Blockstream has released a full node and wallet client for its newly released Liquid, along with a fresh-out-the-box block explorer to monitor transactions and other data on the sidechain.
With a mission to establish “an inter-exchange settlement network,” Liquid was launched last month. The platform is a sidechain built out of Bitcoin’s mainnet that allows its users to swap bitcoin 1:1 for a token on Liquid’s sidechain (L-BTC).
“Liquid is mostly for traders to move assets between exchanges or store in trading wallets ready to quickly deposit to exchanges. The advantage of Liquid is it is faster to deposit and move assets, and time is very much money for cross-exchange trading,” Blockstream CEO Adam Back told Bitcoin Magazine.
Now, in what Back called “the next step” of Liquid’s development, anyone can participate in the sidechain’s network. Running a Liquid full node will let any user “trustlessly self-validate the chain just like they can with the Bitcoin network,” the official announcement reads. The release also comes with a wallet client for holding Liquid assets like L-BTC.
With the full node, the command line utilities give full-node operators free range to issue assets on Liquid, send and receive assets and broadcast information about the state of the sidechain.
In addition to these baseline features, Liquid also leverages anonymity features that Bitcoin does not support. The sidechain’s confidential transactions give users the option to obscure their transaction amounts, and confidential assets hide transacted assets from everyone on the network except the recipient and sender.
To coincide with the new releases, Blockstream has also launched its own block explorer to accommodate Liquid. This extended functionality lets users search data on the Bitcoin mainnet, testnet and the Liquid sidechain, and it also includes a search function to track peg-ins and peg-outs between the Bitcoin and Liquid networks.
“Overall we are very pleased with the level of interest in liquid both from the technical developer and power user community and exchanges, and institutional traders, but there is much more to do so it will be a busy time for blockstream over the next period,” Back said to Bitcoin Magazine.
Staying busy, Blockstream’s forthcoming additions to Liquid’s ecosystem include new assets, a GUI wallet release, further exchange integrations and hardware wallet support for Liquid assets on Trezor and Ledger devices. With these additions, Back believes Liquid “will become more accessible.”
This article originally appeared on Bitcoin Magazine.
Blockchain will be airdropping approximately $125 million worth of Stellar lumens to its users, in conjunction with the Stellar Development Foundation. This marks the largest airdrop in cryptocurrency history.
Those interested in taking part must possess a Blockchain wallet and be willing to verify their identity. The first group of customers is set to receive their lumens sometime this week at no charge. Stellar is Blockchain’s first airdrop partner since it launched its official “Airdrops Guiding Principles” framework last month.
Jed McCaleb, co-founder of the Stellar Development Foundation, believes airdrops can be powerful tools when it comes to building the crypto ecosystem and boosting mainstream adoption.
“We believe airdrops are central to creating a more inclusive digital economy,” he said. “Giving away lumens [XLM] for free is an invitation to communities to design the services they need. Our hope is to eventually have global citizens own and use lumens in both developing and developed economies. By working with Blockchain to increase the availability and active use of lumens on the network and leveraging their almost 30 million wallets, we will increase the network’s utility by many orders of magnitude.”
CEO of Blockchain Peter Smith explained what attracted his company to Stellar. “We were looking for a protocol and network built for scalability with an active and rapidly growing ecosystem,” he said. “Stellar was a clear frontrunner, and we’re excited to be working with their world-class team.”
As part of the airdrop, Blockchain is looking to partner with several additional enterprises including the non-profit fundraising software Network for Good, Stanford’s emerging tech initiative and the online computer science education system Code.org. Blockchain says it will release the details of these partnerships in the coming weeks.
Blockchain has aided millions of companies and individuals in both developed and third world nations to get their hands on digital assets. Recently, the company raised over $70 million in a funding round led by Lightspeed Venture Partners and Google Ventures.
Stellar is a distributed ledger network that permits multiple assets and currencies to be digitally transferred, issued or exchanged online. The system boasts a built-in order book, network token and pathfinding algorithm, allowing assets to move more easily between sending and receiving parties.
This article originally appeared on Bitcoin Magazine.
Tether Limited is back in the news; this time, it has confirmed a banking relationship with a financial institution based out of the Bahamas. The issuer of the controversial USD-pegged stablecoin tether (USDT) announced its partnership with Bahamas-based Deltec Bank & Trust Limited. Tether went a step further by publishing an attestation letter from the bank, showing evidence of its reserves.
In a blog post on its website, Tether stated that Deltec accepted it as a client after a “due diligence review” was carried out, which included an assessment of the company’s ability to maintain its $1 peg, which slipped last month.
The post went on to add:
“This included, notably, an analysis of our compliance processes, policies and procedures; a full background check of the shareholders, ultimate beneficiaries and officers of our company; and assessments of our ability to maintain the USD-peg at any moment and our treasury management policies.”
In an attempt to assure the market of its reserves, Tether also published a letter, purportedly from Deltec, confirming Tether’s reserves with the bank to be $1,831,322,828 as of October 31, 2018 — which is enough to back the remaining 1.78 billion USDT in circulation, as Tether had withdrawn over $1 billion worth of tokens since the beginning of October.
The letter also stated that the confirmation was made “without any liability, however arising, on the part of Deltec Bank & Trust Limited, its officers, directors, employees and shareholders” and that it is “solely based on the information” provided to the financial institution.
When it comes to its reserves, Tether has a history of publishing reassuring statements from credible third parties, but it has so far failed to provide an actual audit.
In June 2018, it tasked a former FBI director’s law firm, Freeh Sporkin & Sullivan LLP, to vet its finances. The law firm said it was confident that Tether had enough in its reserves to back the tokens in circulation as of June 1, but added a caveat that the work it did was “not for the purpose of providing assurance.”
At press time, Tether is currently trading at $0.992952 and there are over 1.7 billion tokens in circulation, according to CoinMarketCap.
This article originally appeared on Bitcoin Magazine.
On October 24, 2018, an advisory committee to the Internal Revenue Service (IRS) published a report calling for clarity on the IRS’s position toward cryptocurrency taxation.
The Information Reporting Program Advisory Committee (IRPAC) recently released its annual report advising the IRS on possible areas to improve the tax code, specifically referring to data gathered throughout the fiscal year of 2018.
In this 95-page report, multiple sections are dedicated to the issue of cryptocurrency taxation, with the IRPAC specifically recommending “that the IRS issue further guidance on the information reporting and withholding implications of cryptocurrency transactions.”
Cryptocurrency tax policy has been a headache for investors, as the IRS regards each trade as a taxable event akin to realizing gains on an investment. Perhaps due to the abstruse nature of the tax code and the inherent complexities that come with reporting each trade, few investors reported their gains for the 2017 tax year.
In the report’s overhead, the IRPAC specifically credits the IRS’s Notice 2014-21 for acknowledging that virtual currency is still treated as property in the eyes of the federal government’s capacity to levy taxes.
Nevertheless, the report claims that the rise of cryptocurrency has raised further questions about the tax regulations around the nascent asset class, including whether or not cryptocurrency is a specified foreign financial asset or if crypto transactions must follow the guidelines of broker reporting.
The report cites research from Fundstrat Global Advisors in April, which estimates that there are $25 billion in tax liabilities within the United States. The report goes on to state that “because transactions in virtual currencies can be difficult to trace and have an inherently pseudonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.”
Needless to say, such a large potential source of taxable income would be of great interest to the IRS, and the report goes on to detail several “general tax principles” that apply to property transactions, stating that these would logically apply to crypto asset transactions as well.
The report concludes the cryptocurrency section by referencing the court’s attempts to enforce a summons on Coinbase, and how this could form a useful precedent for dealing with crypto asset holders that wish to avoid federal tax agents, stating that “IRPAC would be very interested in helping develop information reporting and withholding guidance on these important issues.”
This article originally appeared on Bitcoin Magazine.
Utility billing and payment services provider Novatti is launching a new Australian dollar (AUD)-backed stablecoin known as the Novatti AUD Utility Token on the Stellar Network.
As the platform’s tokens are tied to Australian dollars, all units in circulation will have an equal, matching reserve of AUD, allowing investors to use the currency freely without having to worry about price fluctuations.
Novatti will hold the coin’s dollar reserves through the company’s licensed subsidiary, Flexewallet Pty Ltd., which is also registered as a remittance network provider with the Australian Transaction Reports and Analysis Centre (AUSTRAC). The service is currently in beta but is scheduled for an official launch on November 19, 2018.
This is the second stablecoin to be tied to AUD, the first being Emparta. The blockchain employment platform recently formed a partnership with Bit Trade, one of Australia’s oldest digital currency exchanges, and announced they would design and launch the stablecoin sometime in 2019.
Bit Trade’s managing director Jonathon Miller commented that the currency will act as a “buffer” against the price swings commonly associated with digital entities like bitcoin and ether.
“Stablecoins solve one of the principal issues that may drive investors seeking steady returns and merchants that currently accept traditional currency away from digital currencies: volatility,” he said. “We believe stablecoins will boost trust, accelerate widespread adoption, and could function as the backbone of blockchain-based financial applications, especially here in Australia given the favorable regulatory environment.”
Per the official press release, “Novatti will be the first AUD anchor on the Stellar Network.” On Stellar’s blockchain, anchors act as token-fiat bridges, allowing the entities that run them to issue tokens in exchange for fiat currencies.
“As an anchor to the Stellar Network, Novatti will accept inbound payments, process withdrawals and transfers, and initiate transactions for any KYC’d consumer or enterprise who seeks to transact via a Novatti user-facing platform or portal.”
Stellar has played host to several different projects of late, including cryptocurrency trading platform Stronghold. Recently, the project launched its own stablecoin known as Stronghold USD via the Stellar Network through a collaboration with IBM Blockchain. Each coin is reportedly worth one U.S. dollar, while units are stored in an account with Nevada-based banking institution Prime Trust.
Co-founder and CTO of Stronghold Sean Bennett explained, “The process for seamlessly managing and trading assets of any form from digital to traditional currencies needs to evolve as financial institutions are seeking ways to break into new asset classes like cryptocurrencies. Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money.”
Stablecoins have grown in popularity in 2018, as several new projects have either been announced or launched in the latter half of the year. Recent additions to the stablecoin community include kUSD, TrueUSD, Gemini USD, the Paxos Standard and USD Coin, a product of Goldman Sachs-funded trading platform Circle and Coinbase.
This article originally appeared on Bitcoin Magazine.
Coinbase has secured approval from New York state regulators to act “as a limited purpose trust company” in the state, a press release reveals.
According to the release, the New York Department of Financial Services (DFS) has officially signed off on an application for the Coinbase Custody Trust Company, a subsidiary of Coinbase Global, Inc. With the approval, Coinbase is now authorized to provide custody services in the state of New York for bitcoin, ethereum, bitcoin cash, litecoin, ethereum classic and XRP, the last of which is the only cryptocurrency not yet listed on Coinbase’s platforms.
“The New York State Limited Purpose Trust charter, which now enables Coinbase Custody to act as a Qualified Custodian for crypto assets, builds on our unparalleled success as a crypto custodian while holding the company to the same exacting fiduciary standards and oversight of other, mature financial institutions operating in New York. We applaud the leadership Superintendent Vullo has shown to guide the responsible growth of the cryptocurrency ecosystem and look forward to working with their offices in the future,” Asiff Hirji, president and COO of Coinbase, commented in the press release.
Coinbase’s institutional-grade cryptocurrency custody services went live in July 2018. The services were part of a larger push to appeal to accredited investors, which included the now defunct Coinbase Index Fund. In June, the exchange also announced that it was pursuing a broker dealer license from the U.S. Securities and Exchange Commission, something that would allow it to list approved securities tokens if approved.
DFS first approved Coinbase’s Money Transmitter and Virtual Currency licenses in January of 2017. To date, the New York regulator has issued eleven charters and licenses for cryptocurrency companies in the space. Back in April, the DFS sent inquiries to 13 top exchanges to survey their operations and gauge their use among New York investors. A handful of exchanges didn’t responded, including Kraken, whose CEO Jesse Powell took issue with the practice.
A busy week thus far for Coinbase, the exchange announced earlier today that it has integrated USD Coin, a fiat-collateralized stablecoin that it developed with Circle through their joint blockchain consortium CENTRE.
This article originally appeared on Bitcoin Magazine.
Coinbase is integrating its first stablecoin, joining other top exchanges in what has become a listing race to add Tether’s rising competitors.
As detailed in an October 23, 2018, blog post, Coinbase has added support for Circle’s USD Coin (USDC). Starting today, U.S. Coinbase users — with the exception of those in N.Y. state — can buy and sell the stablecoin through Coinbase.com, the company’s primary platform. All users in “supported jurisdictions” can also send and receive the coin, and the announcement details that trading for other “geographies will be available in the future.
Trading on Coinbase Pro, Coinbase’s spot exchange, will commence “in the coming weeks” according to the post.
USD Coin was first introduced by digital payments company Circle shortly after it purchased the Poloniex exchange. The stablecoin, which is fiat-collateralized, was developed by the Centre Blockchain Consortium, an entity that Coinbase co-founded with Circle.
“The underlying technology behind the USDC was developed collaboratively between Coinbase and Circle, in our capacity as partners and co-founders of the new CENTRE Consortium,” the blog post reads.
The blog post claims that a “blockchain-based digital dollar” is a more efficient alternative to traditional banking and is “an important step toward a more open financial system.” As an ERC-20 token built on the Ethereum standard, the post continues to explain that USDC is compatible with most decentralized applications on Ethereum.
2018 has seen a steady influx of stablecoin projects. As new products flood the market, exchanges like Huobi and OKEx have been quick to add the most notable of these. In the company of USDC, these other stablecoins (TrueUSD, GeminiUSD and the Paxos Standard) are seen as more transparent, regulator-friendly alternatives to tether, whose market dominance has been waning in the wake of all the competition.
This article originally appeared on Bitcoin Magazine.
Fresh on the market, the industry’s newest batch of stablecoins is having trouble striking a price balance.
Amidst news of listings on Huobi and OKEx, two of the industry’s largest exchanges, TrueUSD (TUSD), Gemini USD (GUSD), the Paxos Standard (PAX) and Circle’s USD Coin (USDC) have all risen well above their pegs. Following the fiat-collateralized model pioneered by Tether (USDT), these stablecoins are meant to retain a stable $1 value, keeping their peg by backing each on-chain token with a dollar in their bank accounts.
On October 15, 2018, OKEx announced its immediate support of the four previously mentioned stablecoins, putting them in the company of tether, previously the platform’s only stable asset. Huobi, which also supports tether, followed suit the next day, announcing that it would open deposits for the four on October 19, 2018, with trading support to be announced at a later date.
On the same day as its OKEx listing, TUSD, the oldest and most established of the newcomers, rose to a high of $1.10. Settling down a bit, the coin has fallen since, but, at $1.03, it hasn’t completely stabilized.
Currently trading at $1.02, PAX mimicked TUSD’s price movements down to the cent, jumping to $1.10 on October 15, as well. USDC climbed higher at $1.11 on the same day before coming back down to $1.02.
Gemini exchange’s GUSD, though, had the worst go of it. During the OKEx listing, the coin rose 14 percent above its peg to $1.14. But it even trumped this price rise a day later when it jumped to $1.20 on October 16, 2018, following news of its forthcoming Huobi listing.
These new exchange listings and the subsequent price rises of the assets in question point to the market’s swelling demand for stablecoins, a story their issuance and circulation data makes clear. For example, since it was first listed on CoinMarketCap, TUSD’s market cap and circulating supply has grown 23 fold from $6.4 million to over $139 million. Coming to market roughly half a year after TUSD, PAX is catching up to tether’s number one competitor, minting just over $50 million worth of tokens in the month following its launch.
These price rises appear to have been isolated incidents involving only those fiat-collateralized stablecoins that are experiencing new exchange listings. Crypto-collateralized coins like MakerDAO’s Dai (DAI) and Bitshare’s BitUSD (BITUSD) did not experience the same upward price action.
This isn’t surprising given that each of the four coins were in the limelight for their integrations into two of the industry’s biggest exchanges. But the market’s leading stablecoin’s own stability woes might have a hand in the four’s price leaps.
In the early morning of October 15, a market-wide sell-off sent tether’s peg downward, driving prices to an average low of $0.92 on CoinMarketCap. It continued to trade well below its peg for the remainder of the day, and, on Bittrex, it even bottomed out to $0.90 against its USD pair.
Its peg disrupted, tether’s discounted price distorted prices across the market, as bitcoin began trading at a premium on exchanges that use USDT as a dollar denominated trading standard. Calling it a premium, though, is somewhat misleading, as bitcoin’s actual USD rate was a few hundred dollars lower than its rate against tether. In other words, the demand that was driving bitcoin’s price rise against tether would not hold its value when trading for hard cash, indicating that, instead of bitcoin trading at a more valuable position, tether was actually trading at a less valuable position.
The same effect, in part, could be at play with these four stablecoins’ appreciations. TUSD, for example, has pairs with USDT across multiple exchanges, including Binance and Bittrex, and USDT’s depreciating value could have buttressed TUSD’s own in these markets. PAX has a significant number of USDT pairings too, the largest market coming from Binance. GUSD has a single USDT trading pair on Bibox, though the volume on this pair is too negligible to effect its market averaged rate. USDC features a single trading pair with ether on Poloniex, its native exchange.
Given that Gemini saw the most violent upswing of the four and its USDT pair only accounts for a fraction of its 24-hour volume, tether’s influence could very likely be minimal. In addition, the ripple effect of tether’s distortion of bitcoin and ethereum prices — the two coins most often traded against stable assets — could be a contributing factor, as well.
At any rate, the broken pegs and contingent exchange listings indicate a rising demand for new stable assets. With roughly $600 million shaved off from its market cap during its price drop, the market-wide tether sell-off reveals that the market’s appetite for alternatives is growing. In the case of TUSD, GUSD, PAX and USDC, these alternatives offer more transparency and regulatory protections in areas where Tether has failed to deliver, and the drama that has punctuated the last two days in the market could foreshadow Tether’s waning industry dominance as competitors continue to encroach on its market share.
This article originally appeared on Bitcoin Magazine.
Huobi Global has announced its decision to list four USD-pegged stablecoins by the end of the week.
In a support notice published on its platform, the company noted that users will be able to make deposits for Paxos Standard Token (PAX), True USD (TUSD), Circle’s (USDC), and Gemini exchange’s (GUSD) on its exchange starting from Friday, October 19, 2018 (GMT +8).
That was as much detail as the exchange revealed, as it says further information for when trading would start on the exchange will be announced at a later date. Huobi is the fifth largest digital currency exchange and is currently the ninth largest market for Tether, according to data from CoinMarketCap.
Huobi becomes the latest top 10 crytpocurrency exchange to add new stablecoins as uncertainty continues to mar Tether’s market reputation. OKEx took the same step by adding the aforementioned tokens to its listed assets yesterday. Tether, the world’s largest stablecoin, lost its peg in the early hours of October 15, 2018, causing major price discrepancies between bitcoin’s BTC/USDT and BTC/USD trading pairs across the market.
While uncertainty persists regarding Tether’s USD holdings, Leonardo Real, Tether’s chief compliance officer, in an email response to CNBC, believes the current happenings in the market are no cause for alarm.
“We would like to reiterate that although markets have shown temporary fluctuations in price, all USDT in circulation are sufficiently backed by U.S. dollars (USD) and that assets have always exceeded liabilities,” he added.
At press time, Tether is trading at $0.98, tied to bitcoin trading pairs. Against the USD on Kraken and Bittrex, it is trading at $0.95 and $0.96, respectively.
This article originally appeared on Bitcoin Magazine.
Crypto-to-USD lender BlockFi has announced that it will support loans backed by both Litecoin and Gemini’s recent stablecoin token GUSD. This is the first time the company is expanding to accept collateral in one of the crypto industry’s top-10 assets besides bitcoin and ether. In addition, BlockFi is also the first crypto-backed lender to support loans backed by GUSD.
Founded in 2017, BlockFi offers both debt and credit products and seeks to bring liquidity to the cryptocurrency space. Based in New York, the company operates in over 40 states and is backed by some of the country’s leading financial firms including PJC and ConsenSys Ventures, as well as Galaxy Digital Ventures LLC, which provided the company with nearly $53 million in capital during a funding round in July 2018. This marked the first investment into crypto-backed loans from an institutional enterprise.
Zac Prince is the company CEO. Speaking with Bitcoin Magazine, he said that BlockFi’s acceptance of Litecoin was a “logical first step” toward supporting most — if not all — of the world’s top 10 cryptocurrencies.
“Litecoin was recently added to Gemini and has a long history of price appreciation,” he commented. “Having large, imbedded capital gains is one of the motivating factors for considering a loan backed by crypto. Litecoin also has strong liquidity with USD pairs in multiple trading venues.”
