirrored social media or web page that replicates the official ICO. The tricked investors would then hand over their payment credentials.

“To be honest, most of the time the issue is a lack of security on the ICO’s part – they should’ve known better.”

Security is also something that Picolo looks at. The team carefully examines ICOs’ know-your-customer process to ensure “you’re not letting somebody through the door who can potentially take advantage of everybody else.” They also ring up a lot of the management teams to ask them about the level of encryption they have on their websites. “We ask who they’re using when they collect ethereum or what sort of wallet they have – if it’s a simple wallet or a multi-signature wallet.”

A way to monetize

Dibb admitted having no monetization plan upon setting up Picolo, although a few months in, his team looked at charging a yearly premium subscription for the assessment reports.

They had a lightbulb moment after conducting a survey among subscribers to gauge their level of participation in ICOs and the issues they normally face. “What we found is that they love the research they are getting, but they hated having to apply for the ICO, having to collect the tokens and move it to the exchange and manage it. That whole process could be fragmented and difficult to understand particularly for people who are not tech-savvy,” he said.

The concept of Astronaut was born. The majority or 92 percent of the funds Astronaut will raise from its ongoing token sale will be invested in ICOs and the rest will be spent for operational costs. The fund aims to secure ICO investments that provide returns of five times and more.

There’s risk in investing in Astronaut, Dibb admitted, because it’s susceptible to market ups and downs. The difference with other ICOs is that instead of creating a product where it could burn all of investors’ money, Astronaut is already set up and working. “We do not have the risk of running out of money or not bringing a product to market.”

Upon the close of the token sale, Picolo will exclusively service Astronaut and its token holders.

Fret not, Dibb said, as they will still release some reports to the public albeit a bit delayed.

With Astronaut’s fund value relying on Picolo, it gives the team more incentive to ensure that the assessment reports they are coming up with are reliable. For transparency’s sake, they will also disclose any exposure Astronaut may have in token sales in their reports.

Filtering out dumb money

With more people jumping on the ICO bandwagon – even celebrities have begun endorsing it – plus the fact that it’s largely unregulated, there are concerns that it’s turned into a bubble waiting to burst.

Dibb, however, believes that’s not the case. There’s a very big difference between the dotcom bubble in the late 90s and today’s ICOs and that is the quality of investors going into ICOs, he stated. “Most of the people going into these are quite knowledgeable – a lot of them are programmers and developers. I wouldn’t say that a lot of dumb money has come. It’s actually kind of hard to invest in ICOs if you look at the mechanics.”

All the more there is a need for third-party services that can produce deep analysis to separate the sheep from the goats.

“It’s that transparency that we need to sustain this market, for it to continue to grow and avoid a bubble, avoid new entrants coming in looking for dumb money.”

As many ICO research groups are paid and conflicted, Dibb said there’s only a few he considers competitors and one of them is US-based Smith and Crown. He wishes for there to be more. “We want more competition […] It’s the only way this huge market is going to have longevity. We can’t do it ourselves.”

Astronaut aims to close its token sale by October 25 and list on a few cryptocurrency exchanges beginning November.

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Easy money? Top token players weigh in on the ICO vs venture capital debate

Paul Kittiwongsunthorn of TenX (L), Daniel Saito of RedRobot (M), and Tech in Asia’s Michael Tegos (R) on stage at Tech in Asia Tokyo 2017. Photo credit: Tech in Asia.

The increasingly frequent headlines about sell-out initial coin offerings (ICOs) – some raising millions of dollars for startups – have inevitably led to questions about the future of venture capital. If new businesses can secure significant growth funding through digital token sales, isn’t the role of VC firms diminished? Will traditional VC investment – as some have suggested – be displaced by token crowdsales, and die out?

Singapore-based TenX closed one of the biggest ICOs yet when it raised US$80 million in seven minutes back in June. Speaking on stage at Tech in Asia Tokyo 2017 yesterday, co-founder and COO Paul Kittiwongsunthorn argued that venture capital is unlikely to be overthrown by the emergence of token sales, since the two should be seen as fulfilling different purposes.

Even if you get venture capital you still have to build your user base, and an ICO gives you that.

TenX has raised funding both through its ICO and via the more traditional VC route, and each had its own advantages. The latter stands out for the strategic benefits it brings to the table, Kittiwongsunthorn said. “If you really want to get something going, get connections, then VCs specialize in that. But what they don’t have is the ability to do is give something to the public, which gets fans, gets users,” he explained. “Even if you get venture capital you still have to build your user base, and an ICO gives you that user base. But an ICO doesn’t give you strategic investment and strategic partners.”

Community building

Token buyers are also likely to feel more closely connected to the product or service their tokens relate to. “One thing it gives you is a community, with people in it who give you feedback, criticize you – people who are both financially and emotionally into the project,” Kittiwongsunthorn said.

Daniel Saito speaking at Tech in Asia Tokyo 2017. Photo credit: tech in Asia.

Daniel Saito – director at startup consultancy RedRobot and an investor who has helped design and run several ICOs – suggested that token sales can be a boost for VC investors, and should not necessarily be seen as a source of competition for them.

“An ICO can be done in a matter of months or even minutes. And in a sense, whether you raise a million or US$80 million, there’s an influx of capital.” This cash can be useful in helping to tide the startup over until its next fundraise, and to pay outgoings like tax in the meantime.

“Your series B will probably be slightly higher because of the ICO. So it benefits the VCs as well,” Saito added. Moreover, the token sale acts as marketing mechanism, helping VC firms to shape future investment and strategy decisions.

“It is a good validation from the actual masses – the traction, they can actually have access to Slack and Telegram groups, and see the sentiment the public has for the products,” he said, in reference to the typical channels startups use to communicate with token buyers. “It gives them a feedback loop.”

Beyond blockchain

So far, most token sales have been run by companies offering services built around blockchain technology. This is not a surprise, considering the developmental relationship between blockchain and cryptocurrencies.

Nevertheless, Saito and Kittiwongsunthorn see plenty of scope for the funding format to be used in other segments too.

TenX co-founder and COO Paul Kittiwongsunthorn. Photo credit: Tech in Asia.

“Naturally if you’re a blockchain company, you know how to write the code, understand the market, understand how it behaves – so it’s natural to go into this,” said Kittiwongsunthorn. It will take more standardization of the technology and the market before companies from other areas get involved – but that’s just round the corner. “It’s quite hard to write a secure smart contract – and that’s the basis of ICO,” he said. “That’s why I don’t see many [others] do it, but I totally see that coming.”

I’ve done five ICOs, and each one is like running a presidential campaign.

Saito pointed out that we are already beginning to see the rise of blockchain technology in areas such as pharmaceuticals distribution and human resources management – and the obvious next step is for businesses in these areas to consider token sales as a way of raising additional funds and validating their models.

Not for the weary

Both Saito and Kittiwongsunthorn have experience of launching ICOs – and the message from both is that, while the process may look like a surefire way to gain funds, it is by no means easy money.

Doing this, behind the scenes there’s a lot going on – a lot of pressure,” said Kittiwongsunthorn, who compared the process to running a public company, with obligations to keep token buyers up-to-date with how their money is being used.

“I’ve done five ICOs, and each one is like running a presidential campaign, watching those real time stats coming in,” said Saito. “It’s a lot of work, and it’s not for the weary.”

This is part of the coverage of Tech in Asia Tokyo 2017, our conference taking place September 27 and 28.

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Gaming giant Nexon buys South Korean bitcoin exchange Korbit for $80m

Gaming company Nexon has acquired a 65 percent stake in South Korean cryptocurrency exchange Korbit for US$80 million at a valuation of over US$150 million, reports South Korea’s leading business news publication Hankyung, citing unnamed industry sources.

Nexon is a multi-billion-dollar giant headquartered in Japan with a holding company in South Korea called NXC. It is the biggest developer of games in South Korea, and also has a US base.

Korbit is one of the leading exchanges for trading in both bitcoin and ethereum. Investors in the exchange include billionaire VC Tim Draper and South Korea’s largest telecommunications conglomerate SK Telecom.

The deal is a boost to the cryptocurrency market which has come under a cloud with China’s ban on ICOs and scrutiny of exchanges.

See: China’s blockchain industry looks overseas as ICO blanket ban stirs fear

Despite the turmoil in China, which brought bitcoin rates down from their record high at the start of the month, interest in cryptocurrency trade and ICOs (initial coin offerings) continues to rise across Asia. Thai payments company Omise saw the US$25 million OMG tokens it released in July rise 40 times in value to US$1 billion by the end of August to become an ICO unicorn.