With the addition of GUSD, BlockFi can offer loan options to customers outside the standard business hours of 9-6 through an option that isn’t cash related. Speaking with Bitcoin Magazine, BlockFi’s director of customer operations, Abbey Young, explained, “Most banks have an outgoing wire cutoff time of 5:30 p.m. EST, so we can only send funds between the hours of 9 a.m.-5:30 p.m. EST during the week. However, if a client would like to be funded in GUSD, we can deposit those funds at any time, like weekends or after 5:30 p.m. EST.”
Gemini announced the coin back in September 2018 as an ERC-20, asset-backed token on the Ethereum network. It is supported by USD in a formal bank account where the GUSD deposit balance is examined monthly by public accounting firm BPM, LLP.
“Customers can apply [for funds] in less than two minutes,” Prince said. “The team will then evaluate the application and respond within one business day. Once accepted, the customer sends their crypto to a unique wallet address we generate for them. Then, we send them their funds. With USD, we wire the money directly into their bank account. For our GUSD customers, we can send it to any wallet address they like. This entire process often happens in as few as 90 minutes.”
The company is now designing plans that would enable more lending products supported by an assortment of differing cryptocurrencies to provide further, timely liquidity across the global crypto scene.
“We believe that the crypto asset market will continue to grow, and we are attracted to the promise of being able to deliver financial services on a more equitable and global scale rather than traditional systems,” Prince said.
This article originally appeared on Bitcoin Magazine.
Digital assets platform OKEx has added four stablecoins to its listed assets.
According to a support notice published by OKEx, the Hong Kong-based cryptocurrency exchange says that TrustToken’s TrueUSD (TUSD), Circle’s USDCoin (USDC), the Gemini Dollar (GUSD) and Paxos Standard Token (PAX) are now live on the platform. These four will join Tether’s USDT, the only stablecoin listed on the exchange prior to this announcement.
With the addition of these assets, OKEx now features more stablecoins than any other cryptocurrency exchange.
TUSD, which was launched in March 2018, is currently trading on popular exchanges Bittrex, Digifinex and Binance. In addition to this, other newcomer, fiat-collateralized stablecoins USDC, GUSD and PAX came to market last month. Circle’s USDCoin is available on Poloniex, the exchange acquired by Circle earlier this year and on South Korean Hanbitco and Everbloom.
Paxos, which issues and redeems PAX tokens one-to-one against the U.S. dollar, trades on Binance, while the Winklevoss’ GUSD is available on its native Gemini exchange, HitBTC, Bibox, LATOKEN and others.
OKEx, the second largest global exchange by volume according to CoinMarketCap, will start accepting deposits for the four new listings today, October 15, 2018, at 09:00 UTC. The digital asset platform will begin spot trading for the token pairs against bitcoin and tether tomorrow, October 16, 2018, at 06:00 UTC.
The listing of these tokens comes on the heels of tether (USDT) losing its peg, falling by as much as 8 percent against the dollar on October 15, 2018. At press time, Tether is trading at $0.96, according to data from CoinMarketCap, though Kraken has the coin trading at $0.92 against its USD trading pairs.
Confidence in the most popular stablecoin had been falling over the perception that Tether, LLC, the distributor of tether, doesn’t hold enough reserves to fully back all the USDT in circulation. In the meantime, other stablecoins have begun encroaching on Tether’s market dominance.
This article originally appeared on Bitcoin Magazine.
Tether’s peg is slipping, and an exchange-wide firesale has led to major price discrepancies between bitcoin’s BTC/USDT and BTC/USD trading pairs across the market.
In the early hours of October 15, 2018, Tether’s USDT was trading at $0.92, the lowest asking price the coin has seen in 18 months. At the time of writing, the stablecoin still hasn’t made up enough ground to retain its $1 peg. On most markets, it’s currently trading around $0.96, though this figure is tied to bitcoin trading pairs. Against the USD on Kraken and Bittrex, it is trading at $0.92 and $0.90, respectively.
A combination of exchange activity, related FUD and scuttlebutt could be the catalysts behind the sell-off. Bitfinex suspended fiat deposits on October 15, 2018, “for certain customer accounts in the face of processing complications,” a blog post reveals. In addition, Binance temporarily suspended USDT withdrawals for “wallet maintenance” due to “network congestion,” a measure taken after the exchange extinguished rumors that said it would soon delist tether.
The discount has bitcoin trading at something of a premium against tether on exchanges with USDT/BTC trading pairs. On Binance, Huobi and Bittrex, for example, 1 BTC is trading for nearly 6,700 USDT.
Contrast this with bitcoin’s price in USD/BTC markets and it becomes clear that tether’s sell-off is distorting prices across exchanges. On Coinbase Pro, Kraken and Gemini, bitcoin is trading at roughly $6,400 against USD pairs, an indication that bitcoin’s proper asking price is much lower than its oft-cited USDT pair would advertise. This has led to an inflated price averaged on CoinMarketCap of $6,650.
It’s important to note that the “premium” bitcoin is going for on tether-listed exchanges is less of a premium and more of a price distortion, given that tether is trading below its peg. The price of bitcoin for these pairs has spiked as a result of the sell-off, but if you sold USDT for BTC and then attempted to resell this BTC for USD, the arbitrage opportunity would be nullified by the price differential between BTC/USDT and BTC/USD pairs.
Notably, Bitfinex’s USD/BTC pair is out of line with other exchanges that offer fiat pairs for bitcoin. On Bitfinex, 1 BTC is trading at $6,900, a figure the even superseded its price against USDT on other popular exchanges. An inauspicious discrepancy in its own right, Bitfinex’s data may rouse additional skepticism when we take a look at its USDT/USD pair. At the time of writing, 1 USDT is trading at exactly $1.00 against its pegged asset in actual U.S. dollars, while, as we noted earlier, the same trading pair on Kraken and Bittrex is going for $0.92 and $0.90, respectively. Seeing as Tether and Bitfinex are under like management, the stark departure in price for USDT/USD markets between Bitfinex and other top exchanges could be cause for further concern.
This jumble of numbers and price differentials leaves more questions asked than answers, aggravating the uncertainty that likely led to the sell-off in the first. The price gap between bitcoin’s USD and USDT pairs puts tether’s risk premium at just under $500 (7.62 percent), according to Untether.space.
As the discrepancy in prices across exchanges illustrates, this risk premium denotes the difference between how much bitcoin is trading for in BTC/USDT versus BTC/USD pairs. Ultimately, the figure could indicate that market confidence in Tether is waning, as looming uncertainty over whether Tether has enough funds in the bank, amidst other banking troubles, has shaken investor trust in the market’s number one stablecoin, which accounts for 98 percent of all stablecoin trading volume.
Tether’s troubles comes after a slew of new stablecoins have proliferated in the market. Its two largest competitors, MakerDAO’s DAI and TrustToken’s TUSD, launched earlier this year, while regulation grade coins like Gemini’s GUSD, Paxos’ PAX and Circle’s USDC launched last month as well. In addition to these, the industry’s first algorithmic stablecoin, Kowala’s kUSD, is now in its mainnet’s alpha version, though the coin has yet to begin trading on the open market.
This article originally appeared on Bitcoin Magazine.
Making good on a promise it made back in March of this year, Coinbase has just added its first ERC-20 token. ZRX, the token of the 0x (pronounced “zero x”) protocol began trading on Coinbase Pro (formerly GDAX), the exchange’s professional trading platform, on October 11, 2018.
“Once sufficient liquidity is established, trading will begin on the ZRX/USD, ZRX/EUR and ZRX/BTC order books. ZRX trading will be accessible for users in most jurisdictions, but will not initially be available for residents of the state of New York,” Coinbase Pro general manager David Farmer wrote in a blog post spelling out the details of the launch.
Coinbase said trading of ZRX would happen slowly and in stages. “If at any point one of the new order books does not meet our assessment for a healthy and orderly market, we may keep the book in one state for a longer period of time, or suspend trading…” Farmer wrote. Per the exchange’s policy, new coin trades on Coinbase Pro first. The exchange said it would make a future announcement when ZRX began trading on coinbase.com and the Coinbase mobile apps.
Last year, the popular San Francisco exchange crafted a strict new asset listing policy after getting itself into hot water when a botched bitcoin cash (BCH) listing led to accusations of insider trading.
A lot has changed for Coinbase since. At one point during the crypto bubble, the exchange boasted a user base of 13 million. Following December 2017, however, Bitcoin lost more than 60 percent of its value, a loss that has cut into Coinbase’s business. In fact, Bloomberg reports that the number of U.S. customers buying and selling on Coinbase has declined by 80 percent.
Amidst all of this, Coinbase has been working diligently to expand its offerings.
A year ago, the exchange carried only three coins: bitcoin (BTC), ethereum (ETH) and litecoin (LTC). That changed when it added support for bitcoin cash (BCH) in December of 2017. In March 2018, the exchange announced plans for a crypto index fund available only to accredited investors. And in June 2018, the same month it launched its index fund, Coinbase added a fifth digital asset: Ethereum Classic (ETC).
Efforts to add new coins continued from there. In July 2018, Coinbase announced it was exploring several new assets. One of those was ZRX (newly listed); the others were Cardano (ADA), basic attention token (BAT), Stellar Lumen (XLM) and Zcash (ZEC). And in September, the exchange announced “Coinbase Bundle,” a product for the average investor.
Last month, Coinbase even announced a new asset listing process by which anyone with a token can apply to have that token listed on the platform.
Most recently, Coinbase told The Block on October 12, 2018, it was shutting down its index fund aimed at wealthy investors, due to lack of interest.
This article originally appeared on Bitcoin Magazine.
GMO Internet Group is working to launch a stablecoin by 2019. In an announcement released on Tuesday, October 9, 2018, the Japanese IT conglomerate said it is putting all gears in place to begin building its stablecoin, called the GMO Japanese Yen (GJY).
Banking on success on its home turf, GJY will look to penetrate the Asian market via Z.com once the fiscal year of 2019 is in full swing. GMO launched Z.com as a cryptocurrency exchange subsidiary in its relentless bid to penetrate the cryptocurrency industry.
The company made headlines in December of 2017 when it announced that it would open up a salary option that allowed employees to earn half of their pay in bitcoin.
The news signals the entry of another potential player in the yen-pegged stablecoin market, which already includes Hong Kong’s Grandshores Technology Group.
For a company that already has a foothold in the crypto exchange and mining business, launching a stablecoin, which offers price stability, would help it support “borderless cryptocurrency transactions.” Among efforts to expand its scope of operation, the company also partnered with Aozora Bank Group and others to launch a blockchain-powered online bank.
The web bank is expected to provide a portal that leverages blockchain technology for making cross-border settlements. GMO is also keen on bridging the gap of international remittances via its financial corporations in Japan.
“We have banks and trust licenses in Japan, so we will issue (GJY) in Asia, but we can store assets in Japan as well,” GMO founder and president Masatoshi Kumagai noted in the release.
Kumagai also believes the company is headed in the right direction to avoid the issues associated with tether. He went further to state:
“If that happens, everyone will not be worried like with tether; it can be said that GMO has a bank there and keeps fiat there.”
GMO joins a long list of companies to have issued stablecoins in recent months. Back in July, IBM revealed it had collaborated with Stronghold and the Stellar protocol on a U.S. dollar–pegged stablecoin. In the same vein, crypto exchange Gemini, blockchain startup Paxos and crypto payments firm Circle all announced their U.S dollar–anchored stablecoins earlier this year.
This article originally appeared on Bitcoin Magazine.
Top-three cryptocurrency exchange Bitfinex is pushing back against claims that call its solvency into question.
The Hong Kong-based company released a blog post on October 7, 2017, that states, contrary to recent rumors, it is not insolvent. In its defense, the company provides links to its public wallet addresses, stating that hearsay in spite of these publicly verifiable records is “perhaps indicative of a targeted campaign based on nothing but fiction.”
“Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this. As one of only a very few exchanges operating since 2013, with a small team and low operating costs, we do not entirely understand the arguments that purport to show us to be insolvent without providing any explanation about why.”
Over the weekend, a since-removed Medium post by user ProofofResearch warns readers to exit Bitfinex, alleging that complaints of restricted and frozen withdrawals expose its insolvency. The post goes on to air grievances shared on Reddit regarding these withdrawal issues, and the author accuses r/bitfinex moderators of censoring such posts.
“Both fiat and cryptocurrency withdrawals are functioning as normal. Verified Bitfinex users can freely withdraw Euros, Japanese Yen, Pounds Sterling and U.S. Dollars. Complications continue to exist for us in the domain of fiat transactions, as they do for most cryptocurrency-related organisations,” Bitfinex writes in its post.
To further quell community skepticism, Bitfinex offered block explorer links to its bitcoin, ether and eos cold wallet reserves. Not including fiat holdings, the exchange states that these wallets “represent a small fraction of Bitfinex cryptocurrency holdings.”
Collectively, the wallets hold just over $1.5 billion in assets. The majority of this fortune is accrued in the exchange’s bitcoin wallet, which holds 148,467 BTC worth roughly $989 million at current exchange rates. Its second largest holding, the exchange’s ether wallet contains 1,726,496 ETH (~$395 million), and its eos reserves weigh in at 35,374,975 ($209 million).
Bitfinex’s clarifying its financial position comes after news broke last week that one of its former banking partners is looking for a buyer, a development that ProofofResearch argues further points to Bitfinex’s own financial troubles.
Searching for a bailout of sorts, the Puerto Rican Noble Bank is “no longer profitable,” according to a source close to the matter who tipped the news to Bloomberg. With Noble Bank’s cryptocurrency partners reportedly jumping ship, Bitfinex has also severed its relationship with the financial firm, affirming in its blog post that “[stories] and allegations currently circulating mentioning an entity called Noble Bank have no impact on [its] operations, survivability, or solvency.”
Popular stablecoin Tether also terminated its relationship with the bank. Operated by a like CEO in Jan Ludovicus van der Velde, Tether’s and Bitfinex’s operations, purportedly, are intrinsically linked, and the two companies have been long entangled in a conspiracy that charges Tether is not fully backed by U.S. dollar reserves.
An academic report that points to Tether’s artificially inflating bitcoin’s price during the 2017 run-up has only stoked skepticism. Though, an earlier study provides evidence to the contrary, and Tether has produced an in-house attestation overseen by the Freeh Sporkin & Sullivan law firm to clear its name. However, this attestation is not an official audit, something that Tether states is impossible for a company in its position to attain, even as other stablecoin projects have suggested otherwise.
This article originally appeared on Bitcoin Magazine.
Binance, the largest cryptocurrency exchange by trading volume, said that it will make new cryptocurrency listing fees transparent and donate 100 percent of those fees to charity.
The exchange made the announcement today, October 8, 2018, in a blog post where it stated that a listing fee would now be more appropriately called a “donation.”
Listing fees have been a pain point for cryptocurrency projects. Projects depend on getting their coins listed on exchanges for liquidity. News of getting listed on a major exchange can cause a coin to spike in value overnight. Yet, many projects have complained of exorbitant listing fees.
In April 2018, Bloomberg reported that according to Autonomous Research some crypto trading platforms were charging $1 million to $3 million to list a token — 10 times more than what a traditional exchange, like Nasdaq, demands for securities.
Binance, which now handles most of its operations out of Malta, has been a target of many of those complaints. In August 2018, Christopher Franko, co-founder of Expanse, a fork of Ethereum, tweeted that Binance wanted to charge 400 bitcoin ($2.5 million) to list a coin. Binance CEO Changpeng Zhao refuted the accusation. “We don’t list shitcoins even if they pay 400 or 4,000 BTC,” he tweeted.
Now, according to Binance, cryptocurrency projects will be able to name their price. “Binance will not dictate a number, nor is there a minimum required listing fee,” the exchange said, adding that it won’t be swayed by larger bids either. “A large donation does not guarantee or in any way influence the outcome of our listing review process.”
Once the two parties reach an agreement, the exchange said it will disclose the fee via its charity arm Blockchain Charity Foundation. Binance launched the arm in Malta in July 2018 as a way to funnel some of its profits to philanthropic endeavors. The foundation is chaired by Helen Hai, a goodwill ambassador for the United Nations Industrial Development Organization.
“Hope others will follow,” CZ tweeted earlier today, alluding to the announcement.
Binance was originally founded in Hong Kong in 2017. Within six months, it was already touted as one of the biggest crypto exchanges in the space. Its growth is largely due to its ability to onboard new coins quickly. The exchange currently has 387 crypto-to-crypto trading pairs.
This article originally appeared on Bitcoin Magazine.
Brooklyn-based goTenna has launched TxTenna, a mobile app that allows users to send bitcoin without an internet connection. Built in partnership with Samourai Wallet, the mobile app will enable users to send bitcoin using a secure and private network free of censorship.
goTenna produces consumer-grade mesh networking devices which operate by allowing peers to connect directly to one another for the purpose of routing packets, sidestepping the need to rely on an ISP or cell tower.
“TxTenna demonstrates how decentralized mesh networking can both enhance the privacy and resiliency of Bitcoin transactions, and expand Bitcoin access to people living in areas without cell or wifi connectivity,” Rich Myers, DApps engineer at goTenna, said to Bitcoin Magazine.
Internet connections are not always reliable, and in some locations, they could be unavailable due to natural disasters. This is where the TxTenna app comes into play. The app will allow users to sync their smartphones with a goTenna mesh device, then toggle the settings to send and receive bitcoin. Mesh networks connect devices directly to one another, rather than going through a central point (Internet Service Provider).
“The reality is that local carriers or ISPs can associate subscribers with their transactions or censor Bitcoin transactions altogether. TxTenna provides an answer to these problems by decentralizing the critical transport layer, will enable truly decentralized bitcoin transactions,” said goTenna CEO Daniela Perdomo in a statement.
The new app, which is currently available for Android users, was built on goTenna’s open SDK by Samourai Wallet developers. Explaining why Samourai Wallet was chosen for the partnership, Perdomo told Bitcoin Magazine that their MuleTools initiative was the difference maker.
“Late last year we began talking with the team at Samourai Wallet about including goTenna in their MuleTools initiative. The Samourai Wallet team are leaders in building advanced mobile bitcoin wallets. Inspired by Blockstream’s satellite, their open-source MuleTools initiative encourages more alternative transaction broadcast methods.”
To start transacting offline, users have to download both the Samourai Wallet mobile app and the TxTenna app, and then pair them to a goTenna Mesh device for connectivity. Once this connection is created, users can send bitcoins to anyone in the world and broadcast it on the blockchain.
“Other goTenna devices in the area relay the transaction until an internet connected goTenna node also running TxTenna receives it and forwards it to the Bitcoin network,” Myers added.
TxTenna is another step in boosting the security and diversity of internet connection across the blockchain. Last year, cryptographer Nick Szabo and blockchain engineer Elaine Ou proposed alternative methods for accessing the blockchain. These methods offer much more versatility to those who wish to avoid censored systems, and it opens up use cases for bitcoin adoption in regions with less developed internet infrastructure.
This article originally appeared on Bitcoin Magazine.
The word seems to be at complete odds with the current nature of the crypto market. With its flagship coin having “died” on hundreds of occasions, volatility and meteoric price swings have come to define cryptocurrencies, as price stability, ever-elusive, is in short supply.
Bitcoin’s frenetic value has given critics plenty of fodder to argue that its underlying use case, a digital currency for a digital age, is kaput. The same argument has led proponents to rebrand bitcoin as a store of value, a kind of digital gold, instead of its ostensible utility as a payment method. It’s also one of the primary concerns for institutions when weighing the pros and cons of adopting cryptocurrencies into their business models or investing in the young asset class.
Enter stablecoins. A stablecoin, as its name suggests, is a cryptocurrency that is built to retain a stable value. Typically, each coin is pegged one-to-one to a national currency, most notably, the U.S. dollar or the euro. By mediating between the cryptographic controls of cryptocurrencies and the volatility that mars their monetary functionality, stablecoins are the answer to those critics who cry out against crypto’s mantra as digital cash.
The need for a stable cryptocurrency is obvious. Your local coffee shop isn’t going to sell you that latte for crypto if the price may decrease before they can liquidate it, and, on the flip side, you may not be willing to purchase it in crypto if there’s a chance that payment will appreciate in value after the fact.
Because of the above possibilities, proponents posit that stablecoins are a necessary analogue to adoption. With a stable payment mechanism in place, the belief goes, merchants, institutions and consumers should be more comfortable with using cryptocurrencies in their day-to-day.
But form and function aside, adoption still relies on integration, circulation and widespread use for a stablecoin to become a reliable payment method. What’s more, no two stablecoins are alike, and different models come with different degrees of decentralization and retain their pegs with collateral from different assets — or with none at all.
Somewhat a product of the industry’s first altcoin boom, the stablecoin model dates back to 2014.
Bitshares, the brainchild of Dan Larimer, introduced the first fully functional stablecoin to the space. Described by many as a Decentralized Autonomous Organization (DAO) that offers a suite of services ranging from a a decentralized exchange to smart contract-managed payments, the platform debuted its stablecoin, BitUSD, on July 21, 2014.
Also referred to as a SmartCoin, BitUSD is backed by Bitshares’ native currency, BTS. To retain a 1:1 peg to the USD and to hedge against volatility, each BitUSD (typically) is insured with at least $2 in BTS. These BTS are locked up in a smart contract, and BTS holders can use Bitshares’ network to exchange their coins for BitUSD.
This model, known as crypto-collateralized, was the first first fully operable iteration of a price stable cryptocurrency. Keeping with bitcoin’s ethos, this model’s backing roots it in the cryptographic economy, and its only ties to fiat currency come from the dollar peg it represents.
Though it may seem odd to solve an asset’s volatility with the asset itself (more on this later on when we breakdown each stablecoin type), BitUSD is still around. But it’s been outpaced by its competitors, the strongest of which upholds what some say spits in the face of decentralization: stability with a direct peg to the USD.
Tether (USDT) launched shortly after BitUSD on October 3, 2014, as Realcoin. The most popular stablecoin hardly needs an introduction (though we’ll cover it more comprehensively later on). Currently ranked 8th on CoinMarketCap at the time of publication, the $2.8 billion asset purportedly backs each of its USDT tokens with a dollar in one of its multiple bank accounts. This fiat-collateralized, custodial model has become a market favorite, as Tether has become the go-to arbitrage and trading hedge on some of the space’s top exchanges.
As the first fully functional, fiat-backed stablecoin, Tether broke with the crypto-collateralized model that Bitshares pioneered, and its own model would set a precedent for a host of successors in the years to come.
Fast forward to 2018 and stablecoins have become the flavor of the year. The year following bitcoin and friends’ stratospheric boom and bust has seen the industry’s stablecoin niche roughly double its numbers. This expansion has been accompanied by an infusion of capital, as well, as the asset class has attracted some $350 million in funding, the majority of which comes from crypto-specific venture capital funds.
In the footsteps of Tether, the majority of these newcomers are fiat-backed, though Bitshares’ crypto-collateralized model still has its own adherents, and algorithmic-backed coins, hitherto confined to theoretical models and white papers, are making their working debut.
*Note: The following section examines fiat-collateralized stablecoins. While these coins fall under the larger category of asset-backed coins, we’ve decided to forego examining coins that are backed with hard commodities like gold or other assets like property and stocks, as coins that use these backings for stability either a) haven’t yet achieved a significant enough market cap or rate of adoption or b) are still in the ideation phase.
As the previous history lesson explains and contrary to common misconceptions, Tether was not the first fully-functional stablecoin — though it did drum up enthusiasm for the fiat-collateralized model.
Tether’s cornerstone lies in a 2012 white paper authored by J.R. Willett. Entitled “The Second Bitcoin Whitepaper,” the ambitious document proposes a secondary layer on Bitcoin’s network, one that would allow developers to build additional coins on its blockchain (similar in concept though completely different in execution to building tokens on Ethereum).
This platform would eventually become Bitcoin’s Omni layer, the same technical springboard used to launch Tether. Tether co-founders Brock Pierce and Craig Sellars left Willet’s project in 2014 to work on Realcoin, what would later become Tether after a rebranding in November of 2014. By January of 2015, it began trading on the Bitfinex exchange, and the rest is history.
And that history has been complicated.
Information gleaned from the Paradise Papers leak in 2017, revealed that Bitfinex’s CEO Jan Ludovicus van der Velde is also the CEO of Tether Holdings Limited. This overlap has led skeptics to scrutinize the two organizations’ working relationship.
Augmenting this scrutiny, a report published by John Griffin and Amin Shams, two professors at the University of Texas at Austin, traces Tether’s issuance to a handful of Bitfinex wallets. The same report also corroborates a long-held suspicion that Tether prints more USDT than it has the dollars to back and suggests that Tether was used to artificially inflate bitcoin’s 2017 price, as a result.
Even so, Tether has its defenders. Dr. Wang Chun Wei of the University of Queensland, Australia, actually published research a month prior to Griffin’s and Shams’ own and, as though anticipating their scrutiny, found that Tether does not have enough market share to manipulate bitcoin’s price. Still, Wei’s report did not erase the questions surrounding Tether’s finances.
Tether could absolve itself from suspicion with a formal audit, though it claims this is impossible. Instead, in May of 2018, Tether conducted an internal review through the Freeh Sporkin and Sullivan law firm, which confirmed that Tether’s unencumbered assets match the tokens in circulation, while also cautioning that its report “… should not be construed as the result of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.”
Without a proper audit on the books, Tether’s operations have been decried as opaque, and related concerns are exacerbated when we take a look at Tether’s liquidity. Making promises in its white paper that users can redeem Tether for USD at any time, the only real way to purchase Tether with fiat is indirect at best: You’d have to buy bitcoin or ether from a fiat-crypto ramp, transfer your coins to an exchange that supports tether and then trade for it there.
Tether itself, as Jon Evans has pointed out, does not actually allow users to redeem USDT for USD. The login function on Tether’s website is supposedly for this purpose, but recently, new users have been greeted with a registration error that says the site is rebuilding its system.
Still, a growing force of fiat-backed competitors have taken to Tether’s model — with some modifications. These projects, in their own ways, have looked to avoid the controversies surrounding Tether by offering reliable liquidity and business models that place transparency at the fore of operations.
In the realm of fiat-collateralized coins, Tether’s biggest competitor is TrustToken. Like the monolith that came before it, TrustToken issues tokens tied to underlying dollars. Unlike Tether, however, which plays custodian, issuer and representative for its tokens, TrustToken is more hands-off.
In fact, it doesn’t have any degree of control over TrueUSD (TUSD), its flagship stablecoin. The company leaves this up to its smart contracts, escrow accounts and fiduciary partners.
To mint TrueUSD, users must send a wire transfer with funds to one of TrustToken’s fiduciary partners (currently either Alliance Trust Company or Prime Trust), and after depositing the money into their bank accounts, these institutions use the platform’s Ethereum-driven smart contract to issue tokens to the user’s Ethereum wallet. To redeem tokens, the user burns them through the smart contract, which then signals the trusts to wire the user the corresponding funds.
In an interview with Bitcoin Magazine, TrustToken’s vice president of Corporate Development, Tory Reiss, indicated that the platform provides its fiduciary partners with a dashboard to manage the token issuance and redemption processes.
“We act on behalf of the token holder but, as a business, we can’t access those funds,” he emphasized.
TrustToken’s laissez-faire approach sets it apart from Tether, and its banking partners open up clear liquidation pathways for users. But this isn’t the only difference in the company’s business model. It also publishes weekly and monthly attestations of its financial records.
“We have one top-50 accounting partner (Cohen & Company) that is performing attestation. When they look at your books, they look at all of your transactions. And if your account isn’t in line from day zero, they won’t maintain an audit account,” Reiss stated in our conversation.
“We have nothing to hide,” he continued, in a not-so-subtle jab at TrustToken’s competitor.
Reiss’s comments and TrustToken’s professional relationship with Cohen & Company throws a wrench in Tether’s claims that it can’t receive a proper audit. While Tether has claimed that an audit from one of the big four accounting firms is out of reach for a stablecoin, Reiss stated in our correspondence that TrustToken is currently in talks with two of these firms to give their audits additional legitimacy.
With a $100 million market cap, TrueUSD is Tether’s biggest competitor, even if it has significant ground to make up. But the month of September brought along with it three new institutional tier projects that could cut in to both front runners’ market shares.
Two of these — GeminiUSD (GUSD) and USD Coin (USDC) — were launched as in-house stablecoins for the Gemini and Circle/Poloniex exchanges, respectively. Both are seen as being potentially attractive to institutional investors for their regulatory compliance (Gemini is fully regulated per New York’s BitLicense laws, and Circle, regulated by FinCEN, is seeking money transmitter licenses from all 50 states).
USD Coin runs on Centre’s stablecoin framework, a blockchain developed by Circle. Like many other newcomers, GUSD runs on Ethereum, as does the Paxos Standard (PAX), the Paxos Foundation’s stablecoin that, like GUSD, is regulated by the New York Department of Financial Services. All three coins allow for quick and seamless fiat-to-crypto swaps and crypto-to-fiat redemptions using their own liquidity portals.
Gemini’s and Paxos’s coins have come under fire in the weeks following their same-day launches for backdoors in their coins’ code that allow either association to freeze funds and reverse transactions. These control mechanisms were likely necessitated by virtue of being regulated entities, and there’s no indication that either organization would abuse them under the regulatory spotlight.
As the CEO of Kowala (a stablecoin we’ll get to later), Eiland Glover put it, it’s either organization’s way of “being ahead of regulation, being over compliant” to give them the control “to go back and block or reverse something,” a control traditional financial institutions enjoy.
In the European sphere, Malta-based STASIS launched its STASIS EURS (EURS) in July of 2018. The coin’s finances are secured and managed by an undisclosed “AAA-rated European institution,” and it was the first exclusively euro-pegged stablecoin to hit the market.
Attesting to its reserves with daily, weekly and quarterly audits, CEO Gregory Klumov told Bitcoin Magazine that “STASIS created EURS token following the demand from institutional clients, high net-worth individuals, and funds that trade digital assets. Also, we think that there is a lack of price-stable cryptocurrency with the visible transparency of reserved assets.”
Acting as glorified IOUs for their underlying currencies, fiat-collateralized stablecoins are the least complex of the asset class’ three main categories.
By consequence, they’re also the easiest to understand. For this reason, institutional investors are likely to favor them over their more abstruse, technically complex counterparts. The regulatory protections and transparency that coins like GUSD, PAX, TUSD and USDC offer are also likely to make institutional investors and retail investors with little cryptocurrency knowledge feel at ease when entering the market.
They also offer the most surefire on and off ramps for liquidity. Now, if the end game of a stablecoin is to replace cash and fiat, then this won’t matter in the long term. But considering that stablecoins function primarily as a hedge for trading in their current form, ease of liquidity is a must for most investors.
Ironically, the same features that make stablecoins so attractive are the same things that might make them a turn-off for some users.
They require a baseline of trust that the institution in control of redeeming tokens will honor this commitment. The anxieties surrounding this counterparty risk are probably felt most with Tether, given its lack of transparency. Ultimately, this model reintroduces the same financial intermediaries bitcoin had intended to cut out. As is the case with PAX and GUSD, these same custodians have the power to access funds directly and reverse transactions — financial controls most crypto evangelists have rejected.
It seems odd to use an inherently volatile asset to create stability. But for those who place decentralization as a priority above all else, on-chain collateralized assets provide more peace of mind than their off-chain collateralized counterparts like Tether.
As we covered earlier, BitUSD broke ground by introducing the market to the stablecoin model, collateralizing the trailblazing asset with cryptocurrency in the form of BitShares (BTS).
BitUSD has since substantially fallen behind projects that came after it, and this may be in part due to the fact that its underlying asset, BTS, offers less liquidity and is used by fewer people than the more widely recognized Ethereum.
Because of this, we’ll be focusing on the Ethereum-based Maker, a decentralized autonomous organization (DAO) and its stablecoin, Dai (DAI). Founded in 2015, Dai has become the most popular crypto-collateral stablecoin available with a market cap of $56 million at the time of publication, and it functions similarly to BitUSD with a few key differences.
In fact, Maker’s CEO, Rune Christensen, told Bitcoin Magazine that BitUSD was the inspiration for DAI’s creation.
“I got into stablecoins initially with Bitshares’ [BitUSD], which was the first stablecoin project. And from there me and some of the other Bitshares community decided to take this fundamental stablecoin model and tweak it. At the time, you know, Tether’s model wasn’t around. The original stablecoin model was this crypto-collateralized, and it shows you how much the fundamental thought of the space — to decentralize finance — has changed.”
Dai maintains its $1 peg with what the platform calls Collateralized Debt Positions (CDP), and the same CDPs are responsible for minting new Dai. In order to mint Dai, network users must lock up collateral in a CDP, and in order to hedge against volatility, the CDP must be over-collateralized by at least 1.5x the value of Dai generated (e.g., if the current market value of ether is $225, then to generate 150 DAI, a user would have to front 1 ETH).
To free up collateral, the CDP’s owner must pay back the position’s debt (the amount of Dai originally generated) as well as any interest that the position accrued. This will always be paid in Dai, while the user must also pay a stability fee to the network in MKR, Maker’s base currency, the sum of which is burned by the network.
In the event that Dai’s price goes above or below its target price ($1), the networks Target Rate Feedback Mechanism (TRFM) kicks in to alter user incentives for generating or holding Dai. Falling below will increase the target rate of each CDP, making it more costly to generate Dai so as to reduce the number of coins pumped into circulation. This would then incentivize users to hold Dai as it moves back toward its target price, as their capital gains will increase. With more users holding and fewer Dai being minted, the price will stabilize.
If Dai’s price exceeds $1, the target rate decreases, and Dai is easier to mint in order to dilute supply. Community members are then disincentivized to hold Dai as the price decreases and approaches its equilibrium.
Currently, ether serves as Dai’s only collateral. Denominated as Pooled-Ether (PETH), users must first submit the ether they want to use as collateral into one of Maker’s smart contracts, and this user’s deposit is redeemed as PETH to use in the CDP.
Christensen told us that Maker’s uni-collateral model is something for the platform’s early days. The team hopes to scale the platform to accommodate “basically everything as the backing assets,” he said, collateralizing anything from gold to property and even other stablecoins.
“What we’re looking at is to create a stablecoin that represents a global basket of currencies, so it’s kind of like a measure of global stability for a global economy.”
This ambitious expansion will begin with Dai creating a peg for the euro, with an end goal of becoming blockchain agnostic to bundle the other assets in Maker’s scope.
Maker’s closest competitor outside of BitUSD is Havven, a bi-platform stablecoin ecosystem that runs on the Ethereum and EOS networks. Much like Maker, Havven’s stablecoin, nomins (nUSD), is created through collateralized debt backed by Havven coins (HVN). Unlike Dai, however, nUSD has struggled to catch fire with the wider crypto community and has a current market cap just under $1 million.
Demand, issuance and circulation are all driven by community members for both Havven and Maker. There are no overarching or centralized bodies in charge of the platform’s operations and, in Maker’s case, governance and risk management are the onus of MKR holders.
With communities left to their own devices — and with their responsibility to mint coins — the crypto-collateralized model is more decentralized than its more popular fiat-collateralized counterpart. For this reason, crypto-collateralized stablecoins are often championed by crypto evangelists, as they come without the centralized controls of coins like Tether and are more detached from the traditional financial system that bitcoin was built to disrupt.
For the same reason that decentralization diehards may be willing to endorse these coins, though, more mainstream investors and users may shy away from them. Out of the millions of investment dollars poured into stablecoins, only 9 percent of this ($33 million) has gone to crypto-collateralized assets, and $27 million of this figure has been allocated to Dai.
That few dollars are behind these projects isn’t all that surprising. While these coins may not feature the same counterparty risks that come with custodial, fiat-collateralized models, most investors (especially institutional or accredited ones) like the financial guarantees and protections that come from working with a formal banking institution.
It also speaks to the difference in complexity and perceived reliability of the crypto-collateralized model compared to those coins backed by fiat. A coin that is tied to the dollar because it literally represents an existing dollar is much easier for the general public to understand than the hoops they must jump through with a coin like Dai. Plus, the thought of using a volatile asset in cryptocurrencies to generate stability makes less sense to most investors than using a dollar-based IOU model, which most closely resembles how they currently bank using debit and credit.
Raising 50 percent ($174 million) of all venture capital funding committed to stablecoin projects to-date, algorithmic-backed stablecoins (coins that have no assets backing them) are the ecosystem’s dark horse. And though they have plenty of bills betting on them, there’s no guarantee that they’ll win out in the end — just plenty of promises and expectations to succeed.
Out of New Jersey, Basis coin has attracted the vast majority of this funding, a jaw-dropping $133 million from the likes of Andreessen Horowitz, Polychain Capital, Pantera Capital and the Digital Currency Group. The coin takes a cue for its stability mechanism from the Seigniorage Shares model developed by Robert Sams.
Its launch forthcoming in 2018, Basis relies on a combination of smart contracts and bonds to achieve stability, and its model, while complex, is predicated on traditional economic theories and incentives to maintain its peg.
In short, in the event of market expansion (when the coin exceeds $1), the network’s smart contracts mint more coins to inflate the circulation and drive prices down. If the price dips below $1, the network will create bonds (debt certificates) and sell them for Basis coins, thereby taking excess currency out of the ecosystem to drive the price back up.
These bonds are then bought back in times of expansion with newly minted coins, and they can even be sold for less than they’re worth, in the case of demand being seriously scant.
Carbon (CUSD), a hybrid fiat and algo-backed stablecoin with $2 million in VC funding, will operate using a like model. Instead of bonds, though, it will issue what is called a Carbon Credit token (Carbon Credit) using a reverse Dutch-style auction when CUSD prices fall below the peg threshold. Like Basis, these credits will be redeemed proportionally per user during events when the network must mint new coins to bring the price down from an unwanted rise. To kick start its network, Carbon is launching on a fully fiat-backed model.
Basis is supposed to launch this year, and Carbon, which went live recently with limited access to hedge funds, accredited players, exchanges and professional traders, is supposedly waiting to have some $1 billion in fiat reserves before transitioning to a partly-algorithmic model. When they do come to market, they’ll be the first non-asset backed stablecoins to test out Sams’ Seigniorage Shares model.
But they won’t be the first algorithmic stablecoin to circulate. Kowala’s kUSD, which launched the alpha for its mainnet in September 2018, has them beat. The first stablecoin to see integration by Ledger, kUSD applies the economic rationale of the Seigniorage Shares model with a spin.
Instead of managing a price peg through debt buybacks and smart contract mandated inflation, the coin uses transactions fees, dead-end addresses and mining rewards. Its model relies on two coins to this end: mUSD, a staking token for mining rights, and kUSD, the stablecoin.
Miners mint kUSD as their mining reward and are, in turn, tasked with circulating the currency. In the event that the price of kUSD climbs above $1, mining rewards are increased to correct the discrepancy. If the price dips too low, then transaction fees are slightly increased, and a portion of these is sent to a dead-end address to be burned by one of the network’s smart contracts.
The largely under-the-radar project has been working closely with regulators and accredited individuals, said CEO Eiland Glover in an interview with Bitcoin Magazine. Its coffers have been filled with rounds of funding from private investors and, per SEC regulations, only accredited investors were allowed to purchase initial sums of its mining token, mUSD.
Operating these private rounds as a securities sale, Glover intends to open the sale of this token to the public when the project’s mining rights are more widely distributed. He’s also reportedly in talks with entities outside of the U.S. to create Kowala coins for other national currencies and economies.
Glover also stressed that kUSD went through “test after test” and code audits before it launched, and he showed the author of this article an AI-driven testnet scenario of kUSD’s minting, circulation and trading to demonstrate its stability mechanism in action.
Kowala is also the only algorithmic stablecoin with open-source code on an active GitHub, which can be viewed here.
Our section on algorithmic stablecoins was shorter than the rest for the simple reason that this model is still untried and untested. Even Kowala, the closest to a beta mainnet, is still in alpha and hasn’t stood trial on the crypto market.
Theoretically, algorithmic stablecoins could offer the greatest degree of decentralization. Completely detached from any underlying asset, subsisting only on the math behind their designs, they present themselves as the futurist’s economic instrument, as the next evolution of stablecoins and cryptocurrencies writ large.
But of course, this is assuming they function as intended, and no one can say for certain that they will. Even in Basis’ case, all the backing in the world is no guarantee for success, and there are plenty of variables that could make the model untenable.
One of these is the chance that an algo-backed stablecoin could experience a “death spiral.” Basically, if the price drops low enough, investor confidence could be shaken to the point of inciting a massive sell-off — something akin to a bank run for the network — and this could send the coin into a freefall from which it couldn’t recover.
Basis’s and Carbon’s bonds/debt contracts are meant to mitigate this risk, but these safety nets operate under the assumption that the community has enough confidence in the coin’s economic model to a) buy the contracts in the first place and b) hold them long enough to redeem them. Essentially, they’re predicated on a belief that the network itself holds value; if this belief is shattered, then there won’t be enough buyers left to pick up the pieces.
It’s worth pointing out that the stablecoins examined in this article are not exhaustive. For now, we covered only the most notable stablecoins in each class, focusing mainly on those that have already launched.
There are still others, some of which have attracted significant attention and capital. Saga, for example, has raised $30 million dollars in venture funding, and its team and advisors boast a former J.P. Morgan executive, a former central banker and even a Nobel prize-winning economist. Its peg will tap into the International Monetary Fund’s special drawing right, a foreign exchange reserve asset that represents an index of national currencies to serve as a unit of account.