A number of cryptocurrency investors and advisors, as well as companies launching ICOs from around the world, gathered at the India Blockchain Week which concluded in Mumbai yesterday. Interest in ICOs as an alternative form of raising funds is rising, although the Indian government has yet to come out with regulatory guidelines on them.

See: Exclusive: Omise rival Cashaa, one of world’s ‘top 100’ blockchain firms, launching ICO

ICOs and blockchain are among the hot topics being discussed at the Tech in Asia conference in Tokyo today and tomorrow. One of the speakers this afternoon is Yuzo Kano, CEO and founder of Japan’s leading cryptocurrency exchange bitFlyer. Here’s the conference agenda for easy reference.

Editing by Eva Xiao and Malavika Velayanikal

(And yes, we’re serious about ethics and transparency. More information here.)

About Sumit

A lover of startups and tech, food and travel, cricket and books. Senior Editor with TIA. Mail me at sumit@techinasia.com or tweet me @chakraberty

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Exclusive: Omise rival Cashaa, one of world’s ‘top 100’ blockchain firms, launching ICO

Cashaa is a peer-to-peer payments and remittances startup headquartered in the Level 39 Accelerator in London, with its tech team in Mumbai. It’s now registered in Estonia for the launch of its ICO on October 31. The dissolving national boundaries in its footprint is typical of the blockchain technology underpinning Cashaa.

CEO and founder Kumar Gaurav, currently based in Palo Alto, USA, tells Tech in Asia that the pre-ICO activity of bringing in influential investors is starting next week, ahead of the public launch. Cashaa will release 510 million CAS tokens for 150,000 ETH (the cryptocurrency ethereum), says Gaurav. At the current price of ethereum, that would amount to US$44 million.

Unlike many ICOs based on whitepapers, points out Gaurav, Cashaa has a proven product for remittances or money transfers between England and India, as well as Nigeria and Indonesia. It also has a digital wallet and acts as an exchange for cryptocurrency.

The legal preparation for the ICO has taken months and cost hundreds of thousands of dollars… That’s worth it to protect our reputation.

The way its remittance works does not require users to know anything about cryptocoins. They can simply use their national currency to transfer money. A trader on the platform sells bitcoin in exchange for the fiat currency in the country where the transfer originates. Another trader in the receiving country buys the bitcoin, paying for it in the local currency there. This goes to the receiver, who need not know that a bitcoin trade powers the money transfer and exchange rate.

This can bring the power of cryptocoins to 99.99 percent of the people in the world who have no clue about them, says Gaurav. It reduces the cost and time taken for remittances by banks. That’s huge for countries like India and Indonesia with a large diaspora across the world sending money home.

Other companies like Ripple, which connects banks with its private blockchain network, are also trying to use cryptocurrency to reduce the cost of money transfer. One difference with Cashaa is that it will be crytocoin agnostic to improve liquidity, explains Gaurav, unlike Ripple which mainly works with its XRP token.

The money it raises from the ICO will help Cashaa get licences in more countries to increase its remittance channels. But remittances is just the first large use case to demonstrate the value and robustness of the underlying blockchain technology, explains Gaurav. Post-ICO, Cashaa will expand its repertoire to become a broader blockchain-based financial services platform, with products for lending, cross-border investments, and more. The CAS token can be used to execute a trade on the Cashaa platform.

A la Omise coin

The closest to this business model is Thai payments startup Omise that launched an ICO in July to build an ethereum-based OmiseGo product for peer-to-peer payments and money transfers. OmiseGo is expected to be launched in the next quarter.

By the end of last month, the value of the US$25 million worth of OMG token had risen forty-fold to cross US$1 billion, making Omise an ICO unicorn.

Cashaa will be hoping that its CAS token sees a meteoric rise like Omise’s, and not the fate that has befallen many ICOs in China where they were banned earlier this month.

Gaurav welcomes the regulatory scrutiny, provided it doesn’t throw the baby out with the bathwater. He reiterates that Cashaa has a working product with over 12,000 users even before the ICO. Some token crowdsales in China have been get-rich-quick schemes based only on dubious whitepapers, or rushed attempts to hop on the ICO bandwagon that has raised nearly US$2 billion in the past six months.