If we can glean anything from the institutional track record of its team and its economics, Saga’s design is aimed at big league investors. Over time, its price stability mechanism will allow it to maintain its peg without full funds to back every token in circulation, a feature that may too closely resemble fractional reserve lending for crypto’s more fundamental believers.
With funding to the tune of $32 million, the South Korean Terra offers a basket of assets for collateral like Saga. A bit of Frankenstein’s monster conglomeration of the stability mechanisms we’ve looked at, the coin will initially be backed by fiat, later backed by Luna — a currency for network stakeholders who deposit Luna in a Stability Reserve — and later will be ballasted thanks to transaction fees (these fees are paid out to Luna holders, and they increase in the event of a price fall). It is projected to launch in Q4 of 2018.
At any rate, the myriad stability mechanisms and the divergence of these even within each sub-category of stablecoins illustrates that the asset class is rich in variety and, as evidenced by the number of projects announced and launched in 2018, is undergoing a tremendous growth spurt.
Even still, the model, in all of its forms, has a long road ahead before it becomes completely viable as a payment method or store of value. Merchant integration and community adoption is needed, along with a track record of sustainable value (even the oldest stablecoins are less than half a decade old) and consumer confidence.
This confidence may be tenuous in the short term, as a handful of stablecoins have seen their pegs broken at some point in their lifespans (e.g., TrueUSD rose to $1.30 upon being listed on Binance, rising again to over $1.20 five days later; Dai dipped to as low as $0.86 on February 28, 2018; and Tether even dropped to $0.57 in 2015, albeit upon its launch).
Despite its initial plummet upon going live, Tether has remained incredibly stable, and this may explain, in part, why it still accounts for roughly 98 percent of all stablecoins’ market volume.
Of course, this could also be indicative of a lack of competition, something that has been ramped up as of late. With a slew of new coins joining the market race, it’s possible that each coin could serve its own distinct function in the ecosystem as it matures, something both Christensen and Glover expressed in our conversations.
“People have different demands for what they want from the stablecoins they use,” Christensen put it simply in our conversation.
“We definitely think that for the vast majority of people, they just want to use the currency they use,” he continued, stressing that, for adoption to stick, “user interfaces and DApps [must be] really easy to use.”
Glover echoed Christensen’s thoughts, believing coins like the GUSD, PAX and USDC aren’t “really transaction coins” as they were “built for trading” more specifically.
When we consider the above coins’ painstaking emphasis on regulations and the traditional financial controls they have in place, Glover believes these coins will be more appealing to institutional investors looking for a safer in to the market. He also believes legacy companies and institutions are starting to see the benefit of blockchain and cryptocurrencies, something the influx of investment capital and stablecoin projects in 2018 stands testament to.
But for these institutions to buy in, they’ll need that previously elusive — or eluded — guarantee: regulation.
“I see this as institutions now starting to plug in blockchain and crypto into an existing world. To do that, you have to make it fit,” Glover said.
Christensen believes that regulation is both inevitable and necessary, both to embolden the ecosystem and demonstrate to government officials that it isn’t some boogeyman it should simply fend off.
“I think it’s absolutely crucial. First of all, we need to turn around the image of cryptocurrency away from the early days of destroying the governments, destroying the banks and being used for shady stuff on the internet. And secondly, we need to engage with government and explain to them that this is not going to undermine their ability to control their national currency. For instance, all the stablecoins are pegged to national currencies already — they’re not being circumvented. It’s important that regulation comes to protect consumers, but that it doesn’t interfere with the fundamental advantages of blockchain technology.”
Where these regulations will take the industry and when they will be affected (if at all), is hard to say, especially when you consider the complexity of this newer asset class within a new and largely misunderstood asset class in cryptocurrencies. In the U.S. context, for instance, stablecoins like Basis and Kowala, which both offer profit potential for their users, could very well be seen by the SEC as securities, while asset-backed stablecoins may be seen as commodities by the CFTC for acting as economic instruments.
Capping off our discussion on regulation, Glover indicated that, to remain viable amidst the “moving goalpost of regulations,” projects are running to regulatory guidance instead of away from it. This act of self-preservation couold be interpreted as a show of legitimacy for what use to be a stigmatized industry, but it also means walking the line between what that space is about and what it is primed to become in the larger economy.
“I think a lot of people got subpoenaed and that was a ‘game over.’ You want to do things in a way that preserve the integrity of the stablecoin, but you don’t want to be shut down. I think there is a move toward compliance. Everybody’s seeking out a safe haven where they can feel comfortable that they’re operating under some regulation that protects them. Because now all of this stuff is turning into a real business.”
This article originally appeared on Bitcoin Magazine.
Cardano, the platform underpinning ADA, the ninth largest cryptocurrency by market cap, is opening its doors to third-party developers through a new client, written in systems programing language Rust.
“As a project matures and grows, you need to satisfy the demands of different clients,” Charles Hoskinson, CEO at IOHK, the blockchain development company behind Cardano, told Bitcoin Magazine.
IOHK made the announcement on October 1, 2018, exactly one year after it launched Byron, the first version of Cardano’s settlement layer, which was built in the functional programming language Haskell. While Haskell works well for mission-critical code, Rust shines in areas like mobile, where performance matters. Rust was created by Mozilla for Firefox as a replacement for C++.
It is worth noting that Cardano, a proof-of-stake blockchain, is currently centralized with all of its blocks being produced by IOHK. But the project hopes to change that in Q1 2019 when its Shelley release opens up staking pools to users. (Shelley was originally slated for Q2 2018.)
At its core, Cardano’s Rust project is a software development kit for the Cardano blockchain. It has several ingredients needed to interact with the blockchain, including data types like blocks, transactions and addresses, along with protocol functions to query blocks, send transactions and so on. The Github repository describes the project as a toolbox of Cardano functions intended for use by third parties. It also states that a “future” Rust implementation of a Cardano node is in progress.
A command line interface (CLI) wallet is the first project to come out of Cardano’s Rust project. The wallet, still in alpha phase, acts as a toolbox for third-party developers. Here, developers can pick and choose from a library of wallet and node functions. It also lets developers manage multiple wallets, including Cardano’s Daedalus and Icarus wallets. The library is open source, and the plan is for the community to eventually take over the project.
A diversity of clients is good software engineering and a common practice in open source software because it makes it less likely the protocol will be tightly bound to one implementation.
Ethereum, a project that Hoskinson participated in as co-founder and CEO in 2014, also offers a choice of clients — its main ones being go-ethereum (written in Google’s Go programming language) and Parity (written in Rust). IOHK intends for Cardano-Haskell to serve as a reference code for new clients, showcasing how the Cardano protocol ought to work.
Eventually, IOHK sees Cardano going head-to-head with projects like EOS and Ethereum. But that won’t happen until a third major third release called Goguen introduces a smart contract layer to the platform. Hoskinson said two smart contract testnets are already up and running, adding that IOHK is “likely” to use its Rust client for testing smart contracts.
This article originally appeared on Bitcoin Magazine.
Stablecoins have garnered serious investor attention over the past few weeks. Unlike bitcoin and similar cryptocurrencies, they are digital assets built to lessen price volatility and are often paired against the U.S. dollar or established commodities like gold. Volatility is one of the main reasons why several institutional investors and individuals have thought twice about stepping into the cryptocurrency arena, and stablecoins seek to make things a little less frightening.
Cryptocurrency firm Blockchain has released a report examining the growth of the stablecoin trend, the differences between the growing number of stablecoins in circulation, and whether they truly work to lower volatility in the market.
In total, 57 stablecoins were examined, including Tether, TrueUSD, Dai and Digix Gold Token. About 26 of these stablecoins — roughly 45 percent — are live, while the remainder are in pre-launch phases. The number of active stablecoin projects has increased heavily over the past 12 to 18 months, and more than a dozen separate ventures have issued plans to launch new stablecoins by the end of the year.
The report states that most stablecoins can be separated into two categories: asset-backed and algorithmic (coins that have implemented a central banking platform to keep prices sturdy). Roughly 77 percent of those observed are asset-backed, with USD being the primary asset of choice amongst 66 percent of them. Most of the tokens — roughly 54 percent — utilize on-chain collateral.
More than 50 percent of the stablecoins offer “dividends” or have incentive mechanisms built into their designs; these already make up a healthy portion of the digital asset arena. Tether, for example, is now the second most traded digital asset after bitcoin and lists among the top ten cryptocurrencies by market value. It also accounts for nearly 98 percent of stablecoin trading. Many of these currencies are also listed on approximately 50 different digital exchanges, with Tether on a whopping 46.
The total market value for all current stablecoins is $3 billion, or roughly 1.5 percent of the total cryptocurrency market. Approximately $350 million in venture funds have been put toward the creation of stablecoins, and most are legally domiciled in the U.S. and Switzerland. A large portion of stablecoin teams prefer to set up house in the U.S., while regions in Europe such as the U.K. also remain popular.
Ethereum has proven to be the most widely used hosting platform for stablecoin projects, with approximately 60 percent of them building exclusively on top of the Ethereum blockchain. For the rest, top blockchain choices include Bitcoin, NEO and Stellar. Roughly 69 percent of stablecoin teams have made their code open-source for audit inspection, and some of the biggest investors in stablecoins include Pantera Capital, Coinbase, Circle and the Digital Currency Group.
The report introduces several use cases for stablecoins including “smart travel insurance.” Roughly 600,000 passengers each year do not file eligible insurance claims for canceled or delayed flights. What they don’t seem to know is that these flights become public record and can be queried by smart flight insurance software. If a plane fails to take off for any reason, the smart contract under the insurance will pay the claimant immediately and ease the claims process, while the insurance premium can be escrowed on-chain to remove counterparty risk.
Where stablecoins are failing is in their adoption rates. While enthusiasm does surround these currencies, the technology behind them is still very new and requires further experimentation before a perfect design can come about. Regulation surrounding stablecoins also remains uncertain, with one of the biggest issues being whether stablecoins comply with national securities and money service laws.
Furthermore, many stablecoins are thought to pose greater threats to fiat than standard cryptocurrencies and run the risk of sparking competitive backlash from traditional finance officials. Barry Eichengreen, professor of economics at the University of California, Berkeley, argues that stablecoins backed by USD, for example, introduce several additional expenses in that for every dollar’s worth of cryptocurrency issued, one dollar of investment capital is taken from national reserves. Thus, users are trading fully liquid dollars supported by the U.S. government for cryptocurrencies that are not fully established, possess “questionable” backing and are difficult to use.
He also claims that this kind of stablecoin trading model will only be attractive to money launderers and tax evaders, and he doesn’t expect the model to scale.
The report also says that certain stablecoins will weigh more heavily on the prices of entities like bitcoin and ether, which may lead to more aggressive competition in the crypto market.
However, the report does state that stablecoins are likely to see further adoption in the future and lead to generally stronger adoption rates amongst cryptocurrencies. The authors describe stablecoins as “a form of infrastructure or foundational layer for crypto assets that will generate immense value for the digital assets ecosystem.” They believe stablecoins will successfully address concerns surrounding volatility, though they assert this will be a long-term process.
This article originally appeared on Bitcoin Magazine.
Monero has officially released its Malware Response Workgroup website yesterday. In an effort to help protect Monero’s community, the website aims to provide resources to educate about the types of malware that may take advantage of users. It provides support for problems including unwanted in-browser and system mining (cryptojacking) and ransomware, all which have been a growing problem as of late.
In a blog post by Justin Ehrenhofer on the Monero website, the Malware Response Workgroup is “a self-organized set of volunteers that maintains these resources and provides live support.”
The post goes on to describe future efforts to provide support directly through the website; however, volunteers are currently available for live support at #monero-mrw.
The announcement of the working group is a second bit of positive news from the Monero community, coming shortly after it successfully patched a bug in its wallet code.
The “burn bug” never affected the actual protocol or the coin supply, but, if exploited, it would have allowed a malicious actor to profit significantly from inflicting damages on organizations within the Monero ecosystem, such as exchanges and any entity using a Monero wallet.
The bug could have been exploited as follows: An attacker first generates a random private transaction key. Then, they modify the code to merely use this particular private transaction key, which ensures multiple transactions to the same public address (e.g. an exchange’s hot wallet) are sent to the same stealth address. Subsequently, they send, say, a thousand transactions of 1 XMR to an exchange. Because the exchange’s wallet does not warn for this particular abnormality (i.e. funds being received on the same stealth address), the exchange will, as usual, credit the attacker with 1000 XMR. The attacker then sells his XMR for BTC and lastly withdraws this BTC. The result of the hacker’s action(s) is that the exchange is left with 999 unspendable / burnt outputs of 1 XMR.
In the simplest sense, the bug allowed for funds to be sent in such a way that the recipient could not spend them, and the wallet would still report these as properly received funds.
It would have been possible to send multiple transactions to the same one time address, each transaction with a different key image. Since the one-time address can only be used once, it could only claim one of those outputs sent to it — but the wallet software was accumulating the amounts of all of those transactions.
While the concept of burning funds by sending multiple transactions to the same stealth address is nothing new in the Monero community, the consequences were never properly thought through if a third party, like an exchange, is involved. In May 2017, the topic was lightly discussed in a Monero SE Q&A. Users tossed around the idea, concluding they are “not sure of the implications or whether the protocol guards against this.” It was not until the hypothetical scenario included an exchange where the community realized the true implications of such an exploit.
The exploit was discovered on September 16, 2018, after Reddit user s_c_m_l described a hypothetical attack on exchanges that support the Monero’s XMR token. The scenario presented User A sending XMR to Exchange B via many transactions with the same stealth address, allowing User A to then exchange the currency he sent and proceed to cash out. This was the first time anyone had imagined such a situation.
Less than 24 hours after s_c_m_l proposed the attack in a Monero subreddit, another Reddit user, Vespco, posted the idea in the official Monero subreddit. Shortly after, a patch was created by the Monero dev team and applied on top of the v0.12.3.0 release branch. The patch was implemented via a pull request.
After pull request #4438 was implemented, the developer community privately notified as many exchanges, services and merchants in order to minimize the number of organizations that would be exposed when the official announcement was made.
As dEBRUYNE mentions in his blog post, this practice was not ideal because there were inevitably organizations that they weren’t able to notify. The behind-the-scenes notifications could also have been viewed as preferential treatment, which is never ideal for a community fostering decentralization and fairness.
Following the patch release, community members on Reddit were unsure how to perceive the outcome of the situation and were debating if the Monero dev team should have disclosed that there was a bug while they were working on a patch instead of after. Reddit user fort3hlulz suggested:
“I *do* think that a simple disclosure would be helpful in the future … [for example] a bug is reported and found to be real. Monero devs make a post that there *is* a bug, that it is being worked on, but without details on what/exploit details.”
What’s unusual in this circumstance, however, was that the bug was originally mentioned in Reddit as opposed to the official Monero Dev group, which left the community, devs included, unsure how to announce that there was indeed a bug. Nonetheless, the quick response by the entire community, developers included, seems to have reinforced confidence in Monero.
In the future, Monero and its community hope that further community efforts like the Malware Response Workgroup will provide better resources for users to report bugs of all types. Referring to the main focus of the group, Ehrenhofer writes “We will not be able to eliminate malicious mining, but we hope to provide necessary education for people to better understand Monero, what mining is, and how to remove malware.”
This article originally appeared on Bitcoin Magazine.
In a landmark case for the cryptocurrency industry, a federal judge has ruled that a cryptocurrency caught in the midst of a lawsuit is a commodity, court documents reveal.
U.S. District Judge for Massachusetts Rya Zobel has decided that the suit’s prosecuting party — the Commodity Futures Trading Commission (CFTC) — can proceed with its case against My Big Coin Pay Inc. as its cryptocurrency My Big Coin (MBC) does not fall into the category of a security.
My Big Coin was founded in December of 2013. Allegedly based in Wyoming, the company offers its own digital wallet to store cryptocurrencies and a digital exchange to trade them. My Big Coin began selling its own currency — MBC — through an initial coin offering (ICO) and made approximately $6 million from 28 separate investors by promising 1 percent interest per year to investors that kept their wallets open.
The CFTC claims that the ICO has all the same behavior and qualities of a Ponzi scheme. They allege that the company is based in Las Vegas, not Wyoming, and that owners Randall Crater of New York and Mark Gillespie of Michigan used customer funds to purchase expensive items for themselves.
In addition, the CFTC believes the money was raised through several false claims, including that MBC was backed by gold and traded across several different exchanges, and that My Big Coin had recently struck a partnership with MasterCard.
Charges were filed back in January of 2018. The company’s accounts were frozen, and executives were blocked from accessing them. They were also prohibited from disposing of any financial records.
According to court documents, Judge Zobel believes that MBC classifies as a commodity because it is a cryptocurrency like bitcoin:
“The amended complaint alleges that My Big Coin is a virtual currency, and it is undisputed that there is futures trading in virtual currencies (specifically involving bitcoin). That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the [Commodity Exchange] Act.”
Defending lawyer for My Big Coin Katherine Cooper expressed her disappointment in the decision and continues to argue that the CFTC holds no precedence. In the court documents, she argues that “contracts for future delivery” are indisputably not “dealt in” My Big Coin. Thus, the currency cannot be classified as a commodity under the ECA.
“My Big Coin does not have future contracts or derivatives trading to it,” she asserts. “It is not a commodity. Now that we are moving past the motion-to-dismiss phase of the case, we look forward to challenging the CFTC’s ability to prove many of the factual allegations in the complaint. Among those factual allegations are those which speak to the relatedness of bitcoin and My Big Coin, and, therefore, the CFTC’s jurisdiction,” she said.
Defining crypto tokens has not always been an easy feat for U.S. lawmakers. Recently, federal judge Raymond Dearie in New York invoked decades-old securities laws to decide that two separate ICOs, one for REcoin and one for Diamond, classified as securities. Both projects were run by Maksim Zaslavskiy who claimed that REcoin was backed by real estate and that Diamond was backed by real diamonds. Neither entity backed the coins, and Zaslavskiy has been charged with two counts of securities fraud.
Dearie stated that the ICOs in question were “investment contracts” according to the Securities Exchange Act of 1934 and the Howey Test, which states that a transaction is an investment contract if a person invests money in a “common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”
Dearie asserts customers expected returns on their investments and even referenced the DAO Report in his decision, which was issued in July of 2017 and explains that all tokens sold on Ethereum-based platforms, like both REcoin and Diamond, were securities.
Dearie, however, stated that the laws were meant to be interpreted flexibly and that not all ICOs could be considered securities. The same could be said for the My Big Coin case, as the classification of the cryptocurrency as a commodity is confined to the case at hand and does not extend to other crypto assets currently available on the market.
Image credit: By M2545 – Own work, CC BY-SA 3.0
This article originally appeared on Bitcoin Magazine.
Seba Crypto AG (SEBA) has raised 100 million Swiss francs ($103 million) for the creation of a regulated bank that lets customers trade fiat for digital currency.
The Zug-based startup is headed by former UBS managers Guido Buehler, who serves as CEO, and Andreas Amschwand, who serves as chairman.
SEBA will manage cryptocurrency trading and investments for banks and investors. It will also provide corporate financing services among which are technical guidance on initial coin offerings, cryptocurrency services to conventional clients and groups, and banking services to traditional corporate clients.
“SEBA wants to bridge the gap between traditional banking and the new world of crypto,” Buehler explained to Business Insider.
“With safety, transparency and performance as core values, our ambition is to become a market leader in the convergence of traditional finance with the crypto economy.”
Efforts at translating its financial base into an entity are now dependent on being granted a banking license from the Swiss Financial Market Supervisory Authority (FINMA).
From the creation of a digital ID for citizens built on the Ethereum blockchain to the acceptance of bitcoin payments for municipal services, the Swiss town of Zug has become known as the “crypto valley” of the world.
More than 500 blockchain startups call the town of Zug home, but as the industry has grown, it has faced restrictive banking services, forcing companies to look abroad for banking services, until mortgage bank Hypothekarbank Lenzburg opened its arms to the industry three months ago.
“In Switzerland, we have the commitment from various authorities to establish a comprehensive regulatory environment for the development of blockchain technology and the sustainable, stable, growth of crypto assets,” Amschwand explained in a statement.
“This makes Switzerland the ideal place to launch a new financial services paradigm.”
The eclectic group of investors who have a stake in the business includes Swiss-based BlackRiver Asset Management and Hong Kong-based Summer Capital among other financial backers from Switzerland, Malaysia, Hong Kong, China and Singapore.
This article originally appeared on Bitcoin Magazine.
Boston-based cryptocurrency finance firm Circle has just joined the multitudes of other crypto exchange platforms now issuing and trading their own stablecoins.
As of September 26, 2018, dollar-pegged USDC is now trading on Poloniex, the crypto-to-crypto exchange Circle acquired in February 2018, and on Circle Trade, the company’s over-the-counter (OTC) platform. Circle co-founders Sean Neville and Jeremy Allaire spelled out the details in a blog post.
Acting as a sort of safe haven where crypto traders can park their assets in volatile markets, stablecoins have become increasingly popular. They are especially useful in exchanges that offer only crypto-to-crypto trades. Right now, there are roughly 29 active stablecoins on the market.
All of these coins make their own promises. For Circle, USDC is an Ethereum-based ERC-20 coin. A commonly used token standard, ERC-20 makes it easy for wallets, exchanges and other smart contracts to interact with the token. This helps Circle create an instant ecosystem for the token.
“More than 20 companies are also announcing or launching support for USDC today,” Circle said.
Other exchanges planning to list the coin include OKCoin, DigiFinex, CoinEx, KuCoin, Coinplug and XDAEX, a spokesperson from Circle confirmed.
Similar to the Gemini Dollar and Paxos Standard, USDC is a fiat-collateralized coin. That means that a centralized company holds assets in a bank account and issues tokens that represent a claim on those underlying assets. (In contrast, dai, the stablecoin of MakerDAO, is backed by crypto.)
All of these coins go head-to-head with tether, the most widely used stablecoin in the space. But unlike tether, USDC is regulated as a registered money services business (MSB) under U.S. money transmission laws. As a virtual currency, it is also regulated under the New York BitLicense. What’s more, bank accounts holding fiat to back the token are subject to monthly audits.
Circle will be the first issuer of USDC. Other entities can issue the coin as well, but they need to go through Circle’s non-profit CENTRE consortium. Leveraging $20 million raised in a SAFT token sale last year, CENTRE is focused on defining standards and policies for stablecoins. Each entity that wishes to enroll and issue USDC is held to the same regulatory-compliant standards.
To help create its new stablecoin, Circle raised $110 million in May 2018 in a round led by China-based cryptocurrency giant Bitmain. It was, at the time, the biggest venture capital round raised by a cryptocurrency or blockchain company to date.
This article originally appeared on Bitcoin Magazine.
Based on blockchain technology, most cryptocurrencies have an open and public ledger of transactions. While this is required for these system to work, it comes with a significant downside: privacy is often quite limited. Analytics companies and other interested parties — let’s call them “spies” — have ways to analyze the public blockchains and peer-to-peer networks of cryptocurrencies like Bitcoin, to cluster addresses and tie them to IP addresses or other identifying information.
Still, unsatisfied with Bitcoin’s privacy potential, several cryptocurrency projects have launched over the years with the specific goal of improving on Bitcoin’s privacy features. And not without success. Several of these “privacycoins” are among the most popular cryptocurrencies on the market today, with four of them taking top-50 spots in coin market capitalization rankings.
That said, Bitcoin does have some privacy features which, as this month’s cover story details, have been improving in recent months and are set to improve further in the near future. This miniseries will compare different privacycoins to the privacy offered by Bitcoin, and to the privacy offered by other privacycoins.
In part four: Zcash
The origins of Zcash (ZEC) can be traced back to Zerocoin, which was first proposed in 2013 by Johns Hopkins University professor Matthew D. Green and his graduate students Ian Miers and Christina Garman. Zerocoin was designed as a privacy-enhancing protocol extension for Bitcoin to let users “burn” coins and bring an equal amount back into circulation later. Although transaction amounts could be a giveaway, there’d be no way to link the “new” coins to the burned coins otherwise.
Later that same year, Green announced a “new version of Zerocoin,” which would come to be called Zerocash. Zerocash was not designed as a Bitcoin protocol extension but as an entirely new protocol. It improved on Zerocoin by also hiding the amounts, while at the same time offering a big efficiency gain by decreasing the size of transactions by 98 percent.
All this was possible thanks to a relatively new piece of crypto-magic known as a Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, or “zk-SNARK.” In short, zk-SNARKs allow users to prove possession and validity of certain information without revealing that information to anyone and without needing to interact with anyone.
One year later, in 2014, cryptography security company Least Authority, headed by former DigiCash employee and well-known cypherpunk Zooko Wilcox-O’Hearn, spun up a sibling company: the Zerocoin Electric Coin Company (or Zcash Company). With Zooko as CEO and Green, Miers, Garman and other academics as co-founders, the Zcash Company raised funds from prominent names in the cryptocurrency and privacy space. Adding more cryptographers and engineers to the team over the following years, the Zcash company ultimately forked the Bitcoin codebase in 2016 to launch an implementation of Zerocash as a new cryptocurrency: Zcash.
While there are plans to transfer governance of Zcash to the newly erected, non-profit “Zcash Foundation” at some point in the future, for now Zcash is still maintained by the for-profit Zcash Company. This company, as well as investors in the project, receive 20 percent from the Zcash block reward during the first four years of its existence, called the “founders reward.”
Zcash currently sits in the 21st spot on altcoin market cap lists and has been hovering around there for some time. While this makes it only the third-highest ranked privacycoin by market cap, Zcash has received some notable endorsements, for example, from NSA-whistleblower Edward Snowden.
As a codebase fork of Bitcoin, Zcash works fairly similarly to Bitcoin. In Zcash, however, there are two types of addresses that do something very different. Regular addresses are called “transparent addresses” or “t-addresses” (They start with a “t”). When ZEC moves from a t-address to another t-address, it looks like a Bitcoin transaction and offers similar levels of (non-)privacy.
But there is also another type of address: “shielded addresses” or “z-addresses.” Z-addresses (“inputs” or “outputs”) aren’t actually visible on the blockchain: they are encrypted. Further, funds held by z-addresses are encrypted as well. The cryptographic magic of zk-SNARKS lets anyone verify that transactions with z-addresses are valid according to the Zcash protocol rules.
As such, Zcash allows for interesting types of privacy-preserving transactions. If t-addresses send money to several z-addresses, for example, it’s not revealed where the money is actually going to. At the same time, if z-addresses send money to t-addresses, it’s not revealed where the money is coming from.
But most interestingly, when only z-addresses are involved in a transaction, the whole transaction is effectively encrypted. In what is called a “shielded transaction,” where the ZEC is moving from, where it is moving to and how much is moved are all completely hidden. Except for the payer and the payee, no one learns anything apart from a minimum amount of metadata: the time of payment and the fee. (Note: users do have the option to share their personal information with a “view key.”)
In effect, all this means is that when coins are sent to a z-address, they “disappear” in a pool of encryption, sometimes referred to as the “shielded pool.” Basically any and every subsequent shielded transaction could be spending (some of) the coins, and any shielded transaction after that could spend them again. Or not. The coins may also sit tight on the same address — or they could be moved back to a t-address.
When users move though the encrypted pool, Zcash offers near-perfect privacy.
Although Zcash does not offer fully perfect privacy, the weaknesses are subtle and, in some cases, temporary.
Zcash’s main weakness is probably that creating a shielded transaction is currently computationally heavy. Requiring several gigabytes of memory (RAM), it can take well over a minute to generate a shielded transaction on a good laptop, while generating a shielded transaction on a phone is practically impossible. This means that few users actually make shielded transactions which, in turn, means the anonymity set for those who do use shielded transactions is relatively small, weakening privacy overall.
That said, an upcoming Zcash protocol upgrade (hard fork) is set to solve the problem of heavy transactions almost entirely. Dubbed “Sapling,” Zcash researchers have found a way to cut memory usage for shielded transactions down to 40 megabytes and generation time down to a couple of seconds — still not quite as smooth and easy as creating a regular transaction, but entirely doable, even for mobile users.
As such, the share of shielded transactions may increase significantly over the coming years. (Even then, however, shielded transactions won’t be the default or be required like Monero’s RingCT. Similar to privacy technologies on Bitcoin, even just using shielded transaction could be considered suspect in itself.)
Another weakness is that unshielded transactions can, in some cases, leak information about shielded transactions. Specifically, if z-addresses are used as a sort of mixer, the amounts can be linked across transparent addresses. If exactly 1.65273911 ZEC move from a t-address to a z-address, and in a slightly later transaction 1.65273911 ZEC minus fees move out of a z-address to a t-address, it’s not difficult to figure out that these are probably the same coins, only “separated” by one step of encryption.
This threat is not very difficult to counter: Users just need to take care not to transact into and out of the shielded pool in equal amounts. If Zcash is used to store value and make payments instead of just for mixing purposes, this should happen naturally.
An arguably bigger issue with Zcash is all the trust that’s required to make it work. Zcash users must, to some extent, trust that the math works as advertised and trust that the people that launched the project did not cheat.
Cryptographers generally prefer to use cryptography that has been around for a while, allowing it to be thoroughly peer reviewed and “battle tested” in the field. Zcash, however, relies on advanced math with several new assumptions.
Zk-SNARKS in particular are so novel that few outside of a relatively small academic circle really understand how they work. (Zooko self-admittedly does not; nor does the author of this article.) While this does not mean that anything is wrong with Zcash’s cryptography, the newness of it all also doesn’t instill as much confidence as some would like.
This is especially true because, in technical terms, Zcash is not “unconditionally sound.” In a worst case scenario, a weakness in the Zcash protocol could allow attackers to create money out of thin air without anyone being able to notice. (Zcoin, an implementation of the Zerocoin protocol that also lacks unconditional soundness, has already been hacked once; Monero came very close.)
Additionally, Zcash’s zk-SNARKs require a “trusted setup.” Before launch and every time the project deploys a hard fork, a secret number must be generated, a derivative of which is used in the Zcash protocol. Referred to as the Zcash Multi-Party Computation Ceremony, this number is typically created in several parts by different people (six for the first ceremony, two groups of over 80 for the second). All of them must destroy this “cryptographic toxic waste” after the ceremony without revealing it. If even one person succeeds in doing this, the ceremony should be a success. (And as part of a migration process, the former ceremony can be made obsolete by the latter over time.) But if the ceremony fails, and someone figures out the secret, that person can once again create money out of thin air without anyone able to notice.
Further, it now seems that this risk may not be limited to this sort of hidden inflation. It was long believed that even if the trusted setup was compromised, Zcash privacy would still be protected. However, attesting to the newness of the cryptography, Peter Todd, a participant in and critic of the first multi-party computational ceremony, pointed out that if the software used in the ceremony itself is compromised, privacy of Zcash’s zk-SNARK system could be broken too.
There is no reason to believe that Zcash’s trusted setup has been compromised in any way, and there is definitely no evidence that it was. But calling to mind one of Bitcoin’s unofficial slogans — “Don’t trust, verify” — this is ultimately not something Zcash users can check for themselves.
This article originally appeared on Bitcoin Magazine.
Stablecoins are becoming big business these days. In a $15 million deal, Andreessen Horowitz’s a16z crypto fund is buying 6 percent of the total MakerDAO maker (MKR) token supply. The investment will give a16z a financial and governance stake in the dai stablecoin.
A stablecoin is a token pegged to another asset, like the dollar. Stablecoins can provide a hedge in the volatile world of crypto trading, especially in exchanges that have no direct link to banking. MakerDAO has two main tokens: dai and MKR. A separate token, MKR works alongside dai to help dai maintain its 1:1 peg with the U.S. dollar.
A16z sees a world of opportunity for stablecoins. “The same volatility that is holding back crypto for payments is also limiting its use for a host of other financial services and products,” a16z partners Katie Haun and Jesse Walden said in a co-written statement.
“Today, it’s not really practical to make a long-term loan in bitcoin because you’d have to consider two independent risks: first that the loan would be repaid, and second, whether the bitcoin would be worth more or less at the time the loan came due.”
The purchase of MKR marks the first investment from a16z’s dedicated $300 million crypto fund. The move was driven by Haun, a former federal prosecutor who led the investigations into the Mt. Gox heist and Silk Road.
According to the terms of the partnership, MakerDAO, a project that runs on Ethereum smart contracts, will receive the operating capital over three years. Dai adoption and regulatory support are main priorities, says a16z. To reach those goals, Andreessen Horowitz and a16z will be offering expertise in areas ranging from sales and business development to marketing, talent and more.
A16z is not the only company to set its eyes on MakerDAO. ConsenSys, a production studio for Ethereum-based startups, has partnered with MakerDAO on two social-good projects: Bitfröst and optiMize. Blockchain money transfer company Wyre has also partnered with MakerDAO.
Ethereum creator Vitalik Buterin considers MakerDAO one of the “most interesting” projects running on Ethereum. “The way that whole construction works and how it is designed to be decentralized is fascinating,” he said in a recent interview with Bitcoin Magazine.
Still, MakerDAO faces some stiff competition. Currently, there are 29 active stablecoins in the market, all vying for a piece of the action. Tether is by far the most popular, with a $2.8 billion market cap. The difference between tether and dai, however, is how the two assets are collateralized.
Tether is supposedly backed by fiat (the company tells us this but has had no official audit to support those claims). MakerDAO, on the other hand, is collateralized with ether, the native token of the Ethereum blockchain. But because ether is a volatile asset, if you want to buy $100 worth of dai, you have to deposit $150 worth of ether.
How dai works is not inherently easy to understand either. MakerDAO uses an elaborate scheme of tokens, smart contracts and “autonomous feedback mechanisms” to maintain its peg.
To get dai, for instance, you send ether to an Ethereum smart contract. You then lock your ether into a collateralized debt position (CDP) and draw out a loan of dai against that. To redeem ether, you send dai back to the CDP, along with accrued interest that can only be paid for with MKR.
After interest is paid, MKR is burned, removing it from the total supply. The logic here is that if the adoption and demand for dai and CDPs increase, so too will the demand for MKR. In terms of its governance role, MKR will also enable a16z to vote on certain “risk parameters” of CDPs.
MKR is currently trading at $459 with a total supply of 1 million. If the demand for MKR skyrockets, that will be a boon for a16z. But first, a16z needs to convince crypto traders that dai is a better bet than tether, or fiat, for that matter.
This article originally appeared on Bitcoin Magazine.
The crypto world is welcoming its newest digital currency exchange. Known as BTSE, it’s a platform designed primarily to look after markets and OTC trading. The system is unique in the sense that it offers multiple currencies through one book, and entities like the U.S. dollar, the euro and the Japanese yen all share the same liquidity pool.
Co-founder Jack Li spoke with Bitcoin Magazine about how the exchange works and what its overall purpose is in offering a multi-currency platform.
“Even though there has been some consolidation amongst the existing exchanges, the industry is still largely fragmented and localized,” he commented. “Our goal in offering a multi-currency platform looks to address some of these issues through the aggregation of liquidity.”
Upon registering with BTSE, a user can select their base currency from a list of 18, which includes USD, EUR, KRW, MYR, PHP and many others. Users can then transfer any currency to the platform or trade in their base currency for crypto, while all liquidity is sourced from the same USD orderbook.
“Other exchanges that offer multiple books often struggle with liquidity in their secondary books,” Li stated. “This innovation aims to resolve that issue. If a deposit is sent in a currency we do not yet support, it will automatically be covered at system rate.”
BTSE also has a marketplace where verified merchants can offer their services and users can choose to engage directly. Li says this provides faster turnaround times for deposits and withdrawals while empowering users with greater flexibility. Users can also engage in bilateral transactions amongst themselves.
“At launch, we aim to offer a fully escrowed DVP [delivery versus payment] functionality where users can determine the terms of their transactions (prices, quantities, types of assets or currencies, etc.), and we’ll take care of the settlement within our highly encrypted and trusted environment,” Li said.
At press time, the company is in the process of applying for a VFAA (Virtual Financial Assets Act) class 4 cryptocurrency exchange license from the Republic of Malta and has already received principle approval to operate within their sandbox environment. Furthermore, BTSE has been granted a general commercial trading license and a payment services provider license from the Dubai government in the United Arab Emirates.
“As a platform tailored towards fulfilling the needs of professional traders and institutional investors, usability and reliability are at the core of BTSE’s ethos,” Li said. “Some of the features you will find on our platform include hidden orders, index pegged orders, and of course, our very own BTSE 5 (core coin), BTSE 10 (altcoin), and the BTSE Single Token indexes, which cover prices for currencies like bitcoin, ether, bitcoin cash and litecoin. In the future, we also plan to offer full-fledged capital market services, as well as structured products once the relevant licenses are in place.”
BTSE 5 is an index covering the values of the top five largest cryptocurrencies, while the BTSE 10 index does the same for the industry’s top 10 performing altcoins.
This article originally appeared on Bitcoin Magazine.
Cryptocurrency exchange Poloniex is delisting eight coins: BitcoinDark (BTCD), Bitmark (BTM), Einsteinium, (EMC2), Gridcoin (GRC), NeosCoin (NEOS), PotCoin (POT), VeriCoin (VRC) and BitcoinPlus (XBC).
The announcement was made today, September 19, 2018. The coins will be delisted on September 25, 2018, and the exchange says that traders have 30 days to close out trades and withdraw the balances from their accounts. Poloniex says the move is part of a “continuous effort to improve the performance of the exchange and to better serve our customers.”
A spokesperson from Circle, the parent company of Poloniex, told Bitcoin Magazine that the coins were delisted in keeping with guidelines spelled out in Circle’s Asset Framework.
Circle did not specify what criteria the projects failed to meet. However, Poloniex’s volume has been slipping in recent months. Earlier in the year, it was the 14th largest cryptocurrency exchange by 24-hour trading volume, according to CoinMarketCap. Now, it sits at spot number 34 (at time of publication).
Most of the coins that were delisted appear to be lesser-known projects. Several have seen huge drops in price from the beginning of the year. Still, getting delisted from a larger exchange like Poloniex can sound a death knell for small projects, causing a coin’s price to plummet overnight.
Poloniex announced they are delisting us from their exchange causing a crash in the price.Strange decision to make considering we are about to release our latest version.
— BITCOINPLUS(XBC) (@BitcoinPlusOrg) September 18, 2018
And for others, the news appears to have caught them completely off guard.
1/2 – Given our long history of being listed on @Poloniex, we are just as surprised as you are by their announcement today to delist #potcoin from their exchange. We were given no communication or advance notice by the @Poloniex team & are still unsure…https://t.co/Wh4RPusobB
— PotCoin (@PotCoin) September 18, 2018
Einsteinium’s chief strategist, Ben Kurland, told Bitcoin Magazine the announcement came as a “complete shock.” He said they got the news just as they were in the middle of resolving a wallet issue with the Poloniex development team. “We were not notified ahead of time and given no warning this would occur,” he wrote.
Neos, the project behind NeosCoin, issued a statement about its delisting on Reddit. In response to one Reddit poster who said the delisting was likely a result of Neos missing “deadline after deadline,” Neos explained its project was just a “2-man show for the longest time.” The response provided a window into just how small some of these operations can be.
The delisting also comes at a time when Poloniex is trying to polish its act for regulators. Goldman Sachs–backed cryptocurrency startup Circle purchased Poloniex in February 2018, with the aim of “cleaning up” the exchange and turning it into an alternative trading system, or ATS, which would bring the exchange under regulatory oversight.
In March 2018, the U.S. Securities and Exchange Commission (SEC) issued a clear warning to exchanges that initial coin offering (ICO) tokens may qualify as noncompliant securities. Any exchange that lists securities needs to either register as a national securities exchange or operate under an exemption and set itself up as an alternative trading system.
The move requires Poloniex to register with the SEC as a broker-dealer and become a member of a self-regulating organization (SRO), such as the Financial Industry Regulatory Authority (FINRA).
Between a tightening regulatory environment and demands for increased security, exchanges delisting coins may become a more regular occurence in the months to come.
This article originally appeared on Bitcoin Magazine.
Following a successful launch in California only a few months ago, the U.S. branch of cryptocurrency exchange OKCoin is adding five new coins to its listings. Those coins include Ripple (XRP), Cardano (ADA), Stellar lumens (XLM), Zcash (ZEC) and 0x (ZRX).
OKCoin made the announcement today, September 19, 2018. The new coins will be paired with the U.S. dollar, bitcoin and ether, the native cryptocurrency of the Ethereum platform. Trading against fiat pairs will be available to California residents only, while crypto-to-crypto pairs will be available in California along with 20 other states across the U.S.
“We are very pleased to welcome these five new cryptocurrencies and all of the communities that trade them,” said Tim Byun, OKCoin USA CEO, in a statement. He added that OKCoin is committed to only bringing in tokens “that offer utility, value and demonstrable use cases.”
The moves comes at a time when the exchange is aggressively growing its business in the U.S. OKCoin originally set up shop in Mountain View in November 2017. In June 2018, the company relocated to San Francisco, and the following month, it officially announced its presence in the U.S. when it began offering trading between the U.S. dollar and several major cryptocurrencies. Just a week ago, after getting the green light from U.S. and state regulators, OKCoin opened up crypto-to-crypto trading in numerous other states.
The exchange itself has a long history. One of the oldest crypto exchanges, OKCoin was originally launched in China in 2013. At the time, China was considered the world’s hub for bitcoin trading, and OKCoin became one of the three biggest exchanges in the country, alongside Huobi and BTCC.