See: China’s blockchain industry looks overseas as ICO blanket ban stirs fear

One reason why he shifted to the US was to make the CAS token – which will represent Cashaa products and not its equity – legally airtight. The holding company for the ICO is in Estonia, which is more advanced and open-minded in adopting and regulating blockchain and cryptocoins than most other countries. “The preparation for the ICO has taken months and cost hundreds of thousands of dollars,” says Gaurav. “But that’s worth it because we have a reputation to protect as an early adopter and evangelist of blockchain technology.”

Cashaa is currently ranked 60th in a leaderboard maintained by UK-based Rise on the top 100 most influential blockchain companies in the world. Gaurav also figures in an algorithmically generated Richtopia list of the top 100 most influential people in the cryptosphere.

The ICO autobahn

A number of startups in India are weighing the pros and cons of taking the ICO route to raise funds. For Gaurav, the choice was both philosophical and practical. Cashaa was seed-funded and founded in 2016 to demonstrate the power of blockchain technology in real-world use cases, so it’s a natural extension to now raise money with digital coins. The practical side of it is that Gaurav and his co-founders can continue to build the company without diluting their equity or having VCs calling the shots.

Gaurav had earlier founded Darwinsurance, a peer-to-peer insurance platform in Italy after completing his master’s in business management in Milan. This was acquired by Esedra.

His co-founder Celestine Vettical had founded Performix, acquired by Baker Hughes. He had earlier held senior positions at Microsoft, SAP, and Cognizant.

Another co-founder Janina Lowisz is also the co-founder of Bitnation, which characterizes itself as a decentralized nation on the blockchain. The fourth co-founder Felice Covelli is a financial asset manager and a bitcoin pioneer in Europe.

See: Everything you wanted to know about initial coin offerings but were afraid to ask

Cashaa lists MIT research scientist John Henry Clippinger among its advisors. He was also the advisor for Bancor, which raised US$153 million in an ICO in June – the largest ever token sale until then. It was overtaken the next month by a US$185-million token sale by Chinese company Block.one.

Other advisors include Bernard Lietaer, creator of the Euro and author of The Future of Money, as well as Kumar Gaurav’s younger brother Akash Gaurav, who founded blockchain company Auxesis in 2015 during his undergrad studies at premier engineering college IIT Bombay.

Auxesis is building the blockchain infrastructure for a variety of clients, including state governments in India looking to use distributed ledgers for things like land records. For Cashaa, it has built the core private blockchain network, taking care of performance, scalability, and security.

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They want to bring cryptocoins to the ‘unbanked’

Claude Eguienta (left) with fellow co-founder Paul Neuner. Photo credit: Telcoin.

A few years ago when we were all first getting used to the idea of bitcoin, many of us were imagining that there’d be one digital currency to rule them all – a kind of borderless millennial moolah, a global groat for a global village.

But it’s not working out like that.

There were more than 900 cryptocurrencies floating around the planet midway through the year, with a jumble of serious and weird names (InsaneCoin. Cabbage. VGINA). And now here’s another one: Telcoin.

Why should anyone care? Will this be the last you ever hear of Telcoin?

Its creators, Claude Eguienta and Paul Neuner, think it’ll have staying power because it’s not just another cryptocoin get-rich-quick scheme for early buyers – it’s a genuinely useful thing that could be adopted by countless people, particularly those without bank accounts.

Helping people send money home is a good first step.

Their digital coin is starting out with a focus on online remittances, transfers, and payments – great for those who are just getting into the swing of online shopping but don’t have credit or debit cards, and for people who need to send part of their wages to family.

“Money transfers are a big market where the biggest players still control most of the market share because of their reach and branding. We see disrupting this state as a perfect application for a currency available worldwide,” says Claude Eguienta, Telcoin co-founder and CEO. “We also believe that if we want to solve financial inclusion, helping people to send money home is a good first step.”

mobile money, Kenya, woman on phone

A woman in front of an ad for Kenya’s M-Pesa mobile money system. Photo credit: WorldRemit Comms.

Around 2.5 billion of the world’s adults don’t use banks or microfinance institutions to save or borrow money, according to a McKinsey report. Nearly 1.5 billion of those are in Asia. And yet nearly 5 billion people have mobile phones.

Tapping the phone companies

To get Telcoin off the ground, the experienced duo – Eguienta’s last startup focused on the blockchain; Neuner has a background in telecoms, security, and fraud management software – is tapping into the huge reach of mobile network companies.

So they’re making the unusual move of distributing their global groat to telcos, who can then offer it to their subscribers for use in transfers and payments.

This might prove to be effective in developing nations, where people tend to rely more on telcos than tech giants.

And Telcoin is designed to work with any mobile wallet app – so long as apps add in support for it – so that the digital coin should be easy to convert into cash or mobile money to buy, say, groceries on the streets of Kathmandu.

“In the developing world, where most telcos provide mobile money which is a good equivalent to cash, we will allow for instant exchange to mobile money,” Eguienta says. “One of the reasons why we are starting with remittances is that as most of the transfers go from the developed world to the developing world, cashing out will be very simple for most of those users who want to.”

notes, coins, cash, cashless, currency

Not yet cashless in Vietnam. Photo credit: Niels Steeman / Unsplash.

It’s not meant to replace whatever mobile money system a telco might’ve already set up. Indeed, the mobile wallet and the cryptocoin can work in sync.

“The majority of global remittances go to countries where mobile money exists and is commonly used, but last year mobile money was involved in less than one percent of the US$500 billion worth of remittances,” Neuner tells Tech in Asia. “There is a clear opportunity for telecoms to be involved in a larger share of the remittance market, and Telcoin will help them do this.”

ICO on the horizon

Telcoin, based on the Ethereum blockchain, is set for an ICO on October 30 which will raise an anticipated US$25 million for the young startup. Or maybe more. “[It’s] a target, and not a cap,” points out Eguienta.

“It might sound large compared to a seed round, but we have a team, a sales channel, and a product, and we do not want to go back in fundraising mode in 18 months,” he adds.

Indeed, its fundraise is in line with this year’s boom in ICOs that’s seen startups raise US$1.4 billion from January to July by issuing their own digital coins to folks like you and I.

Eguienta and Neuner have also secured some cash from a VC – an undisclosed amount from Tech in Asia backer East Ventures, which Neuner describes as “a strategic partner more than a financing source.”

With all that ammunition from the ICO, the duo can focus on establishing the telco partnerships that’ll get Telcoin into people’s phones.

Telecoms companies are not exactly known for their innovation, which is why the entrepreneurs think they’ll be keen to get a leg up from a startup. Telcos tend to have issues with “user experience, international interoperability, fast-paced software development, and ability to take risks in a competitive environment,” says Neuner. Therefore a startup “like ours can help mitigate” those problems.

Eguienta agrees, seeing that telcos can branch out successfully when they make an online service that’s easy to use.

“I think it’s interesting to compare the success of telco-led mobile money in Kenya with the failure of bank-led mobile money in Nigeria,” says the CEO. “This is not a trust issue or cultural issue – people simply want a seamless experience. If Telcoin can help make mobile money more usable, people will use it.”

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Blockchain Applications with Mike Goldin

Cryptocurrencies are not only a financial instrument–they are a new platform for building applications. The blockchain allows for new solutions to digital property management, micropayments, hedge fund incentives, and ad fraud.

The cryptocurrency platforms with the most traction are Bitcoin and Ethereum. Bitcoin has no central leader and is going through some growing pains with governance issues. Ethereum is led by the charismatic Vitalik Buterin.

Bitcoin and Ethereum are not competing instruments. They fulfill different technical purposes. Under current conditions of algorithm development and network infrastructure, neither Bitcoin nor Ethereum can accomplish the dreams that will one day be realized, because of the problem of distributing transaction information across nodes in the system.

If we compared cryptocurrencies to the Internet, we would not even be in the days of dial-up yet.

ConsenSys is a venture production studio that is working on several projects within the blockchain space. Mike Goldin is a software developer with ConsenSys and joins the show to talk about blockchain applications in 2017–where we are and where we are going. It was a wide ranging conversation and I hope to have Mike back in the future so we can go deeper on some of the topics we glossed over.

Transcript

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Bitcoin with Andreas Antonopoulos

Andreas Antonopoulos is a bitcoin researcher, journalist, and evangelist.

Questions

  • What are the taboo topics within the bitcoin community?
  • What do you think of when people say “we know bitcoin is the first real cryptocurrency, but the big question is whether it will be the last”?
  • Were grey markets previously underserved before bitcoin?
  • What is at the intersection of big data and bitcoin?
  • Are distributed systems more about technology or philosophy?
  • What are some tips for bitcoin evangelism?

Links

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