OKCoin originally focused on bitcoin-to-yuan trades. To attract a crowd of more professional traders, the following year, the company launched OKEx, which offered hundreds of token-to-token trading pairs. The setup is similar to how Coinbase, a popular cryptocurrency exchange in the U.S., operates Coinbase Pro (formerly GDAX).
China’s cryptocurrency trading business took a hit when the Chinese central bank began regulating bitcoin starting in December 2013. In September 2017, the People’s Bank of China lowered the final curtain when it issued an all-out crypto trading ban in the country. In the past 18 months, OKCoin was also deeply affected when regulations kept it from providing service in nine other countries.
Today, OKEx is listed on CoinMarketCap as the second-largest exchange by trading volume, but looks can be deceiving. Critics argue that the exchange is a virtual “ghost town” and 93 percent of trading volume is fake. In an attempt to regain some of its former glory, OKCoin International relaunched in April 2018, with an eye on the U.S.
Due to regulatory uncertainty in the U.S., it may run into some old, familiar roadblocks. If the U.S. Securities and Exchange Commission (SEC) rules that Ripple, Ada and other popular coins are securities and subject to the same regulatory oversight as stocks, OKCoin will have to either severely limit its offerings or register with the SEC as a broker-dealer or move to become a licenced alternative trading system (ATS), sort of along the lines of what Coinbase is aiming for and what Circle is doing with Poloniex.
This article originally appeared on Bitcoin Magazine.
Grandshores Technology Group, a Hong Kong–listed investment holding company, is seeking to raise around $12.7 million through a digital token fund, according to reports from the South China Morning Post (SCMP). Grandshores Technology plans to use the funding to launch a yen-backed stablecoin.
Chinese investor Yongjie Yao, who currently chairs Grandshores Technology, is also a founding partner at Hangzhou Grandshores Fund, which is backed by the local government of the city of Hangzhou and Chinese crypto billionaire Xiaolai Li.
Yao stated that the company plans to attract investment from qualified investors from outside China to raise funds via Tether, according to the SCMP report. The company will also invest in disruptive startups and other cryptocurrency projects across the globe that are challenging the status quo.
“We are entering the next stage of blockchain evolution, a stage which is akin to when computer operating systems were transiting from MS-DOS [disk operating system] to MS-Windows.”
The founding partners of Hangzhou Grandshores Fund are currently working with an unnamed, mid-tier Japanese bank to develop the yen-based stablecoin. Grandshores has plans to launch stablecoins pegged to the Hong Kong dollar and the Australian dollar in the future.
Yao remains confident regarding the demand for the coin when it launches. He believes the token could be ready by the end of 2018 or the first quarter of 2019.
“We believe cryptocurrency traders and exchanges will be potential takers of this stablecoin,” he added.
Stablecoins help tackle one of crypto’s chief dilemmas — volatility — without compromising its core values. On a smaller scale, they also help investors trade seamlessly while transferring money between crypto exchanges.
Earlier this year, Binance Labs, OKEx and other notable investors funded a stablecoin project out of South Korea called Terra. Liechtenstein’s Union Bank AG also issued its stablecoin, as it aims to become the world’s first blockchain investment bank.
Paxos and Gemini joined the party last week, launching their stablecoins on the Ethereum blockchain.
This article originally appeared on Bitcoin Magazine.
Huobi Japan Holding Ltd. has acquired a majority stake in Japanese cryptocurrency exchange BitTrade, marking the top-three exchange’s formal entry into the Japanese market.
BitTrade, which is one of the 16 government-approved crypto exchanges in the country, announced the news yesterday, September 12, 2018.
Japan’s Financial Services Agency (FSA) began issuing exchange operating licenses in 2017, but in light of the Coincheck hack in January 2018, the approval rate has plummeted as the agency has tightened its requirements.
Huobi Japan, which is a wholly owned subsidiary of Huobi Global, plans to “aggressively scale up the platform” in partnership with the management team of BitTrade. The subsidiary will work on making the platform user-friendly for its international customers, while providing more professional and compliant services as well.
Huobi CFO Chris Lee hailed the partnership as a strategic success, saying the companies’ synergy will strive toward improvement “through continued investment into R&D and compliance.”
“Leveraging on BitTrade’s leadership team and its Japanese government-approved license, this is just the beginning,” he added.
Huobi, currently ranked the third largest crypto exchange in the world by trade volume, has shown an inclination toward expanding into new regions through partnerships with local companies. The exchange currently operates in Singapore, Korea, Canada, Australia, the UAE, Luxembourg, Brazil and others.
BitTrade’s owner Eric Cheng, a Singaporean millionaire who acquired a 100 percent stake in BitTrade Co. Ltd. for $50 million earlier this year, said both parties would scale the platform into the “largest in Japan with the potential to extend its services globally.”
He went on further to state:
“Together, we will leverage on Huobi’s global footprint, excellent management team, and advanced security systems to grow BitTrade into a market-leading position in Japan. Having a long-term partnership with an established brand such as Huobi is the right step for BitTrade as we look to continue our rapid growth trajectory.”
This article originally appeared on Bitcoin Magazine.
University of Berkeley Professor Barry Eichengreen has taken a swipe at the viability of stablecoins in an op-ed published on Project Syndicate. The critique, entitled “The Stable-Coin Myth,” argues stablecoins are not automatically “viable” just because they are pegged to an asset, though Eichengreen does believe they have an advantage over “conventional cryptocurrencies” such as bitcoin which he says “is highly unstable” and “unattractive as units of account.”
“Stable coins purport to solve these problems. Because their value is stable in terms of dollars or their equivalent, they are attractive as units of account and stores of value. They are not mere vehicles for financial speculation. But this doesn’t mean that they are viable,” he writes.
Stablecoins are digital tokens intended to retain a stable value, usually one pegged to a traditional currency like the dollar or euro. Typically, they are backed by a fiat currency or other assets, though this is not always the case.
Citing Tether (USDT) in its U.S. context, Eichengreen believes that fully collateralized stablecoins won’t gain traction because it would mean trading in a currency that is “supported by the full faith and credit of the U.S. government, for a cryptocurrency with questionable backing that is awkward to use.” To him, “it is not obvious that the model will scale, or that governments will let it.”
Since its launch in 2014, USDT has been the most widely used stablecoin, and it’s currently the eighth most popular cryptocurrency by market cap. Going mainstream comes with challenges, though, and Tether has suffered some adversity. Analysts and investors alike have criticized the stablecoin for its lack of transparency, and its affiliation with popular cryptocurrency exchange Bitfinex has raised questions as to whether it is printing more USDT than it can back.
Despite the controversy surrounding Tether, other companies seem to be learning from Tether’s missteps, including fiat-collateralized competitor True USD. 2018 has seen an influx of stablecoins hit the market, some of which are funded by traditional financial institutions.
Two days ago, Gemini announced the launch of the Gemini dollar (GUSD) after getting the green light from the New York Department of Financial Services (NYDFS), an announcement that was quickly followed by the introduction of the Paxos Standard (PAX) stablecoin by Paxos.
According to the NYDFS’ press release, both tokens are subject to the Bank Secrecy Act, anti-money laundering controls and Office of Foreign Assets Control oversight to prevent them from being used in connection with money laundering or to finance terrorism.
Unlike Tether, which runs on the Omni Layer on top of the Bitcoin blockchain, both Gemini Dollar and Paxos Standard are ERC-20 coins that run on the Ethereum blockchain.
This article originally appeared on Bitcoin Magazine.
“We suck at marketing,” Eiland Glover, CEO and founder of Kowala, admitted in good humor. “Our PR probably doesn’t want to hear me say that, but it’s true.”
Glover’s brutally honest statement is by no means a reflection on the company’s work ethic or even its progress — quite the opposite. The milestones the project has surpassed this summer have been an unintentionally well-kept secret, which makes its most recent announcement pretty surprising: Kowala, an under-the-radar stablecoin based in Nashville, Tennessee, is being integrated into Ledger’s hardware wallets.
An integration by the world’s largest hardware wallet manufacturer is a significant stamp of approval, especially considering it’s the first stablecoin to merit the company’s attention.
“I think it’s indicative of what we’re all about,” said Glover, who also pointed out it was the Ledger team that originally approached Kowala about integration. “We’re not the best social media mavens; we’re not the best hypesters. The Ledger deal is indicative of when very serious companies [and] organizations take a deep dive into our code and look at what we’re doing (the structure, the monetary policy, the algorithmic stability mechanisms) [and] say, ‘This is the real deal.’”
The integration announcement also came shortly before another milestone moment for Kowala: the launch of its mainnet alpha version, Andromeda.
Tether likely comes to mind for most people when thinking of stablecoins. The multibillion-dollar market cap coin has become synonymous with its asset class, although TrueUSD, a rising competitor, has recently inserted itself into the conversation.
Both Tether and TrueUSD retain their stability with underlying collateral in fiat. For both currencies, each coin is reportedly backed 1:1 by a corresponding dollar, though questions continue to surround Tether’s coin issuance as it has never received an official audit.
Outside of the fiat-collateralized model, MakerDAO’s stablecoin, Dai, pegs its value to the USD with collateral in cryptocurrency. Through what the project calls Collateralized Debt Positions, anyone can issue Dai with an Ethereum-powered smart contract — so long as they have an excess of cryptocurrency, usually bitcoin or ether, to back the issuance and hedge against volatility.
Self-advertised as a “non-asset-backed stablecoin,” Kowala breaks the collateralized mold that shapes the market’s most prominent fiat-pegged coins. In fact, the only thing backing Kowala is its mining protocol, smart contracts and some serious mathematical gymnastics.
The coin’s economic model is a play on the seigniorage shares stability mechanism proposed by economist Robert Sams in 2014. Taking its cue from the economic principle of the same name, the seigniorage shares model leverages smart contracts to keep a coin’s value stable without needing to tie it to an underlying currency. Overseeing mintage, the smart contract would issue and buy back coins in response to price movements; if price goes above $1, for instance, the smart contract would mint more coins to compensate; if it goes below this threshold, then it would buy back coins until the price stabilizes.
As a non-asset-backed stablecoin, Kowala achieves the same end but through different means. Instead of smart contracts, the network’s miners are in part held responsible for the coin’s stability and distribution. When prices exceed $1, miners net larger mining rewards until the coin’s price reaches an equilibrium. If the price dips too low, then all transaction fees are sent to a dead-end address and burned, taking coins out of circulation permanently until the price stabilizes.
Kowala utilizes a two-tiered token system to structure its stability mechanism. The first of these, kUSD, is the stablecoin itself, serving as the network’s native currency and its mining reward. The second token, mUSD, is a staking token used to gain mining rights on the network. Miners must stake at least 30,000 mUSD in a mining client to earn kUSD.
This week’s Andromeda release sees the distribution of mUSD to Kowala’s early investors. Fully regulated as a securities sale under the U.S. Securities and Exchange Commission (SEC) guidelines, mUSD was only available for private purchase by accredited investors. In our interview, Glover said that Kowala “originally intended to hold a public token sale,” but as the regulatory conversation became complicated, the team decided to err on the side of caution.
“We decided to play it safe rather than get slapped with a subpoena halfway into our token sale,” John Reitano, Kowala’s CTO, said.
Once the project gains traction and has sufficiently decentralized, Glover said, there are plans to take its mUSD sales public for unaccredited investors. Until that time, however, the team is looking to free up avenues for additional private investments, and it’s working on a crowdfunding model with an undisclosed partner to this end (Glover indicated that Kowala can not reveal specifics due to securities guidelines).
With Andromeda underway, Kowala is standing on its own two feet. But by distributing the network’s mining tokens, this alpha version is only just baby steps. It won’t be until these miners begin minting and distributing kUSD — and these coins start trading on exchanges — that the project will truly test its balance and see if it has legs.
Glover indicated in our interview that Kowala is in talks with “a number of top exchanges” as the project enters a phase of seminal growth. These exchanges will provide the live price-watching that the mainnet’s upcoming Boӧtes release, slated for September of 2018, hopes to introduce, along with a kUSD wallet app.
As the project grows, the team plans to extend its stablecoin to additional currencies. Kowala’s roadmap has the Chinese yuan and Russian ruble in its sights. Glover teased that the project also hopes to establish a presence in Japan; they are tied up in NDA business talks with a multitude of top corporations.
Until then, Andromeda marks the introduction of a hitherto unforeseen stablecoin model. Lacking central control and governed by mathematical principles, kUSD adheres to Bitcoin’s decentralized ethos by completely divorcing itself from underlying assets and centralized entities. If its mainnet functions fully operationally, as its testnet did in its controlled, theoretical confines, Kowala could effectively set the standard for what a fully decentralized, autonomously maintained stablecoin looks like.
“With the distribution of our mCoins, we come even closer to fulfilling the promise of the original Bitcoin whitepaper and creating the infrastructure that this industry needs to go mainstream. Andromeda brings an unprecedented level of decentralization to the stablecoin class, allowing users of the kUSD to forgo the centralization problems that have plagued the space for years. Such a system will allow node operators around the globe to have ownership of a money supply mechanism that keeps the stablecoin within its target range around one dollar, without that money supply being locked in a vault controlled by a small handful of c-suite executives,” Glover said.
This article originally appeared on Bitcoin Magazine.
U.K.-based cryptocurrency futures exchange Crypto Facilities, which is regulated by the U.K. Financial Conduct Authority, is adding a bitcoin cash product to its offerings, a press release shared on the exchange’s website reveals. Trading for the bitcoin cash-dollar (BCH/USD) futures began today, August 17, 2018, at 4:00 p.m. GMT +1 (11:00 a.m. EST).
The addition of the new contract will enable investors to take long or short positions in bitcoin cash, allowing them to “broaden [their] investment opportunities” and hedge investment risks. The contracts join a list of derivatives currently offered by Crypto Facilities, which includes Bitcoin, Ripple XRP, Ether and Litecoin futures.
At launch of the litecoin futures, CEO of Crypto Facilities, Timo Schlaefer, said there was “strong client demand” for the product and he believes the “LTC-Dollar futures contracts will increase price transparency, liquidity and efficiency in the cryptocurrency markets.”
Now, in rolling out BCH futures, Schlaefer claims that the new offering will bring even more liquidity and exposure to the maturing market.
“We are pleased to be expanding our cryptocurrency derivatives offering with the launch of BitcoinCash [sic] futures. BCH is a top five coin with a market capitalization of around $10 billion and we expect our new contracts to spur the evolution of the crypto markets by bringing greater liquidity and transparency to the digital asset class,” Schlaefer commented.
Crypto Facilities rose to prominence in 2017 when it partnered with CME Group to launch the first bitcoin futures contract. Currently, Crypto Facilities powers the CME CF Bitcoin Reference Rate Index and the CME CF Bitcoin Real-Time Index.
The addition of the BCH futures comes on the heels of a Bitmain IPO, the crypto mining giant that allegedly holds more than 1 million Bitcoin Cash, worth nearly $550 million at the present exchange rate, according to Bitmain’s investor deck.
This article originally appeared on Bitcoin Magazine.
Venezuelan President Nicolas Maduro recently revealed that the nation’s oil-backed cryptocurrency, the petro, will be used as a unit of account by the state oil company PDVSA. The government is also developing a new salary system that will allow employees to receive their wages in petro funds over fiat.
“As of next Monday, Venezuela will have a second accounting unit based on the price and value of the petro. It will be a second accounting unit of the republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry,” Maduro announced.
The petro was introduced through a pre-sale back in February of 2018 as a means to attract foreign capital to boost the Venezuelan economy and circumvent both EU and U.S. sanctions. It was designed to shore up an economy in shambles, as the bolivar has been struck with rampant hyperinflation over the past year.
From the very beginning, the currency aroused controversy both in and out of Venezuela. Many in the National Assembly publicly claimed that the currency was potentially illegal and that its white paper lacked sufficient details or offered unscrupulous arguments for its creation. Concerns further arose in the U.S., which led to President Trump’s subsequent petro-trading ban in March of 2018.
Some arguments in favor of the cryptocurrency state that the petro makes paying taxes and settlements with state bodies less expensive and that the currency can be easily — and quickly — converted into USD.
Regardless, cryptocurrency is often viewed as an economically liberating tool in the everyday Venezuelan’s struggle to survive. Bitcoin Magazine recently chronicled the struggles of a Venezuelan resident under the alias Hector, who received a donation of roughly 0.5 nano. Though worth less than $2 in USD, the funds were the beginning of what would become a growing account for Hector, who later garnered approximately $950 worth of the cryptocurrency. He is now able to provide his family with food and other supplies once thought unobtainable on a regular basis.
“My dad gave me a huge hug because it was a relief for all of us,” he states. “We are five in our house; four of us are adults, and we work in different areas. Every month, when we get paid, our salaries weren’t enough to buy basic supplies or even food. We were almost running out of food some days ago. It was common for that to happen every six or seven days after getting paid.”
Venezuela’s national currency, the bolivar, ranks high on the “worthless” meter as of late. Maduro believes the new salary system will stabilize wages and offer consumers stronger buying power, which could bear positive repercussions on the country’s ailing economy.
“By 2020, the nation will be able to recover economic and social stability and prosperity,” he announces. “We are building a new revolutionary and humanist economic thought with a new strategic economy for a new economic model. On August 20, a new era will begin. In real time, Venezuelans will know the price of the sovereign bolivar and the petro, made public by the central bank. Also, detailed explanations of the salary system and the prices based on the petro will be forthcoming on August 20. Speculation has ended!” he stated in a speech announcing the cryptocurrency.
This article originally appeared on Bitcoin Magazine.
The updated terms are said to be in line with the latest court position in the ongoing legal proceedings, including a confirmation that compensation must be paid to victims in bitcoin and bitcoin cash.
Between 2011 and 2014, Mt. Gox is estimated to have lost over 850,000 BTC, worth approximately $460 million at 2014 prices. Based in the upmarket Tokyo district of Shibuya, Mt. Gox was once the undisputed king of cryptocurrency exchanges, at one point controlling as much as 70 percent of the global bitcoin exchange market. By the middle of 2013, however, the platform had run into trouble, and, despite all assurances to the contrary, the company closed abruptly in February 2014, ceasing all trading and exchange operations, closing down its website and filing for bankruptcy protection under Japanese law.
Former CEO Mark Karpelès was arrested, and a civil rehabilitation plan was agreed to serve as a framework for ensuring creditors get their money back.
A few notable changes to the initial terms have been made, mostly concerning method and priority of payments to creditors. According to the updated terms, Mt. Gox shareholders are ranked behind its creditors regarding payment priority.
The statement reads:
“No distribution will be made to shareholders. Mt. Gox is not capable of returning all BTC deposited by creditors. Accordingly, we consider that all assets of Mt. Gox should be distributed to creditors and not to shareholders.”
Furthermore, disbursements will be made in bitcoin and bitcoin cash for ease of payment and to avoid the acceptance issues faced on many exchanges by several altcoins.
The update also stipulates that payments would be made after the approval and confirmation of the rehabilitation plan.
“Creditors have been waiting for payment to be made for as long as four years since Mt. Gox was bankrupted. Payment to creditors should be made as soon as possible. We are of the opinion that most of the assets, including approximately 166,000 BTC and 168,000 of BCH and other derivatives currently held by Mt. Gox, should be paid to creditors at the time of the first payment.”
Finally, the update states that Mt. Gox will find a way to give creditors access to their trading records, which it describes as “indispensable for the approval or disapproval of the civil rehabilitation plan.”
This article originally appeared on Bitcoin Magazine.
“We have nothing to hide,” says Tory Reiss, VP of corporate development at TrustToken. Like the market’s most popular stablecoin, Tether, TrustToken’s TrueUSD is fiat-collateralized. Under this model, each token (in theory) should be backed 1:1 with a corresponding dollar in a related bank account.
This model may not play out in practice as it does in theory, however. In a recent interview with Bitcoin Magazine, Reiss’s comment summarizes the bulk of his answer to our first question: How is TrueUSD different from Tether?
Unlike Tether, which plays custodian, issuer and representative for all tokens and their congenital funds, Reiss explains that TrustToken has no control over the network’s monetary flow.
“There are a few pretty major components,” he began. “To be honest, the biggest difference — when we started the businesses, we spent a lot of time architecting legal framework and also financial framework in terms of where the funds are held and how they’re held, which was built around removing us, the company, from the flow of funds and protecting all the token holders in a legal manner from us being able to withdraw or access their funds.”
Instead, a combination of smart contracts, escrow accounts and fiduciary partners manage token supply and issuance. TrustToken’s fiduciary partners include the Nevada-based Alliance Trust Company and Prime Trust (which also banks for the stablecoin Stronghold USD), and these firms leverage smart contracts to mint and buy back tokens. Whenever a new user wants to mint fresh TrueUSD, they can wire money to one of these trusts, and once the funds are settled into the trust’s bank accounts, the smart contract mints new tokens and issues them to the user. To redeem tokens, users burn them through a smart contract, and the respective trust then wires the user the corresponding funds.
“We have a dashboard that we’ve built for our fiduciary partners. Only after they’ve received those funds and they’ve settled for 24 hours can those partners go onto the dashboard and mark that transaction as settled to mint new tokens,” Reiss explained. “We act on behalf of the token holder but, as a business, we can’t access those funds.”
This process allows TrustToken to be as hands-off as possible while also providing them with the code-certain protections of smart contracts and the reliability of a central source of liquidity and asset management.
The system is a more complex version of Tether’s own with more working parts. In fact, Reiss suggested that his team viewed Tether as a sort of working model for what not to do, highlighting the need for clear legal and financial safety nets for its users.
“We learned from Tether’s mistakes in the sense that they put none of those legal protections in place. They hold all of their funds in an omnibus account where they can essentially do whatever they please with the money in that account. In our case, we could never preprint TrueUSD or have a disparity between funds in the accounts and tokens on the chain,” he stated.
Tether has come under fire for its printing/issuance practices in the past. Critics have long speculated that Tether does not have parity between the dollars in its bank accounts and on-chain tokens. Researchers at the University of Texas, Austin, even released a report in June of this year that seems to corroborate this suspicion, laying out evidence that suggests that Tether may have been used to artificially inflate bitcoin’s price during 2017’s bull market.
The smart contracts prevent TrustToken or its partners from preprinting TrueUSD without having dollars to back them. Funds have to hit the trust’s bank account and sit for 24 hours before the smart contract will mint new tokens.
Even if the smart contract didn’t police token issuance, TrueUSD’s accounts would, Reiss claimed. If at any point during their professional relationship the token’s auditor found a discrepancy in supply and fiat reserves, the partnership would terminate.
“We have one top-50 accounting partner (Cohen & Company) that is performing attestation. When they look at your books, they look at all of your transactions. And if your account isn’t in line from day zero, they won’t maintain an audit account.”
Reiss believes that, whether Tether won’t submit to an audit for fear of this outcome or has had a relationship terminated because of a discrepancy, this is why the world’s most popular stablecoin has no official audit on record.
“That’s most likely the case why Tether can’t have a true audit partner — but in our case it’s worked in our favor because we have nothing to hide.”
Tether has never submitted itself to an official audit by any certified accounting firm. The company claims that it’s not out of defiance; it’s simply because no firm is willing to take a risk working with a cryptocurrency company given the industry’s stigmatized connection to money laundering, tax evasion and the dark web. An audit by one of the U.S.’s big four (Deloitte, Ernst & Young, PwC and KPMG), the team claims, is especially elusive.
In lieu of an official audit, Tether has conducted a financial review by Freeh Sporkin & Sullivan LLP, a law firm co-founded by former FBI Director Louis Freeh.
TrueUSD’s operations tell another story. Not only does Cohen & Company currently conduct audits for the currency, but Reiss indicated in our interview that TrustToken is in talks with two of the big four accounting firms to provide audits in the future.
TrustToken also publishes regular attestations from Cohen & Company’s audits on their Medium blog. When they strike a working relationship with one of the big four, the company plans to publish “live attestations (via a public dashboard),” Reiss claimed.
Throughout the interview, Reiss repeatedly iterated that the company is operating in the open. Furthermore, because TrustToken is also playing ball with regulators, the company claims to have close-at-hand opportunities to expand its services.
“Our project is working entirely with U.S. securities laws and also those in Europe, Asia and South America. We’re aiming to build a compliant system that works within the existing regulatory regime but which hopefully expands access,” Reiss said.
This expansion will look to bring the stablecoin model “to European and Asian currencies this quarter,” he continued, also revealing that the company is “aiming for a half dozen [exchange listings] in the next month or so.” Currently, TrueUSD is offered on Binance, HBUS, Bittrex and Cryptopia, among others.
TrustToken has earned funding from Andreessen Horowitz’s a16z crypto, Foundation Capital and Founders Fund, among others. The company has also pooled talent from the likes of Facebook, Airbnb, PayPal, Google and Goldman Sachs.
DIRT, a blockchain startup that plans to develop a trusted platform for structured data, has raised $3 million in a seed funding round. The San Francisco-based company said investment firms that participated in the round include General Catalyst, Greylock Partners, Lightspeed Venture Partners, Pantera Capital and others.
In a Medium post, the company, which describes itself as a “blockchain-based Wikipedia,” wants to make it “economically irrational” for false information to be shared. DIRT is looking to create a protocol for crowdsourcing information using the Ethereum blockchain to organize the world’s data and make it freely accessible to everyone.
Flushed with cash, DIRT plans to release its protocol along with its token in the coming months. The tokens will be based on the Ethereum ERC20 standard, and they are central to the company’s plans to crowdsource trusted data at scale.
Speaking to Bitcoin Magazine, DIRT CEO Yin Wu said, “No single company should have a monopoly on information and truth. We’re building DIRT because we believe structured data about the world needs to be freely available for new applications to emerge.”
“DIRT is doing to data what Wikipedia did to the encyclopedia — create a database of trusted information that is open and free.”
Wu said the protocol would make it possible for third-party DApp developers to create a token curated registry (TCR) similar to how Wikipedia uses its community to verify data.
“Token curated registries use economic incentives to crowdsource information on any topic. Creating lists is at the root of decision making: consider options, rank them, take action. DIRT makes it easy for communities to coordinate and build these lists for an arbitrary number of topics,” she noted.
DIRT plans to create a new way of crowdsourcing trusted information at scale, which it plans to do by incentivizing honesty. A contributor has to deposit tokens before they can contribute to the platform.
Once this is done, the network calls for a vote to attest the information. For accurate information, the DIRT tokens will remain with the data as a form of “bounty for the information’s accuracy.” Incorrect information, however, will result in a penalty, wherein the user who committed the data will lose their staked tokens.
“Similar to Wikipedia, DIRT allows anyone to contribute information. DIRT maintains accuracy because every contributor needs to deposit tokens to write data. If the data is correct, it is freely shared. If the data is incorrect, anyone can challenge the data and earn tokens for identifying these inaccurate facts. Our protocol and platform make it economically irrational for misinformation to persist in a data set,” a DIRT blog post reads.
DIRT sees centralized data providers and companies exploring verticalized data on the blockchain as its primary competitors but competitors with obvious flaws. The company believes that data marketplaces with existing data curation solutions come with scalability problems, untrusted moderators and more.
The company will focus on cryptocurrency projects once it launches, where it hopes to provide a scalable way to vet information and solve the problems of fraud and plagiarism faced by crypto companies raising funds through ICOs.
Dala has officially announced a new multi-chain strategy that will include Stellar, the technology behind the seventh largest cryptocurrency (lumens) by market cap. Dala is looking to create the most decentralized financial system available by bring together top blockchains and protocols. It hopes to reach developing markets by establishing a decentralized system that allows users to borrow, earn, save and transact funds.
Dala says it will be using Stellar for payments, along with Ethereum for its smart contract capabilities. Stellar promises speedy and low-cost transactions for customers, and Dala executives believe its blockchain will lead to steady user growth.
Dala is a new cryptocurrency issued by the Dala Foundation. As a general purpose ERC-20 token, Dala’s ecosystem consists of several partnerships across the globe, making it a borderless financial system. Dala also powers blockchain-backed Wala, a zero-fee monetary platform built for mobile devices.
Tricia Martinez is the founder and CEO of Wala, and the director of the Dala Foundation. Speaking with Bitcoin Magazine, she explained why the team was adamant about working with Stellar over something larger and more established like Bitcoin.
“Stellar has been designed as a payment network to integrate disparate currencies, payment systems and entities to move value quickly and reliably at almost no cost,” she states. “Stellar scales exceptionally well — transactions are generally confirmed in three to five seconds, and transaction throughput of up to 10,000 transactions per second has been reported. Furthermore, transactions on Stellar are extremely cheap in the region of 100,000 transactions for $0.01. This aligns with the core need identified when Dala was created: emerging market consumers need the ability to transact micropayments instantly at no cost.”
Lisa Nestor, Director of Partnerships at the Stellar Development Foundation, also provided her commentary as to why the Stellar blockchain was the best and only choice. She says that the reason Stellar moves so quickly is because it does not use proof-of-work (PoW), relying instead on the Stellar Consensus Protocol.
“With Stellar, it’s easier to move between local currencies and digital currencies, which makes it ideal for cash-heavy, emerging economies,” she says. “Stellar’s architecture makes it an ideal, open-source tool for digitizing and trading any type of asset, from currency to mobile money.”
Concluding our interview, Martinez says Dala is the first cryptocurrency in existence to be completely “blockchain agnostic,” and that it can run on virtually any blockchain depending on the use case. “Dala will take advantage of the best blockchains to drive financial inclusion and bring a decentralized system to the masses,” she explains. “It gives us great pleasure to announce that we will be using Stellar for payments.”
Integration is currently underway, and the partnership between Dala and Stellar will go live in the fourth quarter of 2018.
With an estimated $100 billion value in sunken artifacts in the waters surrounding the Bahamas, deep-sea treasure hunters could soon satiate their thirst for a big bounty through blockchain technology.
Using an approach that tokenizes shipwrecked items found on the seafloor, the founders behind blockchain startup PO8 intend to revitalize marine archaeology in the region minus the kind of looting, corruption and lack of oversight that caused officials with the commonwealth government to put a halt to expeditions in the region for nearly two decades.
PO8’s model in adhering to responsible salvaging practices convinced the local government officials, as Chief Marketing Officer Raul Vasquez told Bitcoin Magazine: “Currently PO8 is the only government approved entity with a salvage license to do any underwater salvaging in territorial waters belonging to the Bahamas.”
Using an Ethereum-based platform along with ERC-721 token functionality, the PO8 model creates non-fungible tokens (NFTs) — tokens based on the collateral value of recovered items. Each NFT utilizes specifically designed smart contracts that are cryptographically certified with unique asset data. While NFT ownership can be to anyone in the world, the majority of PO8 artifacts remain in the custody of the PO8 Foundation.
“For example, let’s say PO8 finds a rare artifact worth millions,” Vasquez explained. “The physical artifact would remain under the custody of PO8 for continued study by the archaeology community or to be exhibited in museums for the larger public good, while the digital ownership of the NFT can be anywhere around the world. Now, the real ownership of an asset is determined by its NFT.”
Later this year, PO8 will be rolling out the PAZAR marketplace where users can buy, sell, auction, lease, trade and leverage the tokens. Land-based undersea explorers will also be able to contribute to the hunt with PO8’s DApp Maritime Artifact Data System (MADS), which serves in big data analysis around satellite images, sonar, image and video, electromagnetic and historic data. In exchange for their MADS efforts, contributors earn NTFs when users already hold PO8 tokens in their wallet as a demonstration of proof of stake in the system.
“Individuals, rather than corporations and governments, will play a more vital role in the recovery, conservation, exhibition and ownership of these artifacts,” a white paper available on the PO8 site states. “Decentralization of the industry will allow millions more to participate in the experience and bear witness to history encapsulated underwater for centuries. What was once only accessible to a few can now be shared with eager enthusiasts all over the world.”
With the recoveries, PO8 first pays the government, insurers and foundations their cut of the booty. From there, the organization sells 50 percent of the artifacts on its open auction platform. The other 50 percent stays with the foundation to be used in educational programs and traveling exhibitions around the world.
At the crux of PO8 is the establishment of a complementary fix for archaeologists and academics who see high value in maintaining shipwreck sites with commercial interests looking for a return on the high-dollar investments necessary to pull off underwater expeditions.
Only a handful of commercial salvage companies “have the financial backing to afford months, years and sometimes decades on the high seas in the treasure hunt of their lives,” according to the white paper. “For governments and the nonprofit sector, these high costs make it difficult to be active participants in exploratory excavations.”
PO8’s promotion of responsible commercial salvage includes building a team capable of carrying out the mission. Most recently, this translates to the addition of David Gallo, a 30-year oceanography veteran and one of the creators of the first detailed maps of the RMS Titanic, in the role of vice president for exploration. Gallo was also part of the successful international effort in locating the wreck site of Air France flight 447, which crashed into the Atlantic Ocean in 2009.
“To me PO8 is the most exciting project to come along in decades,” Gallo said in a statement. “It encourages the development of new technologies and techniques for undersea exploration and visualization. In doing so, PO8 will accelerate the ability to locate, document and protect the precious artifacts of Bahamian undersea cultural resources. The waters surrounding the islands of the Bahamas are not only rich with shipwrecks but also with unlimited treasures of the mind.”
Regarding PO8’s first exploratory mission, slated for Q3 2019, CEO Matthew Arnett only says the team is eyeing a couple target sites with “cargo manifests indicating the loads are significant in value.”
PO8 received its salvaging license from government officials in the Bahamas late in 2017. Since the start of 2018, the firm has focused on the development of its smart contracts and wallet. Beginning in the third quarter of this year, the crowdsource initial coin offering begins with registration most likely to begin in early– to mid-August, Vasquez told Bitcoin Magazine.
In May 2018, TokenPay Swiss AG joined with WEG Bank in Germany. The former attained a 9.9 percent stake in the bank, along with the option to purchase as much as 90 percent, pending regulatory approval. On July 10, 2018, that 9.9 percent stake has been transacted to the Litecoin Foundation in exchange for a marketing and technology service agreement that could greatly benefit TokenPay.
Under current German banking laws, a business cannot own more than 9.9 percent of any bank without legislative support. Should TokenPay earn the approval it needs, the company will purchase the rest of the bank’s shares and use its network to add several hundred thousand customers to its new debit card solutions platform by the end of the year.
Speaking with Bitcoin Magazine, TokenPay CEO Derek Capo explained, “We are building an entire ecosystem that includes merchant services, banking, escrow, gaming, e-sports, employments services, etc., where we have entire control of the vertical integration needed to lower costs, but also control our destiny. Litecoin is a top-five blockchain in the world, and boasts more than one million followers worldwide, which helps increase the chances of TokenPay’s ecosystem to succeed.”
TokenPay describes itself as “Bitcoin on steroids.” A decentralized and self-verifying payment platform project, TokenPay incorporates cryptographic technology along with security and privacy features to create the company’s token, TPAY. The company also boasts shares in both banking and asset management institutions.
Founded in 2011 by tech entrepreneur Charlie Lee, the Litecoin Foundation is based in Singapore as a nonprofit organization designed for promoting and building blockchain applications. The power and speed of the Litecoin blockchain also allow for lower fees and faster transaction speeds when compared to Bitcoin.
The partnership will give TokenPay access to Litecoin’s many users, who will now have the opportunity to trade and sell TPAY, as well as enroll in the company’s debit card services. Litecoin, on the other hand, will benefit from TokenPay’s banking connections to potentially integrate its blockchain network into further legitimate monetary establishments.
Lee commented, “This partnership is a huge win-win for both Litecoin and TokenPay. I’m looking forward to integrating Litecoin with the WEG Bank AG and all the various services it has to offer, to make it simple for anyone to buy and use Litecoin.”
Both companies will focus on specific aspects that are critical to the growth of the joint venture, including the TPAY cryptocurrency and its blockchain and the TokenPay multisignature transaction engine, which will boost payment speeds.
Dr. Jorg E. Wilhelm, head of the supervisory board of TokenPay Swiss AG, stated, “Our ecosystem consisting of the TPAY blockchain, WEG Bank, TokenSuisse and Litecoin Foundation provides us with a tremendous opportunity regarding merchant solutions, along with a strong and diverse customer base for our crypto debit card business. The tangible reality of bridging the gap between the old and new world is electrifying.”
Capo said he is also looking into developing partnerships with additional crypto-based companies like Verge.
“This is the beginning of the impact TokenPay is going to have in the blockchain industry,” he said. “We have a lot more projects and deals to work on, and we feel we have barely scratched the surface. Having partners like Litecoin with us is going to make the chance of success higher than it [was] yesterday.”
Augur, a blockchain-based predictions platform, has opened to the general public. The platform becomes the “world’s first” decentralized prediction-market platform.
Augur was created by the Forecast Foundation, a not-for-profit corporation whose goal is to build “open-source, public forecasting tools.”
Prediction markets — which are a general type of financial market — have long been dominated by the likes of Paddy Power and DraftKings, which are centrally owned, operated and regulated.
This centralization causes all kinds of problems, such as restrictions for users in certain regions, higher associated costs to use and limitations on the types of markets that users could create.
A key differentiator for Augur is its global and decentralized nature.
With the launch of the platform, anyone, anywhere, can launch their own events and bet on them. This also allows the platform to create a higher level of liquidity and volume, as well as a diversity of topics not typically covered by traditional prediction markets.
Beyond trading, Augur also solves a key problem by moving “real world information” onto Ethereum’s blockchain in a secure manner where results can’t be altered.
Vitalik Buterin, founder of Ethereum and advisor to the Forecast Foundation, while commenting on the launch of Augur’s decentralized platform said, “I have been excited about the possibility of prediction markets on Ethereum for a long time, and I’m pleased to see Augur being a leader in releasing such a sophisticated system into the wild.”
Furthermore, the platform ensures that events in the markets are accurately reported on. It does this by incentivizing users to report and correct “markets that have been incorrectly reported on” in exchange for “fees from the market” and a chance to earn more Reputation (REP) tokens — which is the cryptocurrency associated with Augur.
Tom Kysar, head of operations at the Forecast Foundation, said, “Today’s launch of Augur represents three years of relentless work to realize the goal of creating the first — and best — decentralized oracle and prediction-market platform.”
Don’t miss the Fireside Chat at Distributed 2018 in San Francisco on Friday, July 20, when Augur co-founders Joey Krug and Jeremy Gardner will discuss Augur’s journey, as well as the importance of prediction markets. Register here.
Ripple is staring down the barrel of yet another securities lawsuit — its third one this year.
Filed in the Superior Court of the State of California in San Mateo County, the class action alleges that Ripple and its team illegally sold and promoted XRP, Ripple’s currency, as an unregistered security.
The suit’s plaintiff, David Oconer, is demanding that the court classify XRP as a security, while also seeking relief for the “damages, recession” that he incurred from investing in the coin.
“This is a securities class action on behalf of all California purchasers of Ripple tokens (“XRP”), brought against Ripple, XRP II, and the Chief Executive Officer (“CEO”) of the company, Bradley Garlinghouse (“Garlinghouse”), who promoted, sold and solicited the sale of XRP. Defendants raised hundreds of millions of dollars through the unregistered sales of XRP, including selling to retail investors, in violation of the law,” the class action’s complaint reads.
The document argues that Ripple never registered with California’s Commissioner of Corporations for qualification, a mandatory registration for any securities offering in the state. From here, the plaintiff outlines his rationale for XRP’s security classification, namely that Ripple’s sale of XRP in a “never-ending initial coin offering” resembles that of an IPO, with the currency itself acting like a dividend for the ROI its promotion promised to investors.
On top of this, the plaintiff argues that Ripple is highly centralized and that its team has used their control over XRP’s supply and distribution to leverage the asset’s price. Specifically referring to an instance where the Ripple team locked 55 million XRP into an escrow account last December, the suit claims that Garlinghouse and others advertised the lock-up as having price-positive ramifications for the asset.
“The fact that the vast amount of existing XRP resides in the control of defendants further demonstrates the high degree of centralization and control defendants maintain over XRP, as they can determine the supply of XRP, which will, in turn, impact the price of the security,” the court document states.
Investors have been putting Ripple on the hot seat this summer. This securities class action marks the third of the season, as a succession of investor-led lawsuits are becoming a monthly occurrence for the industry’s top third asset by market cap.
The first of these came in May and, like the most recent one, it alleges that Ripple sold and promoted XRP like a security, conducting an endless ICO that allowed its team to reap mass profits. Another suit filed last month reiterates these allegations.
All three lawsuits go to lengths to stress Ripple’s control over XRP’s distribution. According to the class action suit, not only does this manipulate supply and price as a result, but it also conveys that, contrary to other popular currencies like bitcoin and ether, XRP is highly centralized.
This argument carries additional weight in light of U.S. Securities and Exchange Commission (SEC) Director William Hinman’s comments that ether and bitcoin are not securities. Alluding to ether during his speech, Hinman indicated that a coin or token may be sold as a security but, after it has become sufficiently decentralized in governance and management, it may be retroactively declassified as such. Given this analysis, Ripple, whose foundation and founders collectively own more than half the supply of XRP, may fall into the SEC’s classification as a security for its centralized structure.
During his speech, Hinman made no comment regarding XRP.
On July 3, 2018, Binance suspended all trading and withdrawal services due to “irregular” Syscoin (SYS) trades carried out “from a number of API users.” The exchange has since resumed all activities, according to a blog post.
Questions remain, however, as to the root cause of the problem.
While the price of Syscoin had hovered around 0.00004 BTC, an order for 1 SYS in exchange for 96 BTC was placed and completed on Binance. This trade sent the market into overdrive as users assumed that the exchange or the Syscoin protocol had been compromised.
Binance said it was revoking “existing API keys” and asked users to recreate their keys and be more protective. The exchange also informed users that it was rolling back irregular trades and will create a “Secure Asset Fund for Users (SAFU)” which will be funded by 10 percent of all trading fees “to offer protection to our users and their funds in extreme cases.”
After performing system upgrades, Binance announced that it had resumed normal operations at 8:00 a.m. UTC on July 4, 2018.
For its part, Syscoin, a bitcoin fork, tweeted an update, insisting that the protocol was not compromised. Notwithstanding the “odd trading behavior” and an “atypical blockchain activity,” their developers found nothing wrong with the blockchain.
Syscoin Co-founder Sebastien DiMichele told Bitcoin Magazine about a mandatory upgrade to the Syscoin protocol (184.108.40.206) released 10 days prior. This was due to the buggy nature of the previous protocol. “The superblock implementation had bugs that affected transaction validation,” DiMichele said.
DiMichele recounted how the team discovered the irregular trades on July 3. He said his team “noticed large buy walls across a few exchanges and the high increase of Syscoin’s value, rising to an all-time high of 96 BTC per Syscoin on Binance (roughly $650,000K per unit), possibly creating for a brief moment, an all-time high for the market cap of all of cryptocurrencies combined.”
However, the price increase wasn’t unique to Binance. DiMichele said they found massive buy walls on “exchanges such as Bittrex as well; however, 96 BTC per Syscoin was only traded on Binance.”
While the price of Syscoin surged across crypto exchanges, the company started receiving reports from users who were not able to deposit the purchased coin into their Binance wallets.
DiMichele said he was not sure why Binance had that problem, but he suggested it could be traced to the newer version they released some days ago. “I’m not 100% sure if Binance was still running the previous version or updated to the 220.127.116.11 version of the SYS protocol. We had, however, communicated the update to all exchanges several days before the superblock.”
According to the Syscoin team, the Syscoin’s problems seemed to start with Binance. “Community members let us know that Binance wallets did not appear to work and we investigated directly with Binance,” said DiMichele. “A few hours later, they released an API update, a maintenance to their entire exchange (not just the Syscoin wallet) and then reinstated trading/wallets.”
While DiMichele is not sure about the cause of the deposit issues on Binance, he says the spike in the price of the coin to 96 BTC can be traced to higher fees set by the miners. This also affected the confirmation of transactions on the block explorer.
He said the majority of the miners “had a set fee policy that was above the default kb / SYS fee rate of 10,000 satoshi per kb.” This resulted in transactions appearing to be unprocessed, “but in reality, they were just taking much longer.” Rumors abounded, and the price surged to an all-time high of $0.98.
The company later found large block output values of 544 million SYS and 1.2 billion SYS appearing on the block explorer. “It was at this stage that we asked exchanges to halt trading while we investigated the situation,” he said. Those exchanges have since resumed normal trading.
In a Github post issued at approximately 8:00 p.m. UTC on July 4, Syscoin stated, “Our observations conclude that the later action was extremely aberrant.” The company asserts that Syscoin was not hacked and the Syscoin chain was not attacked — it is “fully operational as per design.”
Bitcoin Magazine reached out to Binance for their explanation of the root cause of the problem but Binance has not yet responded.
Technologist and Apple Inc. co-founder Steve Wozniak played contrarian at the NEX technology conference in late June, comparing the hype around blockchain to the fervor he witnessed just before the implosion of the dot-com bubble. Still, Wozniak stood by his unflinching loyalty for Bitcoin, even in the midst of the market’s 2018 downturn.
To be sure, Wozniak believes blockchain technology will serve as a cornerstone for business and industry in the future, calling it “decentralized and totally trustworthy.”
Nonetheless, early adopters “can burn themselves out by not being prepared to be stable in the long run,” Wozniak said. Comparing the growth of the blockchain industry to the dot-com mania of yesteryear, he said, “It was a bubble, and I feel that way about blockchain.”
It’s Wozniak’s guess that the same pattern will repeat today. “If you look now you say all that internet stuff happened, we got it, it just took a while,” he told the tech conference audience.
Ultimately, Wozniak forecasts that blockchain technology will disrupt the social media sector. Facebook, which holds somewhat of a social media monopoly, is ripe for competition, and a blockchain-based platform could emerge as a key rival to challenge the status quo.
Wozniak also sees long-term potential in Ethereum and its currency, ether. In particular, Wozniak cited programmers’ ability to build out their own Ethereum-based projects, as well as development efforts from companies like Microsoft Corp. and J.P. Morgan to unearth the DApp platform’s full potential.
While Wozniak is putting blockchain on ice for now, saying it isn’t yet ready to live up to the hype with mainstream adoption, he held his ground on Bitcoin, something he once referred to as “digital gold.” Although the cryptocurrency lost more than half its value so far this year, he still referred to it as “just amazing.”
Wozniak purchased bitcoin at around the $700 mark and sold most of his holdings at the peak near $20,000.
The Bank of England has warned U.K. lenders to study cryptocurrencies before doing business in the space. In a letter sent out to the financial institutions in the country yesterday, the Bank of England Deputy Governor Sam Woods warned financial companies to take appropriate steps to protect themselves against “exposure to crypto-assets” which he believes are susceptible to “fraud and manipulation, as well as money-laundering and terrorist financing risks.”
While acknowledging the benefits of the underlying distributed ledger, the deputy governor believes the high price volatility and relative illiquidity of cryptocurrencies are good enough reasons why financial institutions need to be careful when dealing with crypto assets.
The letter went on to explain the steps banks should take to lower any possible risk from trading in crypto assets. He lists hiring a PRA-approved “Senior (Insurance) Management Function (S(I)MF)” auditor to review and sign off on the “risk assessment framework,” conservative incentives that discourage “excessive risk-taking” and aligning the bank’s risk management approach with the uncertainties associated with cryptos.
Woods, who also doubles as the CEO of Prudential Regulation Authority (PRA), reminded financial institutions of their fiduciary responsibility under the PRA regulations.
While borrowing a leaf from the Bank of International Settlements (BIS) scathing report on bitcoin, the deputy governor advised the banks not to get ahead of themselves by considering cryptos as a form of money.
“Crypto-assets should not be considered as currency for prudential purposes,” he said.
Classification of cryptocurrencies has been a problem in the U.K., as with most parts of the world. Earlier this year, the Bank of England Governor Mark Carney informed students of the failure of Bitcoin as a form of money as no one “uses it as a medium of exchange.” Carney, who softened his tone some weeks after, advocated for regulating cryptocurrencies not banning “crypto-assets outright.” Authorities should “be careful not to stifle innovations which could in the future improve financial stability,” he said.
Tether Ltd., which issues a stable coin allegedly tied to U.S. dollar reserves, claims it has hired Freeh Sporkin & Sullivan LLP — a law firm co-founded by FBI Director Louis Freeh — to confirm its bank deposits and assure investors that its cryptocurrency is backed by USD. While the law firm did not perform an official audit, it did have access to Tether’s bank accounts and has released data regarding how much money the company holds.
According to Tether CEO Jan Ludovicus van der Velde, the amount confirmed by Freeh Sporkin & Sullivan is equal to the $2.54 billion in coins Tether claims to have in circulation. This reportedly confirms that all Tethers were sufficiently backed by USD as of June 1, 2018.
Van der Velde said, “We’re glad to have independent verification of this to answer some of the questions posed by the public. We are by no means done with our efforts to promote increased transparency at Tether. We are planning to build on this report moving forward and, despite the challenges of applying current accounting and assurance standards to cryptocurrency clients, we continue to discuss these issues with potential audit partners.”
A full audit cannot be obtained, according to Tether’s general counsel Stuart Hoegner. He states that the cryptocurrency market looks “too nascent for large accounting firms to consider taking on clients who offer digital coins” and that “the big four firms are anathema to that level of risk. We’ve gone for what we think is the next best thing.”
Tether has been the subject of mass controversy over the last week after a 66-page document was issued by University of Texas finance professor John Griffin. It alleges bitcoin’s spike to $20,000 in December 2017 was the result of price manipulation orchestrated by Tether.
Griffin claims he reached his conclusions by examining transactions that took place via cryptocurrency exchange Bitfinex. He says that Tether was used to purchase bitcoin at key points when it was declining, which helped to “stabilize and manipulate” the currency’s price.
“I research things that are potentially illegal, and there are a lot of rumors surrounding potential questionable activity in cryptocurrencies,” Griffin proclaimed. “That’s why it’s useful to see what the data says — data speaks.”
Van der Velde responded to the accusations by commenting, “Tether is, nor has it ever been, engaged in any sort of market or price manipulation.”
Some questions remain unanswered regarding the cryptocurrency’s status, however. For one thing, the two banks holding the company’s accounts have not been named, primarily because “banking relationships are private,” as stated by Hoegner.
It is also understood that Eugene Sullivan — one of the law firm’s partners and a formal federal judge — is on an advisory board to one of the institutions in question, and that the investigation relied primarily on in-person and over-the-phone interviews with Tether and its bank representatives to come to its present findings.
The firm’s official report states that investigators did not perform “the above review and confirmations using generally accepted accounting principles,” and that they have not made any conclusions regarding Tether’s activity before or after the set date of June 1.
The document ends by stating the investigators have “assumed, without further inquiry, that the bank personnel providing the confirmations were duly authorized to provide such confirmations, and that the confirmations were correct.”
This is not the first time Tether has passed an unofficial audit. Last September, the company released a report conducted by U.S.-based auditor Friedman LLP which states that, at the time, Tether’s reserves matched the amount of USD in circulation. It was later pointed out that the document did not constitute a full audit, and Tether had ended its relationship with Friedman LLP before this could occur. The Commodity Futures Trading Commission (CFTC) later subpoenaed Tether for more information.
Bancor has announced today it will launch a network of blockchain-based community currencies in Kenya. The new project is expected to combat poverty through the stimulation of local and regional commerce and peer-to-peer collaboration.
By using the Bancor Network, disadvantaged communities in Kenya will be able to create digital currencies that can hold one or more balances in a connected way such that integrated currencies can be swapped for one another without needing a counterparty.
Bancor will launch the new currencies by contributing capital from the proceeds of its $153 million token sales in 2017.
In correspondence with Bitcoin Magazine, Galia Benartzi, Bancor’s co-founder, said, “Bancor will serve as one of several donors in the program providing initial capital to fund the token balances contained within each of the community currencies. In addition, Bancor will provide in-kind operational support, including technical and integrations work, marketing and hardware to get the currencies distributed and operational.”
The company will partner with Kenyan nonprofit foundation Grassroots Economics, who has experience developing community currency programs in Africa.
Grassroots Economics founder Will Ruddick, who is also the newly appointed director of community currencies at Bancor, will oversee the launch of the community currencies from Nairobi. The team will use Bancor Protocol to expand the current paper currency system used by local businesses to reduce poverty and create stable markets.
Ruddick believes that when “communities have the same right as nations to create and manage currencies, they will unlock their full potential.”
Kawangware and Kibera are the focal points for the pilot launch. These communities, which happen to be the largest slums in Kenya, will be used to circulate the currency by incentivizing customers to use it.
Bancor expects that as more people in the community buy and hold the local currency, its market cap can increase, which will create more wealth and a higher purchasing power for the holders.
Community members and supporters of the initiative will have the option to buy and sell the local currencies via the open-source Bancor Protocol using any of the popular cryptocurrencies or a major credit card.
Before its partnership with Grassroots Economics, Bancor had launched a similar program in Israel. The pilot program, aimed at mothers, was processing over 1,000 daily transactions before activities peaked due to the difficulty of transferring wealth outside of the community.
Jeff Garzik first tuned the world into his latest venture in the fall of 2017. The Bloq co-founder unveiled Metronome (MET), a cryptocurrency he founded alongside Matthew Roszak, at the Las Vegas Money 20/20 conference in late October, and the project caught the attention of Bloomberg and Fortune at the time.
What makes Metronome interesting is that it promises its users cross-chain portability. It also purports to offer a consistent rate of inflation and “no undue influence from founders after launch.” These three promises — Metronome’s mantra of self-governance, reliability and portability — set lofty expectations for the new company; anyone acquainted with Bitcoin and blockchain technology is likely to watch and see if it can deliver.
Garzik has stated in past interviews that he created Metronome as a new beginning, a project that embodies what he would do differently after building on Bitcoin for a number of years. Metronome’s differences seem to suggest that the search for hyper-decentralization was Garzik’s touchstone for starting over. Imagine a coin being so intrinsically opposed to centralization, for instance, that it isn’t beholden to a single blockchain.
Of course, as an ERC20 token, it is fundamentally tied to Ethereum; but the team claims that via smart contracts, users can swap the coin from chain to chain. From the get-go, this transferability will only be open to Ethereum Classic, Rootstock and QTUM. From there, it will be up to community coders to free up avenues to other chains. Keeping with the team’s commitment to zero-to-no influence, Metronome will rely on the volunteer work of disparate developers to expand its offerings and improve its protocol.
As for the rest, there’s little about the coin that speaks to convention. Instead of launching an initial coin offering (ICO), the project is holding a week-long descending-price auction. Unlike the more popular English-style auction, in a descending-price auction, price action descends as the auction progresses. For Metronome’s, the price of 1 MET will start at 2 ether (ETH) and decrease each minute until all of the auction’s 8,000,000 MET are sold or the sale ends.
Since the coin doesn’t have — or, in the future, will separate from — a native chain, it offers no mining rewards. To circulate supply, then, Metronome will feature daily descending-price auctions after its initial token sale. According to the project’s FAQ, “MET is added to MET’s Daily Supply Lots (‘DSL’) every 24 hours, at the rate that is the greater of (i) 2,880 MET per day, or (ii) an annual rate equal to 2.0000%.”
Besides the MET to be sold in the initial and daily auctions, 20 percent will be allocated to what the project calls “authors” — its team and advisors. Of these coins, 25 percent will be available immediately upon release, while the other 75 percent will be unlocked incrementally throughout a 12-quarter period.
Smart contracts control coin supply and issuance, as well as coin migration between chains, and the team has pledged to keep its hands free from directing development or swaying governance. “After its launch,” one Metronome FAQ answer reads, “authors will have no more control over MET than any other member of the MET community.”
We had the opportunity to interview Jeff Garzik to learn more about his latest project.
Jeff Garzik: Exporting one’s MET to another blockchain is a process where the owner chooses a target blockchain when initiating the export, and then receives a Merkle root receipt proving they have the MET that they are exporting. The process “burns” or destroys the MET on Blockchain A, and when the owner provides that receipt to the contracts on Blockchain B, they will have the same amount of MET minted for them on that blockchain. The burning of Blockchain A’s MET is to ensure that global supply remains constant.
So, we are careful to not describe it as a “swap,” per se, because it’s actually the opposite of a swap — the asset itself is moving, just as if you were moving gold from one safe to another.
JG: Regarding ongoing development, Metronome is completely open source, and there is no foundation deciding its trajectory — that responsibility is with the community. Consider Bitcoin: there was no “foundation” in the beginning. Similarly, we don’t want to create enshrined leaders of Metronome, which is what a foundation does. Creating a Metronome author-run foundation at the outset bakes in community dependence on that foundation, which is a centralizing force we wish to avoid.
The community can choose a chain they wish to develop compatibility for and work toward that. In the very near term, you’ll be able to transfer from the Ethereum chain to Ethereum Classic, QTUM or another chain using the Ethereum Virtual Machine. From there? Time will tell.
JG: The answer is key to governance. The user holds and controls that “receipt” received when MET is exported from one blockchain. The user chooses when to export/import and must manually initiate that action.
JG: As to the stability of Metronome’s contracts, they have been rigorously reviewed by four independent auditors. The team has gone the extra mile to ensure that those contracts will be as rock-solid as humanly possible at launch. As to the wallet, being standards-compliant with ERC20 of course means that you inherit all of that standard’s characteristics — mostly favorable in terms of compatibility and interoperability — as well as its limitations and those of the cryptocurrency category in general.
JG: Two answers: first, I have been in the cryptocurrency space for a long time as one of the first to start contributing to Bitcoin. The ensuing years have given me enough perspective to ask, “Knowing what I now know about cryptocurrencies and how the communities around them operate, how would I redesign a cryptocurrency from scratch that would be enduring and satisfy the most use cases?” With Metronome, we have built a cryptocurrency intended to serve as a store of value, method of exchange, machine-to-machine payment medium and other applications.
The second answer, though, is a bit more philosophical. I’m a big fan of ideas like the Long Now Foundation, which aims to encourage civilizations to think in terms of generational scale rather than months, quarters and years. That kind of spirit inspired the cross-blockchain idea. For a currency to be truly multi-generational in scale, it cannot be tied to a single, native ledger.
JG: Once launched, Metronome is completely autonomous. There is no foundation where the proceeds from auctions are hidden away for founders, and there is no centralized group defining Metronome post-launch. Even if the founders wanted to manipulate and control Metronome (we don’t), we simply would not be able to.
Additionally, by rewarding the founding team with tokens (rather than proceeds) and slowly disbursing them according to a mechanical rule, we assure the community that the founding team is properly motivated in Metronome’s early years.
JG: Metronome’s issuance is locked in at launch, and any new contracts must accept the issuance logic. (The rate is the greater of 2,880 MET per day or whatever amount necessary to achieve a steady 2 percent annual rate.) Issuance is based on time, not on hash or staking power, since both are subject to fluctuations that create variability over time for circulating supply.
JG: Greater decentralization is something we have been fixated on since we started this journey in spring of 2017. The current cryptocurrency landscape (especially when considering new cryptocurrencies) is not all that decentralized. Small groups of developers and foundations largely define the course, scope and goals of a cryptocurrency.
Metronome is looking to return to the original promises of cryptocurrencies like Bitcoin and Litecoin, where updates and goals are community driven without too much customary deference to a small group. Metronome does this through a unique take on community governance through self-governance.
JG: We believe that every aspect of Metronome makes it more durable. Self-governance allows the community to define and build Metronome, not a far-off foundation. A reliable and a highly predictable issuance allows owners and purchasers to calculate supply at any point in the future with high confidence. Portability allows Metronome owners to move their MET to any compatible blockchain for whatever reason they see fit, rather than locking themselves into a set of rules and chain permanence. These characteristics make Metronome both flexible and resilient — two necessary attributes for the long haul.
In sum: we are introducing a wholly new concept — a token that is not tied to a blockchain. Other tokens are tied to a single network, a single technology and a single blockchain. Metronome is something new. We’re very proud of the results and are looking forward to seeing where the crypto and fintech ecosystem takes it.
According to data from EOS Authority, EOS has finally acquired the minimum votes required for its network to go live.
After EOS failed to launch its platform on its projected launch date of June 2, a live-stream vote was called, where users voted “Go” to launch the blockchain network. But while the network got the green light, it couldn’t go live until it was activated with the EOS tokens held by investors.
Things didn’t go as planned as token owners became reluctant to weigh in with the minimum vote required to activate the blockchain. For the EOS blockchain to go live, 15 percent of the total EOS tokens in supply had to be used to elect the network’s 21 EOS block producers.
Also known as supernodes, block producers operate as part of EOS’s delegated proof of stake (DPoS), where they serve a function similar to Bitcoin miners who secure proof-of-work systems. The candidates for the supernodes include local crypto enthusiasts such as EOS Canada, who is currently leading with just over 42,000,00 token votes at press time, followed by EOS Authority, the entity that started up EOS, in second place with about 39,400,000 votes. Blockchain heavyweight Bitfinex is currently eighth with a bit under 32,000,000 EOS votes, and EOS HuobiPool is in the eleventh spot with just over 30 million token votes.
To vote for the supernodes, token owners have to go through a process of proving ownership, which requires using their private keys.
The most noteworthy voting software is CLEOS, a command-line tool created by Block.one, the creators of EOS. This software requires a lot of programming knowledge, which left non-technical voters with crowdfunded projects like EOS Portal and other desktop tools.
As much as users were eager to activate the mainnet, they were equally nervous that the process might jeopardize their holdings.
EOS’s inability to get the required number of tokens staked led to the mainnet launch being stalled for days. There were also some reports that a general, widespread distrust in third-party software available to owners, coupled with the complexity of the voting process, led to voter apathy.
Despite the success of its ICO, the EOS team has not been able to find a lasting solution to the vulnerabilities that have riddled it from the start. Some weeks back, Chinese internet research firm Qihoo 360 discovered a vulnerability that could be used by hackers to remotely manage codes on nodes and attack any cryptocurrency built on the network.
EOS launched a bug bounty program that rewards developers for discovering security vulnerabilities, with the most significant reward going to Dutch ethical hacker Guido Vranken, who was paid a hefty $120,000 for discovering 11 new vulnerabilities. EOS’s HackerOne profile shows that vulnerabilities are still being discovered.
EOS is currently up by 14.4 percent, trading at $11.32.